SUMMER INTERNSHIP PROJECTREPORT ON

FINANCIAL STATEMENT ANALYSISOF

TAYO ROLLS LIMITED SUBMITTED BY: NI

HARIKA MATHURROLL NO. - 1006247087

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REGIONAL COLLEGE OF MANAGEMENT AUTONOMOUS,BHUBANESWAR

DECLARATION

I NIHARIKA MATHUR, hereby declare that this project report entitled “FINANCIAL STATEMENT ANALYSIS” under Tayo Rolls Limited is based on my own study. This project is completely based on my work experience of 6 weeks in the Tayo Rolls Limited.

I also declare that this report is submitted only to Regional College of Management (Autonomous) and Tayo Rolls Limited for evaluation purpose.

DATE:

PLACE: -----------------------------------

SIGNATURE

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ACKNOWLEDGEMENT

I express my gratitude to the management of TAYO ROLLS LIMITED for

allowing me to do this project in this esteemed organization and allowing me to

learn corporate culture.

I am sincerely obliged to my Guide Mr. Suresh Padmanabhan, Chief Finance

Officer, TAYO ROLLS LIMITED for his valuable guidance and support in

completing the project successfully.

I would also like to express my sincere thanks to Mr. Amit Mukherjee,

Divisional manager Finance, Mr. Kalyan Banerjee, Sr. Manager Finance,

and Mr. Santosh Kumbhakar, Senior Officer Accounts, TAYO ROLLS

LIMITED for his co-operation in successfully completing the project.

I would like to express my gratitude and appreciation to my Faculty Guide Prof.

G.C Patra of MBA Finance department for his kind support while working on

the project.

At the onset I would like to express a deep sense of gratitude to each and every

person who helped and supported me during my project report, which made it

possible for me to bring up my project report on topic FINANCIAL POSITION

OF TAYO ROLLS LIMITED FROM YEAR 2006-2011.

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Last but not the least; I would also like to thanks all the respondents & my

friends for giving me their precious time, relevant information.

NIHARIKA MATHUR

Corporate Guide Certificate

This is to certify that Miss Niharika Mathur, a student of Regional College Of

Management Autonomous, Bhubaneswar undergoing summer training, has

completed 42days of training in our organization from 27.05.2011 to 07. 07.

2011 during which period she was placed in the Finance Department under the

guidance of Mr. Suresh Padmanabhan, Chief Finance Officer.

The conduct and response of Miss Niharika Mathur during the training period

has found to be good.

Miss Niharika Mathur has now submitted a copy of her project report on the

topic of “A STUDY ON FINANCIAL STATEMENT ANALYSIS WITH

REFERENCE TO TAYO ROLLS LIMITED”.

Place: Signature of the Company Guide

Date:

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Internal Guide Certificate

This is to certify that Miss Niharika Mathur bearing registration number

1006247087 of REGIONAL COLLEGE OF MANAGEMENT

AUTONOMOUS has successfully completed the project work titled “A Study

On Financial Statement Analysis With reference To Tayo Rolls Limited” in

partial fulfillment of requirement for the award of Masters In Business

Administration prescribed by the REGIONAL COLLEGE OF

MANAGEMENT AUTONOMOUS.

This project is the record of authentic work carried out during the academic

Year (2010-2012).

Place: Signature of the Faculty Guide

Date: (Prof. G.C Patra)

Faculty of Finance

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TABLE OF CONTENTS

Serial No.

Particulars Page No.

1. Chapter-1 Abstract 8

2. Chapter-2 Preface Executive Summary Types Of Financial Analysis Purpose Of Financial Analysis Tools Of Financial Analysis Objective Of The Study Stages In Research Research Methodology Limitations Of Financial Analysis

101011121315151718

3. Chapter-3 Organisational Overview Organisation’s Profile

(a) Organization’s Policy(b)Plant Facilities(c) Management Of Business

Ethics(d)Awards & Recognitions(e) Business Excellence(f) Quality Assurance(g)Research & Development(h)Organization’s Ideology(i) Management Team

Product Profile

20

2123

2425252526272828

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4. Chapter-4 Financial Statement Analysis & Interpretations 31

5. Chapter-5 Findings Recommendations Conclusion Bibliography

57596061

Chapter – 1 Abstract

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ABSTRACT

This Project Report will emphasize on the FINANCIAL STAEMENT ANALYSIS of a manufacturing concern, “TAYO ROLLS LIMITED”. The aim of the project is to study the financial position of TAYO ROLLS Limited from year (2006-2011).

This had the formal approval of Prof. G.C Patra (Faculty Finance, RCMA Bhubaneswar) and Mr. Suresh Padmanabhan, Chief Finance Officer (Accounts Department)

FINANCIAL POSITION is the financial picture of a company as stated in the FINANCIAL STATEMENT. FINANCIAL STATEMENT comprises of three statements:

a) Income statement (Trading and P/L accounts).

b) Statement of Assets and Liabilities/Position statement (Balance sheet).

c) Cash flow statement.

Here, this project report contains the analysis of the financial position of TAYO ROLLS LIMITED, risk bearing capacity of the company, the solvency position of the company, comparative study of two year’s income statements and balance sheets.

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Chapter – 2Preface Executive SummaryTypes Of Financial AnalysisPurpose Of Financial AnalysisTools Of Financial AnalysisObjective Of The StudyStages In ResearchResearch MethodologyLimitations

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PREFACE:Financial Management is the specific area of finance dealing with the financial decision

corporations make, and the tools and analysis used to make the decisions. The discipline as a

whole may be divided between long-term and short-term decisions and techniques. Both

share the same goal of enhancing firm value by ensuring that return on capital exceeds cost of

capital, without taking excessive financial risks.

Capital investment decisions comprise the long-term choices about which projects receive

investment, whether to finance that investment with equity or debt, and when or whether to

pay dividends to shareholders. Short-term corporate finance decisions are called working

capital.

Management and deal with balance of current assets and current liabilities by managing cash,

inventories, and short-term borrowings.

Corporate finance is closely related to managerial finance, which is slightly broader in scope,

describing the financial techniques available to all forms of business enterprise, corporate or

not.

EXECUTIVE SUMMARY:

Financial analysis is the systematic numerical calculation of the relationship of one financial fact with the other to measure the profitability, operational efficiency, solvency and the growth potential of the business. The analysis serves the interest of shareholders, debenture-holders, potential investors, creditors, bankers, and journalist’s etc. The analysis of financial statement makes it simple, intelligible and meaningful for all the concerned parties. Financial statements are split into simple statements by the process of rearranging, regrouping and the calculations

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of various ratios. The analysis simplifies, summarizes and systematizes the monotonous figures.

Financial analysis in this way is the purposeful and systematic presentation of financial statements. Various items of income and position statements are compared and their inter-relationship is established. Financial analysis, as such presents meaningful, expressions of the relationship between different item, such as, relationship between gross profit and net sales.

Suppose the Gross profit of the firm is Rs. 25000 and Net sales are worth Rs. 100000. At the same time the Gross profit of the second firm is Rs. 30000, and the net sales amount to Rs. 200000. According to these figures, the firm which has earned Rs.30000, as profit may be said to be superior as regards its performance. If we analyze the figures, we come to know that the gross profit margin of the first firm amounts to 25% i.e., (25000*100)/100000 and the second firm is only 15%i.e., (30000*100)/200000.As such analysis shows that the operational efficiency of the first firm is better than the second firm. The use of financial analysis is made to measure the profitability, efficiency and financial soundness of the business, to make comparative studies and effective future plans.

TYPES OF FINANCIAL ANALYSIS

1. Trend analysis or dynamic analysis: The financial analysis indicates the trend of purchases, sales, direct expenses, cost of production, gross profit net profit, assets and liabilities and other items. Financial statements are analyzed over period of years from the comparative financial statements of different years.

