3

ANALYSIS OF FINANCIAL STATEMENTS

OF

1. RATIO ANALYSIS:
With Ratio analysis, we analyze financial statements with following types of ratios.

LIQUIDITY RATIOS SR. NO

1

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

CURRENT TIMES 1.09 0.91 0.90 0.94 0.82 RATIO ANALYSIS: The current ratio is decreasing continuously over the period; from 2004 to 2008.The liquidity of the company is decreasing. The ability to meet short term obligation has declined in 2008 with respect to prior years. Some corrective action should be taken by management to overcome the liquidity problem.
C UR R E NTR AT IO
AC ID TES T RATIO
1 0.8 CUR R E N T R AT IO 0.6 0.4 0.2 0
20 04 20 05 20 06 20 07 20 08

1.2 1 0.8 0.6 0.4 0.2 0

20 04 20 05 20 06 20 07 20 08

ACIDT E S T R AT IO

SR. NO
2

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

ACID TEST TIMES 0.87 0.69 0.61 0.68 0.54 RATIO ANALYSIS: Acid test ratio, which shows the ability to pay current obligation more quickly without considering inventory and prepaid expenses as liquid assets has decreased. Its shows that there is trouble to firm to meet its current obligation. This negative

trend demands management.

some

corrective

action

from

the

SR. NO
3

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

CASH RATIO TIMES 0.34 0.36 0.37 0.38 0.38 ANALYSIS: cash ratio is increasing slightly over the time period. The cash available to pay current liabilities is almost same from 2004 to 2008. So this ratio is satisfactory.

C AS HR AT IO
0.39 0.38 0.37 0.36 0.35 0.34 0.33 0.32 2004 2005 2006 2007 2008

NE TWOR K ING C APIT AL

1000 500 0

C AS H RATIO

-500 -1000 -1500 -2000 -2500

N E T W O R K ING CAPIT AL

SR. NO

RATIO

TYPE

2004

2005

20 04 20 05 20 06 20 07 20 08

YEAR
2006 2007 2008

NET WORKING Rs 775 (1162) (1119) (666) (2114) CAPITAL ANALYSIS: The net working capital is also declining over the time period. The net working capital is negative except 2004. The situation is alarming. The ability to meet expenses for day to day operation shows constraints. The organization is in problem to meet its current obligations.

ACTIVITY RATIOS SR. NO RATIO TYPE YEAR

2004 2005 2006 2007 2008

ACCOUNT RECEIVABLE TIMES 12.81 24.65 36.95 21.19 27.58 TURNOVER ANALYSIS: The number of times receivables are converted into cash has showed continuous increased from 2004 to 2006. In 2007 the accounts receivables turnover showed decline but again in 2008 it has showed increased. So improvement has been made in 2008 in collection of accounts receivables. So overall situation is quite satisfactory.
ACC OUNTR E C E IVAB LET UR NOVE R AVE R AG ECOLLE C T ION PE R IOD
35 30 25
ACCO UN T R E CE IVAB LE T UR N O VE R

40 35 30 25 20 15 10 5 0
20 04 20 05 20 06 20 07 20 08

20 15 10 5 0
20 04 20 05 20 06 20 07 20 08

AVE R AGE CO LLE CT IO NPE R IO D

SR. NO

RATIO
AVERAGE COLLECTION PERIOD

TYPE

YEAR
2004 2005 2006 2007 2008

DAYS

29

15

10

17

13

ANALYSIS: The number of days requires to collect receivables have decreased over the time; it shows the effective management of the credit department. So this ratio shows the positive trend as efficiency has improved.

SR. NO
3

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

DAY SALES IN DAYS 29 15 10 17 13 RECEIVABLE ANALYSIS: The number of days requires to collect receivables have decreased over the time; it shows the effective management of the credit department. So this ratio shows the positive trend as efficiency has improved.
DA YS AL ESINREC EIV A BL ES
INVE NT OR YT UR NOVE R
60 50 40 DAYS ALE SIN R E CE IVAB LE 30 20 10 0 2004 2005 2006 2007 2008
20 04 20 05 20 06 20 07 20 08

35 30 25 20 15 10 5 0

IN VE N T O R Y T UR NO VE R

SR. NO

RATIO

TYPE

YEAR
2004 31.93 2005 47.47 2006 29.31 2007 25.54 2008 55.20

INVENTORY TURNOVER

TIMES

ANALYSIS: Inventory turnover ratio is fluctuating over the years. It was increased during 2005 and once again showed decline in 2006 and 2007. However it has increased considerably in 2008. So improvement has been made regarding converting inventory into sale in 2008.

