A PROJECT REPORT

ON

ANALYSIS OF FINANCIAL STATEMENTS OF

SOUTH INDIA METAL COMPANY,

SHORANUR -2

A

PROJECT REPORT

SUBMITTED TO CALICUT UNIVERSITY

IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD

OF THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION

SUBMITTED BY

SAJA.K.A

REGISTER NO:

UNDER THE GUIDANCE OF

RAMSEENA MISS (M.Com)

DEPARTMENT OF COMMERCE& MANAGEMENT STUDIES

ANSAR WOMEN’S COLLEGE,

PERUMPILAVU,THRISSUR,KERALA.

(Affiliated to the University of Calicut) 2008-2009

1 Saja.K.A

ANSAR WOMEN’S COLLEGE PERUMBILAVU, P.O KARIKKAD

Bachelor of Business Administration

CERTIFICATE

This is to certify that this Project Report

entitled at “SIMCO Metal Industry” with reference to overall study

is a bonafide record of placement training done by SAJA.K.A

(REG NO: )under my guidance and supervision and that is has not

previously formed the basis for the award of any degree, diploma,

associate ship, fellow ship to her

Head of the department Internal Guide

MR PRASAD. P MISS RAMSEENA

(Lecturer)

Dept of commerce& managent studies

2 Saja.K.A

DECLARATION

I hereby declare that the project report entitled

at“SIMCO METAL INDUSTRY” has been written and prepared by me

during the year 2008. The project was done under the valuable guidance and

supervision of RAMSEENA MISS (Department of Commerce &

Management Studies) ANSAR WOMEN’S COLLEGE PERUMPILAVU

In partial fulfillment of the requirement of the Degree of Bachelor of

Business Administration of Calicut University. I also declare that this study

is the result of my own effort and has not been submitted to any other

institution for the case of any Degree.

PLACE: PERUMPILAVU SAJA..K .ADATE: FINAL BBA ANSAR WOMEN’S COLLEGE

3 Saja.K.A

ACKNOWLEDGEMENT

I would like to take this opportunity to express my profound thanks to

all people who have helped me with sound advice. I Acknowledge my

sincere thanks to Mr. Parameswaran of SIMCO for their sincere

guidance and help without which this placement would have been

Impossible.

I am deeply indebted to my guide Miss. Roopalakshmi.VC

(Department of Commerce) and Mr. Prasad. P(Head Department),

who has been constantly encouraging me at every stage of the work of this

placement training report. I cordially express my thanks to other staff

members for their whole hearted co operation.

Above all, I wish to express my gratitude to god and my parents under

whose divine guidance; I have able to successfully complete this work.

I myself, however remain solely responsible for the inadequancies and

blemishes that might have crept in to the report

Perumbilavu: Date:

CONTENTS

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CHAPTER PAGE NO:

1. INTRODUCTION…………………………………………….8-11

2. COMPAN PROFILE…………………………………………13-27

3. FINANCIAL STATEMENT ANALYSIS OF SIMCO……..28-40

4. RATIO ANALYSIS OF SIMCO…………………………….41-73

5. SUMMARYOF FINDINGS &SUGGESTIONS…………….74-76

6. CONCLUSION………………………………………………..77

7. BIBLIOGRAPHY…………………………………………….78

8. ANNEXURE………………………………………………….79-85

CHAPTER-1

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INTRODUCTION

Agriculture constitutes backbone of Indian Economy & in spite of

congested industrialization in the last four decades; Agriculture still occupies a place of

significance. Being the largest sector of the economic activity, it is the source of

livelihood for over 70 % of the population in the economy. Agricultures accelerate the

economic development to a very large proportion of population, capital for its own

development and surplus for investment in other productive sectors.

It is well known that agricultural production is the combined effect of a

variety of implements, fertilizers, irrigation, farm machinery, high yielding varieties of

seeds, etc….All these inputs in one way or another contribute to increasing in

productivity of agriculture & form under one. But these inputs become more effective

and their potential is better utilized if appropriate energy and power sources are made

available to the farmer.

The manufacturing of these agricultural implements & plays a dominant

role in small scale industrial sector of Kerala economy. This industry generally is

included in the agro based category units of small scale units. There are nearly

100small scale agricultural implements tools manufacturing units in KERALA. The main

location of these units is at SHORANUR at PALAKKAD District, {70% are at

SHORANUR itself}. The remaining units are spread over various parts of the state

especially in rural areas.

Total investments of these 100 units in plant and machinery are more than

Rs6Crores .The industry provides employment to nearly 300 people in this sector. The

ANNUAL turn over of these units is more than Rs20Crores and the main item of

manufacturing include Spade, Pick-axe, Hammer, Sickles etc…

It should be noted that various processes of manufacturing, raw materials,

machinery & equipments, investment, labour etc are required for small units. The

industry has been included in small scale units because it requires less investment when

compared to other large scale industries and also less technological background for

6 Saja.K.A

manufacturing process. The system of marketing agricultural implements is through

agents appointed at various parts of the country on commission basis. The products are

sold both inside & outside KERALA.

It may be stated that though these implements and machinery have been

developed mainly for usage in farms. The demand for hand tools and simple implements

continues due to small holding by the marginal farmer.

THE SOUTH INDIA METAL COMPANY

SOUTH INDIA METAL COMPANY is one of the reputed

Companies in KERALA which involved in the manufacturing of Agricultural

Implements, Garden Implements, Estate tools & Hand Tools. It has a very good

popularity in South India Markets.The South India Metal Company was established in

1936. The South India Metal Company is pioneers in he manufacturing field of

Agricultural and Horticultural implements, Garden tools, Estate tools and Hand tools.

The products of South India Metal Company have good market in South India. The

products of South India Metal Company have good market in South India. The company

has received various awards including first prize in the World Agricultural Fare at New

Delhi in 1961 for “Secatures” and second prize is the National Quality Award for

Agricultural Implements In 1986.

OBJECTIVES OF THE STUDY

Working capital management is a significant aspect of financial

Management. It is important that investment in current assets and the level of current

liabilities will have to be geared quickly to change in sales. It is also important that

apportion of working capital requirement is brought from Long term sources such as

equity or long term loans .In adequate working capital is a crisis and it may arise due to

poor working capital and financial management .

Every organization has adequate working capital for its efficient

functioning. As South India Metal Company, Shornur is a reputed institution it should

7 Saja.K.A

have sufficient working capital for its uninterrupted growth. The growth can be ensured

by a systematic and continuous analysis of fixed assets, current assets, fixed and current

liabilities, sales liquidity etc. An analysis of financial statements of South India Metal

Company will help to identify the weak points and convert it to strong points by taking

some remedial measures. The present study is an attempt in this direction.

THE MAIN OBJECTIVES OF THE STUDY ARE

1. To analyses the profitability of the business

2. To analyses the asset management of the firm.

3 To analyses the short term and long term financial position of the firm.

4. To make recommendation based on the analysis of financial statements.

PERIOD OF THE STUDY

The analyses of financial statement of South Indian Metal Company

have been made for a period of 5 years ranging from 2003-2008.

METHODOLOGY

The performance evaluation of an enterprise may be conducted by making

a comparative study of its own records and an attractive approach would here to analyses

the firm’s objectives and performance against absolute standard of efficiency. The study

was conducted on the basis of financial data from published records and other books with

both primary and secondary data. The data have been collected from partnership deed of

SIMCO, published financial statements of last 6 years, personal interview with office

staff and other relevant books and accounts of the firm.

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TOOLS USED FOR ANALYSIS

The study makes use of techniques like

1. Comparative Balance Sheet & Income Statements

2. Common Size Balance Sheet & Income Statements

3. Profitability Ratio.

4. Liquidity Ratio

5. Activity Ratio etc

Simple Mathematical Tools like

1. Averages

2. Percentages

Accounting Tools like

1. Ratios

2. Trend Analysis

& Statistical Tools were made also used for this analysis.

LIMITATONS OF THE STUDY

The Sample Size is very small. Only 5 data were analyzed. So there is a possibility of

occurrence of some sampling errors. If the sample were large and representative, the

observation would have become more credible.

It considers only monetary factors, non monetary factors are not considered.

It is applicable only in the case of South Indian Metal Company, Shornur, not a study

of industry concerned

The time allowed for the study is less.

It has been conducted by using secondary data.

9 Saja.K.A

COMPANY PROFILE

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CHAPTER-2 SOUTH INDIA METAL COMPANY – SHORANUR

COMPANY PROFILE

REGISTERED OFFICE : PURAYANNUR INDUSTRY – SHORANUR S.S.I Reg. No. : 09/07/00380/PMT

AUDITOR : V.K.S NARAYANAN & CO

MANAGING DIRECTOR : P.DIVAKARAN

BANK : PUNJAB NATIONAL BANK

TRADE NAME : SIMCO

BRAND SYMBOL : LION

SOUTH INDIA METAL COMPANY located in SHORANUR is a

partnership firm established and registered in the year 1947. The founder of this firm is

PMC.DIVAKARAN NAMBOOTHIRIPAADU. The partners of the firm are

PURAYANNUR DIVAKARAN and PURAYANNUR VALSALA. The partners of the

firm are PURAYANNUR DIVAKARAN and PURAYANNUR VALSALA. The

managing partner of the firm is P.DIVAKARAN .The firm is running with 20 office staff

and 52 laborers.

HISTORY OF THE FIRM

SIMCO is a well known firm, manufacturing agricultural

implements and garden tools. South India Metal Company was established in 1936 as a

private company. Later partnership firm known as Purayannur Industries purchased the

company from the ABDUL SAMAD in the year 1947 and registered under the Indian

Partnership Act in 1956. The firm improved its working with the help of technical advice

of Sri C.K MENON and Sri K.K RAJA.

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STRUCTURE OF THE FIRM

Accounting to the partnership deed the firm consists of two partners.

PURAYANNUR DIVAKARAN and PURAYANNR VALSALA

The capital of the firm Rs 4, 00, 00 and contributed as under

PURAYANNUR DIVAKARAN -1, 60,000 /-

PURAYANNUR VALSALA-2, 0,000/-

The profit and loss of the firm after adjusting their interest salary and bonus to the

partners if any is divided among the two partners in the ratio of 40 % and 60%

respectively.

The managing partner of the firm is responsible for the overall and effective management

of the staff and whole establishment of SIMCO.

WORKING CAPITAL of SIMCO

The company invites deposits in the form of unsecured loans from

the partners for its day to day activities. It also invites deposits from outsides. These

deposits are used for meeting the company’s working capital requirements. It has also the

banking facilities such as overdrafts.