2. Structural or static analysis: It analyses a single set of financial statement. Relationship between the two variables of the same statement is studied. Establishing relationship between gross profit and sales or current assets and current liabilities etc.

Analysis of financial statements is an art. In this way this can also be presented as under:

1. Horizontal analysis: According to this method, the relationship between different items of financial statements is established, comparisons are made and results obtained. The basis of this comparison may be :

Comparison of financial statements of different years of same business units.

Comparison of financial statements of a particular year of different business units.

2. Vertical analysis: According to this analysis financial statements of the same period of different items of the same financial statements are compared.

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The operating cost and profitability of the business can be ascertained from the income statement establishing relationship between gross profits, net profit, selling expenses, financial expenses and sales is vertical analysis. Income statements and position statements used as the basis for analysis are known as common size statements.

PURPOSE AND ADVANTAGES OF FINANCIAL ANALYSIS:

Financial statements are prepared at a certain point of time according to established conventions. These statements are prepared to suit the requirements of the proprietor. It is, therefore, necessary to analyze financial statements to measure the efficiency, profitability, financial soundness and future prospects of the company. Financial analysis serves the following purposes:

1. Judging the operational efficiency of the business: It is very significant that the company must know the operational efficiency of its management. We analyze the financial statements, match the amount of manufacturing, selling, distribution and financial expenses of the current year with corresponding expenses of the previous year and assess the managerial efficiency of the business. We can judge the operational efficiency of the business by calculating profitability ratio.

2. Measuring short and long term financial position: The business must know its financial soundness. It should satisfy itself that its current resources are sufficient to meet its current liabilities. We can calculate current and liquid ratios for comparing current assets and current liabilities to ascertain short term financial soundness. Long term financial position can be measured by calculating debt equity, proprietary and fixed assets ratios. The result of the financial analysis may be studied and corrective steps can be taken, if necessary.

3. Indicating the trend of achievements: Financial statements of the previous years can be compared and the trend regarding various expenses, purchases, sales, gross profit and net profit can be ascertained, cost of goods

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sold, values of assets and liabilities can be compared and the future prospects of the business can be indicated.

4. Assessing the growth potential of the business: The trend and dynamic analysis of the business provides us sufficient information indicating the growth potential of the business. If the trend predicts gloomy picture, effective measures can be applied as remedial measures. If cost of production is rising without corresponding increase in sales price, efforts should be made to reduce cost of production.

5. Measuring the profitability: Financial statement shows the gross profit, net profit and the other expenses. The relationship of these items can be established with sales. Gross profit, net profit, expenses and operating ratios may be calculated and the profitability of the business ascertained. In case of improving profitability ratios, the cause responsible for this performance should be reinforced.

6. Inter–firm and intra firm comparison of the performance: Analysis of statements can be made with the previous year’s performance of the same firm and also with the performance of the other firms. Intra - firm analysis provides an opportunity to self appraisal, whereas inter- firm analysis presents the operational efficiency of the firm as compared to other firms. Comparison helps us in detecting our weaknesses and applying corrective measures.

TOOLS OF FINANCIAL ANALYSIS:

1. Comparative Statements2. Common Size Statements3. Trend Analysis4. Ratio Analysis5. Funds Flow Statement6. Cash Flow Statement

1. Comparative Financial Statements: Comparative study of financial statements as such is the comparison of the financial statements of the business with the previous year’s financial statements and with the performance of other

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competitive enterprises, so that weakness may be identified and remedial measures applied.

Financial statements provide us information regarding the financial position of the business and the values of different assets, liabilities and capital. The values of these items are changing. In this way, comparison of financial statements is a tool, which expresses the changes in the different items of financial statement.

Financial statements can be compared both inter-firm and intra-firm. In case of inter-firm comparison financial statements of two or more firms are compared, whereas in case of intra firm comparison financial statements of the same enterprise for two or more years are compared.

2. Common Size Statements: Convenient comparison of the financial statements requires that the financial statements should be converted into common size statements. Every item of the statements is presented in the form of percentage of its important heading. Every item of income statements is expressed in terms of the percentage of the total sales. In the same way every asset is expressed in terms of the percentage of total assets and every liability is expressed in terms of the percentage of total liability.

3. Trend Analysis: The word trend means future possibilities. An efficient and effective management tries to know the actual performance and also discovers future prospects of the business. Trend analysis acquaints us with the profitability and the short term and long term liquidity of the business. In addition, it also discovers the future prospects of the business in terms of profitability, operational efficiency and financial soundness of the enterprise.Trend analysis is also termed as Intra-firm comparison, wherein financial statements of the same enterprise for two or more years are compared. Trend analysis is also named as horizontal analysis, because each accounting variable is placed horizontally.

4. Ratio Analysis: The term “Ratio” refers to the numerical and quantitative

relationship between two items or variables. This relationship can be exposed as

• Percentages

• Fractions

• Proportion of numbers

Ratio analysis is defined as the systematic use of the ratio to interpret the financial

statements so that the strengths and weaknesses of a firm, as well as its historical

performance and current financial condition can be determined. Ratio reflects a

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quantitative relationship helps to form a quantitative judgment. In other words

ratio analysis is a study of relationship among the various financial factors in a

business.

BASIC OBJECTIVE OF THE STUDY

1. To ascertain the financial position of TAYO ROLLS LIMITED.

2. To analyze risk bearing capacity of the company.

3. To test the solvency position of the company.

4. To determine the weak spots of the business.

STAGES IN RESEARCH

Step 1: Problem DefinitionThe first step in any marketing research project is to define the problem. In defining the problem, the researcher should take into account the purpose of the study, the relevant background information, what information is needed, and how it will be used in decision making. Problem definition involves discussion with the decision makers, interviews with industry experts, analysis of secondary data, and, perhaps, some qualitative research, such as focus groups. Once the problem has been precisely defined, the research can be designed and conducted properly.

Step 2: Development of an Approach to the ProblemDevelopment of an approach to the problem includes formulating an objective or theoreticalframework, analytical models, research questions, hypotheses, and identifying characteristics or factors that can influence the research design. This process is guided by discussions withmanagement and industry experts, case studies and simulations, analysis of secondary data,qualitative research and pragmatic considerations.

Step 3: Research Design Formulation

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A research design is a framework or blueprint for conducting the marketing research project. It details the procedures necessary for obtaining the required information, and its purpose is to design a study that will test the hypotheses of interest, determine possible answers to the research questions, and provide the information needed for decision making. Conducting exploratory research, precisely defining the variables, and designing appropriate scales to measure them are also a part of the research design. The issue of how the data should be obtained from the respondents (for example, by conducting a survey or an experiment) must be addressed. It is also necessary to design a questionnaire and a sampling plan to select respondents for the study.More formally, formulating the research design involves the following steps:1. Secondary data analysis2. Qualitative research3. Methods of collecting quantitative data (survey, observation, and experimentation)4. Definition of the information needed5. Measurement and scaling procedures6. Questionnaire design7. Sampling process and sample size8. Plan of data analysis

Step 4: Field Work or Data CollectionData collection involves a field force or staff that operates either in the field, as in the case ofpersonal interviewing (in-home, mall intercept, or computer-assisted personal interviewing), from an office by telephone (telephone or computer-assisted telephone interviewing), or through mail (traditional mail and mail panel surveys with prerecruited households). Proper selection, training, supervision, and evaluation of the field force help minimize data-collection errors.

Step 5: Data Preparation and AnalysisData preparation includes the editing, coding, transcription, and verification of data. Eachquestionnaire or observation form is inspected, or edited, and, if necessary, corrected.18 Number or letter codes are assigned to represent each response to each question in the questionnaire. The data from the questionnaires are transcribed or key-punched on to magnetic tape, or disks or input directly into the computer. Verification ensures that the data from the original questionnaires have been accurately transcribed, while data analysis, guided by the plan of data analysis, gives meaning to the data that have been collected. Various techniques are used for analyzing data when there is a single measurement of each element or unit in the sample, or, if there are several measurements of each element, each RCH variable is analyzed in isolation. On the other hand, multivariate techniques are used for analyzing data when there are two or more measurements on each element and the variables are analyzed simultaneously.

