Project Work Gannina Lakshmi Lawanya

CHAPTER-I
INTRODUCTION TO FINANCIAL MANAGEMENT
Finance in the modern business world is regarded as life and blood of a business
enterprise. Finance function has become so important that it has given birth to financial
management as a separate subject. So this subject is acquiring a universal applicability.
Financial management is that managerial activity which is concerned with the

planning and controlling of the firms financial resources. As a separates activity or
discipline is of recent origin it was a branch of economics till 1890. Still today it has no
unique body of knowledge of its own, and it draws heavily on economics for its
theoretical concepts.
The subjects of financial management are of immense interest to both

academicians and practicing managers. It is of great interest to academicians because the
subject is still certain areas where controversies exist for which no unanimous solutions
has been reaching as yet. Practicing managers are interested in this subject because
among the most crucial decisions of the firms are those which relate to finance and un
understandings of theory of financial management provides them with conceptual and
analytical insights to make decisions skillfully.
The modern thinking in financial management accords a far greater importance to

management in decision making and formulation of policy. Financial management
occupies key position in top management and plays a dynamic role in solving complex
management problems. They are now responsible for shaping the fortunes of the
enterprise and are involved in allocation of capital.
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DEFINITIONS:
Financial Management is an area of financial decision making, harmonizing individual

motives and enterprise goals.
Weston and Brigham
Financial Management is the operational activity of a business that is responsible for

obtaining and effectively utilizing the funds necessary for efficient operations.
Joseph and Messie
It is a process of evaluating the relationship between component parts of a financial

statement to obtain a better understanding of a firms position and performance.
Metcalf and Titard
Financial statement analysis is largely a study of relationship among the various

financial factors in a business as disclosed by a single set of statements, and a study of
trend of these factors as shown in a series of statements.
Myers
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OBJECTIVES OF FINANCIAL MANAGEMENT:
1. To reduce the misuse of funds:

It is the objective of financial management to reduce the misuse of funds. I
can take my own example. I hate misusing of my hard earned money. Last month I have
bought DVD writer for starting business of CD& DVD of educational tutorials. But, after
spending one month, DVD writer is being used for the production or business purposes; I
think this is misuse of my fund. If I deposited it in Bank ,I can earn interest on saving
account on daily basis. Like me, company also misuses funds in bad projects. We should
learn from objective of financial management and reduce the misuse of even one rupee.
2. To maximize the profit in long run:

If a business invests his money and wants to earn high profit ,it means it is
taking high risk according to risk theory of financial management. This is not objective
of financial management, but to maximize the profit in long run is aim of financial
management.
3. To maximize the wealth of company:
An investor only purchases shares, if he hopes that he will earn high profit
on it, otherwise he can deposit his money in saving account of bank. So ,it is the objective
of financial management to maximize the value of share. It can be possible by following
way.
a) To increase dividend per share
b) To increase earnings per share
c) To analyze the value of share in market.
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SCOPE OF FINANCE FUNCTIONS:
Three most important activities of a business firm are