LOCATION OF THE FIRM

SIMCO is situated at Kulappully, 3 kilometers from Shornur Town.

There is about 8 acres of land for the company. The office, factory building, canteen,

workers, rest room, watch man sitting room, workers and staff quarters are well

constructed. As it is situated in the heart of Kulappully , all facilities such as road, rail

electricity, banking, communication etc are readily available there. Besides these

facilities the place is famous for small scale industries, especially Metal

Industries .Because of this the parcel booking office of almost all transport companies

have been opened here like T.V.S .Pattel Road ways, ABT ETC……

LAY OUT

12 Saja.K.A

The layout of the firm comprises factory buildings, office, canteen and rest room

for employees, security office and employers quarters well designed to accommodate

with in the available area even providing space for future expansion.

QUALITY CONTROL

SIMCO ranked first in its quality of products targeted towards user satisfaction.

The firm has received various awards including a first prize in the WORLD

AGRICUTURAL FAIR at NEW DELHI in 1961 for SECATURES and second prize in

the NATIONAL QUALITY AWARD FOR AGRICULTURAL IMPLEMENTS in 1986

PRODUCTS OF SOUTH INDIA METAL COMPANY

1. AGRICULTURAL IMPLEMENTS

MAMATTY

PICK-AXE

GRUBBLING MATTOCK

2. HORTICULTURAL IMPLEMENTS

KODAALI FORK

DIGGING FORK

MAMMATTY FORK

DIGGING FORK

3. GARDEN TOOLS

GARDEN SHARES

TRENCHING HOE

HAND FORK etc….

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4. ESTATE TOOLS

RUBBER TAPPING KNIFE

PRUNNING SAW

PRUNNING KNIFE

5. HAND TOOLS

TM CUTTER

ALAVANGOES

FELLING KNIFE

HAMMERS

AXE

SICKLE

COMPANY HAVE A MONOPOLY ON THE PRODUCTION OF

DIGGING FORK

PICK AXE

Pick-axe is an inevitable implements used by farmers and workers.These are used for

digging purposes.Two edges of pick-axe are sharpened one edge is pointed and the other

iand the other is flattered.So the operations become easier.

SPADE

Spade is an essential tool for several kinds of agricultural operations.It is mainly used for

turning up the soil or digging of the ground.It can be used both in light and hard soil.

HAMMER

Hammer is an indispresable tool for mining and quarry works. It is used for splitting

stones or rocks and is also used in the preparation of metal for load and building

constructions.The purpose for which it is being used the hammer is generally included in

the category of agricultural implements.

14 Saja.K.A

ORGANISATION CHART

Purayanur Industries

Managing Partner

Technical Manager Office Manager

Raw material Production and Finished Goods Accounting and Purchase and Maintenance and sales Finance Stores department Department Department Department

Foreman Charge man Sales Manager Account Clerk

Sales Clerk

Wage Clerk Raw material

Workers Store Keeper Dispatch clerk

Watchman Computer

Operator

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VARIOUS DEPARTMENTS

1) RAW MATERIALS PURCHASE AND STORES

DEPARTMENT

The working of the company starts from the Raw material purchase and stores de

partment. The raw material store keeper is the head of this department. There is one

assistant store keeper to help the raw material store keeper. The main functions of thsi

depatment

are (1) Purchasing of raw material (2) Storing of raw material (3) Issuing of raw material.

1)PURCHASING OF RAW MATERIAL

Purchase of raw material is the important function of the raw material

purchase and stores department.It includes the following steps

a) RECEIVING PURCHASE REQUISITION

Purchase requisition is a form used as a formal request to the purchasing

department to purchase materials.It gives the specification and quality materials to be

bought ,works order number and sanctions reference appilicable and data line for the

receipt of the materials.

When the stock of materials come to the re-ordering level ,the store

keeper prepare a purchase requisition.After receiving the purchase requisition,the

purchase manager will inform the same to several manager and then inform to

managing partner.Managing partner give consent to the purchase of such raw

material.After selecting the supplier the purchase manager will send purchase order to

those suppliers who supply the good quality material.

b) ISSUING OF PURCHASE ORDERS

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A purchase order is an order to the supplier for specificed material it is the

evidence of the contract between the buyer and the supplier that binds both buyer and

supplier to the terms under which the order is placed. Purchase order will contain name

and address of both the parties,name of goods,quantity of goods etc…..After obtaining

the order the supplier will inform the date of dispatch,quantity,price &mode of delivery

of materials.The supplier send their goods to the consignee through TVS,KT etc… stated

in the indent.After receiving the materials storekeeper will check the quantity ,quality and

condition and will issue “ Goods received note” to facilitate the procurement department

to release the invoice for payment.

2.STORING OF MATERIAL

After receving the material ,store keeper place the material in proper

place and maintain a stores ledger containing three main column

a) Reciept column

b) Issue column

c) Balance column

On the basis of stores receipt note ,the store keeper accounts the receipt in the receipt

column of the stores ledger.It contain the quantity , rate and value of the material.

3.ISSUE OF RAW MATERIAL

Issue of raw material is done through the raw material indent. It is prepared

by the respective section chargeman showing the job order number, name of the

material,number or quantity etc…When the goods are issued, the storekeeper records it in

the issue column of the store ledger and balance is shown in the balance column.The

company adopt FIFO method for issuing the material .

PRODUCTION DEPARTMENT

Production is a process of converting rawmaterial into semi finished

goods or finished products.The working of the production department consist of the

following process:

17 Saja.K.A

1.RAIL CUTTING

The first step in production process is to cut the rail into comfortable

size.Mainlythe rail is divided into 3 parts head,centre and flange or bottom.Head is used

for making hammers, centre for making mammatties etc…The products which need high

carbon content are made by billets.

2.POWER FORGING

After Rail cutting it is then passed to the power forging section.A far heating the

rail upto red form furnure,it is passed to power hammers.The power hammers will give

Rough shape to the product.From here semi finished goods are passed to Hand forging

section.

3.HAND FORGING

Finishing work is manually done at hand forging section.Only that raw material

which is having rough shape is passed to hand forging section.

4.TEMPRATURE 0R HEAT PROCESSING

Tools are tempered on hardened under this process. Firstly the tools are heated

then suddenly cooling. This is another area of expert work because the qualities of the

tool or implements are very much depending on this process. Similarly sharper tools are

tempered in quenching oil and other tools are tempered is know.

5.GRINDING OR POLISHING

Under this process tools are grinded or polished. This process makes the tools are

very attractive. For this grinding wheels and polishing belts are used.

6.CUTLERY AND CARPENTARY

Next process is cutting and carpentry certain tools require handles. These handles

are fitted under this process. For handled, in this company ‘avail’ plants are used because

of the special quality in nature.

7.PAINTING AND PACKING

Some tools are painted in the red colour, some others in light rose and others in

varnish. Some special tools are electroplated. This process makes tools are very

attractive and prevent stain.

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The painted or varnished tools are packed in convenient Quantities and then

transferred to finished goods stall. The process Of Production is given in diagram. The

diagram showing the Company process of section of production.

MAINTENANCE DEPARTMENT

Maintenance section is a part of production department. It helps to

make the production smoothly affinity. It consists of on maintenance engineer and his

workers. The workers include sharps, mechanist, man and fitters.Maintenance of a

machine means effort dissected towards maintaining the machine in a good condition.

Maintenance reduces break downs and helps in achieving targeted production. The

maintenance is done with out affecting production. The main duties of the department are

repair and maintenance of equipments of the factory.

The main functions of their department are:

1) To provide spare part to the machine.

2) To repair machine

3) To maintain the machine properly

4) To provide directions and instruction regarding options of machines.

The maintenance section is not a suppurate department. But it is a part of production

department. This helps to repair the machines and prevent the stoppage of production or

to avoid the interception in the flow of production process.

MARKETING DEPARTMENT

Marketing is a comprehensive term and includes all resources and set of

activities necessary to direct and facilitate the flow of goods and services from the point

of production to the consumption through the process of distribution.Marketing is the

process of all activities including for the exchange of goods and services from the point

of production to the point of consumption.

The marketing area of SIMCO product is the whole over South India. The

products are marketing directly by the firm. Sales manager is in charge of marketing

department. He is to make sales and keep all records and account in connection with

19 Saja.K.A

sales. Sales department divides the selling price of the products, profit on product and

production on the basis of demand.

The method is that the company has a sales representative to collect orders

from the dealer/retailers. The sale representatives will inform the orders and the

company directly will send the product to the dealer/retailers.

SALES DEPARTMENT

The sales manager with the help of sales clerk undertakes the sales activities.

Orders are received by the firm through agents on securing orders the sales clerk makes

arrangements for the delivery of goods. He records the products delivered, its quality,

price quantity etc in a book known as order book.For order worth Rs 3500 /- or more at a

times 15% discount will allowed for all items. It charges central sales tax and maximum

credit period is one and half month.It also provides credit sales on limited rates.

HUMAN RESOURCE DEPARTMENT

Main purpose of human resource department is to establish and maintain

sound personnel relation at all levels of organization and effective use of personnel by

ensuring good condition of employment.Human resource department is under the charge

of a human resource manager.

Functions of personnel management

1. Incentivating developing and maintaining motivation for work.

2. Wage & salary administrating and wage & salary surveys.

3. To provide benefits and service of insurance, health, hospitalization, medical care etc.

Types of workers

There are three types of workers in the company

1. Piece rate workers on the production department.

2. Administrative staff.

3. Security staff

20 Saja.K.A

SIMCO consists of 100 workers.Among them 49 are permenant workers.It also has 17

office staff and 4 security staff.

The major functions of this department are:

RECRUITMENT AND SELECTION

Like any other company ,SIMCO also need different kinds of personnel for

metal works , supervisors , clerks and so on.This company specifies separate skill and

experience for all these work. SIMCO find out its human resources through various

source like advertisement ,unsolicitated application.

INDUSTRIAL RELATION

Trade union are a powerful instrument to promote and safe guard the interests of the

workers and to achieve the economical psychological and social goal of workers

Trade union of the company are as follows

CITU

INTUC

B.M.S

SIMCO Staff Association (staff union)

WELFARE

Labour comprises all human efforts of body and mind, which is exchanged for a

consideration in term of cash or kind or bosh. Welfare to a broad concept referring to a

condition of an individual or group of relationship – with the whole environmental.

Friendly existence physiological balance, population free existence and proper sanitation,

solid welfare is the prevention of decimation bred on costs, creed sex, establishment of

equity and fairness, ensuring safety. The office of economic welfare same time promotes

Economic development of society by increasing production, productivity and quality of

products and services.

