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Sood MEDICINE TRADERS Pvt LTD
2009-2011
REPORT ON “ANALYSIS OF FINANCIAL STATEMENT”Summer training
Rahul
[ T Y P E T H E C O M P A N Y A D D R E S S ]
Sood MEDICINE TRADERS Pvt LTD
2009-2011
REPORT ON “ANALYSIS OF FINANCIAL STATEMENT”Summer training
SUBMITTED TO:PUNJAB UNIVERSITY, CHANDIGARH
For The Degree of M.com(e-commerce) SUBMITTED BY: NANDINI GULERIA M.COM (e-commerce) 2nd sem
[ T Y P E T H E C O M P A N Y A D D R E S S ]
SISTER CONCERNS OF SOOD MEDICINE TRADERS PVT LTD
ACKNOWLEDGEMENT
“Gratitude is a duty which ought to be paid” Rousseau
Word cannot express the deep sense of gratitude and indebtness. I am
highly grateful to Sh.Anuj sood, Managing Director SMT for granting me
permission for joining their company.
I pay my sincere thanks to P.K khanna (Finance Manager)
under whose guidance I am able to complete my project in a fruitful way. I would
like to thank all persons of Finance Department of SMT ( Hoshiarpur) without
whom my project would not have been completed successfully. I also pay special
thanks to Mr. Dinesh Sharma, Mr. Rakesh, Mr. Sunil Sharma & Mr. Vivek
Sharma and other members for helping, guiding & encouraging me a lot for
acquiring information about Financial Analysis. They made me learn financial
analysis of SMT in depth and guided me to complete the project.
I also pay my special thanks to the head of the various departments in
the SMT under whose kind cooperation I was able to gain ample quantity of
knowledge.
EXECUTIVE SUMMARY
The summer training in an organization is an integrated part of
M.COM program. It exposes students to the problem areas and provides
knowledge as how to face these problems areas and provide confidence as
how to solve this problem. There is a gap between theory and practice and
the training is aimed at removing this gap and to increase the process of
communication between future manager and industrial sector.
BUSINESS PROFILE OF THE COMPANY
They are in the pharmaceuticals business for the last 21 years and they
established Sood Medicine Traders Private limited on 23.02.1989 as whole sale and
retailer of all kinds of pharmaceuticals products. At present Sood Medicine Traders is
known all over the north India as one of the top ten Pharma whole sale dealers and is well
known for its excellent services to customers at their door steps. Sood Medicine traders is
stokists for more than 150 companies includes all top companies of India like Glaxo
SmithKline, Ranbaxy, Cipla, Cadila, Lupin, Johnson & Johnson, Wokhardt and Aventis
etc. Sood Medicine Traders has a fleet of vehicles for suppliers to each & every town
with its dedicated team of salesmen. It has its Own indigenous software for total
computerization of all operation.SMT is capable of executing orders of all of medicines
to any place in India and abroad.
They also have their own Manufacturing unit namely Axon Laboratories Pvt.
Ltd. Which is an ISO 9001:2000 company fully equipped with modern production and
packing units along with own Research & Development labs. Our manufacturing Unit is
one of the Unit in the state of Punjab and is reputed for producing excellent quality of
Tablets, Capsules and Injectables.Axon Lab. Is producing a vide range of products like
Antibiotics, Antifungals, Pain killers ,Harmones, Anabolics, Anti Ulcerants (PPIs), Anti
Histamines, Steroids, multi Vitamines, Anti Emetics, Muscle Relaxant and Eye & Ear
Drops etc. Our other sister concern Axon Laboratories Pvt .Ltd. in most of the states of
India and is also out sourcing some of the products from Meneil Pharma and Scott Edil
Pharmacia Ltd . Their motto is to provide healthcare services at affordable cost to all our
customers at their door steps.
NUMBER OF SUPPLIERS There are about 150 suppliers from whom the company use to make purchases and then they further sell it to the customers with the help of 22 sales man.
Some of the suppliers are:
Company introduction
Company Name : SOOD MEDICINES TRADERS PRIVATE LIMITED
Nature of business : WHOLE SALE DEALER (STOCKIST) OF MEDICINES
Brand : MEDICINES
Status : PRIVATE LIMITED COMPANY
Turnover : 40 crore
Daily sales :
No of employees : 200
Total no of suppliers : 150
Total no of customers : 1500
Sale of medicine : 3121.28
Total dealers : 150
Managing Director : Anuj Sood
Date of Incorporation : 1989
MISSION OF THE COMPANY
To set up and to carry on the business of Manufacturing, refining, processing,
preparing, raising, Acquiring, buying, selling, importing, exporting, distributing and
dealing in the either of their own and/or as commission agent in all kinds of Ayurvedic,
Alialopathic, Homopathic, and Biochemic, medicines, Chemicals, Basic drugs, Crude
drugs, Herbs, Pharmaceutical formulation, food products, Aromatic chemicals cosmetics
and injectable.
