CHAPTER-I

1. INTRODUCTION
MEANING OF FINANCIAL ANALYSIS
The meaning of Financial Analysis is also known as analysis refers to the process
of determining According to Meta fund tutored, is a process of evaluating the
relationship between components parts of financial statements to obtain a better understanding
of a firm's position and performance. In the word of Myers" Financial statements analysis is
largely a study of relationship among the various financial factors in a series of statements". The
purpose of financial statements to judge the profitability and financial soundness of the firm.
We know business is mainly concerned with the financial activities. In order to ascertain
the financial status of the business every enterprise prepares certain statements, known
as financial statements. Financial statements are mainly prepared for decision making purpose.
But the information as is provided in the financial statements is not adequately helpful in
drawing a meaningful conclusion. Thus, an effective analysis and interpretation of financial
statements is required.
Analysis means establishing a meaningful relationship between various items of the two
financial statements with each other in such a way that a conclusion. By financial statements we
mean two statements: (i) Profit and loss Account or Income Statement (ii) Balance Sheet
or Position Statement
These are prepared at the end of a given period of time. They are the indicators of
profitability and financial soundness of the business concern. The term financial analysis is also
known as analysis and interpretation of financial statements. It refers to the establishing
meaningful relationship between various items of the two financial statements i.e. Income
statement and position statement. It determines financial strength and weaknesses of the firm.
Analysis of financial statements is an attempt to assess the efficiency and performance of an
enterprise. Thus, the analysis and interpretation of financial statements is very essential

to measure the efficiency, profitability, financial soundness and future prospects of the business
units. Types of financial statement are: 1) C o m p a r a t i v e s t a t e m e n t 2 ) C o m m o n s i z e
statement 3 ) T r e n d a n a l y s i s
DEVICES OF FINANCIAL ANALYSIS
There are several methods for determining the financial analysis of the company. They are
as follows:

Ratio Analysis
Comparative Statement Analysis
Common Size Statement Analysis
Trend Analysis

FEATURES OF FINANCIAL ANALYSIS

To present a complex data contained in the financial statement is simple and

understandable form.
To classify the items contained in financial statement is inconvenient and rational

groups.
To make comparison between various groups to draw various solutions.

Financial Analysis serves the following purposes:

1. Measuring the profitability
The main objective of a business is to earn a satisfactory return on the funds invested in
it. Financial analysis helps in ascertaining whether adequate profits are being earned on the
capital invested in the business or not. It also helps in knowing the capacity to pay the interest
and dividend.
2. Indicating the Trend of achievements
Financial statements of the previous years can be compared and the trend regarding
various expenses, purchases, sales, gross profits and net profit etc. can be ascertained. Value of
assets and liabilities can be compared and the future prospects of the business can be envisaged.
Assessing the growth potential of the business. The trend and other analysis of the business
provide sufficient information indicating the growth potential of the business.
3. Comparative position in relation to other firms

The purpose of financial statements analysis is to help the management to make

a comparative study of the profitability of various firms engaged in similar businesses. Such
comparison also helps the management to study the position of their firm in respect of sales,
expenses, profitability and utilizing capital, etc.
4. Assess overall financial strength
The purpose of financial analysis is to assess the financial strength of the business.
Analysis also helps in taking decisions, whether funds required for the purchase of new
machines and equipments are provided from internal sources of the business
5. Assess solvency of the firm
The different tools of an analysis tell us whether the firm has sufficient funds to meet
its short term and long term liabilities or not.
Parties Interested
Analysis of financial statements has become very significant due to widespread interest
of various parties in the financial results of a business unit. The various parties interested in
the analysis of financial statements are:
Investors
Shareholders or proprietors of the business are interested in the wellbeing of the
business. They like to know the earning capacity of the business and its prospects of
future growth.
Management
The management is interested in the financial position and performance of the enterprise
as a whole and of its various divisions. It helps them in preparing budgets and assessing the
performance of various departmental heads.
Trade Unions
They are interested in financial statements for negotiating the wages or salaries or bonus
agreement with the management.
Lendors

Lenders to the business like debenture holders, suppliers of loans and lease are
interested to know short term as well as long term solvency position of the entity.
Suppliers and Trade Creditor
The suppliers and other creditors are interested to know about the solvency of the
business i.e. the ability of the company to meet the debts as and when they fall due.
Tax Authorities
Tax authorities are interested in financial statements for determining the tax liability.
Researchers
They are interested in financial statements in undertaking research work in business
affairs and practices
Employees
They are interested to know the growth of profit. As a result of which they can demand
better remuneration and congenial working environment.
Stock Exchange
The stock exchange members take interest in financial statements for the purpose of
analysis because they provide useful financial information about companies. Thus, we find
that different parties have interest in financial statements for different reasons.
Government and Other Agencies
Government and their agencies need financial information to regulate the activities of
the enterprises/ industries and determine taxation policy. They suggest measures to formulate
policies and regulations.

CHAPTER-II

1.2 COMPANY PROFILE

VEESONS PRIVATE LIMITED
.
OBJECTIVE OF VEESONS
The Company has the main objective in production design, based products and primarily caters
to the need for government department. Limestone being the main raw material, the company acquired
and reserved enough limestone bearing around. Thuvakudi and Trichy, which are sufficient to run the
design plants for decades to come. The role of design in the development of state in immense. Besides
the corporation have the objective to provide employment opportunity to newly 10000 members directly
and 3000 members indirectly VEESONS is an inducement to provide industrial development in the
most backward area like Trichy and THUVAKUTI. VEESONS as its expansion and conversion
activities setup asbestos sheet unit at Alangulam during 1981 and an asbestos pressure pipe plant at
Mayanur during 1983. VEESONS also took during 1989, a stoneware pipe plant from VEESONS with
a view to provide employment to the retrenched employees VEESONS has, thus become a multi plants,
multi location and multi products company with annual turnover of around Rs.200 croses and the
authorized capital as now Rs.18 crores.
MISSION
To design and produce allied products in the public sector so as to have a moderating influence
on the market for making available allied products.
VISION

To attain leadership in manufacturing design technology.

To encourage the use of environment and directly practices in production.
To make available production design and other products a affordable prices to the common
consumers and Govt. Departments.

GOALS

Safety
Team work
Productivity
Cost effectiveness
Zero defects
Surpass past achievement

PRODUCT PROFILE
The following are the products to VEESONS at Trichy.