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WAGE AND SALARY ADMINISTRATION

There are different rule for determining the wages of workers and salary of

office staff. Office staff and watch man received fixed salary.But the workers receive

wages under piece rate system.The firm pays iut the wages as per the minimum wages

Act of 1948

Benefits given to employees

This organization provides following retirement benefits to the employee, i.e. Gratuity,

Provident fund and Pension etc.

FAMILY PENSION

Family pension is paid to employees who died before superannuating.Graded

person is provided. Those who retire get a lump sum but no pension. Minimum

eligibility condition of pension is to be 10 years experience.

PROVIDENT FUND

Provident fund is give to the employee by way of contribution equally done by employer

and the employees.

GRATUITY

Gratuity is calculated by using the following formula

Gratuity = Basic Pay + Dearness allowance X 15/26 X year of service

BONUS

SIMCO provide certain percentage of profit as a bonus in a festival season.

EMPLOYEE STATE INSURANCE

Both employees and employers contribute a fixed sum to ESI.

LOANS

The concern provide,loan facility to its employees in times of festival,marriage

and other needs.

CANTEEN FACILITY

The canteen facility are also provided to the employees. For availing this facility

the employees should take canten token from the office and then his token should be

given to canteen instead of cash.

22 Saja.K.A

SAFETY & SECURITY

Management is primarily responsible for safety. Management involves all

managers including top management. All department head and their management staff

including supervisors are equally responsible for safety of their workers and equipment.

A worker who is working with a machine is equally responsible for the safety of his life

as well as the lives of his colleagues. So as also the security man as the gate of his

factory thus we find safety encompasses every employee, every department and every

functionary in the organization.

60 minor accidents are reported in the last year. The main cause of these

accidents is to carelessness of the workers. Most of the workers are working near the

furnace. This is always a chance to burn body of the workers. The company can avoid

this accident to give more training and safety program to the workers.

OTHER ADMINSTRATIVE ACTIVITIES

PERFORMANCE APPRAISAL

The performance of each employee is evalutated by the respective supervisor

and the evaluation report is submitted to the top level executives by the

supervisor.According to this workers may rewarded at the monthly meeting.

ABSENTEESIM

There are two types of absentees. They are habitual absentees and non habitual

absentees. Habitual absentees will take leave frequently without any reason or

somewhere engaged in other wise, other than their workers in the company.Non habitual

absentees those who take leave very rarely. SIMCO permits 10 % absenteeism in a year

GRIEVANCE HANDLING

23 Saja.K.A

If there is any grievance are occupied it will be reported to the top leve

managers and a mmeting will be called immediately.In this the workers and top level

management reveal their problems and complaints according to this proper action will be

taken

TIME OFFICE

For recording the attendance of workers instead of attendance register and

attendance card method is followed.It is placed in the time office. The attendance card

contains the name of the worker, ticket number, name of the dept in which he works,

working hours etc. At the time of his arrival the worker should submit his attendance

card. The charge man also records the attendance in a particular book the note book

include the name of worker, ticket number, 6time of arrival etc. After doing the charge

man submits this book to the personal manager and he will make tick marks on the

attendance card and this is the base for preparing wage sheet.

ACCOUNTING AND FINANCE DEPAREMENT

The accounting and finance department under the control of office manager.

It consists of account clerk wage clerk, sales clerk and dispatch clerk and computer

operator.

The main functions of the finance department are as follows.

1. Maintenance of liquid asset.The department ensures that there is adequate cash in

hand and at bank to meet its obligation at all times.

2. Building up reserves for growth expansion.

3. Maximisations of profit and wealth of the owners.

4. Ensuring maximum operational efficiency by efficient and effective utilization of

finance for ensuring financial discipline in the organization.

5. Evaluation of financial performance.

24 Saja.K.A

6. Negotiate with bankers, financial institution and creditors.

7. The department undertakes financial planning to forecast the needs and source of

finance.

ACCOUNTING SYSTEM

The Accounting Department is fully computerized. The company maintains the accounts

on double entry system of Book-Keeping.Office manager is in charge of accounts section

and is responsible for the entire function of this section.

Main books of accounts

The company prepares mainly the following books.

Cash book : Cash book is prepared for entering all the receipt and

expenses of cash

Purchase day book : Transaction of credit purchase of goods are recorded

in this book

Sales day book : Sales day book includes all sales made in a day. There

are separate column for taxable and nontaxable items in these books.Two

separate column for @ 4 percentages and 10 %. At the end of every

month the sales clerk prepares sales day book.

General Ledge r: A general ledger contains all other accounts.

Bankbook: The bank book contains the receipt and payments of check,

demand draft etc.

Personal Ledger : It includes personal accounts, which are divided into

two separate accounts. They are:

Sundry creditors:- All purchases are treated as credit purchase and so that

all purchases entered in to sundry creditors account.

Sundry debtors: - This account is kept for ending reminder and for

Calculating sundry debtors.

25 Saja.K.A

CHAPTER 3

FINANCIAL STATEMENT ANALYSIS

Financial Statements are the principal sources of Financial Information.

They are the statements showing the financial position and the results of business

operation at the end of the accounting period. It is prepared on the basis of recorded

facts .The statements are prepared for a particular period, generally once in a year

According to John .N. Myer,” the financial statement provide a

summary of accounts of a business enterprise in the balance sheet reflecting the assets,

liabilities and capitals as on certain date and the income statements showing the results of

operations during a certain period. Financial statements are the outcome of summarizing

process of accounting.

Financial analysis refers to the process of determining financial strength

and weakness of the firm by establishing the strategic relationship between the items of

the Balance Sheet, Profit &Loss account and other operative data .It is the use of

financial statements to analyze a company’s financial position and performance and to

assess future financial performance. It is a technique of X-raying the financial position as

well as progress of a firm.

In the words of John .N. Myer “Financial statements analysis is largely a

study of relationship among the various financial factors in a business as disclosed by a

single set of statements and a study of the trend of these factors in a series of statements.”

The analysis and interpretation of financial statements is used to

determine the financial position and operation as well.

For analyzing and interpreting the financial statements, some important

tools used they are as follows.

1. Comparative Statements.

2. Trend Analysis.

26 Saja.K.A

3. Common size statements.

4. Ratio Analysis.

5. Single and multiple bar diagram.

COMPARATIVE STATEMENTS The comparative financial statements are statements

which show the financial position of a firm at different period of time. The changes in

financial data are best understood if the statements of two or more years are placed side

by side to facilitate comparison. Such statements are called Comparative Financial

Statements.

The two Comparative Statements are Comparative Balance Sheet &

Comparative Income Statement.

COMPARATIVE INCOME STATEMENT

The Comparative Income Statements will show the operating results

for two periods and the amount as well as percentage increase or decrease in them. It

explains clearly the relation ship between sales and cost of goods sold and its effect on

gross profit. It gives an idea of a progress of a business over a period of time. The

changes in absolute data and money value and percentages can be determined to analyze

the profitability of the business.

Comparative Income Statement has four columns. First two columns

give figures of various items for two years. Third and fourth columns are used to show

increase or decrease in figures in absolute amounts and percentages respectively.

The increase or decrease in sales will be comparative with increase or

decrease in cost of goods sold. The second step of analysis should be the study of

operational profit .The increase or decrease in net profit will gave you an idea about

27 Saja.K.A

overall profitability. Thus an opinion is formed about profitability, i.e. whether good or

not.

TABLE 3-1 COMPARATIVE INCOME STATEMENT

PARTICULARS 2006-2007 Rs

2007-2008 Rs

ABSOLUTE INCREASE/DECREASE

% INCREASE/DECREASE

SALES

LESS COST OF GOODS SOLD

1,85,38,693.38

1,43,4,7440.8

2,15,67,735.45

1,66,17,804.53

30,29,042.07

22,70,363.73

16.34

15.82GROSS PROFIT

{ADD}.OTHER INCOME

41,91,252.58

10,37,88.54

49,49,930.92 54,571.39

7,58,678.34 49,217.15

18.10 47.42

TOTAL

{LESS}OPERATING EXPENSES

42,95,041.12

31,47,563.54

50,04,502.31

36,69,114.19

7,09,461.19

5,21,55,0.65

16.52

16.57

OPERATING PROFIT

{LESS}. NONOPERATING EXPENSES

11,47,477.58

7,24,581.60

13,35,388.12

7,83,111.02

1,87,910.54

58,529.42

16.38

8.07

NET.OPERATING PROFIT

4,22,895.98 5,52,227.10 1,29,381.12 30.59

INTERPRETATION

The comparative income statement gives above reveals that

1. There has been an increase in sales of Rs 30,29,042.07 in the year 2007- 2008while

the cost of goods sold has increased nearly by 15.82%ther by resulting in an

increase in gross profit of Rs.7,58,679.34.

2. The miscellaneous income decreased in the year 2007-2008.

28 Saja.K.A

3. In the year 2007-2008 operating expenses shows an increase of 16.57%.The

operating profit of the company is increased by 16.38%.

4. In the year 2007-2008the non operating expenses show an increase of 8.07%.

5. In the year 2007-2008 the net operating profit of the company is increased by

30.59%.There is a sufficient progress in the firm and the overall profitability of the

firm is good.

COMPARATIVE BALANCE SHEET

The comparative balance sheet analysis is the study of the same items

and computed items, in two or more balance sheet of the same business enterprise on

different dates. The changes in periodic balance sheet items reflect the conduct of a

business while interpreting comparative balance sheet the interpreter is expected to study

the aspects like current and liquidity position, long term financial position and

profitability of the concern.

TABLE 3-2

PARTICULARS 2006-2007 Rs

2007-2008 Rs

ABSOLUTE INCREASE/ DECREASE

% INCREASEDECREASE

ASSESTS CURRENT ASSETSLOANS& ADVANCES

INVENTORIES:

SUNDRY DEBTORS

CASH AND BANK BALANCE

LOANS&ADVANCE

60,11,711.33

38,92,565.22

1,65,825.63

5,16,294.98

56,47,238.96

45,54,700.82

87,653.10

5,63779.86

3,64,472.04

6,52,135.06

78,172.53

47,484,.88

6.06

16.75

47.14

9.197

TOTALCURRENTASSETS 1,05,86,397.16 1,08,43,372.74 2,56,975.58 2.43

29 Saja.K.A

FIXED ASSETS:

Fixed Assets 8,47,665.65 8,54,428.80 6,763.15 .797

TOTAL.FIXED ASSETS 8,47,665.65 8,54,428.80 6,763.15 .797

TOTAL ASSETS 1,14,34,062.81 1,16,97,801.54 2,63,738.73 2.31LIABILITIESCurrent LiabilitiesCurrent LiabilityTOTAL.CURRENT LIABILITIES

29,18,093.23

29,18,093.23

34,89,218.58

34,89,218.58

5,71,125.35

5,71,125.35

19.57

19.57

LONG.TERM LIABILITIES:Loans

Secured

Unsecured

32,94,765.74

34,12,826.50

33,03,299.00

32,71,432.00

9,133.26

1,41,3945

.28

4.14

TOTAL. LONG TERM LIABILITIES 67,06,992.24 65,74,731 1,32,261.24 1.97

Owners Fund

Capital

Purayannur Industries 18,08,977.34 16,33,851.96 1,75,125.38 9.68

TOTAL.SHARE HOLDERS FUND 18,08,977.34 16,33,851.96 1,75,125.38 9.68

TOTAL LIABILITIES 1,14,34,062.81 1,16,97,801.54 2,63,738.73 2.31

INTREPRETATION

1. The excess of current assets over current liabilities gives the working capital.

Both 2006-07 and 2007-08 shows that current assets exceed current liabilities.