To provide in India or elsewhere outside India know how in the manufacturing,
producing, processing and converting all kinds of Ayurvedic, homeopathic and
biochemic medicine, chemicals, basic drugs, crude drugs, herbs, pharmaceutical
formulation, food products, Aromatic Chemicals Cosmetics and injectable.
To manufacture, buy, sell, repack, C&F agents manipulate, import and export,
Distribute and Trade in or otherwise deal in all types of hospital requisites, toilet
requisites, surgical appliances and equipments, dental goods of all description, Optical
goods of all descriptions, vaternity medicines, Paints, pigments, varnishes, photographic
goods antibiotic, insecticides and Apparatuses and machinery for the testing and
manufactcture of the oforesaid articles and feeds and feed supplements.
OBJECTIVE OF THE STUDY
The main objective of the summer training programme is to make students familiar with the
practical aspect of the classroom learning. Therefore main objective of the present study is to
learn and experience the practical functioning of the organization, to evaluate the strength and
weaknesses of the company on the basis of their financial statements and to ascertain the
profitability of the company on the basis of analysis of its financial statements.
Following are the main objectives of the study:-
1. To be conversant with the financial results system and different planning and control
measures adopted by the company.
2. To know the different measure and way to make financial analysis a successful instrument
for planning and control purpose.
3. To study and review the present financial position of Sood Medicine Traders pvt Ltd (SMT).
(Hoshiarpur) for the purpose of better understanding of system and making it more effective.
4. To measure the growth rate of the organization.
5. To calculate the rate of profitability of the organization.
6. To find out the weakness of company working.
7. To find out the future prospect of the company and available opportunity in the near future.
RECRUITMENTRECRUITMENT
Diploma/Graduate are recruited. Recruitments is done trough following sources:
1) Campus interviews.
2) Employment exchange.
3) Advertisement.
Candidates are required to go through compulsory selection testes as
personality, typing, aptitude test and a series of functional tests by which
competence of the candidates at the cognitive level is assured.
Also the candidates have to undergo training up to a particular
level. Important factor considered while selection an individual are the set of
aptitude and values an individual possess, as this determines the ult imate
adjustments between organization and employee. Candidates with the necessary
aptitude under goes a selection test program based on assessment center
methodology. Those who are successful can jump almost four grades.
LEARNING THROUGH TRAININGLEARNING THROUGH TRAINING
All classes of employees are trained. Non-skilled are trained to become skilled
workers and skilled are trained to acquire multiple skills. Diploma and Graduate
are trained for one year. There are special management programs and classes. In
addition to the job related training all employees attend self-development
programs.
Memorandum Of Understanding
SMT has signed MOUs with various banks all over the country for
Medicine retail finance, which is giving a special impetus to company. It has
resulted in easy availabili ty of loans. The payment rotations have also become
faster from the dealers to the company, which helps cost cutting.
Following is the list of the banks:
CANARA BANK CAPITAL BANK
PUNJAB NATIONAL
BANK
BANK OF PUNJAB
FINANCIAL ANALYSIS
The term financial statement analysis includes both analysis and interpretation.
A distinction should, therefore, be made between the two terms. While the term
analysis is used to mean the simplification of financial data by methodical
classification of the data given in the financial statements, interpretation means
explaining the meaning and significance of the data so simplified. However both
analysis and interpretation are interlinked and complementary to each other.
Analysis is useless without interpretation and interpretation without analysis is
difficult or even impossible.
METHODS OR DEVICES OF FINANCIAL ANALYSIS
A number of methods are used to study the relationship between different
statements.
1. Ratio Analysis
2. Comparative Statements
3. Trend Analysis
4. Common-Size Statements
5. Fund Flow Analysis
6. Cash flow Analysis
The comparative financial statements are statements of the financial
position are different periods of time. The elements of financial posit ion are
shown in a comparative form of so as to give an idea of financial posit ion at two
or more periods.