Autocad
Revit architecture
Archicad
Inventor
Pro e
Catia
Solid works
Solid edge
Ansys
3ds max
Staad pro
Ecad
Orcad pspice
Master cam
Uni graphics &piping

ORGNIZATIONAL CHART

VARIOUS DEPARTMENTS IN VEESONS

VARIOUS DEPARTMENTS IN VEESONS

DEPARTMENTATION:

The limitation on the number of subordinates that can be directly managed would restrict the
enterprise it were not for the device called departmentation. Grouping activities and people performing
them into departments makes it possible to expand organization to an indefinite degree, departments,
however clinker with respect to basic pattern used to group activities, i.e., criteria on which the
grouping are differentiated.
At the outset, let us understand that there is no single best way of department signs applicable to
the organization or to all situations and what managers believe will yield the best result for them in the
situation they fact. The firm has the following functional departments and sections.
PERSONAL AND ADMINISTRATION DEPARTMENT

Personal section
Administration section
Welfare section
Canteen section Security section
Medicine section
Time office section
Land acquisition section (income department)

FINANCE SECTION

Accounting section
Sales accounts section
Computer section.

STORES MANAGEMENT DEPARTMENT

Stores section
Go down section
Raw material section
Weight age section

QUALITY ASSURANCE SECTION

Quality assurance section

Inspection section

MINES DEPARPTMENT

Mines section
Geology section
Blashing section

SALES DEPARTMENT

Sales section
Sales tally checker section
Railway office section

ENGINEERING DEPARTMENT

Machine section
Mill section
Crusher section
Compressor section
Packing section
Electrical section
Instrumentation
Workshop
Water supply civil
Auto garage
Central control section

FINANCE DEPARTMENT:
Can be more department available but I will choose in finance department.

FINANCIAL ACTIVITIES OF THE COMPANY:

Day to day cash & bank transaction, vouchers are prepared and after verification by the officers
and it are forwarded to the officers above and the same transaction is forwarded to EDP for feeding the
information into the computer.
In periodic duration the manual makes necessary joined entries and again the same is forwarded
to the computer section for feeding into the computer in different accounts. On the yearly basis profit &
loss account and balance sheet are prepared.
The main work of the accounts department is book keeping Bookkeeping is nothing but
recording of day-to-day transactions. The purpose of this procedure is to maintain the records,

10

document, approve, disburse and check the authenticity of the cash payments on a real time basis. The
entire activities of the company are divided into seven production cost centers and ten service cost
centers as detailed below.
PRODUCTION COST ENTRIES

Limestone Quarrying
Limestone Transporting
Limestone Crushing
Raw materials Mixing & Grading
Clinkerisation
Clinker Grinding
Cement Packing

SERVICE COST CENTRES

Power Generation
Workshop
Water Supply Services
Purchase and Stores
Laboratory
Welfare &Electrical

BANKERS:

Syndicate Bank
State Bank of India
Indian Bank
Indian Overseas Bank

2.1 INTRODUCTION OF THE STUDY

Financial Analysis is the process of identifying the financial strengths and weaknesses of
the firm by property-establishing relationship between the items of the Balance Sheet and the
Profit and Loss account. There are various methods or techniques are used in analyzing financial
schedule of change in working capital flow, cost volume Profit Analysis and Ratio Analysis.
Finance is one of the most primary requisites of a business and the modern management
obviously depends largely on the efficient management of the finance. Financial statements are
prepared primarily for decision making. They play a dominant role in setting the frame work of
11

managerial decisions. The finance manager has to adhere to the five Rs with regard to money.
This right quantity of money for liquidity consideration of right quality. Whether owned or
borrowed funds. At the right time to preserve solvency from the right sources and at the right
cost of capital.
The term financial analysis is also known as analysis and interpretation of financial
statements refers to the process of determining financial strength and weakness of the firm by
establishing strategic relationship between the items of the Balance Sheet, Profit and Loss
account and other operative data.
The purpose of financial analysis is to diagnose the information contained in financial
statements so as to judge the profitability and financial soundness of the firm.
A financial statement is an organized collection of data according to logical and
consistent accounting procedures. Its purpose is to convey an understanding of some financial
aspects of a business firm. It may show a position at a moment of time as in the case of a
balance sheet, or may reveal a series of activities over a given period of time, as in the case of
an income statement.
Thus, the term financial statements generally refers to two basis statements: (1) the
income statement, and (2) the balance sheet. Of course, a business may also prepare (3) a
statement of retained earnings, and (4) a statement of changes in financial position in addition to
the above two statements. The income statement is generally considered to be the most useful
of all financial statements.
2.2 OBJECTIVES OF THE STUDY

This s tu d y i s mai n l y fo cu s e d to ex a mi n e t he ov er al l fi na nc ia l vi ab il it y

o f VEESONS Industries Ltd as stated below:

To study the financial position of VEESONS Ltd.
To study the periodic changes in the financial performance of VEESONS Ltd by

preparing Comparative, Common Size and Trend Analysis.

To find out the financial strengths and weaknesses of the company.
To study the overall operating efficiency and performance of the company.
The study is conducted to evaluate the returns to the company.

12

To ascertain the efficiency with which the firm is utilizing its assets in generating sales

revenue.
To study & analyze the short term solvency & liquidity position of the company.
To know the impact of various assets & liabilities on financial performance of company.

2.3 SCOPE OF THE STUDY

The study has great significance and provides benefits to various parties who directly or
indirectly interact with the company.

The analysis aims at evaluating financial stability and assessing assets and liability
management by using various tools and techniques like ratio analysis and by comparing

financial statements.
It is beneficial to the top management of the company by providing crystal clear picture

regarding to the important financial aspects of the VEESONS Ltd.

The study is beneficial to Employees and offer motivation by shoeing how actively they
are contributing for the companys growth.

2.4 PROBLEM OF THE STUDY

The information used is primarily from historical reports available to the public and the
same doesnt indicate the current situation of the firm Detailed analysis could not be carried for
the project work because of limited time span. Since financial matters are sensitive in nature, the
same could not be acquired easily.
2.5 LIMITATION OF THE STUDY

The information used is primarily from historical reports available to the public and the

same doesnt indicate the current situation of the firm.

Detailed analysis could not be carried for the project work because of limited time span.
Since financial matters are sensitive in nature, the same could not be acquired easily.

13

CHAPTER-III
REVIEW OF LITERATURE
1. Topic name

Financial analysis of companies in Criteria (profitability and

efficiency focus)
Dr. V. Ganfadhar (the management accountant.
November 1998.

Author
:
Year
:
Abstract
:
In this study the researcher, by using audited financial statements of two companies in
Criteria, covering a period of 5 years 1992 96, by using various ratios relating to
profitability, liquidity, solvency and asset management, has attempted the following:
1. To analysis the profitability of companies with a view to identify the differences if any
between them, and to explain the factors responsible for such position through sales and
asset efficiency.
2. To examine the liquidity position of companies to point out the relative differences if
any between them and to bring them and to bring out the factors for such positions.
3. To study the long term solvency position, in order to highlight the relative strength of
each company for maintaining the same.
4. To identify which of the two companies has been using effectively its assets and to
analyse their impact on the overall effectively of the two companies.
Finally, to summarize the main findings of the study by offering suitable suggestions, if any
for better performance of their companies. The researcher has done similar kind of analysis by
14

applying various ratios on the companies selected by him.