30 Saja.K.A

The working capital in the year 2006-07 was Rs 76,68304.93 and in 07-08 Rs

73,54,154.16. The working capital shows short term financial position of the

concern.

2. The inventories of the firm decreased by 6.06% as compared to 2006-07.This

indicates that there is no accumulation of inventory. The sundry debtors and

loans and advances increased by Rs 6, 52,135.6 and Rs 47,484 cash and bank

balances of the firm decreased by 47.14% compared to previous year. This

shows a decrease in the liquidity position of the firm

3. The figure of fixed assets and long term liabilities and capital reflect the long

term financial position o f the firm. Long term sources are used for financing

not only fixed assets but also a part of working capital. It is better to finance

fixed assets by raising long term funds.

4. The fixed assets increased by Rs 6,763.15 in the 2007-08 compared to

previous year. Long term liabilities shoe decrease of 4.14%.

5. The firm has no reserve and surpluses. This will adversely affect their

profitability. In the absence of reserves and surplus the firm has to depend on

external sources in the event of an emergency. This will create problem for

partners.

TREND ANALYSIS

The financial statement may be analyzed by computing trends of

series of information. This method determines whether the direction is upward or

downward and involves in the computation of the percentage relationship that each item

bears to the same item in the base year is taken as base year. The figures of the base year

are taken as base year. The figures of the base year are taken as 100 and trend ratio for

other years calculated on the basis of the base year

31 Saja.K.A

TABLE: 3-3 TREND ANALYSIS OF SALES

YEAR SALES {in Rs} TREND %

2003-04 1,63.16,381.37 100

2004-05 1,51,25,231.49 92.69

2005-06 1,94,23,836.66 119.04

2006-07 1,85,38,693.38 113.62

2007-08 2,15,67,735.45 132.18

GRAPH: 3-1

32 Saja.K.A

TABLE 3-4

TREND ANALYSIS OF COST

YEAR COST {in Rs} TREND % 2003-04 1,09,06,701.16 100

2004-05 1,02,81,014.31 94.26

2005-06 1,46,96,061.89 134.74

2006-07 1,43,47,440.80 131.55

2007-08 ,66,17,804.53 152.36

GRAPH 3-2

33 Saja.K.A

TABLE 3-5

TREND ANALYSIS OF PROFIT

YEAR PROFIT {in Rs} Trend %

2003-04 7,36,643.86 100

2004-05 4,13,564.53 56.14

2005-06 9,80,793.37 133.14

2006-07 4,22,895.98 57.41

2007-08 5,52,277.10 74.97

GRAPH: 3-3

34 Saja.K.A

INTERPRETATION

Trend Analysis or trend percentage above has clearly given an idea about

sales, cost and profit of five years i.e. 2003-04,2004-05,006-07 and 2007-08.Sales of

2003-04 is taken as base year sales have been decreased in 204-05 when compared to the

base year. In the year 2005-06 sales have been increased by 19.04.I the year 2006-2007

trend percentage of sales is 113.62%.In the year 2007-08 sales has been increased

by132.18%.Trend analysis of sales shows both increasing as well as decreasing trend.

Cost of 2003-04 is taken as a base year. In the year 2004-05 trend

percentage of cost is 94.26% which is lower than the base year. But cost has increased by

34.74%, 31.55% and 52.36% in 2006-07 and 2007-08 respectively. Cost has increased

except in the year 2004-05

2003-04 is taken as the base year. Profit was highest in the year 2005-06.In

the year 2005-06 profit has been increased by 33.145.The profit has decreased except in

the year 2005-06.Profit shows a decreasing trend. The firm has no control over the cost.

Because of this an increasing cost adversely affected the profit.

35 Saja.K.A

COMMON SIZE STATEMENTS

The common size statements are shown in analytical

percentages. The figures are shown as percentages of total assets, total liabilities and total

sales. The total assets are taken as 100 and different assets are expressed as a part of total.

Similarly various liabilities are taken as a part of total liabilities. These statements are

also known as component percentage or 100 percent statement because every individual

item is expressed as total percentage of 100.The analyst is able to asses the figures in

relation to total values. The common size statements may be common size income

statements and common size balance sheet.

COMMON SIZE INCOME STATEMENTS.

A statement in which each expenses item is shown as a

percentage of net sales is called common size income statements. A sales figure is

assured to be 100 % and all percentage and all figures are shown as percentage of net

sales. The items in income statements can be shown as percentage of sales to show the

relation of each item to sales. A significant relation ship can be established between items

of income statements and volume of sales. The increasing sales will certainly increase

selling expenses and not administrative or financial expenses. In case the volume of sales

increases to a considerable extent, administrative and financial expenses should be

reduced at once. So a relationship is established between sales and other items in income

statement and the relationship is helpful in evaluating operational activities of the

enterprise.

36 Saja.K.A

C0MM0N SIZE BALANCE SHEET OF SIMCO

YEAR 2003-2008

PARTICULARS

2003-2004 2004-2005

2005-2006

2006-2007 2007-08

Amount % Rs

Amount % Rs

Amount % Rs

Amount RS % Amount %Rs

1)LIABILITIES

1)Proprietors Fund a) Purayannur Industries

2)Loan Funds

Secured Unsecured

3) Current Liabilities

TOTAL LIABILITIES

10,93,250.42 11.25

16,85,068.61 17.35

39,53,454.40 40.70

29,81,808.04 30.70

97,13,581.47 100

10,30,314.54 10.32

27,49,223.02 27.53

39,57,576.00 39.63

22,50,099.49 22.52

99,87,213.05 100

16,31,395.26 15.69

23,09,726.27 22.22

38,18,842.00 36.74

26,35,774.72 25.35

1,03,95,738.2 100

18,08,977.34 15.82

32,94,165.74 28.81

34,12,826.50 29.85

29,18,093.23 25.52

1,14,34,062.8 100

16,33,851.96 13.97

33,03,299.00 28..24

32,71,432.00 27.97

34,89,218.58 29.82

1,16,97,801.5 100

II.ASSETS1.Fixed Assets

2.Current AssetsLoans &Advances

Inventories

Sundry Debtors

Cash & Bank Balance

Loans&Advance

Total Assets

7,42,554.74 7.64

49, 40,267.1050.86

32,65,810.21 33.62

3,28,204.36 3.38

4,36,745.06 4.50

97,13,581.47 100

6,20,406.61 6.21

60,18,323.1 60.26

26,48,334.42 26.52

2,80,744.06 2.81

4,19,40486 4.20

99,87,21 3.05 100

5,40,723.30 5.20

54,50,178.6 52.43

38,52,554.41 37.06

1,79,727.05 1.73

3,72,554.86 3.58

1,03,95,738.25 100

8,47,665.65 7.41

60,11,711.3 52.58

38,92,565.22 34.04

1,65,825,63 1.45

5,16,294.98 4.52

1,14,34,062.81 100

8,54,428.80 7.30

56,47,238.9 6 48.28

45,44,700.82 38.85

87,653.10 0.75

5,63,779.86 4.82

1,16,97,801.54 100

INTREPRETATION

37 Saja.K.A

The table shows the sale of 5 years and its relationship

with other figures. The sales vary from year to year. The sales in the year 2003-2004 was

Rs 1,63,16,381.37 which reduced to Rs 1,51,25,231.49 in the year 2004-05.But sales of

2005-06 shows an increasing trend and sales reached Rs 1,94,23,836,66.After a decrease

of Rs 18538693.38 in 2006-07 sales increased to Rs 2,15,67,735.45 in 2007-08.These

variation in sales may be due to the changes in marketing strategy adopted by the firm.

A comparison between sales and cost of goods sold gives a clear

picture of the firm’s position .In 2003-04 the cost of goods sold was Rs 10,90,6701.16

which was 66.84% of sales. In 200-05 the sale was decreased to Rs 1,51,25,231.49.But

the cost of goods sold was Rs10281012.31 which was 67.97% of sales. It resulted in a

decrease in gross profit of Rs 3,71,225.03 cost of goods sold was increased in 2005-

06.But because of increased sales, gross profit was satisfactory. In 2006-07 the sale was

decreased to Rs 1,85,38,693.38.But the cost of goods sold was Rs 1,43,47,440.80 which

is 77.39% sales. It resulted in a decrease in gross profit of Rs 5,36,522.19. Cost of goods

sold was increased in 2007-08.But because of increase sales, gross profit was satisfactory

Another important to be noted is the expenses. The expenses of the

firm in the year 2003-04 was 27,76,920.35 which was 17.02 of the sales. It increased to

19.26% in 2004-05.In the year 2005-06 the expenses of the firm increased to Rs

30,25,755.99 because of increased sales, its percentage was only 15.585.In the year 2007-

08,the expenses was Rs 35,34,875.96 which was 16.39% of sales.

38 Saja.K.A

CHAPTER – 4

RATIO ANALYSIS OF SIMCO

Ratio Analysis is one of the methods of analyzing financial statement.

It is means of under standing better the financial strength soundness, weakness or

position of a firm.

According to Myer, Ratio Analysis is a study of relationship among the

various financial factors in a business. It is a process of establishing a meaningful

relationship between tow figures as a set of figures of a financial statement. Ratio can be

expressed in three ways. It may be expressed in times. If the quotient is multiplied by

hundred, it is expressed as percentage. It may also be expressed in terms of proportion

between tow figures. Thus, times percentage and proportion are three ways of expressing

ratios.

ADVANTAGE OR USES OF RATIO ANALYSIS

The use of Ratio Analysis as a tool of financial analysis has been

considerably increased in these days. Ration analysis can be of very valuable aid to

management in the discharge of its basic function of planning, forecasting, coordination,

communication and control. It is a devise to diagnose the disease of an enterprise. It is a

powerful tool of financial analysis. The advantages of Ratio Analysis is summarized as

below.