The comparative statement may show:
1. Absolute figures (Rupee Amounts)
2. Changes in absolute figures i .e. increase or decrease in absolute figures.
3. Absolute data in terms of percentages.
4. Increase or Decrease in terms of percentages.
The analyst is able to draw useful conclusions when figures are
given in a comparative position. The figures of sales for a quarter, half-year may
tell only the present posit ion of sales efforts. When sales figures of previous
periods are given along with the figures of current period, then the analyst will
be able to study the trends of sales over different periods of time. Similarly,
comparative figures will indicate the trend and direction of financial position
and operating results .
RATIO ANALYSIS
MEANING OF RATIO
A ratio is assessment of the significant of one figure in relation to other. It
measures the comparative significant of individual item of income and position
statements. Thus i t shows the mathematical relationship between two related
items express in quantitative form.
WAYS OF EXPRESSION OF RATIO: - A ratio can be broadly expressed in three ways. It may be a
quotient. Obtained by dividing one value by other. In this unit of expressing 100
multiply the above quotient then unit of expression becomes a percentage. If 100
then unit of expression multiply the above quotient becomes a percentage. It
may also be expressed in the form of proportions between two figures.
RATIO ANALYSIS: -
Financial Analysis depends to a large extent on the use of ratio. A
direct examination of the magnitude of two related items is somewhat
enlightening but the comparison is greatly facil itated by expressing the
relationship as a ratio.
Meaning of Ratio Analysis:
An analysis of financial statements with the help of “Ratio” may be
termed as “Ratio analysis”. It implies the process of computing, determining &
presenting the relationship of items of financial statements. It also involves the
comparison & interpretation of these ratios & use of them for further
projections. It is with the help of ratios that the financial statement can be
analyzed more clearly & decisions made accruable & reliable from such
analysis. The judgment of the Management, seem to be made more easily when
they can be rationalized with the number. Thus the Ratio Analysis is a process
of comparison of figures against another and appraisal of ratios to make proper
analysis about the strengths & weaknesses of firm’s operations. So it is a
powerful analytical tool for measuring performance of an organization.
NATURE OF RATIO ANALYSIS: -
Despite the fact that there is no special in Ratio-Analysis as such, most creditors
investors intending to have some financial commitment in firm automatically
twin to a core of relationship for guidance as people prefer to work with data,
which appear to be concrete in nature. Quantitative Ratio-Analysis is not
capable of providing precise answer to all problems faced by a financial
manager or a potential fund supplier unless several ratios often related to one
another are computed & then alone the whole of ratio analysis acquires some
signature from the point of view of i ts users. Thus Ratio-Analysis is not an end
itself it is only a mean of better understanding of financial strengths &
weaknesses of a firm. The Ratio may be used as a symptom like Blood Pressure
the pulse rate on body temperature and this interpretation depends upon the
caliber & competence of the analyst.
INTERPRETATION OF RATIO : -
The importance of Interpretation of ratio lies when they prove as
useful true to financial analyst .
There are four different ways in which ratios may be interpreted.
1) INDIVIDUAL RATIOS : - The single ratio by itself may have
significance of i ts own. But one cannot draw any meaningful conclusions
when a single ratio is considered in isolation.
2) GROUP RATIO: - Ratios may be interpreted by expanding the analysis
& considering a group of several related ratios. In this way the ratio
whose significance is not fully understood are made more meaningful by
calculating Group Ratios.
3) HISTORICAL RATIOS : - This is the third approach of interpretation
of Ratio-Analysis, which involves making comparisons over time. Under
this the ratios are studied and compared over a period of years with the
results that significant trends indicating raise and falls on stabili ty are
indicated.
4) INTERFIRM RATIOS : - In this approach the ratios of any given firm
may be compared with the ratios of other firms in the same industry, such
comparisons are very significant where members of same industry face the
similar financial problems.
OBJECTIVE OF RATIO ANALYSIS :
Ratio-Analysis serves the purpose of various parties interested in financial
statements. The main object of Ratio-Analysis is to help management in analysis
and interprets the financial statement to get adequate information useful for the
performance of various functions like planning, coordinating, controll ing and
forecasting etc. although each ratio has some specific objective for a particular
use some general objects of Ratio-analysis are as given below:
1) Trends in costs, sales, profits and other related facts revealed by the past
ratios and future events can be forecasted on the basis of such ratios.
2) Ideal ratios may be constructed and relationship is found between
strategic ratios, which can be used for achieving desired c-ordination.
3) It also accomplishes the goals of communication. What has happened
during the two intervening periods can easily be communicated by ratios.
4) Ratio-Analysis can also be used as an instrument of managerial control
5) These are the indicators of managerial efficiency.