SR. NO
5

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

INVENTORY TURNOVER DAYS 11 8 12 14 7 IN DAYS ANALYSIS: The number of days required to convert inventory in ACCOUNTS RECEIVABLES or cash were increased in 2006 and 2007. This was indication of negative trend. However improvement has been made in 2008.
INVE NT OR YT UR NOVE RIN DAYS
D AY S ALE SIN INVE NT OR Y
18 16 14 IN VE N T O R Y T UR N O VE R INDAYS 12 10 8 6 4 2 0 2004 2005 2006 2007 2008 DAYS ALE S IN INVE N T O R Y

16 14 12 10 8 6 4 2 0
20 04 20 05 20 06 20 07 20 08

SR. NO
6

RATIO
DAY SALES IN INVENTORY

TYPE

YEAR
2004 2005 2006 2007 2008

DAYS

12

17

13

ANALYSIS: The number of days required to convert inventory in ACCOUNTS RECEIVABLES or cash was increased in 2006.however, from 2006 to 2008 improvement has been made by the management. The day sales in inventory has improved as it is only 5 days in 2008. Improvement has been made and overall trend is positive.

DEBT MANAGEMENT RATIOS SR. NO

1

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

DEBT RATIO TIMES 0.30 0.22 0.50 0.56 0.62 ANALYSIS: The amount of funds provided by creditors in relation to total assets has been increasing from 2005 to 2008. It is obvious that amount of funds provided by creditors to purchase total assets are continuously increasing. As in last 3 years the more than 50% of the total assts are being financed by creditors, so the current situation is quite alarming.
DEBT RATIO
0.7 0.6 0.5 0.4 0.3 0.2 0.1 0
20 04 20 05 20 06 20 07 20 08

D E B TT OS H AR E H OLD E R SWE ALT H

1.2 1 0.8 DE B T R AT IO 0.6 0.4 0.2 0
20 04 20 05 20 06 20 07 20 08

DE B TT O S HAR E H O LD E R SWE ALT H

SR.

RATIO

TYPE

YEAR

NO
2

2004

2005

2006

2007

2008

DEBT TO SHAREHOLD- TIMES 0.72 0.77 0.84 0.90 0.96 -RS WEALTH ANALYSIS: The amount of funds provided by creditors in relation to shareholders equity has been increasing from 2005 to 2008. It is obvious that amount of funds provided by the shareholders is more than creditors. Organization still has capacity to raise loans.
TIME INTERES T EARNED
25 20 15 10 5 0
20 04 20 05 20 06 20 07 20 08

T IME IN T E R E S T E AR N E D

SR. NO
3

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

TIME INTEREST TIMES 17.36 23.13 14.94 12.10 15.44 EARNED ANALYSIS: The times interest earned ratio analysis showed fluctuation over the time period. The overall ability to pay interest on loan was better in 2005 which was increased from 2004 ratio of 17.36. Afterwards in 2008, it indicates increase in the interest paying ability in 2008. Some improvement has occurred in 2008.

SR. NO
4

RATIO
FIXED COVERAGE

TYPE
TIMES

CAUSE OF NOT FINDING

AS OPERATING LEASE IS MUST FOR FIXED COVERAGE RATIO, IN FAUJI

RATIO

FERTILIZER CASE, THERE IS NO OPERATING LEASE, SO WE CANT FIND FIXED COVERAGE RATIO.

PROFITABILITY RATIOS SR. NO

1

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

GROSS PROFIT 37.42 36.06 32.42 35.59 40.40 MARGIN ANALYSIS: The gross profit margin of the organization has showed a continuous increased from 2006 to 2008. Although there was slight decline in 2005 from 2004 gross profit margin. But the above time serious analysis clearly implicit, that the ability of the organization to generate profit is improving. The management has taken reasonable as well as tremendous efforts to improve profitability.