2. Topic name

Liquidity Management of Tamil Nadu Cement Corporation

Ltd., Alangulam
N. Rajeswari.
may, 2000

Author name
:
Year
:
Abstract
:
The paper attempts to evaluate the efficiency of liquidity management Tamil Nadu Cement
Corporation. To analyze the liquidity position the researcher has collected information from
the annual report for a period of five years.
The analysis has been made in two ways
a) Analyzing liquidity position.
b) Analyzing ratios.
The conclusion derived was that the liquidity management of the company was poor and not
satisfactory. The researcher has analyzed the financial performance of the selected companies by
comparing the liquidity ratios and other ratios.
3. Topic name
:
Profitability of fertilizer Industry in Bangladesh
Author name
:
Dr. Mohammed Rafiqul Islam, the management accountant
Year
:
may 2000
Abstract
:
This study examined the profitability of fertilizer industry in Bangladesh from 1985-86 to 199495. The sample included five fertilizer enterprises out of the seven fertilizer enterprises in
Bangladesh under the control of Bangladesh chemical industries corporation (BCIC). Findings
of the study indicate thet none of the selected units returns were concitent and all the units were
plagued with declining profits. The study concluded with some suggestions for improvement of
the profitability of fertilizer industry in Bangladesh.
The researcher has done a similar analysis of the pharmaceutical industry in India.
4. Topic name
Author name
Year
Abstract
In this author has done a

Inter company profitability analysis of Indian General

Insurance Industry.
Debasish Sur.
July 1999

:
:
:
comparative profitability analysis of India insurance companies using

four major profitability indicators, namely return on operating assets, return on capital employed
net and gross and return on net worth. On the basis of the profitability indicators calculated,

15

the author has done a ranking of the insurance companies chosen, in order to determine which
company occupies the first position and which the last position. The researcher has done a
ranking of the companies selected on the basis of return on net worth.
5. Topic name
Author name
Year
Abstract

:
:
:
In this

financial performance of Indian Tea Industry

Sanjib Roy
may 1998
the author has done an overview of performance scenario of

tea industry, the main strength of which according to the author, is its indigenous raw material.
The researcher has done a similar analysis in order to determine the various critical factors for
the success of the pharmaceutical sector India.
6. Topic name
firms.
Author name
Year
Abstract

financial and operating performance of chinas newly listed H-

:
Samuel G. H. Huang and Frank M. Song
:
2002
This study compares, with the use of accounting data, the pre- and

post listing financial and operating performance for the complete sample of the H-firms that
were incorporated in mainland China and listed in Hong Kong. Theoretically, there are two
major opposing influences on the performance change of these newly listed firms: the negative
IPO effect and the positive privatization effect.
Our major findings are: (1) the IPO effect dominates the privatization effect, so that the Hfirms experienced a significant decrease in profitability and operating efficiency after listing,
and (2) the performance of a control sample of newly listed private firms declined more than
that of the H-firms, probably because the positive privatization effect somewhat offset the
negative IPO effect for the H-firms. This paper is the first to document the positive effect of
revenue privatization in listed Chinese companies.
7.

Topic name

Literature Linking Corporate Performance to Mergers and

Acquisitions

Author name

Tariq H. Ismail

Year

2006

Abstract

:
16

There are inconclusive results on the literature on the consequences of mergers and
acquisitions (M&A) on corporate performance as well as factors that might affect such identify
synergies. This paper aims at synthesizing and analyzing prior literature of mergers and
acquisitions and its effects on the financial performance in an attempt to determine factors that
might influence post-mergers and acquisitions performance. Previous studies are using varieties
of measures to examine the impact of M&A on corporate performance, where measures might
be accounting measures-based, market measures-based, mixed measures, or qualitative
measures-based. This study concluded that there is a dispute regarding the factors that affect the
reported performance, where eight factors might affect performance as follows: (1) method of
payment (Cash or Stock), (2) book to market ratio,(3) type of merger or acquisition transaction
(related or unrelated), (4) cross-border versus domestic M&A, (5) mergers versus tender offers,
(6) firm size, (7) macro economic conditions, and (8) time period of transaction. Managers
should be aware of such factors and their impact on post-merger/acquisition corporate
performance to accurately evaluate proposed offers of mergers and acquisitions and take sound
decisions.
8. Topic name
Author name
Year

:
:
:

Abstract

Operating Performance and Earnings Management

Nurwati A. Ahmad-Zaluki
april 2008

The present study investigates the operating performance and the existence of earnings
management for a sample of 254Malaysian IPO companies over the period 1990-2000. Using
accrual-based measure of operating performance,
This study finds strong evidence of declining performance in the IPO year and up to three
years following IPOs relative to the pre-IPO period. This finding is consistent with the results of
prior studies documenting the long run underperformance of IPO companies. The results also
confirm that the decline in post-IPO operating performance is due to the existence of earnings
manipulation by the IPO manager at the time of going public.
ting that banks were improving their operating performance over time. Since 1997, the run-up
in operating costs coincided with the Asian financial crisis, suggesting that banks were
incurring additional costs in dealing with their problem loans while output was declining

17

simultaneously.Moreover, the labor cost share is found to decline significantly between 1997
and 1999, indicating that banks were able to cut their labor force after the financial crisis but
were less flexible to reduce physical capital input.
9.

Topic name

The Financial and operating performance of

Newly privatized firms: Evidence from developing countries.

Year

Abstract

2000

This paper examines the change in financial and operating performance of 79

companies from 21developing countries that experience full or partial privatization over the
period 1980 to 1992. To take account of the possibility that some of the differences between pre
privatization and post privatization performance could be due to economy wide factors we use
performance measures adjusted for market effects in addition to unadjusted performance
measures. For both unadjusted and market-adjusted performance measures, we document
significant increases in profitability, operating efficiency, capital investment spending, output
(adjusted for inflation), total employment and dividends.
We also find a decline in leverage following privatization but this change is
significant only for unadjusted leverage ratios. Additionally, our results are generally robust
when we partition our data into various subsamples. However, the evidence suggests that
privatization yields greater benefits for companies operating in developing countries with high
income per capita and for companies whose governments surrender Voting control.
9. Topic name
Author name
Year

Performance

Management

:
:

Relevance Still Lost

Etienne J.H. Lardenoije
2008

Models

and

Purchasing:

Abstract
:
Measurement of purchasing performance has been a hot topic for centuries and it still is. Like
several other functions, such as marketing, purchasing needs to increase its accountability in
order to strengthen its position at the board of directors. Purchasing professionals are searching
for tools to measure purchasing performance and link it to business strategy. In this paper, we
18

review five existing performance measurement systems and assess their suitability for
performance measurement in purchasing. Each system has its own specific strength, but they all
need a specific translation to the purchasing domain in order to be useful.