Finance
Production
Marketing
The firm secures capital it needs and employ in its activities which generates
returns on invested capital. A business firm is an entity that engages in activities to
perform the functions of finance, production and Marketing.
The raising of capital funds and using them for generating returns and paying
returns to the supplies of funds is called the finance function of the firm. The main
function of the financial managers is to plan for analyzing and utilizing funds to make the
maximum contribution for the operation of the organization.
It realizes knowledge of the financial market from which the funds are drawn; it
realizes knowledge of how to make sound investment decisions and to simulate efficient
operations in the organizations. A large number of alternate choices involved in financial
decisions. The choices include the use of internal resources, external funds and long-term
funds.
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FUNCTIONS OF FINANCE:
The function of raising funds, investing them in assets and distributing returns
earn from asset to shareholders are respectively known as financing, investment dividend
decisions, finance functions or decisions include.
Investment or long term asset mix decisions.
Financing or capital mix decisions.
Dividend or profit allocation decisions
Liquidity or short term asset mix decisions.
1. Investment Decisions:
This comprises decisions relating to investment in both capital and current
assets. The financial manager has to evaluate different capital investment proposals and
select the best keeping in view of the overall objective of the enterprise.
The investment in the current assets will depend on the credit and inventory
policies by the enterprise. The credit policy is determined keeping in view of the need of
growth in sales and availability of finance. Similarly, the inventory policy will be setup
taking in to account requirement of production, the market trend to the price of raw
material and availability of the funds.
2. Financing Decisions:
Financing decisions is the second important function to be performed by the
financial manager. Broadly, he must decide when, where and how to acquire funds to
meet the firms investment needs. The financial manager is concerned with determining
the best financing mix cum capital structure for his firm. Once the financial manager is
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able to determine the best combination of debt and equity must raise they appropriate
amount through the best available sources.
3. Dividend Decisions:
A dividend decision is the third major financial decision. The financial

manager must decide whether the firm should distribute all profits or retain them or
distribute the portion and retain the balance. The optimum dividend policy is which
maximizes the market value of the firms shares. Thus if shareholders are not indifferent
to the firms dividend policy the financial manager must determine the optimum dividend
payout ratio.
4. Liquidity Decisions:
Current assets manager that affects a firms liquidity is yet another important
finance function, in addition to the management of long term assets. Current assets
should be managed efficiently for safeguarding the firm against the dangerous of liquidity
and insolvency. Investment in current assets affects the firms profitability, liquidity and
risk.
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INTRODUCTION TO FINANCIAL STATEMENTS
Financial statements comprise Income Statement, Balance Sheet and other

statements that reveal the financial position of a firm. These statements are prepared
from the Accounting Records maintained by the firm. They are the end products of the
financial Accounting process. The principle Financial Statements published for
information of outsiders are the Balance Sheet, the Income Statement, late reports such as
Statements of Retained Earnings, Sources and Used of Funds, Capital Surplus,
Stockholders Equity Statements, Funds Flow, Cash Flow Statements and the like are
treated as a part of Financial Statements
Meaning of Financial Statement Analysis:
Financial Statement Analysis is collective name for the tools and techniques
that are intended to provide relevant information to decision-makers. The purpose of
financial statement analysis consists of comparisons for the same company over periods
of time and comparisons of different comparisons of different companies either in the
same industry or in different industries.
Financial statement analysis enables investors and creditors to evaluate past

performance and financial position, and to predict future performance. Thus, analysis
and interpretation of financial statements usually has as its objective-the formation of an
opinion with respect to the financial statements usually has as its objective-the formation
of an opinion with respect to the financial condition of the select enterprise.
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Financial statements present a mass of complex data in absolute monetary
terms and revel little about the liquidity, solvency and profitability of the business.
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SIGNIFICANCE OF THE FINANCIAL ANALYSIS
Now the day analysis of financial statements has become of general

interest various parties are interested in the financial statements of a business due to
various reasons. The significance of the financial statements analysis for different
parties is as follows:-
SIGNIFICANCE TO MANAGEMENT:
The management can measure the effectiveness of the own polices and decisions,
determine the advisability of adopting new policies, procedures and document to owners,
the result of their managerial efforts.
SIGNIFICANCE TO INVESTORS:
With the help of financial analysis investors and share holders of the business can
know about the earning capacity and the safety to their investments in the business.
SIGNIFICANCE TO CREDITORS:
Financial analysis tells them whether companies have sufficient assets and funds
to pay off its creditors.
SIGNIFICANCE TO GOVERNMENT:
Government can judge, the basis of analysis of financial statements, which
industry is progressing on the desired lines and which industry need the financial help.
SIGNIFICANCE TO FINANCIAL INSTITUTIONS:

With the help of financial statement analysis financial institution can know the
profit earning capacity of the business and its long term solvency.
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OBJECTIVES OF FINANCIAL STATEMENTS:
Provide information needs of various present and prospective stakeholders about

the net results of the business activities at regular intervals.
Make the affairs of the company transparent to the parties external to the day-to-
day activities of the company.
Keep the management under pressure so that the scope of manipulation can be
minimized as they are to measure and report the financial results of the business
adhering to certain rules and regulations promulgated by the regulatory
authorities.
Observe legal formation.
Enhance credibility of the enterprise and increase its market acceptability.
Build up better performance of the enterprise.
Present performances of the past, prospects in the future and plan for future
course of action in order to reap emerging opportunities of the market.
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ADVANTAGES OF FINANCIAL STATEMENTS
Users of a financial statement should be aware of the advantages of the

Financial Statement Analysis.
Through analyzing these statements, an idea about the existing economic

position of the enterprise can be derived.
These statements present facts in numbers, personal observing the events

directly may be aware of an on the spot situation, but they may comprehend
neither the background nor the sequences and implicating of the fact. At the time
of analyzing as analysts, they have the scope of examining sequences of the
events, contemporary economic and other related facts. The chance of the
analysts being neutral and far-reaching is very high.
It is difficult for individual households to examine the financial statements of

individual enterprises. Expert analysts give their opinions after considering
various facts and statements. This is why such analysis system helps various
parties for their decision-making.
Analysis is made with the aim to find the future on the basis of the past.
Financial statements relate to individual enterprises. But analysts consider

simultaneously the financial statements of a number of firms over space and time,
opinions of various parties, socio-economic positions of the industry and the
economy, and give their considered judgment about the prospect of an enterprise.
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TECHNIQUES OF FINANCIAL STATEMENT ANALYSIS
The tools of financial statement analysis help in establishing significant

relationships and changes. The most commonly used analytical techniques are under.
The application of these techniques is illustrated using the 1997 financial statements of
Hindustan Lever Limited. The financial statement amounts are in lakhs of rupees.
Horizontal Analysis:
Financial Statements present comparative information for the current year

and the previous year. A simple approach to financial statement analysis, known as
Horizontal Analysis, is to calculate amount changes and percentage changes from the
previous year to the current year. While an amount change in itself may mean
something, converting amount changes to percentages is more useful in appreciating
the order of magnitude of the change.
Vertical Analysis:
This is the proportional expression of each item on a financial statement to

the statement total. The result of analysis are presented in the form of common-size
statement in which all the statement are expressed as percentage of some common
number and always add up to 100. The items in the Profit and Loss account are
usually expressed as percentage of sales, while the balance sheet items are given as
percentage of total shareholders funds and liability or of total assets.
This helps in making comparisons of companies that differ in size since the
financial statements are expressed in comparable common-size format. Further,
comparison of common size statements for several years may reveal important
changes in the components from one year to the next year.
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Techniques of Financial Analysis
Comparative Common Funds Ratio Trend

Statement Size Flow Analysis analysis
Analysis Analysis Statement
The published financial statements do not always convey to the reader

significance of the operating results and financial health of the business. In order to make
financial statements more meaningful, one should depend on certain techniques for
analysis the financial statements. The main objective of the tools of financial analysis is
to minimize the financial data and use it in a appropriate and understandable form
Common Size Analysis:
Under this, individual items of the income statement and balance sheet
are reduced to a common basis which is treated as equivalent to hundred. A
statement prepared under this tool is known as 100 percentage or component
percentage statement or vertical statement . Under this technique, all balance
sheets items are shown as percentage of assets, and income statement items as a
percentage of sales. The resulting statement is known as Common Size Statement.
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Trend Percentage Analysis:
This is a guide to follow the changes that occur in a business from period to
period. The purpose of trend analysis is to ascertain the direction in which a series is
moving. Trend ratios or percentages are useful means of comparing financial
statements for several years. These, emphasize changes or trends that have occurred
over a period of time, the trends are calculatedly:
Selecting a base year.
Assigning a weight of percentage to the amount appearing on the base
year and
Expressing the amounts shown on the other years financial statements as
a percentage of their corresponding base year financial statement amount.
Comparative Statement Analysis:
Another technique used in analyzing financial data is the Comparative