G R OS SPR OF ITMAR G IN
45 40 35 30 25 20 15 10 5 0 2004 2005 2006 2007 2008 25 20 GR O S S PR O F IT MAR GIN 15 10 5 0

NE TPR OF ITMAR G IN

NE TPR O F IT MAR GIN

2004 2005 2006 2007 2008

SR. NO

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

NET PROFIT 19.04 19.22 15.48 18.86 21.33 MARGIN ANALYSIS: Although there was slight decline in 2005 from 2004 net profit margin. But the above time serious analysis clearly implicit, that the ability of the organization to generate profit is improving. This showed that the management is managing it selling and admin expenses efficiently and effectively with increasing sales profit to add more to net profits. profit generation capability is showing positive trend over the years

SR. NO
3

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

OPERATING PROFIT 29.59 30.79 23.24 27.08 31.67 MARGIN ANALYSIS: operating profit was increased in 2005 from 2004. It was decreased in 2006 as compared to previous year. However in 2008 a considerable increased has occurred. Operating profit has increased considerably. So the overall situation is quite satisfactory.

O P ERATINGP RO F IT MARGIN
35 30 25 20 15 10 5 0 2004 2005 2006 2007 2008 OP ERATING P ROFIT MARGIN

ASSET MANAGEMENT RATIOS SR. NO RATIO TYPE YEAR

2004 2005 2006 2007 2008

TOTAL ASSETS TIMES 0.8 0.9 1.09 0.97 0.96 TURNOVER ANALYSIS: The utilization of assets to generate more revenue is fluctuating over the time period. There utilization of asset was efficient from 2004 to 2006. But in year 2007 and 2008 there is negative indication. Its apparent from the above analysis that management should take some corrective action to improve the current situation.

T OT AL AS S E T ST UR NOVE R
1.2 1 0.8 0.6 0.4 0.2 0
20 04 20 05 20 06 20 07 20 08

OP ERATING AS S ETS TURNOVER

1.2 1 0.8 T O T AL AS S E T S T UR N O VE R 0.6 0.4 0.2 0
20 04 20 05 20 06 20 07 20 08

O PE R AT IN GAS S E T S T UR NO VE R

SR. NO
2

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

OPERATING ASSETS TIMES 0.91 0.95 1.10 1.06 1.05 TURNOVER ANALYSIS: Operating assets turnover has increased consistently up to 2006. In 2007 and 2008 it has decreased. It is apparent that operating assets utilization to revenue generation has been decreased. Some corrective actions should be taken.

SR. NO

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

RETURN ON 23.08 25.36 25.47 26.73 31.49 ASSETS ANALYSIS: The return on assets is increasing continuously from 2004 to 2008. It showed that assets are being used by the management effectively and efficiently to ad more to net profit of the organization. So there is effective utilization of the assets to generate more profit for the organization.

R E T UR N ON AS S E T S
35 30 25 20 15 10 5 0 2004 2005 2006 2007 2008 R E T UR NO N AS S E T S 3.5 3 2.5 2 1.5 1 0.5 0

RETURN ON FIXED AS S ETS

R E T UR N O NF IX E D AS S E T S

SR. NO
4

RATIO

TYPE

2004

2005

20 04 20 05 20 06 20 07 20 08

YEAR
2006 2007 2008

RETURN ON FIXED 2.29 2.77 3.12 2.74 2.40 ASSETS ANALYSIS: Fixed assets utilization was efficient up to year 2006. The return on fixed assets has decreased in year 2007 and 2008. The above trend shows that fixed assets are no utilizing optimal level. So, some measures should be taken for effective utilization of fixed assets.

SR.

RATIO

TYPE

YEAR

NO
5

2004

2005

2006

2007

2008

35 30 25 20 15 10 5 0

RETURN ON OPERATING 23.20 25.50 26.91 28.76 33.33 ASSETS ANALYSIS: return on operating assets has increased consistently over the 5 years. The above time series analysis shows, operating assets are utilized efficiently and effectively in the generation of the R E T UR N ON OPE R AT INGAS S E T S R E T UR N ON INVE S T ME NT operating profit. The overall trend is quite satisfactory. 40

35 30 25 R E T UR NO N O PE R AT ING AS S E T S 20 15 10 5 0 2004 2005 2006 2007 2008

20 04 20 05 20 06 20 07 20 08

R E T UR NO N IN VE S T ME N T

SR. NO
6

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

RETURN ON 26.41 36.49 32.76 34.81 36.94 INVESTMENT ANALYSIS: The overall trend is positive over the time period. The return on investment has increased considerably from 2006 to 2008. It is 36.94 in 2008, which indicates that funds are being utilized effectively to generate revenue.