CHAPTER - IV
RESEARCH METHODOLOGY
This project financial Performance Analysis is based on the information collected from
the annual reports and balance sheets of the company.According to Kennedy and Muller The

19

analysis and interpretation of financial statements reveal each and every aspect regarding the
well financial soundness, operational efficiency and credit worthiness of the company.
4.1 METHOD OF DATA COLLECTION
The collection of the data of this report is segregated into:
a. Primary data
Interviewing primary and secondary data have been the sources of data. The
study derives its date mainly from primary sources of information through direct
interaction with Account officer. This includes the organization chart, various
department etc.
b. Secondary data
Sources like company annual report of V E E S O N S

Industries Ltd for years

2008-2009, 2009-2010, 2010-2011 ,2011-2012 and 2012-2013 from of the balance sheet and
profit and loss account of the company.
Financial Performance analysis
Financial performance analysis is defined as the process of identifying financial
strengths and weaknesses of the firm by properly establishing relationship between the items of
the balance sheet and profit and loss account.
There are various methods or techniques that are used in analyzing financial statements, such as
comparative statements, common size percentages, comparative statement, trend analysis and
ratio analysis.

Financial Statements
Financial statements are prepared to meet external reporting obligations and for decision
making purposes. They play a dominant role in setting the framework of managerial decisions.
But the information provided in the financial statements is not an end in itself as no meaningful
conclusions can be drawn from these statements alone. However, the information provided in

20

the financial statements is of immense use in making decisions through analysis and
interpretation of financial statements.
TOOLS AND TECHNIQUES OF FINANCIAL PERFORMANCE ANALYSIS:
The following are some tools to analyses the financial Performance of the company:

Ratio Analysis
Comparative Statement Analysis
Common Size Statement Analysis
Trend Analysis

4.2 RATIO ANALYSIS

The relationship between two figures expressed mathematically is called a Ratio. It is a
numerical relationship between two numbers which are related in some manner. In financial
analysis, a ratio is used as a benchmark for evaluating the financial position and performance of
a firm. Ratio analysis is a technique of analysis and interpretation of financial statements. It is
the process of determination and interpretation of various ratios for helping in decision making.
Ratio analysis involves three steps.
1. Calculation of appropriate ratios from the financial statements.
2. Comparison of the ratios with standards or with ratios of the past period. Comparison
can also be made with the ratios of other firms.
3. Interpretation of ratios.
A) Significance and uses
Ratio analysis is a powerful tool of financial analysis. It is used as a device to analyse
and interpret the financial health of a firm. Analysis of financial statements with the aid of ratios
helps the management in decision making and control.
The use of ratio analysis is not confirmed to financial managers only. Different parties
are interested in knowing the financial position of a firm for different purposes. Ratio analysis is
used by creditors, banks, financial institutions, investors and shareholders. It helps them in
making decisions regarding the granting of credit and making investments in the firm. Thus,
ratio analysis is of immense use and has wide application.
B) Classification of Ratios

21

Accounting ratios can be classified in a number of ways important among them are
stated below:
a) Classification according to statement:
1. Profit and loss account ratios: Ratios calculated on the basis of the items of the profit and
loss account only. E.g. gross profit ratio, net profit ratio etc.,
2. Balance sheet ratios: Ratios calculated on the basis of the figures of the balance sheet only
e.g. current ratio, quick ratio proprietary ratio etc.
3. Composite ratios: Ratios based on figures of profit loss account as well as the balance
sheet e.g. debtors and creditors turnover ratio, return on capital employed, etc.
b) Classification according to function:
1. Solvency ratios: short- term and long-term solvency ratios. E,g, current ratio, debt- equity
ratio.
2. Profitability ratios: e.g gross profit ratio, net profit ratio, operating profit ratio, return on
capital employed.
3. Turnover or activity ratios: e.g. stock turnover ratio, debtors turnover ratio, creditors
turnover ratio.
4. Capital structure ratio: e.g. capital gearing ratio.
Liquidity (short-term solvency) ratios
Liquidity ratios measure the ability of the firm to meet its current obligations. They
indicate whether the firm has sufficient liquid resources to meet its short- term liabilities. The
following are important liquidity ratios:
1. Current Ratio: Current ratio is the relationship between current assets and current

liabilities.

A Current ratio of 2:1 is considered ideal. That is, for every one rupee of current
liability there must be current assets of Rs.2. if the ratio is less than two, it may be difficult for a
firm to pay current liabilities. If the ratio is more than two, it is an indicator of idle funds.
2. Quick ratio or Liquid Ratio:

22

Quick ratio is also called Acid- test ratio because it is the acid test of a concerns
financial soundness. It is the relationship between quick assets and quick liabilities. Quick assets
are those assets which are readily converted into cash. They include cash and bank balances,
bills receivable, debtors, short- term investments. Current liabilities include creditors, bills
payable, outstanding expenses.

Quick assets = current assets (stock + prepaid expenses)

A quick ratio of 1:1 is considered satisfactory. The quick ratio supplements current ratio.
2) Solvency Ratios (Long term)
Solvency ratios assess the long term financial condition of the firm. Bankers and
creditors are most interested in liquidity. But shareholders, debenture holders, and financial
institutions are concerned with the long term financial prospects
The following are the widely used solvency ratios:
1. Debt-equity ratio:
The debt-equity ratio establishes the relationship between shareholders funds and
outsiders funds. Outsiders funds include all long-term and short-term debts. Shareholders
funds consist of preference share capital, equity share capital and reserves and surplus.

A debt-equity ratio 1:1 is considered desirable (satisfactory). It gives an idea of the

relative properties of debt and equity in financing the assets of the firm.
Debt equity ratio can also be calculated by the following formula.

23

The above ratio is useful to analyses the capital structure of a company. It indicates the
proportion of shareholders funds and long term debt in the capital structure. The standard debt
equity ratio is 2:1.
2. Proprietary Ratio:
Proprietary ratio is the relationship between proprietors funds and total tangible assets.

Proprietary ratio indicates the proportion of shareholders funds in the total assets. A high
proprietary ratio indicates less danger and risk to creditors in the event of winding up.
3) Profitability Ratios:
Profitability ratios measure the profitability of a firms business operations. These ratios
may be related to sales (e.g. Gross Profit ratio) or investments (e.g., Return on assets or Return
Capital employed).

1. Gross Profit Ratio:

This ratio expresses the relationship between gross profit and net sales.