Step 6: Report Preparation and PresentationThe entire project should be documented in a written report which addresses the specific research questions identified, describes the approach, the research design, data collection, and data analysis procedures adopted, and present the results and the major findings. The findings should be presented in a comprehensible format so that they can be readily used in the decision making process. In addition, an oral presentation should be made to management using tables, figures, and graphs to enhance clarity and impact. For these reasons, interviews

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with experts are more useful in conducting marketing research for industrial firms and for products of a technical nature, where it is relatively easy to identify and approach the experts. This method is also helpful in situations where little information is available from other sources, as in the case of radically new products.

RESEARCH METHODOLOGY

RESEARCH DESIGN FOLLOWED:

Descriptive research is the research method used because descriptive studies embrace a large proportion of market research. The purpose is to provide an accurate snapshot of layout effect.Descriptive research is more rigid than exploratory research and it helps to fulfill the objective as required.

DATA COLLECTION TECHNIQUES:-

SOURCES OF DATA:-

SECONDARY DATA

Secondary data collected from the Company’s website. The secondary data formed background for the project.

RESEARCH INSTRUMENT The research instrument used in the project was based on the Annual Report of the company of 5 years (2006 to 2011) to collect the information; it provided the base to the project.

METHOD OF DATA COLLECTION Data are collected from the following:-

1.Annual Reports.

2.Companies website-www.tayorolls.com

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LIMITATIONS OF FINANCIAL ANALYSIS:

1. Suffering from the limitations of financial statement: Financial statements suffer from variety of weaknesses. Balance sheet is prepared on historical record of the value of assets. It is possible that assets may not have the same value. Financial statements are prepared according to certain conventions at a point of time, whereas the investors are concerned with the present and future of the company. Certain assets and liabilities are not disclosed. Personal judgement plays an important role in determining the figures of the balance sheet. In other words, we can say that balance sheet cannot be said to have a complete accuracy. Financial statements suffer from these weaknesses, so analysis based upon these statements cannot be said to be always reliable.

2. Absence of standard universally accepted terminology: Accounting is not exactly science. It does not have standard, universally accepted terminology. Different meanings are given to a particular term. There are different methods of providing depreciation. Interest may be charged on different rates. In this way, there is sufficient possibility of manipulation and the financial statements have to suffer. As a consequence financial analysis also proves to be defective.

3. Ignoring qualitative aspects: Financial analysis does not measure the qualitative aspects of the business. It does not show the skill, technical knowhow and the efficiency of its employees and managers. It is the quantitative measurement of the performance. It means that analysis of financial statements measures only the one sided performance of the business. It completely ignores human resources.

4. Financial statements are affected by window dressing: The management displays rosy picture of the enterprise through financial statements. Sometimes material information is concealed. Financial statements sometimes

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contain false information. In order to show excellent profit, sales may be exaggerated, stock may be overvalued and certain purchases may not be shown, in such cases analysis of financial statements will also be incorrect.

Misleading results in the absence of absolute data: results shown by financial analysis may be misleading in the absence of absolute data. We cannot have the idea of the size of the business. Increase in sales from Rs. 40000 to 80000 shows that sales have doubled. In case of other firms increase of sales from Rs. 20000000 to 4000000 also shows that sales have doubled but the size of the firm is quite different. Profitability ratio of two firms may be the same, but magnitude of their businesses may be quite different.

Chapter – 3Organizational Overview Organization’s Profile

(a) Organisation’s Policy(b) Plant Facilities(c) Management of Business Ethics

(d) Awards & Recognition (e) Business Excellence (f) Quality Assurance (g) Research & Development

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(h) Organization’s IdeologyProduct Profile

ORGANISATIONAL OVERVIEW

TAYO ROLLS LIMITED

-A TATA enterprise with state-of -the -art technology

TAYO ROLLS LIMITED (Formerly Tata- Yodogawa limited) was promoted in 1968 by Tata Steel with Japanese Technology. TAYO has established itself as a quality roll manufacturer, over the years and has further acquired a state-of-art technology through technical collaboration with EISENWERK SALZAU-WERFEN (ESW), Austria in 1992. Equipped with Japanese, European and indigenously developed technologies, TAYO has pace with the changing needs of industry by developing rolls meet the exactly demand for various applications.

TAYO has the necessary expertise in roll technology to advise the customers about the proper type of rolls to be used to achieve maximum efficiency called for in each individual application. TAYO takes every care to meet the delivery schedules and other stipulations of all customers, big or small. Regular checks are maintained to get a complete feedback on roll performance and co-ordination meetings are held with shop floor personnel to sort out problems that may arise. TAYO’s technical advice on sound mill practices is backed by the experience of Tata Steel, pioneers in steel industry in India. TAYO is not there just to sell a roll, it makes sure that along with quality rolls, and customers get efficient technical support of a reputed manufacturer. It is total package that TAYO offers to its customers.

ACCREDTED WITH “ISO 9001:2000” certification, TAYO is continuously implementing TQM and other related activities to improve customer satisfaction.

TAYO has equipment, experience and capability to undertake manufacture of custom designed products to meet the most demanding mill requirements. TAYO rolls have been designed to roll ingots, slabs, blooms, billets, angels, channels, rods, tubes, strips, plates, sheets and various other flat and section products. In the non-metallurgical area, TAYO rolls,

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also, find wide application in paper and rubber industries. The rolls vary from 30 kgs. To 30 tonnes in weight and from 250 mm. to 1350 mm. in diameter.

TAYO enjoys a wide customer base in India as well as in overseas countries like U.S.A, Europe, Africa, Middle East, CIS Countries, Korea, South East Asia, Pacific Rim, etc. besides neighbouring countries.

TAYO’s plant at Gamharia, 16 kms. West of Jamshedpur is spread over an area of 50 acres and comprises suitable Melting furnaces, a modern foundry and a sophisticated Machine Shop.

TAYO started operations in 1968 with an installed capacity of 7500 tonnes and has been continuously modernizing and upgrading its facilities to meet market demands. In 2003, the installed capacity was 12500 tonnes and to meet global challenges, plans are afoot to further upgrade, modernize and increase the capacity to 17000 tonnes within the next three years. Adequate attention is being paid to acquire state-of-the-art equipments and facilities to achieve quality standards comparable to the best in the world. A mini blast furnace is also being installed to have an in house control on the quality of metallic’s required to produce high quality rolls.

In 1999, TAYO also entered the forged roll business in India for which a know-how agreement was signed with Union Electric Steel Corporation, USA, and the leading forged roll manufacturer in the world. As per this agreement, semi finished forged roll manufactured in USA, are finished machine at TAYO for sale in India. TAYO has, thus, become a one-stop-shop for cast and forged rolls.

TAYO has also diversified into area of Special Casting for Thermal Power Plants, located all around the country.

TAYO has dedicated teams of employees to monitor and improve safety, health, ergonomics and environmental processes. The company has always been pro-active in anticipating, developing and catering to the customer’s requirements well ahead of time.

POLICIES OF TAYO ROLLS:

1. Quality PolicyWe at TAYO are committed to produce and deliver products and services that exceed our customers’ expectations.

We dedicate ourselves to aim for accelerated growth and strive to achieve Total Quality through effective implementation of the Quality Management System and delivering best values to our customers.

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Quality ObjectivesGuided by the Quality Policy of the Company, our Objectives at TAYO shall be to :

Produce and deliver products as per customers' expectations ensuring Quality and Reliability at all times.

Constantly monitor product performance and the level of Customer Satisfaction. Strive continuously for maintaining and improving Product Quality in order to

upload our identity as a global recognized producer. Enhance the knowledge and skill of employees for effective implementation of

Quality Management System.