1. Ratios are helpful in judging financial performance of an enterprise over a

period of time. They tell the various aspects of management performance

and the overall financial position.

2. A study of the trend of strategic ratios may help the management in the task

of planning and forecasting.

39 Saja.K.A

3. The ratio measures the efficiency of operation of an enterprise. Hence they

can be used as tool of management control.

4. Ratio facilitate interfirm comparison

5. It is possible to test the liquidity, solvency and profitability of the enterprise

through the technique of ratio analysis.

6. Some times, investment decisions are guided by certain ratios.

7. Ratio Analysis simplifies the comprehension of financial statement

8. Ratio Analysis communicate the financial strength or weakness of firm in a

more easy and understandable manner.

9. Thus, ratio analysis gives valuable information not only to management but

also to creditors, investors and share holders.

CLASSIFICATION OF RATIOS

On the basis of purpose, Ratio may be classified as under

1. Profitability Ratios

2. Turn over Ratios.

3. Financial Ratio

a) Liquidity or Short – term financial ratios

b) Solvency or Long – term financial ratio

ANALYSIS OF PROFITABILITY OF SIMCO

The ultimate aim of any business enterprise is to earn

maximum profit. Lord Keynes remarked, Profit is the engine that derives the business

enterprises. A firm should earn profit to survive and grow over a long period of time. To

the management profit is the measure of efficiency and control. To the owner, it is

measure worth of their investment. To the creditors it is the margin of safety. The

management of the company should know how efficiently they carry on business

40 Saja.K.A

operations. In other words the management of the company is very much interested in

the profitability of the company. Besides management, creditors and owners are also

interested in the profitability of the company.

The profitability of a firm can be easily measured by its profitability

ratios. Profitability ratio measures the ability of the firm to earn an adequate return on

sales, total assets and invested capital. Profitability ratios are generally calculated either

in relation to sales or in relation to investment.

PROFITABLILTIY RATIOS BASED ON SALES

The general profitability ratios based on sales are gross profit ratio,

net profit ratio, operating profit ratios and expenses ratio.

GROSS PROFIT RATIO

Gross profit ratios show the relationship between gross profit to sales. To

calculate this ratio gross profit and net sales are required. This ratio indicates the

efficiency of production or trading operations. It is useful to as certain whether the

average percent age of mark up on the goods sold is maintained. A higher gross profit

ratio is always favorable to the firm.

GROSS PROFIT= GROSS PROFIT

---------------------X 100

NET SALES

GROSS PROFIT = SALES-COST OF GOODS SOLD

NET SALES= SALES – SALES RETURN

41 Saja.K.A

GROSS PROFIT RATIO OF SIMCO from 2003 to 2008

Table 4.1

YEAR GROSS PROFIT

Rs

NET SALES

Rs

GROSS PROFIT

RATIO

2003-04 46,06,914.21 1,63,16,381.37 28.23%

2004-05 42,35,689.18 1,51,25,231.49 28.00%

2005-06 4,72,774.77 1,94,23,836.66 24.34%

2006-07 41,91,252.58 1,85,38,693.38 22.16%

2007-08 49,49,930.92 2,15,67,735.45 22.95%

GRAPH:4.1

Graph showing Gross Profit Ratio of SIMCO year 2003-08

INTERPRETATION

42 Saja.K.A

The above bar diagram clearly indicates the Gross profit Ratio for the last

Five years. It indicates the margin of profits on sales. Gross profit ratio in the ear 2003 –

04 was the highest in 28.23%. Then it started decreasing. In the year 2007-08 Gross

profit ratio was 22.95%. Decrease in gross in gross profit ratios is mainly due to inability

of the management to improve the volume of sales and decrease in selling price with out

corresponding decrease in the cost of goods sold.

NET PROFIT RATIO

Net profit ratio is the ratio of net profit earned by a business to its net sales.

Net profit or net income is calculated by deducting the selling and distribution expense

and financial expenses from gorses profit. It measures over all profit it ability. It is

calculated as follows.

Net profit = Net Profit

-------------X100

Net Sales

Net profit = Gross Profit + Operating and non operating income – Operating and

non operating expenses.

TABLE: 4.2

Year Net Profit it (Rs) Net Sales Net Profit Ratio

2003-04 7, 36,643.86 1,63,16,381.37 4.51%

2004-05 4,13,564.53 1,51,25,231.49 2.73%

2005-06 9,80,793.37 1,94,23,836.66 5.04%

2006-07 4,22,895.98 1,85,38,693.38 2.28%

2007-08 5,52,277.10 2,15,67,735.45 2.56%

43 Saja.K.A

GRAPH: 4.2

Graph showing net Profit Ratio of Simco from 2003 – 08

INTERPRETATION

Net profit ratio indicates management efficiency in manufacturing

administrating and selling the products. This is a measure of over all profitability. Net

profit ratio was the highest in the year 2005-06 ie 5.04%. But in the next year it again

decreased to 2.28% and in the 2007-08 net profit ratio was 2.56%. a low net profit ratio

would mean low efficiency and in adequate returns to the owners

OPERATING RATIO

This ratio establishes the relationship between operating cost and net

sales. This ratio is used to test the operating efficiency of the firm. It is calculated by

using the following formula.

Operating ratio= Cost of goods sold + operating expenses

44 Saja.K.A

---------------------------------------------------X 100

Net sales

TABLE: 4.2

OPERATING RATIO OF SIMCO FROM 2003-08

YEAR COST OF GOODS SOLD+

OPERATING EXPENSES

NET SALES OPERATIN

G RATIO

2003-04 1,09,06,701.16+27,76,920.35

=1,36,83,621.51

1,63,16,381.37 83.86%

2004-05 1,02,81,014.31+29,13,706.71

=1,31,94,721.02

1,51,25,231.49 87.24%

2005-06 1,46,96,061.80+30,25,755.99

=17,72,1871.99

1,94,23,836.66 91.24%

2006-07 1,43,47,440.80+30,49,989.95

=1,73,97,430.75

1,85,38,693.38 93.84%

2007-08 1,66,17,804.53+35,34,875.96

=2,01,52,680.49

2,15,67,735.45 93.44%

GRAPH:4.3

Graph showing operating profit of SIMCO year 2003-08

45 Saja.K.A

INTERPRETATION

The Operating Ratio of SIMCO indicates that for every Rs 100 % of

sales, cost of goods sold and operating expenses between 80% to 95%.

PROFITABILITY RATIO BASED ON INVESTMENT These ratios are computed on the basis of investment in business. Important over all

profitability ratios are return on investment, return on owners funds etc.

RETURN ON INVESTMENT

When a firm investment money in business it naturally expects

adequate return on its investment. Therefore the firm wants to know how much profit is

earning on its investment. It is for knowing this return on investment is computer. ROI

measures the over al profitability. It establishes the relationship between profit or return

and investment. It is computed as follows.

ROI = Profit it before interest and Tax

------------------------------------------X100

Net capital employed

Net capital employed = Fixed asset –Current asset – current liabilities

46 Saja.K.A

TABLE: 4.5

RETURN ON INVESTMENT OF SIMCO YEAR 2003-08

Year Net Profit it (Rs) Net sales Net profit ratio

2003-04 18,40,356.36 67,31,773.43 27.34%

2004-05 13,44,713.79 77,37,113.56 17.38%

2005-06 1,86,716.71 77,59,963.53 24.03%

2006-07 12,45,051.17 85,15,969.58 14.62%

2007-08 14,69,626.35 82,08,582.96 17.90%

GRAPH: 4.4

Graph showing return on investment of SIMCO from 2003-08

47 Saja.K.A

INTERPRETATION

Ideal return on capital employed 13.1 in the year 2006-07 ROI is below the

standard norm. but in all other years RIO was above the standard norm.

Return on owners Funds

This will help to measure the profitability from owner’s point of view. This is the

ratio of net profit to share holder’s funds or net worth. It is calculated in follows.

Return on owners fund = Net Profit after tax and interest

-------------------------------------------X 100

Owner’s fund

TABLE 4.6

YEAR NET PROFIT (Rs) NET SALES (Rs) NET PROFIT

RATIO

2003-04 7,36,643.86 10,93,250.42 67.38%

2004-05 4,13,564.53 10,30,314.54 40.14%

2005-06 9,80,793.37 16,31,395.26 60.12%

2006-07 4,22,895.98 18,08,977.34 23.38%

2007-08 5,52,277.10 16,33,851.96 33.80%

48 Saja.K.A

GRAPH:4.5 Graph showing Return on owners fund of SIMCO year 2003-08

INTERPRETATION

This ratio helps to measure the profitability from the owners point of view. It

indicates how efficiently the owners funds have been utilized by the firm. In the year

2003-04 return on owner’s funds is 67.38%. But in the year 2007-08it was decreased to

33.80%.

ANALYSIS OF ASSET MANAGEMENT OF SIMCO

Asset management is an important function of financial

management. In this chapter an attempt is made to analyze the efficiency of the

management in managing the assets. Turn over ratios is used to measure the efficiency of

effectiveness with which a firm manages its resources or assets.

49 Saja.K.A

TURN OVER RATIOS OR PERFOMANCE RATIOS OR ACTIVITY

RATIOS

These ratios indicate how effectively the resources are being utilized by

a firm. In other words, these ratios reflect the efficiency of a firm in the asset

management. Turn over ratios related to sales. Sales have divert relationship to the

performance of the business. Higher sales mean better performance which means better

efficiency and productivity of the business. Higher sales also mean, more production

which is the result of the best possible utilization of physical resources. Important turn

over ratio is the following.

Fixed Asset Turnover Ratios

Fixed assets are used in the business to produce goods for sale. The

effective utilization of fixed assets will result in increased production and reduced cost.

Fixed asset turn over ratio is calculated by establishing the relationship between net fixed

asset and sales (or cost of goods sold) of the concern. It is used to judge the effectiveness

of the use of fixed assets.This ratio assumes added significance in the case of

manufacturing concern like SIMCO. An increase in this ratio is the indicator of

efficiency, work performance and a decrease in this ratio speaks of unwise and improper

investment in fixed assets. However in the labour intensive industries it is exported to be

high and in capital intensive industries it is bound to be low.

As a rule of thumb fixed asset turn over ratio of 5 times is considered ideal. Fixed assets

turn over ratio is calculated by following formula.

