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Financial Analysis Of Wipro LTD

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Category: BusinessAutor: antoni 08 March 2011Words: 11721 | Pages: 47

A

Project Report

On

Financial Analysis

Of

Presented to

Prof. Kumar Mitra Dutta

Faculty Member

Calcutta Business School

On

December 23rd , 2010

In the partial fulfillment of the requirements for

Management Accounting Course in the Master of PGDM 2010-12

By:

Rajdeep Laha (Roll No.11)

Preface

As a part of our syllabus of MBA programme in Semester-I, we are assigned somepractical and theoretical project work. In partial fulfillment of the ManagerialAccounting-I, course we have prepared a comprehensive project report in FinancialAnalysis of the company.

Study of management will be immaterial if it is not coupled with study of financial aspectof the business. It gives the student an opportunity to learn the connection between
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comparison & execution to test & verify application of theories & help inthe comparison of management theories and practice. The study gives a chance to knowabout the profitability and financial position of the firm.

We have chosen Wipro Limited which is a $3.5 Billion Global company in InformationTechnology Services ,R&D Services, Business Process Outsourcing.

This report contains the analysis of the 5 years data of the company. The Financialstatements of the report are analyzed in three different ways such as

Trend Analysis

Horizontal Analysis

Ratio Analysis

Cashflow Analysis

The ratio analysis of the company has been derived for 23 ratios which help to determinethe company's performance. In the Scenario Analysis of the company we have includedthe company's industrial GDP, its Market Share, Market Capitalization, Market Growthetc.

Date: 23th December ,2010 Rajdeep Laha (RollNo.11)

Place: Kolkata

Acknowledgement

With a sense of gratitude and respect, we would like to extend our heartiest thanks to allof those who provided help and guidance to make this project a big success. No Project isever the outcome of single individual's talent or effort. This work is no exception. Thisproject would not have been possible without the whole hearted encouragement, supportand co-operation of our guide, friends and well-wishers. Although it is not possible for usto name and thank them all individually, we must make special mention of some of thepersonalities and acknowledge our sincere indebtness to them.

The successful completion of this project rests on the shoulder of many persons who havehelped us directly or indirectly. We wish to take this opportunity to express to all those,without whose help, completion of this project would have been difficult. We are

indebted and thankful to all the individuals who have guided, advised, inspired andsupported us in making this project a success.

Our gratitude to our honorable guide Prof. Nikunj Patel for giving us the opportunity fordeveloping the project and his able guidance, inestimable motivation and constantencouragement throughout our project. Without his help this project would never havebeen realized in its entirety.


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We are especially thankful to our Head Of Department Prof. Bhavin Pandya for hisvaluable support in providing us the facilities and his valuable guidance for thedevelopment of this project.

Date: 20th December ,2008 Ashwin Chaudhary (Roll No.5)

Place: Kadi Priyanka Mehata (Roll No.)

Executive Summary

It is Summarize tin of all report in one or two pages so as to provide an overview of thecompany. it is also called synopsis or Abstract. As a partials fulfillment of therequirement for the Managerial Accounting Cource.We have completed a project reporton financial Analysis of Wipro Ltd.

Sales Figure is increasing at a handsome rate. it is at Rs. 58400.23 Million. in 2003-04and it is increased to Rs. 141395.8 Million. So Sales is increased 75.05% because of

aggressive Selling Policy.

Profit after Tax is also increasing as compare to 2003-04 it is increasing 22514 Millionat Rs 3408, 8747, 4388.6, 5970.4, respectivaly last four year. This is because companyhas increased it sales and doing good cost management

Net worth of the company is increased in this year because of increase in Reserve& Surplus

Current Ratio of Wipro limited is showing good position. It is 1.26 Times in 2003-04then it is increased to 2.13 Times in 2007-08 this shows Company has achieved standardRatio.

The returns on the investment is some what decline in current year.

The EPS of Share is increased Rs. 7.43 to Rs 20.62 in 2007-08 So Share holder arebenefited.

Company's Total Assets are increased and it trying to expand its business on the otherhand debt are also increased it shows that company trying to Trading on Equity.

After analyzing all aspect Company's performance is good.

CONTENT

Preface

Acknowledgement

Executive Summary

1. INTRODUCTION


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1.1 Introduction to company

1.2 Group of companies

1.3 History

1.4 Company Profile

1.5 Registered office address

1.6 Board of director

1.7 Auditor

2. ANALYSIS OF BALANCE SHEET

2.1 Trend analysis of Balance sheet

2.1.1 Trend analysis of fixed assets

2.1.2 Trend analysis of total current assets

2.1.3 Trend analysis of share holders equity

2.1.4 Trend analysis of total current assets

2.1.5 Share holder's fund

2.1.6 Sources of fund

2.1.7 Investment

2.1.8 Application of funds

2.2 Horizontal analysis of Balance sheet

2.2.1 Sources of fund 2008

2.2.2 Application of fund 2008

2.2.3 Sources of fund for five years

2.2.4 Application of fund for five years

3. ANALYSIS OF P & L ACCOUNT

3.1 Trend analysis of P & L

3.1.1 Trend analysis of total income

3.1.2 Profit after tax


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3.1.3 Transfer to general reserve

3.1.4 Net sales and services

3.2 Horizontal analysis of P & L

3.2.1 Comparison of PBT and Income with expenditure

4. CASH FLOW ANALYSIS

4.1 Introduction

4.2 Cash flow statement

4.3 Interpretation of Cash flow statement

5. RATIO ANALYSIS

5.1 Introduction of the ratio analysis

5.2 Liquidity ratio

5.2.1 Current ratio

5.2.2 Quick ratio

5.2.3 Net working capital

5.3 Profitability ratio

5.3.1 Gross profit

5.3.2 Operating ratio

5.3.3 Net profit ratio

5.3.4 Return on investment

5.3.5 Return on equity

5.4 Assets turnover ratio

5.4.1 total asset turn over ratio

5.4.2 net fixed asset turn over

5.4.3 inventory turn over ratio

5.4.4 average age of inventories

5.4.5 debtor turn over ratio


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5.5 Finance structure ratio

5.5.1 debt ratio

5.5.2 debt equity

5.5.3 interest coverage ratio

5.6 Valuation ratio

5.6.1 earning per share

5.6.2 divident pay out ratio

5.6.3 P/E ratio

5.6.4 Profit margin ratio

5.7 Du-Pont chart

6. SCENARIO ANALYSIS

6.1 business unit performance

6.2 company analysis

6.2.1 Share holding pattern

6.2.2 Market capitalization

7 ANNEXURES

8 BIBLIOGRAPHY

Chapter 1.

Introduction

Introduction to company

Group Companies

History

Company Profile

Registered Office Address

Board of Directors

Auditors


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________________________________________

1. INTRODUCTION

1.1. Introduction of company

Wipro Limited (Wipro), together with its subsidiaries and associates (collectively, thecompany or the group) is a leading India based provider of IT Services and Products,including Business Process Outsourcing (BPO) Services, globally. Further,Wipro hasother business such as India and AsiaPac IT Services and products and Consumer Careand Lighting. Wipro is headquartered in Bangalore, India.Wipro Technologies is a globalservices provider delivering technology-driven business solutions that meet the strategicobjectives clients. Wipro has 40+ Centers of Excellence' that create solutions aroundspecific needs of industries. Wipro delivers unmatched business value to customersthrough a combination of process excellence, quality frameworks and service deliveryinnovation. Wipro is the World's first CMMi Level 5 certified software services companyand the first outside USA to receive the IEEE Software Process Award.