2. Environment PolicyTAYO is committed to address the impact of its processes and products on the environment and society through:

A conscious goal-setting and review mechanism by senior leadership in matters of environmental impact.

Total compliance to regulatory and legal requirements

Management of process-wastes to ensure pollution-free surroundings.

Conservation of nature and natural resources Development of concern for environment

among all employees.

3. Safety Policy

TAYO believes that Safety and Health of all employees is essential for the success of Company's goals. TAYO therefore, is committed to provide safe and healthy work environment to all its employees.

It shall be the endeavor of the Company to identify, control, and eliminate through continuous awareness and training programs the hazardous conditions and situations posing a potential risk/danger to employees and loss to plant, equipment and products.

It shall be the responsibility of every employee:

To observe safety rules and to make use of safety appliances issued to him/her. To follow safe working practices and ensure that others do the same in him/her area

of responsibility. Not to endanger him/her, other employees, plant, equipment and products.

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PLANT FACILITIES

TAYO has the best combination of melting Furnaces used for manufacturing of different types of metal grades for various types of rolls. The 25- tonne Electric Arc Furnace is used for manufacture of high strength alloy iron, high quality SG iron and alloy steel rolls. The 8- tonne & 16- tonne mains frequency Induction Furnaces are used for small and medium size cast iron, steel and SG rolls. These furnaces, also, provide highly alloyed shell metal for static as well as spun cast rolls.

The vide variety of furnaces offer full flexibility in production of rolls of different sizes and weights.

Melting is carried out using carefully segregated Scrap, Pig Iron and Ferro-alloys to achieve the desired composition. A modern analytical laboratory using a computerized emission spectrometer backs the melting unit and modern equipment for analyzing important elements of the melts has been installed to keep pace with the changing needs of the customers.

MELTING

TAYO has the best combination of melting furnaces. The Electric Arc Furnace is used for manufacture of high strength alloy Iron, high quality SG and Steel Rolls. The mains frequency induction furnaces are used for small and medium sized cast iron, steel and SG Rolls. These furnaces also provide highly alloyed shell metal in indefinite chill quality rolls which are cast through static and centrifugal route. Shell metal for high chrome iron and Steel rolls are also processed in these furnaces. The wide variety of furnaces offers full flexibility in production of rolls of different sizes and weights. The melting is carried out using carefully segregated scrap, pig Iron and ferro alloys to achieve the desired composition. The melting unit is backed by a modern analytical laboratory using a computerized vacuum spark emission spectrometer and other automatic analysis for different elements.

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FOUNDRY

TAYO has a well-equipped Foundry with facilities of Static Casting, Spin Casting and Heat Treatment of rolls.

STATIC CASTING

There are modern facilities for preparing moulds to exacting standards to produce rolls with maximum yields. All rolls are bottom poured with tangential ingot to ensure maximum cleanliness of the roll-body surface. All nodular iron rolls are poured with special ladle inoculation followed by mould inoculation to ensure high strength requirements. Hot-Topping equipment is used for all Steel and Steel Base Rolls to ensure internal soundness, appropriate grain size and structure, making the rolls absolutely free from cavities and porosities.

SPIN CASTING

State-of-the-art horizontal spin casting machine is used to produce Work Rolls for Flat Rolling. Rolls ranging from 630 mm. to 1085 mm. in diameter are being produced through this machine with strict control of rotational speed, cooling and casting time. The shell sleeve is tilted to vertical position and core metal is poured from top with precise thermal synchronization to achieve a perfect bond between shell and core. High core strength is achieved through special mould inoculation.

MANAGEMENT OF BUSINESS ETHICS (MBE)

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Tayo has adopted Tata Code of Conduct in its letter and spirit. All employees of the Company have signed their commitment to the compliance of the code. All stakeholders of the Company are made aware of the relevant clauses of the code. Process audits are conducted regularly to ensure that no violations take place. Procedures and machinery are in place for reporting, investigating and removing concerns relating to possible violations of the code.

Company regularly participates in MBE Assurance survey conducted by Tata Quality Management Services (TQMS.)

AWARDS & RECOGNITION

Year Awards2002 National Quality Award in the Secondary Steel Sector by Indian Institute of Metals.2002 CII Eastern Region Productivity Award.

2002-03 Indian Oil - Trophy award. Secured First Position in Fuel Conservation Contest, Conducted by CII(ER)

2004 Golden Peacock Innovation Award.2004 First Prize at National Quality Award-2004-IIM.

2005-06 Secured First Position in HRD ,Conducted by CII(ER)

 BUSINESS EXCELLENCE

Tayo Rolls limited is a signatory to "Brand Equity and Business Promotion" (BEBP) Scheme of Tata Sons Limited. The Company has adopted Tata Business Excellence Module (TBEM) as a vehicle for excellence in business. The Company has undergone five cycles of Internal Assessment and four cycles of External Assessments conducted by Tata Quality Management Services (TQMS). Tayo today is well on path of excellence in all its activities. The Company has been regularly participating in group level and regional level Quality Circle competitions, where our teams have performed well and have won many prizes and recognitions.

"Working-together" has been the guiding philosophy of the Company to generate active participation of all its employees. Eleven Joint Bodies function under the umbrella of Joint Works Council. These joint forums have equal representation from management and workers. Organizational performance is discussed and communicated through various means of communication. Many officers and supervisors have been trained by TQMS on Business Excellence Model. The Company has a pool of Internal and External Assessors who are used as resource persons by the Group. Company has also provided Senior Assessor for conducting assessment for CII EXIM BANK Award in 2003.

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Tayo has regularly been participating in Business Excellence Assurance Survey being conducted by TQMS.

QUALITY ASSURANCE

The metallographic and mechanical tests keep a constant the entire operation from selection of raw materials to dispatch of finished products goes through a series of quality control checks conducted by a team of metallurgists. Analyses the bath samples to ensure correct chemistry of the final product. The Rolls are tested for surface hardness by the conventional Scleroscopic as well as Equotip hardness testers along with Rockwell hardness tester to conform to specifications are desired by the customers check on the desired structural constituents strength and homogeneity of the product. Ultrasonic testing is carried out to ensure the overall internal soundness and structure of the roll as well as the quality of bond between the shell core of cast roll.

In recognition of the Company having a well established Quality Management System Functioning at all levels which helps the Company in achieving improvements in Quality, TAYO has been awarded ISO-9002 Certificate of Approval by Indian Register Quality System in February, 1996. The Certificate is valid until January, 1999. However, TAYO will retain the certificate in the years beyond.

Equotip Hardness Testing

Hardness Measurement

RESEARCH & DEVELOPMENT

A well equipped R&D laboratory recognized by Govt. of India, Ministry of Science and Technology provides the facility for continued research on development of new grades of rolls and special castings. Research & Development work is basically conducted at the laboratory equipped with pilot induction Furnace, programmable heat treatment furnace, emission spectrometers, ferritescope, and high resolution microscope with image analyzer, mechanical testing machine and different types of hardness testing equipment. In Addition,

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TAYO has access to outside research laboratories for special investigations wherever required.

 

ORGANISATION’S IDEOLOGY

VISION

Five Fold in Five Years

 MISSION

"TAYO aspires to be a Rs.500 crores plus turnover company by 2010, through :

Accelerated growth with global mindset. Strategic alliances/diversification. People focus. Best values to our customers. Low cost quality product and services.