INVESTOR ANALYSIS: SR. NO

1

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

DEGREE OF FINANCIAL TIMES 1.06 1.04 1.07 1.09 1.06 LEVERAGE ANALYSIS: The degree of financial leverage is fluctuating over the time period. It was improved in year 2006 and 2007 but, in 2008 once again it indicate a negative trend. The loan is not being utilized efficiently to made more earnings available to shareholders. So the above trend needs corrective action.
D E G R E EOFF INANCIAL LE VE R AG E E AR NING PE RS H AR E
14 12 10 DE GR E EO F F IN ANCIAL LE VE R AGE 8 6 4 2 0
20 04 20 05 20 06 20 07 20 08

1.1 1.09 1.08 1.07 1.06 1.05 1.04 1.03 1.02 1.01
20 04 20 05 20 06 20 07 20 08

E AR N IN G PE RS H AR E

SR. NO

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

EARNING Rs 8.11 9.92 9.39 10.86 13.12 PER SHARE ANALYSIS: Earning per share has been increased continuously. It is apparent, that earning capacity of the organization is improving continuously with the passage of time. Earning made on each share of the stockholders equity is increasing. This shoed that the shareholders fund is being used efficiently and effectively to maximize the shareholders wealth.
PAYOUTR AT IO
P/ER AT IO
20 18 16 14 PAYO UT R AT IO 12 10 8 6 4 2 0 2004 2005 2006 2007 2008 P/ER AT IO

140 120 100 80 60 40 20 0

20 04 20 05 20 06 20 07 20 08

SR. NO
3

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

PAYOUT 123.4 133.12 106.45 101.25 122.89 RATIO 8 ANALYSIS: Dividend payout ratio is fluctuating over the years. Although it was decreased in year in 2006 and 2007 as compared to year 2005. But in 2008 this ratio has increased, which indicates some improvement has been made.

SR. NO

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

P/E RATIO

17.19

13.80

11.23

10.93

4.44

ANALYSIS: Price/earning ratio has been decreasing continuously over the five years. It has decreased considerably in 2008. It reflects a very bad indication on the price of the share. It is quite alarming for the marker price of the stock. Corrective action should be taken immediately.

SR. NO
5

RATIO

TYPE

YEAR
2004 2005 2006 2007 2008

DIVIDEND 15.36 11.39 8.07 9.43 13.57 YIELD ANALYSIS: Dividend yield which shows dividend per share in relation to market price per share. It was decreasing from 2005 to 2007. Dividend yield showed improvement in 2008 as compared to previous 3 years. So the above analysis shows that some improvement has been made.

DIV IDENDY IEL D

20 15 10 5 0 2004 2005 2006 2007 2008 D IVIDE ND YIE LD

VERTICAL COMMON SIZE ANALYSIS (INCOME STATEMENT)

SALES COST OF SALES GROSS PROFIT DISTRIBUTION COST OPERATING PROFIT FINANCE COST OTHER EXPENSES OTHER INCOME NET PROFIT BEFORE TAX PROVISION FOR TAXATION NET PROFIT AFTER TAX 2004 100 62.57 37.42 8.40 29.02 1.77 2.66 4.44 29.02 9.98 19.04 2005 100 64.29 35.71 9.30 26.40 1.28 2.46 5.65 28.31 9.09 19.21 2006 100 67.58 32.42 9.17 23.42 1.67 2.46 4.21 23.32 7.84 15.48 2007 100 64.41 35.59 8.51 27.08 2.47 2.97 5.86 27.49 8.63 18.86 2008 100 59.60 40.40 8.72 31.67 2.27 2.93 6.35 32.82 11.49 21.33

INDEX ANALYSIS /HORIZONAL ANALSIS (INCOME STATEMENT)

SALES COST OF SALES GROSS PROFIT DISTRIBUTION COST OPERATING PROFIT FINANCE COST OTHER EXPENSES OTHER INCOME (DIVIDEND/OTHERS) NET PROFIT BEFORE TAX PROVISION FOR TAX 2004 100 100 100 100 100 100 100 100 100 100 100 2005 121.18 124.51 115.62 134.22 110.23 87.44 111.83 111.70 154.21 118.21 110.38 2006 142.44 153.84 123.38 155.49 114.08 134.33 131.31 110.75 134.94 114.45 111.91 2007 135.20 139.17 128.56 136.92 126.16 188.77 150.76 118.97 178.31 128.05 116.91 2008 145.49 138.59 157.04 151.08 158.78 186.35 159.86 156.67 208.08 164.52 167.51

NET PROFIT AFTER TAX EPS

100 100

122.31 122.31

115.78 115.78

133.89 133.91

162.96 163.00