6) Inter-Firm comparisons can be made easily as ratios bring uniformity in
the financial data.
7) It also aims at making profitable investments.
NEED OF RATIO ANALYSIS: -
The need of ratio analysis due to following facts:
1) Business facts shown in financial statements do not carry any importance
individually. There importance l ies in the fact that they are interpreted.
Hence there is a need for establishing relationship between various related
items.
2) Ratio-analysis is a tool for interpretation of financial statements is also
needed because ratios have analyst to have a deep peep into the data given
in the financial statements.
CLASSIFICATION OF RATIOS: -
Many types of financial ratios may be used and the purpose for
which analysis is made will usually suggest emphasizing one set of ratios in
preference to another. Because different parties are interested in different ratios
for knowing the financial position of a firm for different purpose. The particular
purpose of the user determines the particular ratios that might be used for
financial analysis. Ratios calculated from the information given in financial
statements pertaining to different purposes are classified into different
categories.
LINE CHARTS
CURRENT RATIO :-
FORMULA: CURRENT ASSETS / CURRENT LIABILITIES
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
1.9 3.8 1.7 3.4 2.4
Current ratio of the company is satisfactory. In the last five years it stands at 1.9,3.8,1.7,3.4,2.4.
As per the ‘Rule of Thumb’, it should be in the ratio of 2:1, which shows the sound liquidity
position of the firm. Only in the year of 2005, 2007, it came down at 1.9,1.7 but the ratio shows
the improvement in liquidity position of the company. But the company that increases in the ratio
after limit is harmful for it should consider one thing. So proper steps should be taken to
maintain it at optimum level.
ACID TEST RATIO:-
FORMULA:
LIQUID ASSETS / CURRENT LIABILITIES
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.56 2.6 0.67 1.79 1.03
Quick ratio is complementary to the current ratio. It measures the firm’s capacity to payoff its current obligations and when they become due. The satisfactory norm for the liquid ratio is 1:1 is acceptable by law. In the last five years company’s liquid ratio stands at 0.56,2.6,0.71.8,1.03, which shows a satisfactory liquidity position of the concern. The increase in the ratio is due to the increase in the sundry debtors and loan & advance
ABSOLUTE LIQUID RATIO
FORMULA: - = ABSOLUTE LIQUID ASSETS
CURRENT LIABILITIES
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.1 0.3 0.1 0.6 0.3
Absolute liquidity ratio include ratio of cash, bank, marketable securities to
current liabili ties. The acceptable norm for i t is 0.50:1.the absolute liquid ratios
of the company are 0.10 ,0.27,0.096,0.63 and 0.3, which shows a satisfactory
position of the cash with the company. This ratio is fluctuating up & down with
the change in the position of cash and loan & advances of the company. But it
shows a satisfactory position of cash with the company.
EFFICENCY RATIOS
DEBTORS TURNOVER RATIO
FORMULA:
CREDIT SALES / AVERAGE DEBTORS
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 26.9 32.6 23.9 24.03 22.43
Debtor turnover ratio indicates the velocity of debt collection of the firm. there
is no rule of thumb for the Debtor turnover ratio. But a high Debtor Turnover
ratio indicates more efficient management of debtors. It throws light on the
collection and credit policies of the firm. but much higher ratio shows the
inability of the firm to sell its product on credit. The debtor turnover ratio for
the last five years of the company is 26.9,32.6,23.9,24.03,22.43.. Which shows a
satisfactory position of debtors in the company.
WORKING CAPITAL TURNOVER RATIO
FORMULA:
SALES/NET AVERAGE WORKING CAPITAL
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
5.6 4.8 14.4 10.1 8.9
Working capital is directly relates to the sales as i t is the difference between
current assets and current liabilit ies. Working capital turnover ratio indicates
the velocity of utilization of net working capital in the firm. This ratio indicates
the firm’s ability of generating sales per rupee of working capital. there is no
rule of thumb for this ratio but higher the ratio is considered good. The ratio of
the company for the last five years are 5.6,4.8,14.4,10.1,8.9.This show a
decrease in every year expect one year. So it is necessary for the company to
improve this ratio on higher side.
INVENTORY TURNOVER RATIO:-
FORMULA:
NET SALES/AVERAGE INVENTORY
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
11.2 12.9 10.6 12,2 10.9
A high Inventory Turnover ratio indicates the efficient management of inventory
because more frequently the stocks are sold; the lesser amount is required to
finance the inventory. It measures the relationship between cost of goods sold
and inventory level. On the other hand lower this ratio indicates inefficient
management of inventory. There is no rule of thumb for this ratio but higher the
ratio is considered good. The stock turnover ratio of the company for the last
five years are 11.2,12.9,10.6,12.2,10.9. which shows the fluctuation in it but
st ill it is satisfactory for the company.