Fixed Asset Turnover Ratio = Net sales

-------------

Fixed asset

50 Saja.K.A

TABLE: 4.7

YEAR NET SALES

Rs

FIXED ASSETS

Rs

TURNOVER

RATIO

2003-04 1,63,16,381.37 7,42,554.74 22 TIMES

2004-05 1,51,25,231.49 6,20,406.61 25 TIMES

2005-06 1,94,23,836.66 5,40,723.30 36 TIMES

2006-07 1,85,38,693.38 8,47,665.65 22 TIMES

2007-08 2,15,67,735.45 8,54,428.80 25 TIMES

GRAPH: 4.6

Graph Showing Fixed Assets Turn Over Ratio from 2003

INTERPRETATION

51 Saja.K.A

The above table indicates that from the year 2003 fixed asset turn over ratio is

showing an increasing trend and attained highest level of 36 times in 2005. The high

ratio is the sign of efficiency of fixed asset management. Another reason is SIMCO is a

labour intensive small scale unit.

Stock Turn over Ratio

Stock or Inventory Turn over ratio, measures how many times the average stock is sold

during the year. Higher inventory turn over ratio is always beneficial to the concern.

This ratio measures the effectiveness of the stock policy of the management. This ratio

indicates the relationship between cost of goods sold and average stock. This ratio is

calculated as follows.

Stock Turn over ratio = Cost of goods sold

------------------------

Average stock

Cost of goods sold = Opening stock + purchases – closing stock

Average stock = Openings stock +closing stock

2

TABLE 4.8Stock Turn over ratios of SIMCO from 2003-08

Year Cost of goods sold

Rs

Average Stock

Rs

Stock Turn over

Ratio

2003-04 1,09,06,701.16 46,89,844.71 2.33 times

2004-05 1,02,81,014.31 54,79,295.10 1.88 times

2005-06 1,46,96,061.89 57,34,250.86 2.56 times

2006-07 1,43,47,440.80 57,30,944.98 2.50 times

2007-08 1,66,17,804.53 58,29,475.15 2.85 times

GRAPH: 4.7

52 Saja.K.A

Graph showing stock turn over ratio of SIMCO from 2003-08

INTERPRETATION

The stock turn over ratio is below standard norm i.e. 8 times. It indicates that the firms

stock turned over into cash below 3 times in a year.

Debtors Turn over Ratio

This ratio is also known as Receivables Turn over ratio. It shows how quickly debtors

are converted into cash. It established the relation ship between credit sales and average

debtors. It can be calculated as follows.

Debtors Turn over Ratio = Credit sales

Average Debtors

Average Debtors = Opening Debtors + Closing Debtors

2

Table: 4.9

53 Saja.K.A

Debtors Turnover Ratio of SIMCO from 2003-08

Year Credit sales

Rs

Average Debtors

Rs

Debtors

Turnover Ratio

2003-04 1,63,16,381.37 30,43,246.68 5.36 times

2004-05 1,51,25,231.49 29,57,072.31 5.11 times

2005-06 1,94,23,836.66 32,50,444.41 5.97 times

2006-07 1,85,38,693.38 38,72,559.82 4.78 times

2007-08 2,15,67,735.45 42,18,633.02 5.11 times

GRAPH: 4.8

Graph showing Debtors Turnover Ratio of SIMCO from 2003-08

INTERPRETATION

Debtors Turn over ratio indicates that how fast the debtors are turned over or converted

into cash. This depicts how fast the firm can collect the credit sales.

54 Saja.K.A

Debtors turn over ratio was highest in the year 2007-08 it was 4.78 times and in the year

2007-08 it was increased to 5.11 times

AVERAGE COLLECTION PERIOD

Average collection period indicates days in which debts are collected or

in other words, sales remain uncollected. This ratio is in fast interrelated with and

depended upon the receivable turnover ratio. It is calculated by dividing the days in a

year by the debtor’s turnover ratio.

Average collection period= Days in a year (360 or 365)

Debtors turn over ratio

TABLE: 4.10

Average Collection Period of SIMCO from 2003-08

Year DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD

2003-04 5.36 times 69 days

2004-05 5.11 times 72 days

2005-06 5.97 times 62 days

2006-07 4.78 times 77 days

2007-08 5.11 times 72 days

GRAPH: 4.9

Graph showing Average Collection Period of SIMCO from 2003-08

55 Saja.K.A

INTERPRETATION

The above bar diagram clearly indicates the speed with which debts are collected.

From 2003-04 to 2007-08 it is seen that there is slight fluctuation in the average

collection period.

The average collection period is between 62 to 72 days.

The efficiency of management of receivable would be analyzed with that of management

of payables.

CREDITORS TURNOVER RATIO

Creditors turn over ratio shows the relation ship between net

credit purchases and average creditors including bills payable. This ratio

indicates the number of times creditors are paid. Creditor’s turnover ratio is

also called payables turnover ratio. It is computed by the following formula.

CREDITORS TURN OVER RATIO = NET CREDIT PURCHASE

AVERAGE CREDITORS INCLUDING BILLS PAYABLE

AVERAGE CREDITORS=OPENING CREDITORS+CLOSING DEBTORS

2

56 Saja.K.A

Net Credit Purchase=Total Credit Purchase – Purchase Returns

Total Purchase =Cash Purchase +Credit purchases

Year Total Purchase

Rs

Average

Creditors (Rs)

Creditors

Turnover Ratio

2003-04 65,54,924.28 24,00,994.49 2.73 times

2004-05 64,83,206.33 26,15,953.77 2.48 times

2005-06 71,43,407.80 24,42,937.10 2.92 times

2006-07 83,20,541.41 27,76,933.97 2.99 times

2007-08 99,08.548.21 32,03,655.91 3.09 times

GRAPH: 4.10

Graph shows Creditors Turn over Ratio of SIMCO from 2003-08

INTERPRETATION

57 Saja.K.A

Creditors turn over ratio indicates that how fast the firm has to

make payment for the credit purchases. A lower ratio indicates the firm is

taking full advantage allowed by creditors. Above table indicates that

creditors turn over ratio is satisfactory.

AVERAGE PAYMENT PERIOD

Average payment period means the credit period enjoyed by the firm in

paying creditors. In short it means creditors turn over is expressed in days or months. It is

computed by the following formula.

Average Payment = 365/360

---------------------------------------------

CREDITORS TURNOVER RATIO

In months = 12

-----------------------------------------------------

CREDITORS TURN OVER RATIO

TABLE: 4.12

Average Payment Period of SIMCO from 2003-08

Year Creditors Turn Over Ratio Average Payment Period

2003-04 2.73 times 134 days

2004-05 2.48 times 148 days

2005-06 2.92 times 125 days

2006-07 2.99 times 123 days

2007-08 3.09 times 119 days

GRAPH: 4.11

58 Saja.K.A

INTERPRETATION

This ratio indicates the speed with which payment against credit purchases are made.

Average payment period is between 119 and 134 days.In 2007-08 average payment

period is 119 days.

WORKING CAPITAL TURNOVER RATIO

Current assets will change with change in sales. This means working

capital is related with sales. The relation between sales and working capital is called

working capital turn over ratio. This ratio shows how many times the working capital is

turned over to produce sales. Working capital turn over is computed by the following

formula

Working Capital Turnover ratio = Net Sales

--------------------

Working Capital

Net Sales=Sales-Sales Return

Working Capital =Current Asset-Current Liabilities

59 Saja.K.A

TABLE: 4.12

WORKING CAPITAL TURNOVER RATIO OF SIMCO FROM

YEAR 2003-08

YEAR NET SALES WORKING CAPITAL

Rs

WORKING CAPITAL

TURN OVER RATIO

2003-04 1,63,16,381.37 59,89,218.69 2.72 times

2004-05 1,51,25,231.49 71,16,706.95 2.12 times

2005-06 1,94,23,836.66 72,19,240.23 2.69 times

2006-07 1,85,38,693.38 76,68,303.93 2.42 times

2007-08 2,15,67,735.45 73,54,154.16 2.93 times

GRAPH: 4.12

WORKING CAPITAL TURN OVER RATIO FROM 2003-08

INTERPRETATION

Working Capital turnover ratio indicates the relationship between net sales and

working capital. The working capital turnover ratio in every year was below standard

60 Saja.K.A

norm. So the management should take necessary action to utilize the working capital

efficiently.

ANALYSIS OF LIQUIDITY OR SHORT TERM FINANCIAL

POSITION OF SIMCO

Liquidity means the firms liability to meet its current liabilities when they become due.

Christs and Roden defines the liquidity of an asset as money ness. Whether the liquidity

position of SIMCO is good or bad is analyzed by comparing the assets and liabilities of

SIMCO it can be analyzed by using various ratios.

LIQUIDITY RATIO

Liquidity ratio is used to measure the liquidity position or short tem financial

position of a firm. Various ratios like current ratio, liquid ratio and absolute liquid ratio

are used to measure the liquidity position of business.

1. CURRENT RATIO

Current ratio is defined as the ratio of current assets to current liabilities .It shows

the relation ship between total current assets and total current liabilities. Current ratio

is also called working capital ratio or banker’s ratio, generally current ratio of 2:1 is

considered satisfactory or ideal.

Current Assets

Current Ratio = -----------------------

Current Liabilities

TABLE: 4.14

61 Saja.K.A

CURRENT RATIO OF SIMCO FROM 2003-2008

Year Current Assets

Rs

Current Liabilities

Rs

Current Ratio

Rs

2003-04 89,71,026.73 29,81,808.04 3.01:1

2004-05 93,66,806.44 22,50,099.49 4.16:1

2005-06 98,55,014.95 26,35,774.72 3.73:1

2006-07 1,05,86,397.16 29,18,093.13 3.62:1

2007-08 1,08,43,372.74 34,89,218.58 3.10:1

GRAPH 4:13

Graph showing current ratio of SIMCO year 2003-2008

INTERPRETATION

62 Saja.K.A

During the years under study the current ratio is much above the standard

norm ie 2;1.The current ratio in most years shows the ratio around 4.However the rule of

2;1 should not be blindly followed while making interpretation of ratios.

2. LIQUID RATIO

Liquid ratio is the ratio of liquid assets current liabilities. It establishes the

relation between quick assets and current liabilities .It is the measure f instant debt

paying ability of business enterprise. It is also called Acid Test Ratio.