We shall upload the TATA values and be a good corporate citizen"  

CORE VALUES

Honesty & Integrity Credibility Commitment Agility Team Spirit Excellence

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BOARD OF DIRECTORS AND MANAGEMENT TEAM

Board of DirectorsMr. Anand Sen , Chairman Promoter, Not Independent , Non ExecutiveMr. Om Narayan Not Independent , ExecutiveMr. SK Bhattacharyya Independent, Non Executive Mr. SN Menon Independent, Non Executive Mr. Dipak Banerjee Independent, Non ExecutiveProf. Ranjan Das Independent, Non ExecutiveMr. VSN Murty Promoter, Not Independent, Non Executive Mr. Osamu Nishimura Promoter, Not Independent, Non Executive

Management TeamMr. Om Narayan Managing DirectorMr. Jaydeb Burman Vice President ( Operations )Mr. Abhijit Mitra Vice President (Marketing)Mr. AK Das DGM (Maintenance Services and Forge Shop)

Mr. NG Murthy General Manager(Management Services & procurement)

Mr. V Satyamohan General Manager(Finance & Accounts)Mr Amit Gupta General Manager(Business Executive)Mr BK Sinha General Manager(Business Development)Mr. Suresh Padnabhan Chief ( F & A ) Mr. KH Gandhi Chief ( HR & IR )Mr. AK Srivastava Chief ( Production-MBF)Mr. V Mohan Chief ( Production)Mr. RK Choudhary Chief ( Marketing)Mr. SK Chattoraj Chief ( Marketing)

PRODUCTS OF TAYO

[28]

1. Forged Rolls2. Pig Iron3. Cast Rolls4. Ingot

1. Forged Rolls: TAYO has an agreement with Union Electric Steel Corporation (UES), USA, for sourcing the Forged Hardened Rough Turned Rolls and finish machining these Rolls in our plant at Jamshedpur. This value addition of Forged Rolls has enabled TAYO to provide a single window for both Cast and Forged Rolls to various customers in India.With our excellent machining capability we can finish the Forged Rolls in a wide range of Sizes and Qualities to cater to the demand of both Ferrous and Non Ferrous Industries for Hot as well as Cold applications.

2. Pig Iron: Apart of Rolls & Special Castings, TAYO Rolls Limited backward integrated its process to manufacture pig iron and is engaged in the business of selling of foundry grades pig iron. The company presently manufactures 7 different Pig Iron grades. TAYO Rolls commenced Commercial Production in 1st Feb 2005 with a capacity of 34,000 tonnes per annum.

3. Cast Rolls: Tayo Rolls has the capability and the capacity to meet the most demanding mill requirements. Tayo rolls have been custom designed to roll flat as well as long products.Tayo’s Technical advice on sound mill practices is backed by the experience of Tata Steel, a frontrunner in the steel industry in India.Tayo Rolls Limited is a leading Cast Iron and Steel Roll manufacturer in India. Now, Tayo has put up manufacturing facility for Forged Hardened Roll and Engineering Forgings consisting of Ingot Making, Forging and Heat Treatment including Induction Hardening in the existing premises

4. Ingot: An ingot is a material, usually metal, that is cast into a shape suitable for further processing. Non-metallic and semiconductor materials prepared in bulk form may also be referred to as ingots, particularly when cast by mold based methods.

Forged Roll Pig Iron Cast Roll

[29]

Ingot

[30]

Chapter – 4

FINANCIAL STATEMENTANALYSIS & INTERPRETATION

[31]

COMPARATIVE INCOME STATEMENT

PARTICULARS CURRENT YEAR (2010-2011)

PREVIOUS YEAR (2009-2010)

CHANGE IN ABSOLUTE FIGURES

CHANGE IN PERCENTAGE (%)

Net SalesLess: Cost OF Goods Sold

12815.6414166.77

12709.7913690.33

105.85476.44

0.833.48

Gross Income/Profit Less: Operating Expenses

(1351.13)6332.66

(980.54)4591.81

(370.59)1740.85

37.7937.91

Operating Net Income/ ProfitAdd: Other IncomeLess: Interest Paid

(7683.79)

484.73 447.41

(5572.35)

415.74951.68

(2111.44)

68.99(504.27)

37.89

16.5952.98

Profit Before TaxLess: Income Tax

(3044.31) -

(1153.30) -

(1891.01) -

163.96 -

Profit After Tax(PAT) (3044.31) (1153.30) (1891.01) 163.96

INCOME STATEMENT: It comprises of Trading and P/L accounts. It is wholly concerned with the items of Nominal Account; i.e. expenses and losses and incomes and gains. COMPARATIVE INCOME STATEMENT is a method of analysis of the company’s operating activities through comparing the Trading and P/L accounts of two consecutive years. It depicts the level and direction of changes in the absolute figures of the components of the income statements as well as the percentage of changes.

[32]

COMPARATIVE BALANCE SHEET

PARTICULARS CURRENT YEAR (2010-2011)

PREVIOUS YEAR (2009-2010)

CHANGE IN ABSOLUTE FIGURES

CHANGE IN PERCENTAGE (%)

FIXED ASSESTS:Gross BlockLess: DepreciationNet Block Capital Work In ProgressTotal Fixed Assets(A)

28004.21 8785.6319218.58 2239.5921458.17

11482.438226.56 3255.8715773.6819029.55

16521.78559.0715962.71(13534.09)2428.62

143.886.79490.2785.8012.76

Total Investment(B) 32.14 32.14 - -CURRENT ASSETS, LOANS &ADVANCES:InventoriesSundry DebtorsCash & Bank BalancesLoans & AdvancesTotal Current Assets(C)

3775.153009.63364.471140.538289.78

4034.742689.79331.74866.027922.29

(259.59)319.8432.73274.51367.49

6.4311.899.8631.694.63

PROFIT & LOSS A/C (D) 1777.68 - 1777.68 -

TOTAL ASSETS (A+B+C+D) 31557.77 26983.98 4573.79 16.95

LIABILITIES and CAPITALSHAREHOLDERS’ FUNDS:Share Capital Reserve & SurplusLOAN FUNDS:Secured LoansUnsecured LoansTOTAL FUNDS EMPLOYED/ LONG TERM LIABILITIES(A)

1026.13 5540.05

14183.94 2486.25

23236.37

1026.13 6806.68

11746.93 242.01

19821.75

-(1266.63)

2437.012244.24

3414.62

-18.60

20.74927.33

17.22CURRENT LIABILITIES & PROVISIONS:Current LiabilitiesProvisionsTOTAL CURRENT LIABILITIES(B)

6594.96 1726.44 8321.40

5724.53 1437.70 7162.23

870.43288.741159.17

15.2020.0816.18

TOTAL LIABILITIES(A+B) 31557.77 26983.98 4573.79 16.95

[33]

POSITION STATEMENT: It comprises of the BALANCE SHEET of the company which deals with the items of REAL and PERSONNEL ACCOUNTS. It reflects the actual position of the Assets and Liabilities of the company. It shows the Assets that the company owns and the Liabilities that it owes as on date.

COMPARATIVE POSITION STATEMENT is a method of analysis of the company’s financial position through comparing the Balance Sheets of two consecutive years. It depicts the level and direction of changes in the absolute figures of the components of the Balance sheets as well as the percentage of changes.

ANALYSIS:

The comparative analysis of THE INCOME STATEMENT and THE POSITION STATEMENT, show the amount, level and direction of changes in the components of net income and assets and liabilities respectively. They help in assessing and reviewing the operational efficiency, deciding future course of action and formulating effective planning.

[34]

RATIO ANALYSIS

PROFITABILITY RATIOS

1. GROSS PROFIT RATIO:

GROSS PROFIT RATIO = (GROSS PROFIT * 100) / NET SALES

SIGNIFICANCE: Gross Profit Ratio reveals profit earning capacity of the business with reference to its sale. Increase in GPR will mean reduction in cost of production or direct expenses or sale at reasonably at good price and decrease in the ratio will mean increased cost of production or sales at lesser price. The true efficiency or profitability of the business cannot be understood by GP because profitability may be lesser, whereas GP is more.