Statement Analysis. Comparative balance sheet exhibit trends, a clear understanding
of these trends based upon sound ratio studies may convey some premonition
regarding the immediate of a particular business enterprise, provides management
policies do not change radically. For this purpose, the Profit & Loss and Balance
Sheet are prepared in a comparative form, because these statements constitute the
most vital statement of financial position. Comparative financial statement may be
prepared to show the following.
Absolute data (rupee amounts or money values).
Increase or decrease in absolute data in terms of money values,

and
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Increase or decrease in absolute data in terms of percentages.
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Comparative Income Statement:
This will show the absolute figures for the select period and absolute
change from one period to another in terms of percentages. It is easy for the
reader to understand the trends, since the figures for the select period are shown
side by side.
Comparative Balance Sheet:

Here also analysts can select a period for comparative analysis and
prepare statement for the select period.
Funds Flow Analysis:

Recently, funds flow analysis has become an important technique in
analyzing financial matters. It is because balance sheet of a firm reveals its financial
condition at a particular point of time. Funds flow analysis helps see the changes in
the financial position of a firm.
There are two statements generally prepared under funds flow analysis.
Funds Flow Statement:
Preparation of funds flow statement is an attempt to record and report the

flow of funds between various assets and liabilities and owners capital during a
select accounting period. The Flow means Change and therefore, the term
Funds Flow means, Changes in funds or, Change in Working Capital .
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Funds Flow helps to:
Explain the financial consequences of business operations.

Get answers to intricate queries.
Allocation of resources and
Test effective use of working capital.
Cash Flow Analysis:
Cash flow refers to the management of cash into or out of a business, or

a project or a financial project. Cash flow analysis can be done for a specific
period of time.
Cash flow analysis helps to:
To determine a projects rate of return,

To determine problems with a businesss liquidity,
To evaluate the quality of income generated by accrual accounting,
To evaluate risk within a financial project.
Cash flow statement is divided into three main heads:
a) Cash flow from business operation,

b) Cash flow from investments and
c) Funds from fixed assets.
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Relation between Financial Statements and Financial Statement
Analysis:
Financial statements published by enterprises are major sources of

information. But financial statement by themselves cannot provide required information.
They contain representation of bundle of facts and figures. Thus figures are to be made
to speak the underlying information through analysis and interpretation.
The management is interested in learning the growth trend of their

businesses and their shares in the market, position of divisional performances, etc from
the income statements and balance sheet of their own concern for successive years. But
the analysts external to an enterprise do not remain confined to such statements of the
individual firm. Rather, they consider various firms under the same industry, the overall
socio-economic and political position, expectations of prospective investors, fluctuations
in the value of foreign exchanges and similar pictures at aggregate level. Hence, the
related objective is inseparably associated with the term Financial Statement Analysis.
Difference between the Terms Analysis and Interpretation:
Literally these two terms do not convey identical idea. Through analysis,
attempts are made to enquire interrelations among various components of something.
But these analysis indicate or imply can be known from the interpretations. In other
words, interpretation begins when analysis ends. In the context of FSA, such literal
distinction is not made. Here, the term analysis is used in the broader sense to mean the
function of both analysis and interpretation.
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Meaning of Term Analysis in the content of Financial Statement
Analysis:
In the present context, analysis does not mean only finding out
interrelations among components. It includes also the function of what it implies. Here
the term analysis is used in place of interpretation. Even though the term
interpretation is not usually used in this content the function of interpretation is
included herein. Hence, financial statement analysis does not mean only revealing the
interrelations among various components; it refers also to what is revealed from the
underlying facts and figures in the statements
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NEED FOR THE STUDY:
Andhra Pradesh is the state where there is the highest number of solvent
extraction units. So it can draw that there is necessary to gain a more accurate insight into
the working to such a unit and the balance that is being brought about between
mechanization of plant and utilization of financial resources.
The present study carried out is FINANCIAL STATEMENT ANALYSIS of