Liquid Assets

Liquid Ratio= ------------------------

Current Liabilities

Liquid Assets = Current Assets-(Stock Prepaid Expenses)

TABLE: 4.15

LIQUID RATIO OF SIMCO FROM 2003-2008

Year Current Asset –Stock =Liquid AssetRs

CurrentLiabilities

Rs

Liquid Ratio

2003-04 89,71,026.73 -49,40,267.10=40,30,759.63

29,81,808.04 1.35:1

2004-05 93,66,806,44 - 60,18,323.10=33,48,483.34

22,50,099.49 1.49:1

2005-06 98,55,014.95 - 60,11,711.33=45,74,685.83

26,35,774.72 1.67:1

2006-07 1,05,86,397.16- 60,11,711,33=45,74,685.83

29,18,093.23 1.57:1

2007-08 1,08,43,372.74 -56,47,238.96=51,96,133.78

34,89,218.58 1.49:1

GRAPH: 4.14

Graph showing Liquid Ratio of SIMCO YEAR 2003-04

63 Saja.K.A

INTERPRETATION

Liquid Ratio is the ratio of Liquid Assets to current liabilities. It is

considered to be superior to current ratio in testing the liquidities of the firm. Standard

form of quick ratio is 1:1.Liquidity ratio above standard norm is good. Liquidity ratio

below 1:1 will not help to pay of its Current liabilities when they become due. From

2003-04 to 2007-08 Quick Ratio states that Liquid Liabilities can be easily paid off by

realizing Quick Assets without resorting to the sale of stock.

ABSOLUTE LIQUID RATIO

Although receivables i.e. debtors and bills receivable are generally more liquid

than inventories; there may be doubts regarding their realization into cash immediately or

in time. Therefore the absolute liquid ratio should also be calculated together with current

ratio and quick ratio. Absolute liquid ratio establishes the relationship between absolute

liquid assets and current liabilities

Absolute liquid assets=Cash in hand Cash at bank +Marketable securities

64 Saja.K.A

TABLE: 4.16

Year Absolute Liquid Assets Current

Liabilities

Rs

Absolute Liquid Ratio

2003-04 3,28,204.36 29,81,808.04 0.11:1

2004-05 2,80,744.06 22,50,099.49 0.12:1

2005-06 1,79,727.05 26,35,774.72 0.07:1

2006-07 1,65,825.63 29,18,093.23 0.06:1

2007-08 87,653.10 34,89,218.58 0.03:1

GRAPH:4.15

Graph sowing Asolute liquid ratio of SIMCO from 2003-2008

INTERPRETATION

Absolute Liquid Ratio establishes the relationship between Absolute Liquid Assets

and Current Liabilities. Absolute Liquid Ratio of 5:1 is considered as ideal. Above group

shows that the absolute liquid ratio in various years. In no year the firm could attain the

standard norm. It is far below the standard norm. The concern may face serious crises to

meet the liabilities.

65 Saja.K.A

ANALYSIS OF SOLVENCY OR LONG TERM FINANCIAL

POSITION OF SIMCO

The term solvency refers to the ability of a concern to meet its long term

obligation. The long term indebtedness of a firm includes Debenture holders, financial

institution providing medium and long term loans and other creditors selling goods on

installment basis.

DEBT EQUITY RATIO

Debt-Equity Ratio also known as External –Internal equity Ratio, is calculated to

measure the relative claims of the outsiders and the owners i.e. the share holders against

the firm’s assets. This ratio indicates the relationship between the external equity or

outsiders funds and the internal equities or the share holder’s funds.

Outsiders Funds

Debt Equity Ratio= --------------------------

Share holder Funds

External Equities

Debt Equity Ratio =--------------------------

Internal Equities

TABLE: 4.17

DEBT EQUITY RATIO OF SIMCO YEAR2003-2008

Year Debt

Rs

Equity

Rs

Debt Equity Ratio

2003-04 56,38,523.01 10,93,250.42 5.15:1

66 Saja.K.A

2004-05 67,06,799.02 10,30,314.54 6.51:1

2005-06 61,28,568.27 16,31,395.26 3.76:1

2006-07 67,06,992.24 18,08,977.34 3.71:1

2007-08 65,74,731.00 16,33,851.96 4.02:1

GRAPH: 4.16

GRAPH SHOWING DEBT EQUITY RATIO OF SIMCO YEAR 2003-2008

INTERPRETATION

Debt Equity ratio includes the relative contribution of creditors and owners of the

business in its financing. It is an index of the degree of protection the creditors have.

Standard Debt Equity Ratio is considered to be 2:1.Both high and low Debt Equity Ratio

is not desirable to firm. From above bar diagram, it is clear that in 2004-05 debt equity

ratio was very high which very risky.But they have improved a lot and by 2006-2007

67 Saja.K.A

they brought the ratio near to the standard ratio i.e. 3.71:1.In the year 2007-08 Debt

Equity Ratio was increased to 4.02:1

INTEREST COVERAGE RATIO

Interest Coverage Ratio is also known as Debt Service Ratio. This ratio relates fixed

interest charges to the operating profits or earning before interest and tax .It shows

whether the concern is able to pay the interest and tax. It shows whether the company is

able to pay the interest and tax. It shows whether the company is able to pay the interest

and tax. It shows whether the company is able to pay the interest out of the profit.

Earning before interest and tax

Interest Coverage Ratio = -----------------------------------------

Interest

TABLE: 4.18

INTEREST COVERAGE RATIO OF SIMCO YEAR 2003-2008

Interest Coverage Ratio is also known as Debt Service Ratio.

This ratio relates fixed interest charges to the operating profits or earning before interest

and tax. It shows whether the company is able to pay the interest and tax. It shows

whether the company is able to pay the interest out of their profit.

INTEREST COVERAGE RATIO = Earning before Interest and Tax

-----------------------------------------

Interest

TABLE: 4.18

INTEREST COVERAGE RATIO OF SIMCO YEAR 2003-2008

Year Earning Before Interest and Tax Interest Interest

2003-04 18,40,356.36 9,33,131.78 1.97 times

2004-05 13,44,713.79 7,91,835.18 1.70 times

68 Saja.K.A

2005-06 18,66,716.71 7,57,702.03 2.46 times

2006-07 12,45,051.17 7,24581.60 1.72 times

2007-08 14,69,626.35 7,83,111.02 1.88 times

GRAPH: 4.17

GRAPH SHOWING INTEREST COVERAGE RATIO OF SIMCO FROM 2003-2008

INTERPRETATION

Interest Coverage Ratio shows how many times the interest charges are covered

by EBIT .It indicates the ability of the company in the payment of interest to creditors.

Standard Ratio is 6 to 7 times. The above bar diagram clearly shows that the interest

coverage ratio in 5 years i.e., from 2003-04 to 2007-08 is very low which clearly

indicates exercise use of debt and the inability to offer assured payment of interest to

creditors.

BAR DIAGRAM SHOWING THE RELATION SHIP BETWEEN CURRENT ASSETS

AND CURRENT LIABILITIES.

69 Saja.K.A

TABLE: 4.19

Table showing Current Assets and Current Liabilities from 2003-08

Year Current Assets

Rs

Current Liabilities

Rs

2003-04 89,71,026.73 29,81,808.04

2004-05 93,66,806.44 22,50,099.49

2005-06 98,55,014.95 26,35,774.72

2006-07 10,58,6397.16 29,18,093.23

2007-08 10,84,3372.74 34,89,218.58

GRAPH: 4.18

GRAPH SHOWING CURRENT ASSETS AND CURRENT LIABILITIES FROM

2003-2008

BAR DIAGRAM SHOWING THE RELATIONSHIP BETWEEN DEBT AND EQUITY

TABLE: 4.20

TABLE SHOWING DEBT AND EQUITY FROM 2003-04 TO 2007-08

Year Current Assets Current Liabilities

70 Saja.K.A

Rs Rs

2003-04 56,38,523.01 10,93,250.42

2004-05 67,06,799.02 10,30,314.54

2005-06 61,28,568.27 16,31,395.26

2006-07 67,06,992.24 18,08,977.34

2007-08 65,74,731.00 16,33,851.96

GRAPH: 4.19

GRAPH SHOWING DEBT AND EQUITY FROM 2007-08

CHAPTER – 5

71 Saja.K.A

FINDINGS SUGGESTIONS AND CONCLUSIONS

FINDINGS

Shoranur is the sale centre of Agricultural and Horticultural implements. There are a

number of firms engaged in the production of agricultural and horticultural implements.

Among them, SIMCO stands first due to its high quality products.

1. When compared with other firms SIMCO is the only concern which get regular

tenders for their products from Tamilnadu

2. Products of SIMCO are sold not only with in Kerala but ALSO outside the state.

In short, it has its market in all states of South India including Orissa.

3. Workers of SIMCO are very efficient and majority of them are able to produce

more than the standard fixed. But they are facing the problem of hiring skilled

labors. Hence, they hire unskilled labours and provide sufficient training. As such

employees are taking time to get acquainted with the methods of production and

machines used.

4. The company is purchasing raw materials at very high prices which in turn

increases the cost of goods and hence decreases the profit .

5. Net Profit position of the business is not at all satisfactory. The operating

expenses of the business are very high.

6. The operating profit ratio is not satisfactory.

7. In the year 2006-07 Return On Investment is below the standard norm.

8. Inventory management of the firm is not satisfactory

9. The collection of debtors is not effective .In 2006-07 the firm has taken 77 days to

collect the credit sales.

10. Creditor’s turnover ratio of the firm is satisfactory.

11. On analyzing working capital turn over ratio, it is understood that the

management of working capital is not efficient.

72 Saja.K.A

12. During all year under study, current ratio shows that is much above the standard

norm.

13. A major portion of the current asset is blocked in trade.

14. The liquid ratio in all years under study above standard norm.

15. On comparing the current ratio and liquid ratio, it is understood that the current

ratio is much higher than liquid ratio position. It is because of excessive

investments in stock in trade.

16. The absolute liquidity position of the firm is in pathetic condition.

17. Debt Equity Ratio of the firm comes near to standard by 2006-07, which indicates

high degree of protection to creditors. The firm makes use of loan funds to

purchase fixed assets by paying interest.

SUGGESTIONS

1. The over investments in stock is a notable defect. This can be over come by

taking necessary steps for improving the sales.

2. The cash position of the firm is not at all satisfactory. Sufficient cash balance

should be kept in the firm so as to keep the available favorable position.

3. Necessary steps have to be taken to make the working capital management more

effective.

4. The profitability of any business depends to a very depends to a very extent on the

capacity of it to enhance sales. So new marketing techniques have to be

introduced.

5. Profit earned by the firm shows both increasing and decreasing trend. Due to this

fluctuation, firm is suggested to make use of owned funds rather than outsiders

fund.

6. Unnecessary funds locked up in inventory and debtors should be invested in some

profitable project which in turn helps in the expansion of the firm.

73 Saja.K.A

7. Some of the item included in the product line of SIMCO is out dated. Therefore

new models or new versions of such items should be introduced and outdated

items should be excluded from the product line.