Wipro is a $3.5 billion Global company in Information Technology Services, R&D

Services, Business process outsourcing. Team wipro is 75,000 Strong from 40nationalities and growing. Wipro is present across 29 counries,36 Development canters,Investors across 24 countries.

Largest third party R&D Service provider in the world.

Largest Indian Technology Infrastructure management service provider.

A vendor of choice in the middle east

Among the top 3 Indian BPO Service provider by Revenue (* Nasscom)

Among the top 2 Domestic IT Services companies in India (*IDC India)

1.2. Group Companies

Wipro Infrastructure Engineering Ltd.

Wipro Inc.

cMango Pte Ltd.

Wipro Japan KK

Wipro Shanghai Ltd.

Wipro Trademarks Holding Ltd.

Wipro Travel Services Ltd.


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Wipro Cyprus Private Ltd.

Wipro Consumer Care Ltd.

Wipro Health Care Ltd.

Wipro Chandrika Ltd.(a)

Wipro Holdings (Mauritius) Ltd.

Wipro Australia pty Ltd.

WMNETSERV Ltd.(a)

Quantech Global Service Ltd.

3D Network Pte Ltd.

Planet PSG Pte Ltd.

Spectramind Inc.

1.3. History

Wipro started in 1945 with the setting up of an oil factory in Amalner a small town inMaharashtra in Jalgaon District. The product Sunflower Vanaspati and 787 laundry soap(largely made from a bi-product of Vanaspati operations) was sold primarily inMaharashtra and MP. The company was aptly named Western India Products Limited.

The Birth of the name Wipro - As the organization grew and diversified into operationsof Hydraulic Cylinders and Infotech, the name of the organization did not adequatelyreflect its operations. Azim Premji himself in 1979 selected the name"Wipro" largely an acronym of Western India Products. Thus wasborn the Brand Wipro. The name Wipro was unique and gave the feel of an'International" company. So much so that some dealers even sent their chequesfavouring Wipro (India) Limited. Fortunately, the banks accepted them!!By the early 90s,Wipro had grown into various products and services. The Wipro product basket hadsoaps called Wipro Shikakai, Baby products under Wipro Baby Soft, Hydraulic Cylindersbranded Wipro, PCs under the brand name Wipro, a joint venture company with GEnamed Wipro GE and software services branded Wipro. The Wipro logo was a

'W", but it was not consistently used in the products.It was clearly felt that theorganization was not leveraging its brand name across the various businesses. The mainissue remained whether a diverse organization such as Wipro could be branded under auniform look and feel and could there be consistent communication about Wipro as anorganization.

1.4. Company Profile


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Business-Description

Wipro Limited is the first PCMM Level 5 and SEI CMM Level 5 certified IT ServicesCompany globally. Wipro provides comprehensive IT solutions and services, includingsystems integration, Information Systems outsourcing, package implementation, softwareapplication development and maintenance, and research and development services tocorporations globally.

The Group's principal activity is to offer information technology services. The servicesinclude integrated business, technology and process solutions including systemsintegration, package implementation, software application development and maintenanceand transaction processing. These services also comprise of information technologyconsulting, personal computing and enterprise products, information technologyinfrastructure management and systems integration services. The Group also offersproducts related to personal care, baby care and wellness products. The operations of theGroup are conducted in India, the United States of America and Other countries. Duringfiscal 2007, the Group acquired Wipro Cyprus Pvt Ltd, Retailbox Bv, Enabler

Informatica SA, Enabler France SAS, Enabler Uk Ltd, Enabler Brazil Ltd, Enabler andRetail Consult GmbH, Cmango Inc, Cmango (India) Pvt Ltd, Saraware Oy, QuantechGlobal Services and Hydroauto Group AB

Global IT Services and Products

The Company's Global IT Services and Products segment provides IT services tocustomers in the Americas, Europe and Japan. The range of its services includes ITconsulting, custom application design, development, re-engineering and maintenance,systems integration, package implementation, technology infrastructure outsourcing,BPO services and research and development services in the areas of hardware and

software design. Its service offerings in BPO services include customer interaction

services, finance and accounting services and process improvement services for repetitiveprocesses.

The Global IT Services and Products segment accounted for 74% of the Company'srevenues and 89% of its operating income for the year ended March 31, 2007 (fiscal2007). Of these percentages, the IT Services and Products segment accounted for 68% ofits revenue, and the BPO Services segment accounted for 6% of its revenue during fiscal2007.

Customized IT solutions

Wipro provides its clients customized IT solutions in the areas of enterprise IT services,technology infrastructure support services, and research and development services. TheCompany provides a range of enterprise solutions primarily to Fortune 1000 and Global500 companies. Its services extend from enterprise application services to e-Businesssolutions. Its enterprise solutions have served clients from a range of industries, includingenergy and utilities, finance, telecom, and media and entertainment. The enterprise


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solutions division accounted for 63% of its IT Services and Products revenues for thefiscal 2007.

Technology Infrastructure Service

Wipro offers technology infrastructure support services, such as help desk management,

systems management and migration, network management and messaging services. TheCompany provides its IT Services and Products clients with around-the-clock supportservices. The technology infrastructure support services division accounted for 11% ofWipro's IT Services and Products revenues in fiscal 2007.

Research and Development Services

Wipro's research and development services are organized into three areas of focus:telecommunications and inter-networking, embedded systems and Internet accessdevices, and telecommunications and service providers.The Company provides softwareand hardware design, development and implementation services in areas,

such as fiber optics communication networks, wireless networks, data networks, voiceswitching networks and networking protocols. Wipro's software solution for embeddedsystems and Internet access devices is programmed into the hardware integrated circuit(IC) or application-specific integrated circuit (ASIC) to eliminate the need for running thesoftware through an external source. The technology is particularly important to portablecomputers, hand-held devices, consumer electronics, computer peripherals, automotiveelectronics and mobile phones, as well as other machines, such as process-controlledequipment. The Company provides software application integration, network integrationand maintenance services to telecommunications service providers, Internet serviceproviders, application service providers and Internet data centers.