The GPR also works as a guide to the management in determining its selling and distribution expenses. There is no ideal standard measure for GPR but it should be sufficient to cover the selling expenses of the firm.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 12.31 9.34 -6.02 -2.44 -11.94

2006-07 2007-08 2008-09 2009-10 2010-11

-15

-10

-5

0

5

10

15

RATIOS

RATIOS

INFERENCE: The GPR of the company is decreasing constantly from 2006-07 to 2010-11, because of increased cost of production and sales at lower price. Sales at lower rate will reduce margin of profit. Effort should be made to sell at competitive price.

[35]

2. NET PROFIT RATIO: NET PROFIT RATIO = (NET PROFIT * 100) / NET SALES

SIGNIFICANCE: This ratio establishes relationship between net profit and net sales. Net profit or net income is the GP less selling, distribution and financial expenses. NP, for calculating this ratio is picked up from the P/L A/c. The net profit ratio is the overall measure of the firm’s ability to turn each rupee of income from services in net profit. If the net margin is inadequate the firm will fail to achieve return on shareholder’s funds. High net profit ratio will help the firm service in the fall of income from services, rise in cost of production or declining demand.

Net Profit = Gross Profit

+Operating & Non-Operating Income (-)Operating & Non-Operating Expenses

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 8.17 4.67 -11.15 -9.07 -23.75

2006-07 2007-08 2008-09 2009-10 2010-11

-30

-25

-20

-15

-10

-5

0

5

10

15

RATIOS

RATIOS

INFERENCE: The net profit is decreased because the income from sales has decreased.

The decrement resulted at decrease in 2010-11 ratio compared to the year 2009-10.

[36]

3. OPERATING NET PROFIT RATIO:

Operating Net Profit Ratio = (Operating Net Profit *100)/Net Sales

Operating Net Profit=Net Profit

(-)Non Operating Income

+ Non Operating Expenses

SIGNIFICANCE: The operating profit ratio is used to measure the relationship between

net profits and sales of a firm. Depending on the concept, it will decide.

Years 2006-07 2007-08 2008-09 2009-10 2010-11

Ratios 9.60 6.57 -7.18 -3.35 -14.48

2006-07 2007-08 2008-09 2009-10 2010-11

-20

-15

-10

-5

0

5

10

15

RATIOS

RATIOS

INFERENCE: The operating profit ratio has decreased compared to last few years. The

earnings are decreased due to the decrease in the operating & non-operating income. So, the

ratio is decreased compared to the previous year.

[37]

4. NET PROFIT TO NET WORTH RATIO

Net Profit To Net Worth Ratio= (Net Profit After Interest But Before

Tax*100)/Net Worth

Net Worth=Equity & Preference Share Capital

+ Reserve & surplus

+ Accumulated Profit

SIGNIFICANCE: This ratio indicates the relationship between NP and Net Worth. The term

Net Worth here means Capital or Shareholders funds.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 33.05 23.61 -20.47 -14.72 -46.36

2006-07 2007-08 2008-09 2009-10 2010-11

-60

-50

-40

-30

-20

-10

0

10

20

30

40

RATIOS

RATIOS

INFERENCE: Ratio has been reduced significantly as a result of issue of new equity shares and decrease in Net Profit.

[38]

5. NET PROFIT TO FIXED ASSET RATIO:

Net Profit To Fixed Asset Ratio = Net profit Before Interest And Tax / Net Fixed Assets

SIGNIFICANCE: The ratio shows relationship of Net Profit to Fixed Assets and also indicates, whether fixed assets are being properly used or not. It will be in the favour of the business, if the ratio is higher.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.49 0.18 -0.13 -0.06 -0.14

2006-07 2007-08 2008-09 2009-10 2010-11

-0.2

-0.1

0

0.1

0.2

0.3

0.4

0.5

0.6

RATIOS

RATIOS

INFERENCE: Ratios are declining year after year, as the application of funds towards fixed assets is more than the sources of funds, hence it is a sign of danger for the company. There was a slight improvement in ratio of the year 2009-2010 as compare to 2008-2009 due to decrease in comparative loss. So the company should apply a corrective check on it.

[39]

6. RETURN ON INVESTMENT OR RETURN ON CAPITAL EMPLOYED:

Return on Investment = (Net Profit Before Tax, Interest And Preference Dividend * 100) / Capital Employed

SIGNIFICANCE: Return On Investment Ratio measures, the operational efficiency and borrowing policy of the enterprise. It also shows how effectively the capital employed in the business is used. It shows the earning capacity of the net assets of the business. The ratio judges the performance of the business. It can be used for comparing the performance of even dissimilar business or different departments of the same business.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 21.80 11.53 -10.42 -5.82 -13.10

2006-07 2007-08 2008-09 2009-10 2010-11

-15

-10

-5

0

5

10

15

20

25

RATIOS

RATIOS

INFERENCE: The performance of the company is declining gradually year after year which has an adverse effect on the company’s operational efficiency. It indicates that the capital employed of the company is being inefficiently utilized.In order to enhance the operational efficiency, the company should go for a proper project analysis of any project before undergoing through it and invest the capital in the right direction to avail a fruitful result.

[40]

7) RETURN ON EQUITY RATIO:

Return On Equity Ratio = (Net Income Before Tax, Interest And Preference Dividend * 100) / Equity Shareholders Funds

SIGNIFICANCE: This ratio shows how effectively Equity Shareholders Funds are utilized. It measures the operational efficiency of management. Higher ratio is always in the interest of the enterprise, because it proves efficiency of the management. This ratio helps in the comparison of performance and decision making regarding declaration of dividend and creation of reserve.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 25.51 13.42 -18.62 -14.72 -46.36

2006-07 2007-08 2008-09 2009-10 2010-11

-50

-40

-30

-20

-10

0

10

20

30

RATIOS

RATIOS

INFEREENCE: Performance of the company is declining gradually year after year which has an adverse effect on the company’s operational efficiency.Higher the ratio more the dividend a company can declare which depicts the positive picture of the company in the eyes of the shareholders and vice-versa. No profit no dividend.

[41]

8) EARNING PER SHARE RATIO (E.P.S) :

Earnings Per Share Ratio = (Net Profit – Preference Dividend) / No. Of Equity Shares

SIGNIFICANCE: The ratio measures the return per share receivable by equity or ordinary shareholders. Equity shareholders are virtually the owner of the company. Dividend payable to them is ascertained after deducting operating and non-operating expenses and even the interest payable to debenture holders and dividend to preference shareholders.

Years 2006-07 2007-08 2008-09 2009-10 2010-11Ratios 19.41 11.60 -23.68 -11.24 -29.67

2006-07 2007-08 2008-09 2009-10 2010-11

-40

-30

-20

-10

0

10

20

30

RATIOS

RATIOS

INFERENCE: Return per share is gradually reducing year after year due to occurrence of yearly losses and issuance of additional shares.

[42]

TURNOVER OR ACTIVITY RATIOS

1) TOTAL CAPITAL TURNOVER RATIO:

Total Capital Turnover Ratio = Net Sales / Capital Employed

SIGNIFICANCE: It shows how many times capital is turned over into sales. It reflects the efficiency in the utilization of capital. Higher capital turnover ratio is always in the interest of the enterprise. Excessive Capital turnover ratio proves over trading which is not good.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 2.67 2.47 0.93 0.64 0.55

2006-07 2007-08 2008-09 2009-10 2010-110

0.5

1

1.5

2

2.5

3

RATIOS

RATIOS

INFERENCE: There is no any given standard of the Total Capital Turnover Ratio. It entirely depends on the efficiency of the company that how much it is capable of rotating (investing and getting return) its capital, but if; in case of a good ongoing company like TAYO ROLLS this ratio is declining year after year ,then it is not acceptable and have an adverse effect on its existence. Hence, the company should try to

[43]

maintain its Total Capital Turnover Ratio at least for the level of Break Even Point as per its capabilities.