SOLVENCY RATIOS
DEBT-EQUITY RATIO
FORMULA:
OUTSIDER’S FUND / SHAREHOLDER’S FUND
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.6 0.9 0.5 0.9 o.99
It establishes a link between the long-term funds from outsiders and long funds
available in the business. Though there is no thumb rule but st ill the lesser
reliance on outsiders will be better option. If this ratio is smaller it will be
favorable for the firm. There is no acceptable rule of thumb for this ratio but 50-
55% is tolerable and not beyond .the ratios of the company for the last five
years are 0.6,0.99,0.57,0.9,0.99.As the ratio should be less than 50% so we can
say that this ratio is absolutely under control.
EQUITY RATIO
FORMULA: SHAREHOLDER’S FUND TOTAL ASSETS
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.27 0.18 0.182 0.2 0.17
This ratio establishes the relationship between shareholder’s funds to total
assets of the firm. This ratio is an important ratio for determining long-term
solvency of firm. Higher the ratio, means better is the long-term solvency of the
firm. This ratio indicates the extent to which the assets of company can be lost
without affecting the interest of the creditors. In the firm this ratio is increasing
year by year. It is 0.27,0.18,0.18,0.2,0.17 in the last five years. So we can say
that the firm is strengthening year by year.
FUNDED DEBT TO TOTAL CAPITALISATION : -
FORMULA: FUNDED DEBT X 100 TOTAL CAPITALISATION
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 0.9 0.95 0.56 0.67 0.69
It establishes a link between the long-term funds from outsiders and long funds
available in the business. Though there is no thumb rule but st ill the lesser
reliance on outsiders will be better option. If this ratio is smaller it will be
favorable for the firm. There is no acceptable rule of thumb for this ratio but 50-
55% is tolerable and not beyond .the ratios of the company for the last five
years are 0.93,0.95,0.55,0.67,0.69.As the ratio should be less than 50% so we
can say that this ratio is absolutely under control.
PROFITABILITY RATIOS
NET PROFIT RATIO
FORMULA: NET PROFIT (BEFORE TAX) X 100 SALES
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009 0.03 0.06 0.07 0.14 0.2
This ratio is very useful as if the profits are not sufficient the firm shall not be
able to achieve a satisfactory return on investment. This indicates the firm’s
capacity to face the adverse situations. Higher the ratio better will be
profitabili ty. The ratios for the last five years for the company are
0.03,0.06,0.07,0.14,0.19. The net profit of the firm is not stable and fluctuates
year by year. The company should try to make growth in net profit by efficiency
of management in manufacturing, selling, administration and other activit ies of
the company and be in the position to earn the faith of the customers.
GROSS PROFIT RATIO:
FORMULA: PROFIT (BEFORE TAX) / SALES X 100
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
6.5 7.4 6.5 3.4 6.6
Gross profit ratio reflects the efficiency with which a firm produces i ts products. There are no standard norms for gross profit, but should be adequate to cover the operating expenses. A lower ratio indicates high cost of goods sold due to unfavorable purchasing policies, lesser sales; over investment etc. the G.P ratios of the company for the last five years are 6.5,7.4,6.5,3.4,6.6. which shows a fluctuating trend in profit. So company need to take necessary action to control it .
RETURN ON INVESTMENT
FORMULA: NET PROFIT (AFTER TAX) X 100 SHAREHOLDER’S FUND
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.21 0.97 1.0 2.07 2.09
It shows the relationship between net profits and shareholder’s fund. This ratio
is one of the important ratios used for measuring the overall efficiency of the
firm. This ratio reveals the how well the resources of a firm are being used.
Higher the ratio better will be the results. If we ignore the year of 2004-05, it is
on decreasing side, which is not good from the company point of view. So the
management of the company should take necessary action to improve this ratio
RETURN ON ASSETS
FORMULA: PROFIT AFTER TAX X 100 TOTAL ASSETS
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.25 0.37 1 1 0.35
It shows the relationship between net profits and shareholder’s fund. This ratio
is one of the important ratios used for measuring the overall efficiency of the
firm. This ratio reveals the how well the resources of a firm are being used.
Higher the ratio better will be the results. The R.O.I Ratios for the last five
years for the company are 0.25,0.37,1,1,0.35.