Business Process Outsourcing Service

Wipro BPO's service offerings include customer interaction services, such as IT-enabledcustomer services, marketing services, technical support services and IT helpdesks;finance and accounting services, such as accounts payable and accounts receivableprocessing, and process improvement services for repetitive processes, such as claimsprocessing, mortgage processing and document management. For BPO projects, theCompany has a defined framework to manage the complete BPO process migration andtransition. The Company competes with Accenture, EDS, IBM Global Services,Cognizant, Infosys, Satyam and Tata Consultancy Services.India and AsiaPac ITServices and Products

The Company's India and AsiaPac IT Services and Products business segment, which isreferred to as Wipro Infotech, is focused on the Indian, Asia-Pacific and Middle-Eastmarkets, and provides enterprise clients with IT solutions. The India and AsiaPac ITServices and Products segment accounted for 16% of Wipro's revenue in fiscal 2007. TheCompany's suite of services and products consists of technology products; technologyintegration, IT management and infrastructure outsourcing services; custom application


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development, application integration, package implementation and maintenance, andconsulting

Wipro's system integration services

Include integration of computing platforms, networks, storage, data center and enterprise

management software. These services are typically bundled with sales of the Company'stechnology products. Wipro's infrastructure management and total outsourcing servicesinclude management and operations of customer's IT infrastructure on a day-to-day basis.The Company's technology support services include upgrades, system migrations,messaging, network audits and new system implementation. Wipro designs, develops andimplements enterprise applications for corporate customers. The Company's solutionsinclude custom application development, package implementation, sustenance ofenterprise applications, including industry-specific applications, and enterpriseapplication integration. Wipro also provides consulting services in the areas of businesscontinuity and risk management, technology, process and strategy.

Consumer Care and Lighting

Wipro's Consumer Care and Lighting business segment accounted for 5% of its revenuein fiscal 2007. The Company's product lines include hydrogenated cooking oil, soaps andtoiletries, wellness products, light bulbs and fluorescent tubes, and lighting accessories.Its product lines include soaps and toiletries, as well as baby products, using ethnicingredients. Brands include Santoor, Chandrika and Wipro Active. The Wipro Baby Softline of infant and child care products includes soap, talcum powder, oil, diapers andfeeding bottles and Wipro Sanjeevani line of wellness products.

The Company's product line includes incandescent light bulbs, compact fluorescent

lamps and luminaries. It operates both in commercial and retail markets. The Companyhas also developed commercial lighting solutions for pharmaceutical production centers,retail stores, software development centers and other industries. Its product line consistsof hydrogenated cooking oils, a cooking medium used in homes, and bulk consumptionpoints like bakeries and restaurants. It sells this product under the brand name WiproSunflower.

1.5. Registered Office Address

WIPRO LIMITED

Doddakannelli, Sarjapur Road,

Bangalore 560 035, India.

Tel : +91-80-28440011

Fax : +91-80-2844054

1.6. Board of Directors


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Azim H . Premji Chairman

Dr Ashok S Ganguly Former Chief Ex.Officer Nortel

B .C. Prabhakar Practitioner of Law

Dr. Jagdish N. Sheth Professor Of Marketing-Emory Uni.Usa.

N.Vagual Chairman-ICICI Bank Ltd

Bill Owens Former Chief Ex.Officer,Nortel

P. M. Sinba Former Chairman Pepsico India Holdings

1.7. Auditors

KPMG

BSR & Co.

Audit committee

N Vaghul - Chairman

P M Sinha - Member

B C Prabhakar - Member

Board Governance and Compensation Committee

Ashok S Ganguly - Chairman

N Vaghul - Member

P M Sinha - Member

Shareholders' Grievance and Administrative Committee

B C Prabhakar - Chairman

Azim H Premji - Member

Chapter 2.

Analysis of Balance Sheet

Trend Analysis of Balance Sheet

Horizontal Analysis of Balance Sheet

________________________________________


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2. ANALYSIS OF BALANCE SHEET

________________________________________

2.1. Trend Analysis of Balance Sheet

Trend Analysis of Balance Sheet involves calculation of percentage changes in theBalance Sheet items for a no. of successive years. This is carried out by taking the itemsof the past financial year used as base year and items of other years are expressed aspercentage of the base year. Here 2003-04 is taken as base year

Perticular 2003-04 2004-05 2005-06 2006-07 2007-08

SOURCES OF FUNDS

Share Holder's Funds

Share Capital 100 302.27 202.68 207.37 100.171

Share application money pending allotment 100 622.41 290.456 114.286

Reserves & Surplus 100 138.62 122.94 180.99 122.516

Share holder's Equity 100 140.68 125.18 181.718 121.833

Loan Funds 100

Secured 100 22.786 208.9 689.7 139.154

Unsecured 100 382.54 75.796 577.241 1829.68

Total Loan Funds 100 58.947 122.08 616.343 1171.94

Minority Interest 100 161.94 - 10.929 400

Total Sources of Funds 100 138.55 124.53 149.283 162.162

APPLICATION OF FUNDS

Fixed assets

Goodwill 100 107.82 62.297 268.622 445.384

Gross Block 100 133.91 118.74 142.195 159.492

Less:

Accumulated Depreciation 100 130.95 129.74 147.107 147.775

Net Block 100 136.72 108.75 153.667 154.22


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Capital work in progress and advances 100 182.43 240.03 163.056 131.194

Total Fixed Assets 100 130.83 112.84 175.077 220.726

Investments 100 123.33 131.09 107.909 48.1879

Deferred Tax Assets(Net) 100 101.79 120 99.3266 89.661

Current Assets, Loans & Advances

Inventories 100 135.23 118.19 200.969 160.578

Sundry Debtors 100 130.78 137.08 138.168 137.637

Cash & Bank Balances 100 176.2 155.03 223.775 198.113

Loan & Advances 100 97.872 230.42 127.844 180.692

Total Current Assets 100 129.24 157.71 154.955 166.304

Less:

Current Liabilities & Provisions

Current Liabilities 100 143.26 145.4 181.719 118.484

Provisions 100 61.257 239.3 63.3118 180.879

Total Liabilities 100 102.82 172.99 133.59 130.504

Net Current Assets 100 231.52 131.44 203.29 219.526

Total Application of Funds 100 138.55 124.53 149.283 162.162

Table 2.1.1 Trend Analysis of Balance Sheet

2.1.1 Trend Analysis of Fixed assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08


Table 2.1.2 Trend Analysis of Fixed assets

Figure 2.1.1 Trend Analysis of total fixed assets

Interpretation

The fixed assets are increase in current year is good for the company.


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Hear fixed assets are increasing as a increasing rate it means the company has expandit's business.

Fixed Assets are continuously increasing year by year.

It seems that the company has good future plans and they want to expand theirbusiness so they have invested more and more funds in fixed assets.

Fixed assets are efficiently utilized by the company due to which the profit of thecompany is increasing every year.

In 2006-07and 2007-08 Company has huge increase its land, patents, trade marks andrights.

2.1.2 Trend Analysis of total current assets

Table 2.1.3 Trend Analysis of total current assets

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Current Assets 100 129.242 157.708 154.955 166.304

Figure 2.1.2 Trend Analysis of total current assets

Interpretation

The current assets is shows the cash liquidity of the company.

Hear it is increase it year by year it means the company has sufficient liquidity for

generating the business.

2.1.2 Trend Analysis of total current assets

Table 2.1.4 Trend Analysis of total Liabilities

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Liabilities 100 102.817 172.991 133.59 130.504

Figure 2.1.3 Trend Analysis of total Liabilities

Interpretation

The total liabilities is highest in 2005-06.

Liabilities is incressing rate it mean company has to developed business. And purchaseraw material on credit basis.

2.1.3 Trend Analysis of share holder's equity.


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Table 2.1.5 Trend Analysis of share holder's equity.