8. Firm is suggested to give more attention to garden tools which contribute a

sizeable portion of the profit to the firm.

9. Since the firm is facing the problem of labour absenteeism, it is suggested to take

necessary measures to reduce the same and also provide additional incentives

which in turn motivate them to work more efficiently and effectively.

10. Advertisement programme should be improved for the increase in sales. SIMCO

is facing more competition from other units, therefore the strength and weakness

of the competitors should be studied and new strategies should be prepared

accordingly.

11. Firm should take measures to purchase raw materials at lower prices which

directly affects profit of the firm.

74 Saja.K.A

CONCLUSION

The material for writing this project report was obtained

during the actual course of the allowed time period undergone at SIMCO,

Shoranur.The three weeks project helped me in getting a rare chance to familiarize

with the functioning of manufacturing organization .This project report enabled to

expose certain valuable conclusions pertaining to the short term and long term

liquidity position of the firm and its profitability. Though the firm has reached near

declining stage, but due to the importance of simple implements I agricultural sector,

it occupies the good position in small scale industries.

In short, this project report has given me an opportunity

to list and substantiate theoretical knowledge, which in turn facilitated its own

argumentation.

75 Saja.K.A

BIBLIOGRAPHY

BOOKS

1. R.K Sharma and Sasi . K .Guptha “MANAGEMENT

ACCOUNTING” Kallyani Publishers, New Delhi 1991

2. I. M. Pandey “FINANCIAL MANAGEMENT” Vikas Publishing

House Pvt Ltd, New Delhi 1999

3. Khan .M.Y and Jain .P.K “FINANCIAL MANAGEMENT” Tata

Mc Graw Hill Publishing Company Ltd , New Delhi 1985

4. P.V Kulkarni “FINANCIAL MANAGEMENT” Himalaya

Publishing House, Mumbai 1996.

5. Prasanna Chandra “FINANCIAL MANAGEMENT THEORY

AND PRACTICES” Tata Mc Graw Hill Publishing Company Ltd

New Delhi 2002.

6. S.P Guptha “STAISTICAL METHODS” Sulthan Chand and Sons,

New Delhi 1995.

REPORTS

1. Annual Reports of South India Metal Company 2003-08

2. Financial Statements of South India Metal Company fom2003-08

76 Saja.K.A

ANNEXURE

COST STATEMENT OF SIMCO OF SIMCO FOR THE YEAR 2003-2008

77 Saja.K.A

Particulars 2003-04 2004-05 2005-06

Opening Stock of Raw Materials

Purchase

Expenses on Purchases

12,82,677.75

65,54,924.28

3,15,609.70

17,62,722.68

64,83,206.33

1,78,107.30

12,89,552.21

71,43,407.80

3,17,821.25

Materials available

Less:Closing Stock of

Raw Material

81,53,211.73

17,62,722.68

84,24,036.31

12,89,552.21

87,50,781.26

11,20,129.28

Material Cost

Direct Labour Cost

Add :Opening Stock of W/P

63,90,489.05

38,83,842.23

18,59,413.71

71,34,484.10

40,19,390.57

16,04,614.55

76,30,651.98

40,06,189.15

24,52,206.11

Less:Closing Stock of W/P

1,21,33,744.99

16,04,614.55

1,27,58,489.22

24,52,206.11

1,40,89,047.24

1,18,10,105.95

Prime Cost

Manufacturing Expenses

1,05,29,230.44

6,60,186.10

1,03,06,283.11

6,80953.20

1,18,10,105.95

6,12,883.32

Cost of Production

Add.Opening Stock of Finished

Goods

Finished Goods Purchased

1,11,89,316.54

12,31,142.62

---

1,09,87,236.31

15,13,758.00

---

1,24,22,989.27

22,19,980.00

20,37,192.62

Cost of Goods Available for sale

Less: Closing Finished Goods

1,24,20,454.16

15,13,758.00

1,25,00,994.31

22,19,980.00

1,66,80,161.89

19,84,100.00

COST OF GOODS SOLD 1,09,09,701.16 1,02,81,014.31 1,46,061.89

78 Saja.K.A

COST STATEMENT OF SIMCO FOR THE YEAR 2006-2008

Particulars 2006-07 2007-08

Opening Stock of Raw Materials

Purchase

Expenses on Purchases

11,20,129.28

83,20,541.71

4,45,834.13

14,22,195.66

99,08,548.21

3,51,414.00

Materials available

Less:Closing Stock of

Raw Material

98,86,504.82

14,22,195.66

1,16,82,157.87

16,67,019.10

Material Cost

Direct Labour Cost

Add :Opening Stock of W/P

Semi Finished goods purchases

84,64,309.16

39,85,028.66

22,78,941.29

-----

1,00,15,138.77

43,57,258.34

30,41,134.78

2,05,384.00

Less:Closing Stock of W/P

1,47,28,279.11

30,41,134.78

1,76,18,915.89

25,67,212.02

Prime Cost

Manufacturing Expenses

1,16,87,144.33

6,62,621.07

1,76,18,915.89

7,63,938.66

Cost of Production

Add.Opening Stock of Finished

Goods

Semifinished goods purchased

Finished Goods Purchased

1,23,49,765.50

19,84,100.00

98,457.00

13,93,213.40

1,58,15,642.53

14,78,095.00

----

6,43,134.00

Cost of Goods Available for sale

Less: Closing Finished Goods

1,58,25,535.80

14,78,095.00

1,79,36,871.53

13,19,067.00

COST OF GOODS SOLD 1,43,47,440.80 1,66,17,804.53

79 Saja.K.A

PROFIT AND LOSS ACCOUNT OF SIMCO FOR THE YEAR ENDED 31 st

MARCH 2003 – 2004Year 31 / 03 / 2003 Particulars Year ended 31 / 03 /

2004

16342713.03

2633163.00

INCOME

Sales…………………………

Less:- returns…………………..

Less:- exercise duty

Less:- cost of goods sold

Gross profit

Add:- other income

EXPENDITURE

Provision to office staff

Sales and distribution cost

Other general expenses

Profit before interest and

depreciation

Less:- interest

Profit after interest

Depreciation

Profit transferred to purayannur

industries

1515819.13

33387.64

16316381.37

802766.00

15125231.49

608528

15513615.37

10906701.16

14516703.49

10281014.31

4606914.21

10362.50

4235689.18

22731.50

4617276.71 4258420.68

647578.58

1360556.08

768775.69

633773.50

1365545.23

914387.98

2776920.35 2913706.71

1840356.36

933131.78

1344713.97

791835.18

907224.58

170580.72

552878.99

139314.26

736643.86 413564.53

80 Saja.K.A

PROFIT AND LOSS ACCOUNT OF SIMCO FOR THE YEAR ENDED 31 st MARCH 2005 – 2006

Year 31 / 03 / 2005 Particulars Year ended 31 / 03 /

2006

19455006.66

31170.00

INCOME

Sales

Less:- returns

Less:- cost of goods sold

Gross profit

Add:- other income

EXPENDITURE

Provision to office staff

Sales and distribution cost

Other general expenses

Profit before interest and

depreciation

Less:- interest

Profit after interest

Depreciation

Profit transferred to purayannur

industries

18570636.53

31943.15

19423836.66

14696001.89

18538693.38

14347440.80

4727774.77

164697.93

4191252.58

103788.54

4892472.70 4295041.12

579290

1538041.94

908424.05

646051.52

1504139.88

899798.85

1866716.71

757702.03

1245051.17

724581.60

1109014.68

128221.31

520469.57

97573.59

980793.37 422895.98

81 Saja.K.A

PROFIT AND LOSS ACCOUNT OF SIMCO FOR THE YEAR ENDED 31 st

MARCH 2007

Particulars Year ended 31 / 03 / 2007

INCOME

Sales

Less:- returns

Less:- cost of goods sold

Gross profit

Add:- other income

EXPENDITURE

Provision to office staff

Sales and distribution cost

Other general expenses

Profit before interest and depreciation

Less:- interest

Profit after interest

Depreciation

Profit transferred to purayannur

industries

21665195.91

97460.46

21567735.45

16617804.53

4949930.92

54571.39

5004502.31

686733.32

1120786.74

1127355.90

3534875.96

1469626.35

783111.02

686515.33

134238.23

552277.10

82 Saja.K.A

SOUTH INDIA METAL COMPANY,SHORANUR -2,

BALANCE SHEET AS ON 31ST MARCH

PARTICULARS

2003-2004 2004-2005

2005-2006

2006-2007 2007-08

Amount % Rs

Amount % Rs

Amount % Rs

Amount RS % Amount %Rs

1)LIABILITIES

1)Proprietors Fund a) Purayannur Industries

2)Loan Funds

Secured Unsecured

3) Current Liabilities

TOTAL LIABILITIES

10,93,250.42 11.25

16,85,068.61 17.35

39,53,454.40 40.70

29,81,808.04 30.70

97,13,581.47 100

10,30,314.54 10.32

27,49,223.02 27.53

39,57,576.00 39.63

22,50,099.49 22.52

99,87,213.05 100

16,31,395.26 15.69

23,09,726.27 22.22

38,18,842.00 36.74

26,35,774.72 25.35

1,03,95,738.2 100

18,08,977.34 15.82

32,94,165.74 28.81

34,12,826.50 29.85

29,18,093.23 25.52

1,14,34,062.8 100

16,33,851.96 13.97

33,03,299.00 28..24

32,71,432.00 27.97

34,89,218.58 29.82

1,16,97,801.5 100

II.ASSETS1.Fixed Assets

2.Current AssetsLoans &Advances

Inventories

Sundry Debtors

Cash & Bank Balance

Loans&Advance

Total Assets

7,42,554.74 7.64

49, 40,267.1050.86

32,65,810.21 33.62

3,28,204.36 3.38

4,36,745.06 4.50

97,13,581.47 100

6,20,406.61 6.21

60,18,323.1 60.26

26,48,334.42 26.52

2,80,744.06 2.81

4,19,40486 4.20

99,87,21 3.05 100

5,40,723.30 5.20

54,50,178.6 52.43

38,52,554.41 37.06

1,79,727.05 1.73

3,72,554.86 3.58

1,03,95,738.25 100

8,47,665.65 7.41

60,11,711.3 52.58

38,92,565.22 34.04

1,65,825,63 1.45

5,16,294.98 4.52

1,14,34,062.81 100

8,54,428.80 7.30

56,47,238.9 6 48.28

45,44,700.82 38.85

87,653.10 0.75

5,63,779.86 4.82

1,16,97,801.54 100

83 Saja.K.A