2) WORKING CAPITAL TURNOVER RATIO:

Working Capital Turnover Ratio = Net Sales / Working Capital

SIGNIFICANCE: This ratio is very significant for non-manufacturing concerns where working capital is more than the fixed assets. It reflects the efficiency in the utilization of working capital. This ratio must be normal. Excessive ratio shows overtrading and lower ratios under trading. Both the situations of overtrading and under trading shows the weakness of the enterprise.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 6.27 7.71 5.67 16.72 -405.30

2006-07 2007-08 2008-09 2009-10 2010-11

-450

-400

-350

-300

-250

-200

-150

-100

-50

0

50

RATIOS

RATIOS

INFERENCE: This ratio is basically concerned with non-manufacturing enterprises whereas TAYO ROLLS Ltd. is a core manufacturing unit. Hence, this ratio does not carry that much of importance in case of TAYO ROLLS Ltd.

[44]

3) FIXED ASSETS TURNOVER RATIO:

Fixed Assets Turnover Ratio = Net Sales or Cost of Sales / Net Fixed Assets

SIGNIFICANCE: Fixed assets are used in the business for producing goods to be sold. The effective utilization of Fixed Assets will result in increased production and reduced cost. It also ensures whether investment in the assets have been judicious or not. Higher ratio indicates better performance. This ratio is very significant for manufacturing enterprises, where fixed assets employed are more than working capital.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 6.01 3.84 1.15 0.66 0.59

2006-07 2007-08 2008-09 2009-10 2010-110

1

2

3

4

5

6

7

RATIOS

RATIOS

INFERENCE: These ratios establish a relation with the fixed assets and sales of the company. Which indicates, how many times the fixed assets is utilized to achieve the sales of the company. Here the company is utilizing 0.59 times of its fixed assets to achieve the sales

[45]

of the company. The company should try to increase the production and this will increase the sales of the company and ultimately the fixed assets turnover ratio will increase.

4) INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO =Cost of goods sold / Average Inventory (in times)

Inventory Turnover Ratio = 365 days / 1n times(in days)

SIGNIFICANCE: This ratio indicates the relation between the inventory and sales of the company. Which provide us the information about the velocity of stock during the year. High ratio is always desirable by the company; the high ratio indicates a good position of the company.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios (in times)

-5.57 3.84 3.12 3.63

Ratios (in days)

-65.52 95.05 116.98 100.55

2006-07 2007-08 2008-09 2009-10 2010-110

20

40

60

80

100

120

140

RATIOS(in times)RATIOS(in days)

[46]

INFERRENCE: The Company’s inventory turnover ratio is 3.63 times, which means the movement of stock is approximately 4 times in a year. Moreover, in terms of days inventory turnover ratio is approximately of 100 to 101 days. The lesser the number of days involve in completing one cycle , the better the condition of the company as per its performance and return. Here, the number of days are increasing and number of times of turnover are decreasing is not a good sign for the company.

LIQUIDITY RATIOS

1) CURRENT RATIO:

Current Ratio = Current Assets / Current Liabilities

SIGNIFICANCE: This ratio indicates the short term soundness of the company. This ratio is analyzed to test the solvency position of the company. The Current ratio reveals the firm’s ability to meet its current liabilities out of current source of fund. The standard ratio is 2: 1, but in practically the standard ratio is assumed to be 1.5:1.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 1.45 1.39 1.48 1.11 0.99

2006-07 2007-08 2008-09 2009-10 2010-110

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

RATIOS

RATIOS

INFERENCE: The Company is having current ratio of 0.99:1, which means that for every Re.1 of current liabilities, the company has Re. 0.99 of current assets, which is not in satisfactory position so the company should try to increase the current ratio to at least 1.5:1.

[47]

2) LIQUID RATIO OR ACID TEST RATIO:

Liquid Ratio = Liquid Assets / Current Liabilities

Or

Acid Test Ratio = Current assets – Inventories /Current liabilities - Bank O/D

SIGNIFICANCE: This ratio also known as Acid test ratio or quick assets ratio. This ratio is also used to know the solvency of the company. This ratio reveals the actual financial ability of the company to pay off its immediate impending liabilities. The standard ratio is 1:1 but in practically it is accepted to be 0.8:1.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.87 0.70 0.69 0.54 0.54

2006-07 2007-08 2008-09 2009-10 2010-110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

RATIOS

RATIOS

[48]

INFERENCE: The Company is having 0.35:1 quick ratio which is not satisfactory. Which means that for every Re.1 of CL the company can pay immediately Re.0.35.

SOLVENCY RATIOS

1) DEBT EQUITY RATIO:

Debt Equity Ratio = Long Term Loans / Shareholders funds

SIGNIFICANCE: This ratio is calculated to judge the long term financial policy of the business. The ratio establishes relationship between long term loans and owner’s funds .It also shows the efficiency of the management in financial planning.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.68 0.34 0.91 1.19 2.23

2006-07 2007-08 2008-09 2009-10 2010-110

0.5

1

1.5

2

2.5

RATIOS

RATIOS

[49]

INFERENCE: This ratio reveals the relation between the long term debt and Proprietors’ fund of the concern; it. The debt equity ratio is 2.23, which means that for every Re 1 of the Proprietors’ fund, the long term debt stands to Rs.2.23.

2) TOTAL DEBTS RATIO:

Total Debts Ratio = External Equity / Internal Equity External Equity = Long term loans + Current liabilities

SIGNIFICANCE: This ratio shows the relationship between external and internal equity. Equity means both long and short term outsider’s funds. It consists of both current and non-current creditors liabilities.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 2.26 1.80 1.57 2.10 3.49

2006-07 2007-08 2008-09 2009-10 2010-110

0.5

1

1.5

2

2.5

3

3.5

4

RATIOS

RATIOS

[50]

INFERENCE: This ratio reveals the relation between the long term as well as short term debt and Proprietors’ fund of the concern. The Total debt ratio is 3.49, which means that for every Re 1 of the Proprietors’ fund, the long term and short term debt stands to Rs.3.49.

3) INTEREST COVERAGE OR DEBT SERVICE RATIO:

Interest Coverage Or Debt Service Ratio = Net Profit Before Interest And Income Tax / Fixed Interest Charges

SIGNIFICANCE: The ratio ascertains whether the company is capable of meeting interest on the loans easily out of profits or not. Interest payable on debentures and other loans, where rate of interest is specified is the fixed charges i.e., the business will have to make the payment of interest, whether the company earns profit or suffers loss. The net income of the company should be ideally 6 or 7 times of the fixed interest charges.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 16.71 12.81 -4.78 -2.17 -4.36

2006-07 2007-08 2008-09 2009-10 2010-11

-10

-5

0

5

10

15

20

RATIOS

RATIOS

[51]

INFERENCE: In order to avail the solvency position, an enterprise is required to be capable enough to meet its total debt and expenses out of its total assets and profit and for this purpose the latter should be 6 or 7 times of the former. Here, in this case the ratio is not only less than 6 or 7 times but it is also negative which is not desirable situation for the Company’s solvency is. Hence, the company should work on its planning to achieve its solvency position.

4) FIXED ASSETS RATIO:

Fixed Assets Ratio = Long Term Loan / Net Fixed Assets

SIGNIFICANCE: The ratio indicates the long term financial soundness of the business. It also assesses, whether investments have been properly made or not. The ideal ratio should be more than one. In case it is lesser than one it will mean that the business has been financing the purchases of fixed assets out of working capital which is a wrong policy.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.91 0.29 0.57 0.49 0.68

2006-07 2007-08 2008-09 2009-10 2010-110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

RATIOS

RATIOS

[52]

INFERENCE: To be at a solvent position a company’s Fixed Assets Ratio should be 1, which in case of the company is below 1, i.e. 0.68, which predicts that company has been financing the purchases of its fixed assets out of its working capital which is a wrong policy.