Year 2003-04 2004-05 2005-06 2006-07 2007-08


Figure 2. 4 Trend Analysis of share holder's equity.

Interpretation

Share holder equity is increase high in 2006-07 because the company has allocatednew share.

Share holder equity is showing high fluctuation.

2.1.4 Trend Analysis of total loan fund.

Table 2.1.6 Trend Analysis of total loan fund.

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Loan Funds 100 58.9472 122.076 616.343 1171.94

Figure 2.1.5 Trend Analysis of total loan funds

Interpretation

The total trend line is slowly increase up to 2005-06. And after that it is increase at ahigh rate.

From 2006-07 onward the loan fund is increase because the company has expanse itsbusiness.

The company has been able to raise its secured loan without shortage of funds.

Increase in secured loan shows that company has very good prestige in Financialmarket.

Company increasing loan funds because company want to increase its trading onequity.

2.1.5 Share Holder's Funds

Share Holder's Funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08

share capital 100 302.273 202.68 207.37 100.171

Share application money pending allotment 100 622.406 290.456 114.286


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Reserves and Surplus 100 138.625 122.944 180.99 122.516

Total 100 140.684 125.181 181.718 121.833

Table 2.1.7 Trend Analysis of Share Holder's Funds

Figure 2.1.6 Trend Analysis of Share Holder's Funds

Interpretation

There is increase in share capital more than two times in 2005-06 and 2006-07 and itincrease three time in 2004-05 compare to base year 2003-04.In 2007-08 there is not bigincrease in share capital compare to 2005-06.

There is highest share capital in 2004-05.

The company has issued new shares in the 2005-06.

As a result no. of shares is increased and these funds are implemented for future plansof the company.

Reserves & surplus shows a remarkable increase in 2004-05, 2005-06 and 2006-07 and it slowly decrease in 2008. respectively with respect to the base year, this showsthe company has future vision and it would like to expand its business.

Increase in Reserve & surplus shows because of increase in profit every year.

Has a hole we can say that the company is target oriented and its sticking to its policiesas a result share holder's funds is increasing year by year.

2.1.6 Source of Funds

Source Of Funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08


Minority Interest 100 161.9446 - 10.929 400

Total Loan Funds 100 58.94717 122.076 616.343 1171.94

Total Sources of Funds 100 138.5534 124.52769 149.283 162.162

Table 2.1.8 Trend Analysis of Source Of Funds

Figure 2.1.7 Trend Analysis of Sources of Funds

Interpretation


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The loan fund is increases six and twelve time in year 2007, 2008 respectivelycompare to 2003-04.

The company has observed an increase in loan funds as compared to the base yearwhich indicates its growing reputation in the financial market.

Hence the overall sources of funds have shown big increase with respect to the baseyear

2.1.7 Investment

Investment

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Investments 100 123.3283 131.087 107.909 48.1879

Table 2.1.9 Trend Analysis of Investment

Figure 2.1.8 Trend Analysis of Investment

Interpretation

Investment figure shows healthy progress of the company.

Investment has increased in 2005, 2006 and after that it has strated decrease in 2007,2008 which shows not good growth compared to base year.

As they have invested most of their funds in Indian money market mutual funds.

Shows that the company has not take risk but the company has invested money fordeveloped it's own business.

2.1.8 Application Of Funds

Application of funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08


Investments 100 123.3283 131.087 107.909 48.1879

Deferred Tax Assets(Net) 100 101.789 120 99.3266 89.661

Net Current Assets 100 231.5197 131.437 203.29 219.526

Table 2. 10 Trend Analysis of Application Of Funds

Figure 2.1.9 Trend Analysis of Application Of Funds


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Interpretation

Graph shows that in 2007-08 Company invested more fund in fixed Assets.

Company has enough cash in hand so that in any condition company can take

Any Financial decision easily.

2.2 Horizontal Analysis of Balance Sheet

Financial Statement present information for the last five year. Horizontal analysis ofBalance Sheet deals with the amount changes and the percentage changes of the items ofthe Balance Sheet.

Financial Statement present comparative information for the current year and theprevious year. Horizontal analysis of Balance Sheet deals with the amount changes andthe percentage changes of the items of the Balance Sheet.

YEAR 2007-08 2006-07 2005--06 2004-05 2003-04

SOURCES OF FUNDS

Share Capital 1.35 2.06 2.91 1.96 0.83

Share application money pending allotment 0.02 0.02 0.08 0.02 0.00

Reserves & Surplus 52.69 65.73 64.42 71.64 65.85

Secured 0.96 1.05 0.46 0.30 1.68

Unsecured 19.77 1.65 0.31 0.56 0.19

Minority Interest 0.05 0.02 0.37 0.29

Current Liabilities 18.44 23.78 18.89 17.76 15.79

Provisions 6.72 5.67 12.93 7.39 15.37

TOTAL 100 100.00 100.00 100.00 100.00

APPLICATION OF FUNDS

Total Fixed Assets 38.73 26.82 22.10 26.78 26.08

Investments 7.41 23.49 31.41 32.76 33.84

Deferred Tax Assets(Net) 0.24 0.42 0.61 0.69 0.86

Current Assets, Loans & Advances 0.00 0.00 0.00 0.00 0.00

Inventories 3.08 2.93 2.10 2.43 2.29


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Sundry Debtors 18.70 20.76 21.68 21.63 21.07

Cash & Bank Balances 18.15 14.00 9.03 7.96 5.76

Loan & Advances 13.69 11.58 13.07 7.75 10.09

TOTAL 100 100 100 100 100

Table 2.2.1 Horizontal Analysis of Balance Sheet

2.2.1 analysis of sources of funds 2008

Share Capital 1.35

Share application money pending allotment 0.02

Reserves & Surplus 52.69

Secured 0.96

Unsecured 19.77

Minority Interest 0.05

Current Liabilities 18.44

Provisions 6.72

Table 2.2.2 Horizontal Analysis of sources of funds

Figure: 2.2.1 Horizontal analysis Sources of funds

Interpretation

Graph shows that in 2007-08 unseured loan is 19.77% it means that company has moretaken short term borrowings for expantion of business.

In this graph revenue is more then 50% compare to other source so it is good forcompany.

2.2.2 analysis of application of funds 2008

Total Fixed Assets 38.73

Investments 7.41

Deferred Tax Assets(Net) 0.24

Current Assets, Loans & Advances 0.00

Inventories 3.08


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Sundry Debtors 18.70

Cash & Bank Balances 18.15

Loan & Advances 13.69

Table 2.2.3 Analysis of application of funds in 2008

Figure: 2.2.2 analysis of application of funds

Interpretation

Graph shows that in 2007-08 the current assets loan is increase

Sondory debtors is 13.69 so company has to recover it.

2.2.3 Sources of Funds

Sources of Funds

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Share holder's Equity 97% 98% 99% 96% 72%

Total Loan Funds 3% 1% 1% 4% 28%

Total Sources of Funds 100% 100% 100% 100% 100%

Table 2.2.4 Horizontal Analysis of Sources of Funds

Figure 2.2.3 Horizontal Analyses of Sources of Funds

Interpretation

Company has raised Share Capital during 2003-04 to 2006-07 and after that it wasreduced at 24% this step has been taken in order to promote expansion of their business.