EARNING PER SHARE
FORMULA: PROFIT AFTER TAX NO. OF PAID UP EQUITY SHARES
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.75 7.15 3.7 7.7 7.9
This is a good measure of profitability. It is calculated to know that weather the
earning power of the firm has increased or not. In ITL this ratio shows a
continuous increasing trend from the last four years. The EPS ratios for the last
five years for the company are 0.75,7.15,3.7,7.7,7.9 which shows that company
has excellent profitabili ty and seems satisfactory for the company
LEVERAGE RATIOS
CAPITAL GEARING RAITO:
FORMULA: EQUITY SHARE CAPITL + RESERVE & SURPLUS – LOSSES PREF. SHARE CAPITAL + DEBENTURE + LONG TERM DEBT
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.78 0.37 0.39 0.29 1.57
The term capital gearing used to describe the relationship between equity share
capital including Reserve & surplus and preference share capital plus other fixed
interest bearing loans. The firm is said to be in high gear if preference capital &
fixed interest bearing loans exceed equity share capital and reserve & surplus.
The ratios for the company for the last five years are 0.78,0.37,0.39,0.299,1.57.
The Company is always in low gear as equity capital plus reserve & surplus are
always is more than fixed interest bearing long term loans. So company is in
good position according to capital gearing ratio.
RATIO OF RESERVES TO EQUITY CAPITAL
FORMULA: RESERVES X 100 EQUITY SHARE CAPITAL
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
53.5 57.7 60.04 64.70 69.45
This ratio establishes relationship between reserves and equity capital. This
ratio is important to know that how much profits are retained by the company
for the future growth. Generally higher the ratio better is the position of the
company. As we analyzed the financial statements of SMT we find that over the
years, SMT has been able to build very large amount of reserve, which are,
much more than its equity share capital .
RATIO OF CURRENT LIABILITIES TO SHAREHOLDER’S FUND: -
FORMULA: CURRENT LIABILITIES SHAREHOLDER’S FUND
2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
1.5 2.3 2.7 1.25 2.1
SCHEDULE FOR CHANGES IN WORKING CAPITAL
FOR THE YEAR 2004-2005
PARTICULAR 2004 2005 INCREASE DECREASE
CURRENT
ASSETS
INVENTORIES 22526663.00 22100397 _ 426266
SUNDRY
DEBTOR
11219692.25 7362817.28 _ 3856874.97
CASH & BANK 35417647.79 31340793.98 _ 4076853.81
LOAN &
ADVANCES
_ _ _ _
TOTAL (A)
69164003.04 789722918.98 8359994.78
CURRENT
LIABILITIES
25154289.47 16456422.28 8697867.19 _
TOTAL (B)
25154289.47 16456422.28 8697867.19 _
NET WORKING
CAPITAL (A-B)
44009713.57 773266496.7 _ _
INCREASE IN
WORKING
CAPITAL
729256783.13 _ _ _
NET AFFECT _ _ _ _
SCHEDULE FOR CHANGES IN WORKING CAPITAL
FOR THE YEAR 2005-2006
PARTICULAR 2005 2006 INCREASE DECREASE
CURRENT
ASSETS
INVENTORIES 22100397 30125520.57 8025123.57 -
SUNDRY
DEBTOR
7362817.28 13336271.99 5973454.71 -
CASH & BANK 31340793.98 50616514.67 19275720.69 -
LOAN &
ADVANCES
_ 2223120.58 2223120.58 -
TOTAL (A)
60804008.26 96301427.81 35497419.55 -
CURRENT
LIABILITIES
16456422.28 25367634.14 8911211.86
TOTAL (B)
16456422.28 25367634.14 - 8911211.86
NET WORKING
CAPITAL (A-B)
44347585.98 70933793.67
INCREASE IN
WORKING
CAPITAL
26586207.69
NET AFFECT
SCHEDULE FOR CHANGES IN WORKING CAPITAL
FOR THE YEAR 2006-2007
PARTICULAR 2006 2007 INCREASE DECREASE
CURRENT
ASSETS
INVENTORIES 30125520.27 33035225 2909704.73 -
SUNDRY
DEBTOR
13336271.99 14735723.60 1399451.61 -
CASH & BANK 50616514.67 3194597.74 - 47421916.93
LOAN &
ADVANCES
2223120.58 1864581.84 - 35853874
TOTAL (A)
96301427.81 52830128.18 - -
CURRENT
LIABILITIES
25367634.14 29518096.46 4150462.32
TOTAL (B)
25367634.14 29518096.46 - 4150462.32
NET WORKING
CAPITAL (A-B)
70933793.37 23312031.72
INCREASE IN
WORKING
CAPITAL
26586207.69
NET AFFECT
SCHEDULE FOR CHANGES IN WORKING CAPITAL
FOR THE YEAR 2007-2008
PARTICULAR 2007 2008 INCREASE DECREASE
CURRENT
ASSETS
INVENTORIES 33035225 22713593.54 - 10321631.46