It indicates the efficiency of production or trading operations. A high gross profit ratio is a
sign of good management as it implies that the cost of production is relatively low.
2. Net Profit Ratio:
This ratio measures the relationship between net profit and net sales.

24

It indicates the efficiency of the overall operations of the firm. It shows what percentage of
sales is left to the owners after meeting all costs. An increase in net profit ratio year after year is
an indication of improving working conditions and vice versa.
3. Operating Ratio:
Operating ratio matches cost of goods sold and other operating expenses with sales.

The ratio shows the percentage of sales absorbed by the cost of goods sold and operating
expenses. A lower is more favorable as it would leave a higher margin for operating profit.
Operating expenses include selling and distribution expenses and administration expenses
4. Return on Capital Employed:
Return on capital employed establishes the relationship between profits and the
capital employed. It is most widely to measure the overall profitability and efficiency of the
business.
Return on capital employed

Or
Capital employed:
Capital employed = Fixed assets + Current Assets Current Liabilities
Or
Shareholders funds + Long term liabilities.
4) Activity or Turnover Ratios:

25

Activity ratios measures the efficiency of asset management. The efficiency in (asset
utilization) the use of assets would be reflected by the speed with which they are converted into
sales. Activity ratios indicate the relationship between sales and various assets of the firm.
1. Stock (or Inventory) Turnover Ratio:
This ratio indicates the number of times stock is turned over (or re placed) during a
year. A high ratio indicates quick movement of stock and vice versa.

2. Debtors turnover ratio:

This ratio shows, on an average, the number of times debtors are turned over during
a year. A higher ratio indicates efficiency in asset management and vice versa.

3. Average Collection Period:

This ratio indicates the speed with which debtors/accounts receivable are collected. It
shows the number of days taken to collect money from debtors.
Average collection period

A lower ratio implies quick recoveries of money from debtors when information
regarding credit sales is not available total sales are taken for calculation of the ratio.
4. Creditors turnover ratio:

26

This ratio shows, on an average, the number of times creditors are turned over during a
year. A higher ratio indicates quick settlement of dues and a lower ratio reflects liberal credit
terms granted by suppliers.

Average payment period :

It refers to the number of days taken by the firm to pay its creditors.

Generally, lower the ratio, the better is the liquidity position of the firm.
5. Fixed Assets Turnover Ratio:
Fixed assets turnover ratio explains the relationship between sales and fixed
assets.

This ratio indicates the sales generated by every rupee invested in fixed assets. A higher
ratio is an indicator of greater efficiency in the utilization of fixed assets.
5) Capital Structure Ratio:
1. Capital Gearing Ratio:
The ratio explains the relationship between equity shareholders funds on the one
hand and preference share capital and fixed interest bearing loan on the other.

If the preference shares capital and fixed interest bearing securities exceed equity
shareholders funds. The company is said to be highly geared. The company is said to be low
geared. The company is said to be low geared if preference share capital and other fixed
interest bearing securities are less then the equity shareholders funds.

27

4.3 COMPARATIVE STATEMENT:

Comparative statements are financial statements that cover a different time frame, but
are formatted in a manner that makes comparing line items from one period to those
of a different period an easy process. This quality means that the comparative statement is a
financial statement that lends itself well to the process of comparative analysis. Many
companies make use of standardized formats in accounting functions that make the generation
of a comparative statement quick and easy.
Importance and Uses
The benefits of a comparative statement are varied for a corporation. Because
of the uniform format of the statement, it is a simple process to compare the gross sales of a
given product or all products of the comp an y w ith the gross s ales generated
in a previous month, quarter, or year.
Comparing generated revenue from one period to a different period can add
another dimension to analyzing the effectiveness of the sales effort, as the process
makes it possible to identify trends such as a drop in revenue in spite of an increase in units
sold.
Along with being an excellent way to broaden the understanding of the success of the
sales effort, a comparative statement can also help address changes in production costs.
Features of Comparative Statements:

A comparative statement adds meaning to the financial data.

It is used to effectively measure the conduct of the business activities.
Comparative statement analysis is used for intra firm analysis and inters firm analysis.
A comparative statement analysis indicates change in amount as well as change
in percentage.

4.4 COMMON SIZE STATEMENT

28

Common size ratios are used to compare financial statements of different-size companies
or of the same company over different periods. By expressing the items in proportion to some
size-related measure, standardized financial statements can be created, revealing trends and
providing insight into how the different companies compare. The common size ratio for each
line on the financial statement is calculated as follows: Common Size Ratio =Item of Interest
Reference Item For example, if the item of interest is inventory and it is referenced to total
assets (as it normally would be), the common size ratio would be: Commo n

Size

Ratio

for

Inventory =Inventory Total Assets The ratios often are expressed as percentages of the reference
amount. Common size statements usually are prepared for the income statement and balance
sheet, expressing information as follows:

Income statement items - expressed as a percentage of total revenue

Balance sheet items - expressed as a percentage of total assets

Preparation of Common Size Statement

The preparation of Common Size Income Statement consists of the following steps:

Enter the items of Income Statement in first column.

Enter the absolute amounts of different items of expenses and income of previous

year's Income statement in second column.

Enter the absolute amount of different items of expenses and income of current year's

Income statement in third column.

Enter the percentage relation of different items of previous year's Income Statement

to Net Sales of previous year, which is taken as 100 in fourth columns.

Enter the percentage relation of different items of current year's Income Statement to
Net Sales of current year, which is taken as 100 in fifth columns.

COMMON SIZE BALANCE SHEET STATEMENT

A Common Size Balance Sheet is a statement in which total of assets or liabilities is
assumed to equal to 100 and all the figures are expressed as percentage of the total. In other

29

words, each asset is expressed as to total assets and each liability is expressed as percentage to
total liabilities. That is why, it is also known as percentage Balance Sheet.
Common Size Balance Sheet analysis facilitates the vertical analysis since each item of
the Balance Sheet is analyzed vertically.
Significance of Common Size Balance Sheet
A comparison of Common Size Balance Sheets for different periods helps to highlight
the trends in different items. If it is prepared in different firms in industry, it is useful to judge
the relative soundness and helps in understanding the financial strategy.

Preparation of Common Size Balance Sheet

In the case of Balance Sheet, the amount of total assets is taken as 100 and other items of
assets side are converted as percentage to total assets. Similarly, the amount of total liabilities is
taken as 100 and other items of liabilities side are converted as percentage to total liabilities.
Objectives of Common Size Balance Sheet

To show the changes in individual items of Balance Sheet.

To determine the trend in different items of Assets and Liabilities.
To judge the relative financial positions on the basis of common size Balance Sheet for

different enterprises belonging to the same industry.

To assesses the financial strategy adopted by different firms belonging to same industry.