Company strive enhancement of share holder's value through sound business decision,prudent financial management and high standard of ethics through the organizations.Reserves and surplus has been retained for future expansion of the business.

In the base year 2003-04 total loan funds is normally up to 2006 and after that it wasincrease up to 25%, so it means that company has expand the business.

2.2.4 Application of funds

Application of Funds

Year 2003-04 2004-05 2005-06 2006-07 2007-08


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Total Fixed Assets 38% 36% 32% 38% 52%

Investments 49% 44% 46% 33% 10%

Deferred Tax Assets(Net) 1% 1% 1% 1% 0%

Net Current Assets 12% 20% 21% 28% 38%

Total Application of Funds 100% 100% 100% 100% 100%

Table 2.2.5 Horizontal Analysis of Application of Funds

Figure 2.2.4 Horizontal Analysis of Application of Funds

Interpretation

The total fixed assets are 38% in 2004 and after that it was decrease up to 4% in 2006and after that it was increase 10% so it means the company has bought the assets for

expansion of business.

The investment is decline slowly and gradually.

The net current assets are increase at increasing rate so that company has a goodliquidity.

The company's future plans for expansion seem clear due to increased investment inFixed Assets .Efficient use of these Assets has enabled the company to observe anincreased profit.

Chapter 3.

Analysis of Profit & Loss Account

Trend Analysis of Profit & Loss Account

Horizontal Analysis of Profit & Loss Account

________________________________________

3. ANALYSIS OF PROFIT & LOSS ACCOUNT

________________________________________

3.1. Trend Analysis of Profit & Loss Account

Trend Analysis of Profit & Loss Account involves calculation of percentage changesin the P & L Account items for a no. of successive years. This is carried out bytaking the items of the past financial year used as base year and items of other years areexpressed as percentage of the base year. Here 2004-05 is taken as base year


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2003-04 2004-05 2005-06 2006-07 2007-08

Income

Gross Sales and Services 100 139.16 129.73 142 133.12

Less: Excise Duty 100 95.25 106.94 174 122.77

Net Sales and Services 100 139.74 129.93 141 133.21

Other Income 100 71.79 162.58 193 140.87

Total Income 100 138.24 130.3 142 133.36

Expenditure

Cost of Sales and Services 100 138.14 132.18 143 136.91

Selling and marketing expenses 100 104.38 124.21 136 148.91

General and administrative expenses 100 1.812 62.37 354 8669.4

Interest 100 109.12 137.58 149 21.48

Total Expenditure 100 133.38 131.74 143 139.13

PROFIT BEFORE TAXATION 100 157.48 125.5 139 112.37

Provision for taxation including FBT 100 163.61 123.33 114 117.63

PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES100 156.49 125.87 143 111.68

Minority interest 100 -148.9 -1.13 -600 -400

Share in earning of Associates 100 764.97 164.26 102 112.88

PROFIT FOR THE PERIOD 100 157.88 126.95 142 111.58

Appropriations

Interim dividend 100 40.33

Proposed dividend 100 373.65 204.92 20 400.69

Tax on dividend 100 57.05 202.68 127 117.43

TRANSFERTO GENERAL RESERVE 100 456.02 101.88 155 116.03

EARNINGS PER SHARE-EPS


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Equity shares of par value Rs.2/- each

Basic (in Rs.) 100 78.68 125.64 140 109.70

Diluted (in Rs.) 100 78.11 124.83 141 110.29

Number of Shares for calculating EPS 100

Basic (in Rs.) 100 200.55 101.07 101 101.69

Diluted (in Rs.) 100 202.19 101.68 101 101.69

Table 3.1.1 Trend Analysis of Profit & Loss Account

3.1.1 Trend Analysis of Total Income and Total Expenditure

Table 3.1.2 Trend Analysis of Total Income and Total Expenditure

Trend analysis of total income & expenditure

2003-04 2004-05 2005-06 2006-07 2007-08

Total Income 100 138.238 130.304 142 133.36

Total Expenditure 100 133.382 131.735 143 139.13

Figure 3.1.1 Trend Analysis of Total Income and Total Expenditure

Interpretation

Though the sales has been continuously increased from past 3 years but theproportionate expenditure is also rising so overall not making any huge effect on netprofit of this company.

In 2006-07 Income from mutual fund dividend increased by 93.57 % and Interest ondebt instrument 567 % increased in 2005-06 compare to previous year.

Percentage Expenditures increasing year by year little more than Income increased, sothat Profit margin Decrease year by year.

3.1.2 Profit After Tax

Profit after tax

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Profit after tax 100 157.481 125.497 139 112.37

Table 3.1.3Trend Analysis of Profit After Tax


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Figure 3.1.2 Trend Analysis of Profit After Tax

'

Interpretation

PAT has been rising over the years when we compare with the expenditure which hasbeen incurred to earn this profit is also rising

PAT has been increased all the years because of increasing in sales.

3.1.3 Trend Analysis of Profit trancfer to genral resrve

Year 2003-04 2004-05 2005-06 2006-07 2007-08

TRANSFERTO GENERAL RESERVE 100 456.022 101.883 155 116.03

Table 3.1.4 Trend Analysis of Profit trancfer to genral resrve

Figure 3.1.3 Trend Analysis of Profit trancfer to genral resrve

Interpretation

The graph is showing that in year 2004-05 the company has transferred big portion ofnet profit to genral reserve.

Hear the in 2005 company has reinvest profit for business expansion it is good shinefor the company.

3.1.4 Trend Analysis of net sales and services

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Net Sales and Services 100 139.735 129.93 141 133.21

Table 3.1.5 Trend Analysis of net sales and services

Figure 3.1.4 Trend Analysis of net sales and services

Interpretation

Net sales and services are incresing from 2004 to 2005.

From 2005 onward the net sales incresing at a stret line so hear company should tray toincrese net sales.

3.2. Horizontal Analysis of Profit & Loss Account

Financial Statement present comparison or every year what portion the rest of particularis having compare to the total income. Hear we assume that the total income is 100 then


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what is the of particular compare to total income. Horizontal analysis of Profit &Loss Account deals with the amount changes and the percentage changes of the items ofthe Profit & Loss Account in every year individually.