SUNDRY
DEBTOR
14735723.60 13785750.26 - 949973.34
CASH & BANK 3194597.74 8993265.83 5798668.09 -
LOAN &
ADVANCES
1864581.84 2571428.68 706846.84 -
TOTAL (A)
52830128.18 48064038.31 - -
CURRENT
LIABILITIES
29518096.46 14087853.82 15430242.64
TOTAL (B)
29518096.46 14087853.82 -
NET WORKING
CAPITAL (A-B)
23312031.72 33976184.49
INCREASE IN
WORKING
CAPITAL
10664152.77
NET AFFECT
SCHEDULE FOR CHANGES IN WORKING CAPITAL
FOR THE YEAR 2008-2009
PARTICULAR 2008 2009 INCREASE DECREASE
CURRENT
ASSETS
INVENTORIES 22713593.54 34158648.25 11445054.71
SUNDRY
DEBTOR
13785750.26 14047661.02 261910.76
CASH & BANK 8993265.83 8069023.90 924241.93
LOAN &
ADVANCES
2571428.68 3060180.55 488751.87
TOTAL (A)
48064038.31 59335513.72 12195717.34 924241.93
CURRENT
LIABILITIES
14087853.82 24349003.44 10261149.62
TOTAL (B)
14087853.82 24349003.44 - 10261149.62
NET WORKING
CAPITAL (A-B)
33976184.49 34986510.28
INCREASE IN
WORKING
CAPITAL
1010325.79
NET AFFECT
MEANING OF BUSINESS FINANCE AND ITS IMPORTANCE
FOR BUSINESS
Finance is an indispensable for any business. It is as important to a business as
blood streams to a person. It is foundation of sound management.Business
finance is the provision of money at the time when it is required. Every
enterprise big or small , private or public, sole trader or partnership needs
finance to carry on its operations, to run the business smoothly, to stand
comfortable in the highly competitive market and finally to accomplish its
targets. Moreover finance is needed for meeting short-term requirements
(working capital) and for vital permanent investments in the fixed assets.
IMPORTANCE OF FINANCE FOR A BUSINESS
Finance is just like lubricant oil that oils the engine of enterprise
and helps i t to run smoothly. Every business needs finance to complete their
jobs such as to promote or establish the business, to acquire fixed assets for
research and development for making investigations, create values, quality
control, to keep right men at right job and for efficient management control
system. The importance of the finance can be evaluated from following points: -
1. Proper allocation of funds.
2. To increase or improve profits.
3. To increase savings and investments.
4. Acquisition of assets.
5. Helps in financial planning and controlling functions.
6. To increase goodwill of the company.
7. To satisfy investors.
8. To acquisition of funds as and when required at minimum possible
cost.
LITRATURE REVIEW
Different type of l iterature is studied while preparing this report which includes:
1) CONCEPTUAL LITRATURE :
Conceptual l iterature is that l iterature which relates with concepts and
theories. Help from the different books should be taken for studying different
concepts & theories.
2) EMPERICAL LITERATURE:
Empirical li terature consists of study made by other persons in the same field
that is similar to i t.
3) Published data in newspapers such as Financial Express, Business
Standard and Denik Bhaskar etc.
4) Books and magazines available in the organization library.
5) Discussion with the people of the organization.
6) Study of Audit Reports and Balance Sheets of the company of last five
years.
RESEARCH METHODOLOGY
The present chapter explains the objective of the study and methodology
adopted to achieve those objectives. The main objective of the summer training program
is to make students familiar with the practical aspect of the classroom learning. Therefore
aim objective of the present study is to learn and experience the practical functioning of
the organization to evaluate the strength and weakness of the company on the basis of
their financial statements and to ascertain the profitability of the company on the basis of
the analysis of its financial statements.
The whole research work can be described in following steps:-
1. Recognition of Information: - The very first step is the recognition of various
types of information, which in necessary for the study of financial ratio-analysis.