5) SOLVENCY RATIO:

Solvency Ratio = Total Outside Liability / Total Assets

SIGNIFICANCE: Solvency is a state, where the company is supposed to be financially sound and capable of meeting its liability out of its assets. This ratio indicates the relationship between total outside liabilities and total assets of the business. It should be at least 1or less.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.21 0.59 0.55 0.66 0.74

2006-07 2007-08 2008-09 2009-10 2010-110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

RATIOS

RATIOS

[53]

INFERENCE: Here, the ratio is below 1, which is a positive situation for the company’s solvency.

6) RESERVE TO CAPITAL RATIO:

Reserve to Capital Ratio = Reserve / Capital

SIGNIFICANCE: This ratio indicates the relationship between reserves and capital. More reserves show financial soundness of the firm, because it will be able to meet future losses, if any out of these reserves. It should be 1 or more.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.51 0.49 0.45 0.34 0.23

2006-07 2007-08 2008-09 2009-10 2010-110

0.1

0.2

0.3

0.4

0.5

0.6

RATIOS

RATIOS

[54]

INFERENCE: Here, Reserve to Capital Ratio is less than 1 which is having a negative impact in the solvency of the company.

7) CAPITAL GEARING RATIO:

Capital Gearing Ratio = Equity Capital / Preference Share Capital + Debentures + Loans

SIGNIFICANCE: This ratio makes an analysis of the capital structure of the firm. The firm is said to be more geared, if equity capital is more than the debentures and preference share capital.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.22 0.15 0.12 0.08 0.06

2006-07 2007-08 2008-09 2009-10 2010-110

0.05

0.1

0.15

0.2

0.25

RATIOS

RATIOS

[55]

INFERENCE: Here, the equity capital is less than the debentures and preference share capital, it implies that internal or proprietor’s fund is less than the external or the outsider’s fund, which is an important matter of concern for the prosperous future of the company.

8) PROPRIETARY RATIO:

Proprietary Ratio = Proprietors Funds / Total Assets

SIGNIFICANCE: This ratio is very important for the creditors, because they know the share of proprietor’s funds in the total assets and satisfy how far their loan is secured. The higher the ratio, the more safety will be to the creditors. This ratio shows the general financial position of the company also. 50% is supposed to be satisfactory proprietary ratio for the creditors. Lesser than 50% is the sign of risk for creditors.

Years 2006-07 2007-08 2008-09 2009-10 2010-11 Ratios 0.30 0.31 0.38 0.29 0.21

[56]

2006-07 2007-08 2008-09 2009-10 2010-110

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

RATIOS

RATIOS

INFERENCE: This ratio explains the relation between the total assets and the proprietary fund of the company. This shows that how much proprietary fund is engaged in the business while financing the total assets of the company. Here the company has engaged 21% of the proprietary fund for financing its assets. This ratio also shows that how much the company is dependent on external equity while financing its total assets. Here the company is dependent on external equity to the extent of 37%. The company should gradually try to decrease the ratio of dependent on the external equity. This will in turn increase the share of profit of the company.

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Chapter – 5 Findings Recommendations Conclusion Bibliography

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FINDINGS OF THE STUDY:

1. The current ratio has shown in a fluctuating trend 1.45, 1.39, 1.48, 1.11 and 0.99 during

2006-11 of which indicates a continuous fluctuation in both current assets and current

liabilities.

2. The quick ratio is in a decreasing trend throughout the period 2006 – 11 resulting as 0.87,

0.70, 0.69, 0.54 and 0.54 .The company’s present liquidity position is satisfactory as the

thumb rule is 1:1.

3. The inventory turnover ratios are 5.57times, 3.84 times, 3.12 times and 3.63 times. It is

decreasing from the last three years as indicating inefficiency of the company to manage the

inventories.

4. The inventory conversion period is also increasing year after year i.e.65.52 days, 95.05

days, 116.98 days and 100.55 days which is not the good sign of effectiveness.

5. The working capital turnover ratio is showing a fluctuating trend from year to year and is

as follows 6.27, 7.71, 5.67, and 16.72.

6. The gross profit ratio is also showing a decreasing trend for the last three years 12.31,

9.34, -6.02, -2.44 and -11.94.

7. The operating profit ratio is also decreasing for the last five years 9.60, 6.57, -7.18, -3.35

and 14.48 which shows that operation cost has increased.

8. The net profit ratio is in decreasing manner. It decreased in the current year compared

with the previous year from-9.07 to -23.75.

9. The return on capital employed ratio is also showing a decreasing trend and has fallen

down from -5.82of previous year to -13.10 in the year 2010-11.

10. The return on equity has also decreased from -14.72 in the year 2009-2010 to-46.36 in the

year 2010-11.

11. The return on assets has decreased from 15 to 10 in the year 2008-09 which shows that

the profit has decreased.

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12. Earnings per share is reduced when compared with the last year. It is reduced from -11.24

to -29.67.

13. The Reserves and Surplus to Capital ratio is decreased from 0.34 to 0.23. The capital is

constant, but the reserves and surplus is decreased in the current year.

14. The fixed assets turnover ratio is in decreasing trend from the year 2006 – 11 (6.01, 3.84,

1.15, 0.66, and 0.59). It indicates that the company is inefficiently utilizing the fixed assets.

15. The proprietary ratio has shown a decreasing trend. The proprietary ratio is decreased

compared with the last five years i.e. 0.30, 0.31, 0.38, 0.29 and 0.21. So, the long term

solvency of the firm is decreased.

RECOMMENDATIONS:

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Post to careful analysis of the study, following suggestion are derived to improve the scenario

by considering the pros and cons of the objectives and scope of the study for the period

2006-2007, 2007-2008, 2008-2009, 2009-2010 and 2010-2011.

1. In order to overcome the consecutive three years business losses, the company’s top

management should look further for the CAPITAL RESTRUCTURING.

2. As the Working Capital turnover ratio is very good for the year 2009-2010, TAYO

should adopt a consistent policy of working capital, for which it should increase the

current assets while decreasing the current liabilities and should try to settle down its

long term debts out of the permanent capital’s or investment’s return .

3. The management of working capital should emphasize over the company’s credit

management activities and credit policies.

4. To reduce the inventory conversion period the company should take the necessary

steps as reviewing its production and operation policies.

5. To maintain the liquid ratio with the standard value (1:1) the company should

improves its liquidity positions by proper management of inventories and bill

receivables, in order to meet its current obligations.

6. The organization must improve its inventory management in order decrease stock

accumulation and increase profits.

7. Since, the net profit of the company is decreased the organization should emphasize

on re-viewing and re-planning its investment policies and setup plans.

8. However TAYO ROLLS LIMITED, The One-Stop-Shop for Cast and Forged Rolls

Company has concentrated all its effort and operations to maximize its operational

profits and minimize the borrowings.

CONCLUSION:

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According to study at TAYO ROLLS LIMITED, It can be concluded that there is continuous

effort to upgrade the skills of the exciting personnel and to create a congenial work and social

environment of growth for development of the personnel. The management believes in bi-

party settlement of all dispute and differences with the unions through the participative

system of management. The overall industrial relations situation in the organization has been

more or less normal. This helped to achieve production targets.

TAYO is already the only producer of the FORGED ROLLS in the world, what has now put

it in the ‘big league’ of International Market in its spectacular achievement or export front.

Even as already thinking in terms of further growth.

Keeping in the track with economic changes TAYO is trying harder to overcome its losses

and be established successfully by implementing the cost control measures of which RATIO

ANALYSIS is of immense importance. Effort of TAYO starting from worker in shop floor to

the position of top management all is conscious. All the performances achieved or expansions

achieved are due to the earlier proper controls and policies and they are trying hard to re-view

those fruitful policies to overcome the incurred losses.

BIBLIOGRAPHY:

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Books:

Financial Management – I M Pandey Financial Management – Khan and Jain Financial Accounting – S.A Siddiqui

Websites:

www.tayo.co.in www.wikipedia.com www.google.com

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