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Income

Gross Sales and Services 99.07% 99.73% 99.29% 98.94% 98.77%

Less: Excise Duty 1.27% 0.88% 0.72% 0.88% 0.81%

Net Sales and Services 97.80% 98.86% 98.57% 98.06% 97.95%

Other Income 2.20% 1.14% 1.43% 1.94% 2.05%

Total Income 100.00% 100.00% 100.00% 100.00% 100.00%

Expenditure

Cost of Sales and Services 65.56% 65.51% 85.32% 66.97% 68.75%

Selling and marketing expenses 9.05% 6.83% 6.51% 6.24% 6.97%

General and administrative expenses 5.19% 0.07% 0.03% 0.08% 5.27%

Interest 0.06% 4.64% 4.89% 5.14% 0.83%

Total Expenditure 79.85% 77.05% 77.89% 78.43% 81.83%

PROFIT BEFORE TAXATION 20.15% 22.95% 22.11% 21.57% 18.17%

Provision for taxation including FBT 2.81% 3.33% 3.15% 2.53% 2.23%

PROFIT BEFORE MINORITY INTEREST /SHARE IN EARNING OF ASSOCIATES17.33% 19.62% 18.95% 19.04% 15.94%

Minority interest -0.10% 0.11% 0.00% 0.00% -0.01%

Share in earning of Associates 0.04% 0.21% 0.27% 0.19% 0.16%

PROFIT FOR THE PERIOD 17.27% 19.73% 19.22% 19.24% 16.10%

Appropriations

Interim dividend 9.74% 4.73% 1.43%

Proposed dividend 1.56% 4.21% 6.63% 0.95% 2.87%

Tax on dividend 1.45% 0.60% 0.93% 0.83% 0.73%


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TRANSFERTO GENERAL RESERVE 4.52% 14.92% 11.66% 12.72% 11.07%

Table 3.2.1 Horizontal Analysis of Profit & Loss Account

3.2.1 Comparition of PBT and Expenduture with total income

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Total Income 100.00% 100.00% 100.00% 100.00% 100.00%

Total Expenditure 79.85% 77.05% 77.89% 78.43% 81.83%

PROFIT BEFORE TAXATION 20.15% 22.95% 22.11% 21.57% 18.17%

Table 3.2.2 Comparition of PBT and Expenduture with total income

Figure 3.1.1 Comparition of PBT and Expenduture with total income

Interpretation

The total expenditure is near by 80% of total income in every year.

Every year PBT is near by 20% of total income.

Chapter 4.

Analysis of Cash Flow Statement

Introduction

Cash Flow statement

Interpretation of Cash Flow Statement

________________________________________

4. ANALYSIS OF CASHFLOW STATEMENT

________________________________________

4.1. Introduction

Cash flow statement [CFS] provides information about the historical changes in cash byclassifying cash flows during the period from operating activities, financial activities andinvesting activities of a concern. It shows the summary of cash flow on account of theseactivities.

Operating activities as the principal revenue-production activities of the enterpriseThese activities determines the net profit or loss of a concern. Operating Activities referto the operations of a business of purchasing, sales etc. Sales generate cash; purchase and


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expense use up the cash. Net profit leads to net increase in cash.Net increase in cash fromoperating activities is the main source of cash inflow.

Investing activities as the acquisition and disposal of long tern assets and investments.Acquiring and selling of a subsidiary or other concerns should be shown as InvestingActivity. Investing Activities of acquisition of fixed assets, long term investing reducesthe cash and indicate cash outflow. Investing activities of disposal of fixed assets etcincrease the cash inflow.

Financial activities as the activities resulting in the changes in the size and compositionof the owner's capital and borrowing of the enterprise. Owner's capital includespreference capital in case of a company. Financial Activities such as issue of shares,taking a loan from Bank, sale of fixed assets etc. increase the amount of cash availableand form the source of cash inflow. Financial activities such as repayment of preferencecapital or repayment of loan reduce the amount of cash and indicates cash outflow.

4.2 Cash Flow Statement

Year ended March 31, (Ra. In Million)

Table 4. 1 Cash Flow Statement

2008 2007 2006 2005 2004

A. Cash Flow from Operating Activities

Adjustments for :

Depreciation and amortizations 5359 3,978 3,096 2,456.24 1971.85

Amortizations of stock compensation 1166 1,078 688 342.62

Unrealized foreign exchange Net -595 457 65 92.45 -132.77

Interest on borrowings 1690 125 35 56.12

Dividend/interest Net -2802 -2,118 -1,069 715.15 -762.41

(Profit)/Loss on sale of investments -771 -588 -238 35.59

Gain on sale of fixed assets -174 -10 -8 109.8 -107

Working Capital Changes :

Trade and other receivable -11885 -7,633 -6,991 4,433.69 -3670.41

Loans and advances -5157 -299 -1,033 311.74 -359.89

Inventories -1565 -1,120 -317 455.23 -281.5


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Trade and other payables 6182 5,445 6,150 4,180.42 2748.13

Net cash generated from operations 28518 32,303 24,102 20,456.00 -594

Direct taxes paid -5459 -4,252 -4,543 2,354.70 -1568.36

Net cash generated by operating activities 23059 28,051 19,559 18,101.30 -2162.36

B. Cash flows from investing activities:

Acquisition of property, fixed assets

Plant and equipment(Inc. advances) -14226 -13,005 -7927 6,465.43 -4100.97

Proceeds from sale of fixed assets 479 149 113 168.98 121.86

Purchase of investments -231684 -123,579 -59,047 70,145.11 -10706.5

Proceeds on sale/from maturities on Investments 250013 122042 52,043 66,383.54 48.06

Inter-corporate depo sit 150 -650 - 285.3

Net payment for acquisition of Business -32790 -6608 -2,777 617.99 -465.27

Dividend/interest income received 2490 2,118 923 254.15 777.85

Net cash generated by/(used in) Investing -25568 -19533 -16672 144035.2 -14039.7

C. Cash flows from financing activities:

Proceeds from exercise of Employee Stock Option 541 9,458 4,704 2,576.58 238.6

Share application money pending allotment 40 35 63 12.05

Interest paid on borrowings -1690 -125 -35 56.12

Dividends paid (including distribution tax -12632 -8,875 -3,998 7,575.76 -262.36

Proceeds/(repayment) of long term -74970 142 -268 - 463.02

Proceeds/(repayment) of short term 110641 1825 -200 432.43

Proceeds from issuance of shares by Subsidery 55 35 266.19 147.53

Net cash generated by financing Activities 21985 2495 266 -5209 -12954.5

Net increase in cash and cash equivalents During the period 19476 11013 3154 2469.95-958.77

Cash and cash equivalents at the Beginning of the period 19822 8858 5714 3242.74210.08


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Effect of translation of cash balance -28 -49 -10 0.92 -8.61

Cash and cash equivalents at the end of Period * 39270 19822 8858 5713.57 3242.7

*includes Rs. 7,278 Million in a restricted designated bank account for payment ofinterim dividend

4.2. Interpretation of Cash Flow Statement

Overall Cash flow Statement shows that cash has been generated through Operatingactivity is Rs 23059 , 28051 , 19559, 18101, -2162.36 and in the years 2007-08, 2006-07,2005-06, 2004-05 and 2003-04 respectively. So major part of cash inflowing is Operatingdepartment. Investment Activity Shows Cash Outflow and borrowing activities takes alittle part in increasing cash.

Operating Activities : Profit before tax is increased by Rs. 25038.17 Million and NetCash generated by Operating activity is increased by Rs. 25221.36 Million because,

Depreciation and amortizations are increased by Rs. 3387.15 Million in between fouryear.

Trade and other receivable are also increased by Rs. 8214.59 Million in between fouryear.

Investing Activities : Net Cash outflow from investing activities is Rs. 11528 Millionbecause,

Company has increased its plan and equipment worth Rs.10625 Million in betweenfour year.

Investment is also increase worth Rs. 220977 Million in between four year.

From this inference that these investments has been met out of the cash fromOperations or borrowings.