2. Collection of Data:- Collecting the required information from accounts
department carried out by the study of the financial performance of (ITL)
International Tractor Limited (Hoshiarpur). Base for the study is published &
unpublished records prepared by accounts department. Mainly the information is
secondary is nature, in order to understand the present system of financing data
conducting personal interviews has collected from various departments.
3. Understanding of reports being prepared by the Units:- For understanding
the various types of reports being set to finance departments by different sections,
personal interviews have been conducted with the concerned person with prior
permission from concerned department head.
METHODOLOGY
Collecting the required information from accounts department carried out
the study of the financial performance of SMT Hoshiarpur. Base for the study is
published and unpublished records prepared by accounts department. Mainly the
information is secondary in nature but direct conservation with accounts department also
was used for the study.
Study of various Financial Statements:- For better understanding various ratio have
been calculated and comparative statements are prepared.
1 Calculation of Ratio & Their Interpretation:- By comparing the ratio of
different years the analysis in made and various strengths and weakness of the firm
is mentioned out.
2 Identification of Strength and weakness of the Financial Statement:- The
strength & weakness of the financial statements have been observed in the light of
the requirement of various types of information and adequacy and sufficiency of
the reports being sent to the unit
SAMPLING & SAMPLING DESIGN
Sampling design is a definite plan for obtaining a sample in a given population.
It refers to the techniques or procedure which would adopt in selecting item for
the sample.
FEATURES OF SAMPLE DESIGN
Sample design must result in a true representative sample of the
population.
Sample design should be with small sampling errors
It must be viable in context of availabili ty of time and funds.
It should be such so that systematic bias can be controlled.
It should be such that the result of the sample study can be applied for
universe with reasonable level of confidence.
TYPE OF SAMPLE DESIGN USED
For preparing this report , mainly the Exploratory Research Design is used. In
exploratory research design, we try to discover the new relationship between
two or more variables. The different types of research design used in
exploratory research design are as follow:
EXPERIENCE SURVEY :
Experience survey means survey of peoples who have practical knowledge or
experience with the problem to be studied. its main objective is to obtain insight
into the relationship between variable and new ideas relating to the study.
ANALYSIS OF INSIGHT STIMULATING
It is the most fruitful method of suggesting hypothesis for research. This method
consists of the intensive study of selected instances of the phenomenon in which
one is interested. For this purpose Existing records may be examined,
Unstructured interviews may take place or some other approaches may be
adopted.
SURVEY OF CONCERNING LITRATURE
IT is the most fruitful and simple method of collecting information regarding the
research problem or developing hypothesis. Literature includes study of
different magazines and journals, newspapers, company reports, and other
published or unpublished data.
TOOLS AND DEVICES OF THE STUDY:
For analyzing the financial performance of the company the various tools or
devices can be used such as:
a. Comparative Statements
b. Common Size Statements
c. Trend Analysis
d. Ratio Analysis
e. Schedule of change in working capital.
f. Cash Flow Statements
In the present study only four devices are used to analyze the financial
performance of the company, which are as under: -
1. Comparative Statements Analysis
2. Ratio Analysis
3. Common Size Statements
4. Trend Analysis
PERIOD UNDER OBSERVATION
The present study relate to the financial year 2005-2006. The other
data is also observed for the period from 2001-02 to 2005-06.
DATA COLLECTON
Mainly two techniques of data collection is used in this report which area as
follow:
1) OBSERVATION METHOD
2) UNSTRUTURED PERSONAL INTERVIEW METHOD.
OBSERVATION METHOD
Observation deals with obtaining information that is already recorded or deals
with the objectives. In this method, the efforts, t ime and cost involved are high
but it provides more accurate and reliable data. The accuracy of data depends
upon the capacity of observer to perceive and recording the people’s behavior.
PERSONAL INTERVIEW METHOD
This method helps in obtaining a great range of data although it requires more
time, efforts and funds. It should be conducted after establishing sufficient
rapport or level of understanding with the respondent. It provides the
opportunity to interpret and collect information as per the objective. The
interviewer has to be very apt and experienced to collect adequate and proper
information from the respondent. This method helps in obtaining much reliable
and accurate data from the respondent.
LIMITATIONS OF THE STUDY
1. All the techniques or tools available for financial performance
analysis are not used; only comparative statement, analysis, common
size statement and trend analysis and ratio analysis have been used for
analysis.
2. The ratios have been interpreted by comparing the standard with the
actual wherever these are available in literature. So cent percent
accuracy cannot be claimed.
3. The data may not be accurate.
4. Time was the major limitation.
5. Rely upon the information supplied by the organizations & various
departments.
6. There are not proper arrangements for the trainees.
.