4.5 TREND ANALYSIS STATEMENT:

Trend analysis calculates the percentage change for one account over a period of time of
two years or more.
An aspect of technical analysis that tries to predict the future movement of a stock based
on past data. Trend analysis is based on the idea that what has happened in the past gives
traders an idea of what will happen in the future.
1
Short, Intermediate and, Long-term.

30

TREND PERCENTAGE ANALYSIS

The next important tools of analysis are trend percentage which plays significant role in
analyzing the financial status of the enterprise through base year performance ratio
computation.
The following ratio is being used to compute the trend percentage.
Current year
Trend percentage = ----------------------------*100
Base year

Importance of Trend Analysis

(1)

Comparative study: The trend analysis is of immense help in comparative study of

different variables of the financial statements for several years. Such analysis is very significant
from the point of view of forecasting and budgeting.
(2)

Direction of changes: The trends clearly reflect the increase or decrease in the various

facts of business from the past to the present or from the year to year. The direction of change
can be even more clearly represented by graphs and diagrams, where the change can be noted at
a glance.
(3) Calculation of index numbers: This is a method which is most appropriate in calculating
various index numbers.
(4) Brevity and readability: The method of trend analysis is useful for the management and
also the common man since by substitution of percentage for large amounts the brevity and
readability are achieved.

31

CHAPTER- V
DATA ANALYSIS AND INTERPRETATION
1. Liquidity ratio (Short term Solvency)
i)
Current ratio:
Current assets=

Current assets
-------------------------Current liabilities
TABLE 5.1

Year

Current Assets
(in Rs)

Current Liabilities
(in Rs)

2009
2010
2011

63,54,33,983
51,77,12,239
66,81,57,031

26,20,75,978
38,87,40,731
42,08,04,653

2.42
1.33
1.59

2012
2013

63,11,71,469
74,20,36,000

28,25,58,238
39,43,26,000

2.23
1.88

Ratio

Sources: secondary data

Inference: On seeing analysis table it is evident that the current ratio is well maintained except
in the year 2009 and 2010. This happens due to increase current liabilities. But sudden step has
been taken and the company is in a position to meet its current liabilities efficiently in 2011 but
now it is little bit decreasing.
CHART NO 5.1

ii) Quick Ratio:

32

Quick assets
Quick ratio = --------------------------------Current liabilities
TABLE NO 5.2
Liquid Assets

Current Liabilities

Year

(in Rs)

(in Rs)

2009
2010

50,24,29,414
40,10,82,338

26,20,75,978
38,87,40,731

1.92
1.03

2011

54,17,84,092

42,08,04,653

1.29

2012
42,86,70,936
2013
51,39,00,000
Sources: Secondary data.

28,25,58,238
39,43,26,000

1.52
1.30

Ratio

Inference: Quick Ratio is above 1 for all the years which shows the company could pay
the current liabilities in the years and it helps to it to maintain in the following years
also.
CHART NO 5.2

2. Debt ratios (Long term Solvency):

33

i) Debt equity ratio:

Long term debt
Debt equity ratio= ---------------------------------Share holders funds 2
TABLE NO 5.3
Long term debt
Year
2009

Share Holders funds

(in Rs)
45,94,81,554

(in Rs)
1,17,03,16,598

Ratio
0.39

2010
38,19,52,554
1,24,93,44,881
0.31
2011
31,67,09,354
1,54,22,79,274
0.21
2012
24,55,35,554
1,70,01,29,785
0.14
2013
17,34,64,000
1,37,07,94,000
0.13
Sources: secondary data
Inference: The above computation shows that debt equity ratio is low in the Year 2009,
2010, 2011, 2012and 2013 and it gives quite satisfactory but it is too high in the 2012
&2013. The management has to maintain the ratio in a gradual manner.
CHART NO 5.3

ii)

Proprietary ratio:
Share holders funds
Proprietary ratio = -------------------------------Total tangible assets
TABLE NO 5.4
34

Owners Funds

Total Tangible Assets

Year
(in Rs)
2009
1,17,03,16,598
2010
1,24,93,44,881
2011
1,54,22,79,274
2012
1,70,01,29,785
2013
1,37,07,94,000
Sources: secondary data

(in Rs)
85,78,44,705
73,88,92,856
88,83,96,090
84,07,75,868
93,89,93,000

Ratio
1.4
1.7
1.7
2.0
1.5

Inference: The Company has maintained the proprietary ratio in an increasing order in
the years 2009, 2010, 2011, 2012, 2013 but it is low in the year 2013 comparing to
previous years. This should be stopped by the company and has maintained the level of
ratio. Keeping moderately optimum level is to maintain total assets and proprietary
funds.
CHART NO 5.4

iii)
iv)

Fixed Assets Ratio:

Fixed Assets
Fixed Assets Ratio= ----------------------------Long term Funds
TABLE NO 5.5

Year

Fixed Assets

Long Term Funds

(In Rs)

(In Rs)

35

Ratio

2009

22,24,24,909

1,17,03,16,598

0.19

2010

22,11,80,617

1,24,93,44,881

0.17

2011

22,02,39,058

1,54,22,79,274

0.14

2012

20,96,04,399

1,70,01,29,785

0.12

2013
19,69,57,000
Sources; Secondary data.

1,37,07,94,000

0.14

Inference: Fixed Asset Ratio is less than 1 so it shows that the portion of working capital has been
financed by long term funds. The ideal fixed asset ratio is 0.67 but here less than it so the
company no needs to worry about the purchase of fixed assets with short term funds.
CHART NO 5.5

iv) Capital Structure Ratio:

Preference share capital + fixed interest securities
Capital structure ratio=----------------------------------------------------------------X100
Equity share holders fund
TABLE NO 5.6
preference share capital+

Year

fixed

Equity Shareholders

interest securities

Funds

(in Rs)

(in Rs)
36

Ratio

2009
49,18,60,976
2010
41,44,22,751
2011
35,62,83,338
2012
31,86,26,687
2013
19,70,03,000
Sources: Secondary data.

1,17,03,16,598
1,24,93,44,881
1,54,22,79,274
1,70,01,29,785
1,37,07,94,000

0.42
0.12
0.23
0.19
0.14

Inference: From the above computation it clearly shows that the capital structure ratio
decreases and also increases gradually for every year. Because high and low gearing should be
avoided and fair capitalization will be achieved. Thus the management keeping the ratios good.
CHART NO 5.6

3. Turnover Ratios:
i) Inventory Turnover Ratio
Cost of goods Sold
Inventory Turnover Ratio = ----------------------------------Inventory
TABLE NO 5.7

Year
2009
2010
2011
2012

Cost of goods sold

Average Inventory

(in Rs)
1,03,14,54,000
84,58,53,000
1,19,32,05,000
1,21,90,86,000

(in Rs)
12,75,59,579
1,24,81,01,000
1,21,50,14,000
16,57,86,736
37

Ratio
8.09
1.48
1.02
1.36

2013
1,08,00,47,000
Sources: Secondary data.