Investments in Fixed Assets could be part of Company's plan of expansion ormodernization.

Financial Activities : From the section on cash flow from Financial Activities companythink to proceeds in both short term and long term borrowings with proceeds from

exercise of employee stock option.

Chapter 5.

Ratio Analysis

Introduction To The Ratio Analysis

Liquidity Ratios


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Profitability Ratios

Finance Structure Ratios

Valuation Ratios

The Du-Pont Chart

________________________________________

5. RATIO ANALYSIS

________________________________________

5.1. Introduction Of The Ratio Analysis

Ratio analysis involves establishing a comparative relationship between the componentsof financial statements. It presents the financial statements into various functional areas,

which highlight various aspects of the business like liquidity, profitability and assetsturnover, financial structure. It is a powerful tool of financial analysis, which recognizes acompany's strengths as well as its potential trouble spots.

It can be further classified as in different categories of Ratio.

Liquidity Ratios

Profitability Ratios

Asset Turnover Ratios

Finance Structure Ratios

Valuation Ratios

5.2. Liquidity Ratio

Liquidity refers to the existence of the assets in the cash or near cash form. This ratioindicates the ability of the company to discharge the liabilities as and when they mature.The financial resources contributed by owners or supplemented by outside debt primarilycome in the cash form as under in the balance sheet form.

The following Liquidity Ratios are calculated for the company.

Current Ratio

Quick Ratio

Net Working Capital

5.2.1. Current Ratio


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This ratio shows the proportion of Current Assets to Current Liabilities. It is also knownas "Working Capital Ratio" as it is a measure of working capitalavailable at a particular time. It's a measure of short term financial strength of thebusiness. The ideal current ratio is 2:1 i.e. Current Assets should be equal to CurrentLiabilities.

Current Ratio = Current Assets

Current Liabilities

Current Ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Ratios 1.26 1.58 1.44 1.67 2.13

Table 5. 1 Current Ratio Analysis

Figure 5. 1 Current Ratio Analysis

Interpretation

Current ratio is always 2:1 it means the current assets two time of current liability.

After observing the figure the current ratio is fluctuating.

In the year 2008 ratio is showing good shine.

Hear ratio is increase as a increasing rate from 2004 to 2008.

Company is no where near the ideal ratio in every year but every company can notachieve this ratio.

Current ratio is increased in 2007-08 as compared to 2003-04 because of increase inInventories 100.96% and 123.77 % increased in Cash and Bank balance.

Current ratio is decreased in 2005-06 as compared to the last year because of increasein liabilities by 45.39% and 93.19% in increasing in Provision.

5.2.2 Quick Ratio

This ratio is designed to show the amount of cash available to meet immediate payments.It is obtained by dividing the quick assets by quick liabilities. Quick Assets are obtainedby deducting stocks from current assets. Quick liabilities are obtained by deducting bankover draft from current liabilities.

Quick Ratio = Quick Assets

Current Liabilities


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Quick Ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Ratios 1.2 1.5 1.4 1.6 2.0

Table 5. 2 Quick Ratio Analysis

Figure 5. 2 Quick Ratio Analysis

Interpretation

Standard Ratio is 1:1

Company's Quick Assets is more than Quick Liabilities for all these 5 years.

In 2007-08 the ratio is increasing because of increase in bank and cash balance.

So all the years has quick ratio exceeding 1, the firm is in position to meet itsimmediate obligation in all the years.

In 2005-06 quick ratio is decreased because the increase in quick assets is lessproportionate to the increased quick liabilities.

The Quick ratio was at its peak in 2007-08, while was lowest in the 2004-05.

5.2.3 Networking Captial

Networking capital = Current Assets Current Liabilities

Net working capital

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Trend 4534.3 10497.8 13798.0 28050.0 61577.0

Table 5.3 Networking Capital

Figure 5.3 Networking capital

Interpretation

This ratio represents that part of the long term funds represented by the net worth andlong term debt, which are permanently blocked in the current assets.

It is Increasing Double than year by year because of assets increasing fast thanliabilities.

5.3 Profitability Ratios


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A company should earn profits to survive and grow over a long period of time. It wouldbe wrong to assume that every action initiated by management of company should beaimed at maximizing profits, irrespective of social as well as economical consequences. Itis a fact that sufficient must be earned to sustain the operation of the business to be ableto obtain funds from investors for expansion and growth and to contribute towards the

responsibility for the welfare of the society in business environment and globalization.

The profitability ratios are calculated to measure the operating efficiency of the company.

The following Profitability Ratios are calculated for the company.

Gross Profit Ratio

Operating Profit Ratio

Net Profit Ratio

Rate Of Return On Investment

Rate Of Return On Equity

5.3.1 Gross Profit Ratio

This is the ratio expressing relationship between gross profit earned to net sales. It is auseful indication of the profitability of business. This ratio is usually expressed aspercentage. The ratio shows whether the mark-up obtained on cost of production issufficient however it must cover its operating expenses.

Gross Profit Ratio = Gross Profit X 100

Sales

Gross profit ratio analysis

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend 29.8 31.7 32.6 33.7 33.0

Table 5.4 Gross Profit Ratio Analysis

Figure 5.4 Gross Profit Ratio Analysis

Interpretation

GP Ratio shows how much efficient company is in Production.

GP is decreasing 2007-08 due to higher production cost.

Gross sales and services are increasing year by year so in effect Gross profit ratio isicreasing year by year up to 2007.


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5.3.2 Operating Profit Ratio

This ratio shows the relation between Cost of Goods Sold + Operating Expenses and NetSales. It shows the efficiency of the company in managing the operating costs base withrespect to Sales. The higher the ratio, the less will be the margin available to proprietors.

Operating Profit Ratio = COGS+Operating expences X 100

Sales

Operating ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend 83.5 80.0 79.0 77.9 81.7

Table 5.5 Operating Profit Ratio Analysis

Figure 5.5 Operating Profit Ratio Analysis

Interpretation

Operating ratio is lowest during current 2007.

This shows that the expenses incurred to earn profit were less compared to theprevious two years.

Operating ratio is decreses feom 2004 to anward decreasing rate.

From the graph conclusion is made that company is not on the right track by efficientlycutting down manufacturing, administrative and selling distribution expenses.

5.3.3 Net Profit Ratio

= Net profit x 100

Net sales

Net profit ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Trend 16.3 19.4 19.2 19.8 17.7

Table 5.6 Net Profit Ratio Analysis

Figure 5.6 Net Profit Ratio Analysis

Interpretation


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After observing the figure the ratio is fluctuating.

Company has rise in its net profit in 2006-07 as compared to the previous year becausethe company has increased its sales 41.45% .

Though the company's sale is continuously rising but the net profit is not so muchincreased so management should take some steps to decrease its expenses.

Sales is decrease in 2008 compare to 2007

The overall ratio is showing good position of the company.

5.3.4 Return On Investment

Rate of Return on Investment indicates the profitability of business and is very much inuse among financial analysts.

ROI= EBIT X 100

Total Assets

Return On Investment

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend 32.7 39.7 35.7 30.6 18.6

Table 5.7 Rate of Return on Investment Ratio Analysis

Figure 5.7 Rate of Return on Investment Ratio AnalysisInterpretation

From the above observation it can be seen that ratio is fluctuating.