21,66,68,500

4.98

Inference: From the above computation it clearly shows that inventory ratio initially high and
gradually decreasing for year by year and again hike in 2012.The ratio is helpful in evaluating
and review of inventory policy.
CHART NO 5.7

ii) Debtors Turnover Ratio:

Net Sales
Debtors Turnover Ratio = -----------------------Average Debtors
TABLE NO 5.8
Net Sales

Average Debtors

Year

(in Rs)

(in Rs)

Ratio

2009

1,43,03,00,346

4,00,02,75,000

2.8

2010

1,15,98,39,221

28,62,18,000

0.25

2011

1,63,67,78,149

29,74,34,000

0.18

2012

1,51,22,06,105

33,75,26,000

0.22

2013
1,29,88,84,000
Sources: Secondary data.

14,11,08,000

0.11

38

Inference: Debtors turnover ratio is gradually decreasing which shows the company
positions of collection from debtors are delayed. If the debtors turnover ratio is low means debts
may be collected is quite doubtful.
CHART NO 5.8

Average Collection Period

Months in a year
Debtors Turnover Ratio = --------------------------------Debtors Turnover
TABLE NO 5.9
Year

Debtors Turnover

Months

2009

2.8

4.29

2010

0.25

48

2011

0.18

54.5

0.22
0.11

54.5
109.09

2012
2013
Sources: Secondary data.

39

Inference: Debtors turnover ratio is decreased so the collection periods are

high .collection period is low only in the year of 2009 but in remaining years of
the collection period of days are more which shows also the default in collection
of debts.
CHART NO 5.9

4. Profitability ratios :
I) Gross profitability Ratio
Gross profit
Gross profit ratio = ----------------------- X100
Net sales
TABLE NO 5.10
Gross Profit

Sales

Year
(in Rs)
2009
39,88,46,000
2010
31,39,86,000
2011
44,35,73,000
29,31,20,000
2012
21,88,37,000
2013
Sources: Secondary data.

(in Rs)
1,43,03,00,346
1,15,98,39,221
1,63,67,78,149
1,51,22,06,105
1,29,88,84,000

40

Ratio
27.9%
27.07%
27.1%
19.38%
16.85%

Inference: While analyzing the above ratio it is evident that the gross profit ratio is
increasing as well as decreasing. Therefore the company has to take necessary steps to increase
sales and to reduce the cost of sales. So that in future the loss will be prevented.
CHART NO 5.10

ii) Net profitability ratio:

Net profit
Net profit ratio = ----------------------- X100
Net sales
TABLE NO 5.11
Net profit

Sales

Year

(in Rs)

(in Rs)

Ratio

2009
2010
2011
2012

24,54,63,131
13,15,09,229
32,44,71,740
15,78,50,511

1,43,03,00,346
1,15,98,39,221
1,63,67,78,149
1,51,22,06,105

17.16%
11.34%
19.82%
10.44%

2013
14,15,31,000
Sources: Secondary data

1,29,88,84,000

10.9%

41

Inference: From the table, it is clear that Net profit ratio is higher in the year 2009
&2011 which indicates the return on shareholders investments. Higher the ratio better in the
operational efficiency of the concern but it is gradually decreasing from the year 2012.
CHART NO 5.11

Operating ratio:
Cost of goods sold + operating expenses
Operating ratio = ----------------------------------------------------------- X 100
Sales
TABLE NO 5.12
Cost of goods sold +Operating exps

Sales

Year

(in Rs)

(in Rs)

Ratio

2009

1,18,55,62,000

1,43,03,00,346

82.88%

2010

1,03,27,61,000

1,15,98,39,221

89.04%

2011

1,32,35,59,000

1,63,67,78,149

80.86%

2012
2013

1,36,17,97,000
1,20,60,30,000

1,51,22,06,105
1,29,88,84,000

90.05%
92.85%

Sources: Secondary data.

42

Inference: From the above table it clearly shoes that the operating ratios are well
maintained by gradually increasing. There is no static operating ratios maintained by the
company but the ratio is poor. The sales rate could be increased gradually in order to
prevent loss of the company. The ratio should be low enough to provide fair return to the
shareholders and other investors.
CHART NO 5.12

v)

Return on capital Employed:

Net profit +interest+ taxes
Return on capital employed =-------------------------------------------*100
Average capital employed
TABLE NO 5.13
Net profit + interest + taxes

Average capital employed

(in Rs)
24,34,63,000
13,15,09,000
32,44,72,000
15,78,51,000

(in Rs)
62,81,62,336
38,26,22,322
50,71,65,419
63,13,08,763

Ratio
38.76%
34.37%
63.98%
25%

2013
12,49,18,000
Sources: Secondary data.

62,23,06,000

20.1%

Year
2009
2010
2011
2012

43

Inference: The above computation clearly shows that the declining of the return on
capital employed. The ratio is not stable for every year. This is due to increase and decrease of
the profit of the company. The company has to take step over to increase the sales.
CHART NO 5.13

5. TREND ANALYSIS
1) Trend Percentage on Net Sales:
Net sales
Trend percentage = ---------------------------- X 100
Base year
TABLE NO 5.14
(Base year -2008)
Year
2009
2010
2011
2012

Net Sales(Rs)
1,43,03,00346
1,15,98,39221
1,63,67,78149
1,51,22,06105

Trend %
100
18.91
114.44
105.73

2013

1,29,88,84000

9.19

CHART NO 5.14
44

2) Trend percentage on Net profit:

Net profit
Trend percentage = ---------------------------- X 100
Base year
TABLE NO 5.15
Year
2009
2010
2011
2012
2013

Net Profit(Rs)
24,54,63,131
13,15,09,229
32,44,71,741
15,78,50,511
12,49,18,000
CHART NO 5.15

45

(Base year -2008)

Trend %
100
46.42
132.19
47.9
49.11

3) Trend percentage On Current Assets:

Current assets
Trend percentage = ---------------------------- X 100
Base year
TABLE NO 5.16
(Base year -2008)
Year

Current assets

Trend%

2009

63,54,33,983

100

2010

51,77,12,239

18.53

2011

66,81,57,031

105.15

2012

63,11,71,469

0.67

2013

74,20,36,000

116.78

CHART NO 5.16

46

4) Trend percentage of current liabilities:

Current liabilities
Trend percentage = ---------------------------- X 100
Base year
TABLE NO 5.17
Year

current liabilities(in Rs)