In the year 2005-06 Rate of Return on Investment is slightly increase as compared toprevious year

Ratio is decreasing after 2005 at adecreasing rate because of asseets increase compareto sales.

The company's Total Assets is increased to 86.51%, so ROI is decreased so conclusionmade that company is not utilizing its assets and investment efficiently.

5.3.5 Rate of Return on Equity

Rate of Return on Equity shows what percentage of profit is earned on the capitalinvested by ordinary share holders.

Rate of Return on Equity = Profit for the Equity


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Net worth

Rate of return on equoty

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Trend % 22.2 11.5 7.1 10.0 5.5

Table 5.8 Rate of Return on Equity Ratio Analysis

Figure 5.8 Rate of Return on Equity Analysis

Interpretation

ROE is remaining almost same Between 2005 to 2007, but it is decrease in2008because the the company has increase share capital but profit not getting that muchincrease.

Company is getting same return on equity.

As a result the share holders are getting higher return every year and investmentportfolio scheme selection was a judicious decision taken by the company.

This happens because Profit and Share Capital both increasing same way.

5.4 Asset Turnover Ratios

Asset Turnover Ratio are basically productivity ratios which measure the outputproduced from the given input deployed. This relationship is shown as under

Productivity = Output

Input

Assets are inputs which are deployed to generate production (or sales). The same set ofassets when used intensively produces more output or sales. If the asset turnover is high,it shows efficient or productive use of input.

The following Assets Turnover Ratios are calculated for the company.

Total Assets Turnover

Net Fixed Assets Turnover

Net Working Capital Turnover

Inventory Turnover Ratio

Debtor Turnover (in times)


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5.4.1 Total Asset Turnover Ratio

The amounts invested in business are invested in all assets jointly and sales are affectedthrough them to earn profits. Thus it is the ratio of Sales to Total Assets. .It is the ratiowhich measures the efficiency with which assets were turned over a period.

Total Asset Turnover Ratio = Sales

Total Assets

Total assets turnover ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Trend 1.5 1.5 1.6 1.5 1.2

Table 5.9 Total Asset Turnover Ratio Analysis

Figure 5.9 Total Asset Turnover Ratio Analysis

Interpretation

The total assets turnover ratio is almost same in all years.

The Assets turnover Ratio is near by 1.5 in all 5 years which shows effectiveutilization of assets from the company's view point.

In the year 2005-06 ratio is increased because of company's total assets is increased by24.52%, but sales is increased by 29.92%.So the ratio is increased but in current year it is

decreased because sale increasing by 41.45% and Assets increasing by 49.28%.

5.4.2 Net Fixed Assets Turnover

To ascertain the efficiency & profitability of business the total fixed assets arecompared to sales. The more the sales in relation to the amount invested in fixed assets,the more efficient is the use of fixed assets. It indicates higher efficiency. If the sales areless as compared to investment in fixed assets it means that fixed assets are notadequately utilized in business. Of course excessive sale is an indication of over tradingand is dangerous.

Net Fixed Assets Turnover Ratio = Sales

Net Fixed Assets

Total fixed assets turnover ratio

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Time 4.0 4.2 4.9 4.0 2.4


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Table 5.10 Net Fixed Asset Turnover Ratio Analysis

Figure 5.10 Net Fixed Assets Turnover Ratio Analysis

Interpretation

Here the ratio of Net Fixed Asset Turnover is continuously increasing up to 2006 andafter that it has strated decline.Because sales as wellas assets boths are equally increase.

Net Fixed Assets Turnover Ratio is increasing year by year because of Sale isincreasing continuously.

It indicates that the company maximizes the use of its fixed assets to earn profit in thebusiness so that whatever amount is invested by company in fixed asset, gives maximumproductivity which helps to increase sales as well as profit.

5.4.3 Inventory Turnover Ratio

Inventory Turnover Ratio: The no. of times the average stock is turned over during theyear is known as stock turnover ratio.

Inventory Turnover Ratio = COGS

Average stock

Total Inventory turnover ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Time 30.3 22.6 24.3 19.8 16.0

Table 5. 11 Inventory Turnover Ratio Analysis

Figure 5. 11 Inventory Turnover Ratio Analysis

Interpretation

From the above calculation we can say that the ratio is decreasing. It mens inventory isnot spdly convert in to sales. So that it is bad for the company.

In 2003-04 ratio is increased as compared to after that all year so management should

take care about good efficiency of stock management.

But in 2006 onward ratio is decreasing because of increase in COGS. So companyshould devise a systematic operational plan for inventory control.

5.4.4 Average age of Inventories


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This ratio indicates the waiting period of the investments in inventories and is measuredin days, weeks or months. Inventory turnover and average age of inventories areinversely related.

Average age of Inventories Ratio = 360 days

Inventory Turnover

Average age of Inventories

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Days 11.9 15.9 14.8 18.2 22.4

Table 5. 12 Average age of Inventories Ratio Analysis

Figure 5. 12 Average age of Inventories Ratio Analysis

Interpretation

This graph shows that inventory convert into cash in short time period.

Inventory turnover ratio is low in 2003-04 So In this year inventory is converted incash 11.9 days.

The inventory conversation in to cash time duration is increases from 2004 to everyyear so the management should tray to efficient inventory conversation,so it will It showsthat company effectiveness utilizing its Inventories in quickly.

5.4.5 Debtor Turnover Ratio

Debtor turnover ratio: The debtor turnovers suggest the no. of times the amount of creditsale is collected during the year.

Debtor's Turnover Ratio = Sales

Average Debtors

Debtors turn over in (times)

Year 2003-04 2004-05 2005--06 2006-07 2007-08

Time 4.9 3.8 3.7 3.7 1.5

Table 5. 13 Debtor Turnover Ratio Analysis

Figure 5.13 Debtor Turnover Ratio Analysis

Interpretation


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Debtor turnover indicates how quickly the company can collect its credit sales revenue.

Here the ratio is continuously decreasing, so that the company's collection of creditsales is efficient management is improved its collection period every year so it shows thatthe management have an ability to collect its money from his debtors. So they can invest

that money on Assets, HRD and other investments.

5.5 Finance Structure Ratios

Finance Structure Ratios indicate the relative mix or blending of owner's funds andoutsiders' debt funds in the total capital employed in the business. It should be noted thatequity funds are the prime fund which increase progressively through reinvestment ofprofits, while outside debt funds are supplementary funds and are added at the discretionof the management.

The following Finance Ratios are calculated for the company.

Debt Ratio

Debt-Equity Ratio

Interest Coverage Ratio

5.5.1 Debt Ratio

Debt ratio indicates the long term debt out of the total capital employed.

Debt Ratio = Long Term Debt

Total Capital Employed

Table 5. 14 Debt Ratio Analysis

Debt Ratio

2003-04 2004-05 2005-06 2006-07 2007-08

Trend 0.0284 0.0165 0.0114 0.0383 0.384

Figure 5. 14 Debt Ratio Analysis

Interpretation

From the above calculation it seems that the ratio is fluctuating.

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