Trend %

2009
2010

26,20,75,978
38,87,40,731

100
148.3

2011

42,08,04,653

160.6

2012

28,25,58,238

107.8

2013

39,43,26,000

150.5

CHART NO 5.17
47

5.23 Comparative Balance Sheets as on 31st Mar 2011 & 31st Mar 2012
(In Lakhs)
31st Mar
31st Mar
2011
2012
Current Assets:
Cash

Increase /
(Decrease)

% of increase /
(decrease)

292.05

469.33

177.28

60.70

Accounts Receivables

3928.39

2822.14

(1106.3)

(28.16)

Inventory

1263.73

2052.01

788.28

62.38

Loans and Advances

1197.40

968.24

(229.16)

(19.14)

Total Current Assets

6681.57

6311.72

(369.85)

(5.54)

Fixed Assets:
Net Block

2202.39

2096.04

(106.35)

(4.83)

395.74

730.91

335.17

84.7

2598.12

2826.95

228.83

8.81

Capital Work-in-Progress
Total Fixed Assets

48

Total Assets

9279.70

9138.67

(141.03)

(1.52)

4208.05

2825.58

(1382.5)

(32.85)

4208.05

2825.58

(1382.5)

(32.85)

Shareholder's Funds &Tax

Liability
Reserves and Surplus

1904.56

3857.73

1953.17

102.55

Sales Tax

3167.09

2455.36

(711.73)

(22.47)

Total Stockholder's equity

5071.65

6313.09

1241.44

24.48

Total Liabilities &

Stockholder's equity

9279.70

9138.67

(141.03)

(1.52)

Current Liabilities:
Current Liabilities and
Provisions
Total Current Liabilities

CHAPTER-VI
FINDINGS, SUGGESTIONS, CONCLUSION
6.1. FINDINGS

Current ratio has decreased in the year of 2009 and 2010 due to increase in current

liabilities. But it is recovered in 2011.

Quick ratio is above 1 for all the years. So the company would able to pay the current

liabilities.
Debt Equity Ratio is quite satisfactory in all the years from 2008-2012.
Proprietary Ratio is low in the year 2012 comparing to previous years. The company is

keeping optimal level of total assets and proprietary funds.

The Fixed Asset Ratio is less than the ideal fixed asset ratio of 0.67. So the company has

financed the working capital by long term funds.

The Capital Structured Ratio is decreasing as well as increasing gradually for every year.
The management has to take steps for fair capitalization.

49

Inventory Turnover Ratio is too high in 2008 and 2012 which is helpful to evaluate and

review of inventory policy.

Debtor Turnover Ratio is gradually decreasing which shows the default in collection of
debts from debtors. The collection period is too high to recover the debts in 2008 only it

is favorable to the concern to recover the debts

The Gross Profit is increasing as well as decreasing. So that the company has to increase

the sales and reduce the cost of sales.

Net Profit is higher in the year of 2009 and 2010 which shows the operating
efficiency of the concern.
Operating ratio is well maintained by gradually increment in cost of goods sold and

operating expenses.
Return on Capital Employed is declining year by year which is not stable.
Trend percentage of net sales is moderated year by year. But it is too high in 2010.
Current assets are high in 2010 and 2012 and current liabilities are gradually increasing

year by year. But low in the year of 2011.

Comparing the years of 2008 and 2009 the gross profit as well as operating profit have

decreased. So the net profit started to decline. In order to increase the gross profit the

sales should have been increased and reduce the cost of sales.
Comparing the 2009 and 2010 the sales have increased so the gross profit, operating

profit and net profit have increased from the previous years.
Comparing the year of 2010 and 2011 the sales have decreased. Due to increment in the

cost of sales. So the Gross Profit is decreased.

Comparing the year of 2011 and 2012 sales and cost of goods sold have decreased but
Gross profit is increased and operating profit and net profit have also decreased. Due to

administration expenses.
Comparing the year of 2008 and 2009 the total current asset has decreased. So the

liquidity position of the concern is poor to pay the current liabilities.

Comparing the year 2009 and 2010 the total assets have increased to meet out the

liability of the concern.

Comparing the year of 2010 and 2011 current assets and current liabilities decreased.
Comparing the year 2011 and 2012 current liabilities has increased more than the current

assets.
The percentage of cost of goods sold is too high in sales by comparing the years from

2008 to 2012. So the company has to takes the steps to reduce the cost of goods sold.
Percentage of current assets is too high in total assets to pay the current liabilities by
comparing the years from 2008 and 2012.
50

6.2 SUGGESTIONS

The company should utilize all its resource in an efficient manner. The company should
improve their liquidity position to the future year. The net sales can be raised by

adopting a better marketing technique.

In the third year 2010, the sale has increased than the previous year.
The company can maintain the same position in the future year. In the year 2010 firm

has achieved more profit because sales have increased.

Efforts should be taken to increase the overall efficiency in return out of capital

employed by making use of the available resource effectively.

The expenditure of the company is too high. The company should take efforts to reduce
the expenses whereby it can reduce the loss. So the researchers suggest that the firm has

to maintain the same level of working capital to meet its working capital requirements.
Trend analysis reveals that the firm is to concentrate on the current assets, which would
boost up the liquidity position of the firm and which will be a stock observer in
fluctuations

6.3 CONCLUSION
Every needs the financial manager to manage the financial activities of a company by
using different analytical tools, which help the company in taking managerial and tactical
decision. So every manager should make proper analysis of operational performance of the
company. The analysis and interpretation of various ratios will help in giving better
understanding of the financial condition and the performance of the organization. It is a
perfectly organized company having all the departments well organized to perform the activities
that lead to the customers satisfaction. Current ratio and quick ratio both are varying increasing
and decreasing from the above data. So the company should take care of this two ratio. In future
to show the increasing chart. Company is performing satisfactorily as the increasing trend and is
expected to grow in the coming years also. Though the company assets are not fully utilized and
maintained well, the firm is in a liquidity position as it is earning profit from last 5 years. The
company should take some necessary precautions regarding utilizing the assets.
It provided a good learning experience. All though it helped to gain a lot of practical
knowledge and also understand the working of an organization. And also provided to be a part

51

of the organization and understand the working. It also helped to related to the understanding of
various concepts studied during the course and its implementation in practical working of an
organization. This study will further help to understand the studies and helped to gain a lot of
knowledge about the working of an organization.
Finally I can conclude that the (VEESONS) corporation ltd is performing efficiently
at the outset satisfactorily.

BIBLIOGRAPHY
Books

T.S.Reddy and Y.HariprasadReddy, Management Accounting, 3 rd Edition, Margham

publications 2005.
Management Accounting Principles and Practice R.K.SharmaSahashiK.Gupta
Eighth edition kalyani Publishers.
Dr.S.N.Maheshwari-financial Management G.G.S.Indraprasatha University, New Delhi.
Financial Management I.M.Pandey Ninth Edition Vikash Publishing House Pvt.Ltd.

Websites
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