AVANTI FEEDS LIMITED at the instant of the management of that company. As there
is a need for every company to analyze its present financial position and trend. I was
provided with the required data for analyzing present financial position and trend during
last five years. The present study makes an attempt to analyze present financial
performance of AVANTI FEEDS LIMITED besides the future prospects.
Besides studying financial position one can study the entire organization as
financial analysis covers every aspect. This would be the primary reason that evoked in
the interest and need for the study.
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SCOPE OF THE STUDY:
The study has been conducted to understand the position of the organization and
its functional areas and operations of industry.
The Study concentrates on the methods and techniques followed by the AVANTI
FEEDS LIMITED
The study broadly concentrates on the overall financial analysis of the company.
But the present study is contained to one of the technique i.e. Ratio Analysis was
used to evaluate the performance of the company.
The data required for the study of financial statement Analysis is collected
from the last 5 years Annual Reports of the company. The time period for carryout
this project is 35 days only.
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OBJECTIVES OF THE STUDY:
1. To provide reliable information about economic resources and obligations ie..,

cash inflows and cash outflows of AVANTI FEEDS LTD.
2. To provide reliable information about changes in net resources of AVANTI

FEEDS LTD that result from the activities, profitability of the business.
3. To provide financial information that assists in estimating the future capacity of

AVANTI FEEDS LTD to generate earnings.
4. To provide information needs of various present and prospective stake holders

about the net results of the AVANTI FEEDS LTD activities at regular intervals.
5. To make the affairs of AVANTI FEEDS LTD transparent to the parties external
to the day to day activities.
6. To provide information about changes in resources and obligations resulting from
sources such as transactions between AVANTI FEEDS LTD and it owners.
7. To observe legal formalities of AVANTI FEEDS LTD.
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METHODOLOGY OF THE STUDY:
Methodology describes the method of achieving the objectives through

collection of the data. The data collected can be either primary or secondary.
The above information is carried on with the co-operation of the

management of AVANTI FEEDS LTD, who permitted me to carrying on the study to
provide with the requisite data.
1. Primary Data:
Most of the information is collected from the internal resources, interviews
and discussions with various officials in the finance department and concerned executive
of various departments.
2. Secondary Data:
The rest of the data is collected from the financial statements and its
information brochures of the organization. Also data is collected from various books
published articles and published annual reports of AVANTI FEEDS LTD
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LIMITATIONS OF THE STUDY:
The project work was undertaken with almost accurate data but the following aspect
can be termed as the limitations of the project work.
Even though the ratio analysis is widely used technique to evaluate the financial
position and performance of a business, there are certain problems in use of ratios.
The ratios are calculated from the past financial statements and thus are no
indicators of future.
There are certain standards known as ideal ones for comparing the ratios, which
may not be suitable in all the situations.
It is difficult to decide on the proper basis of comparison.
The price level changes make the interpretation of ratios invalid.
35 days time cannot be considered sufficient time to assess situation of the

company.
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CHAPTER-II
INDUSTRY PROFILE OF PRAWN FEED

At the olden age Indian Shrimp Feed cultivators used to import shrimp fed from
other countries such as Thailand Taiwan, East Asian Countries etc., since there is no
manufacturing of Shrimp feed in India. In importing this feed from other countries, the
Indian cultivators face many problems such as it takes long time to import feed from
other countries and the transportation charges are also very high and government duties
are levied on the materials. In spite of heavy expenditure and lot of delay in getting feed,
the aqua cultivators have to spend on them for feed because there is no aqua cultural
production in India. After long time the Indian cultivators got Knowledge as hoe to
prepare feed and decided to establish same active culture projects in India.
In this process few companies have been established manly in Madras, Nellore,
Cochin in India. Because of the high Technology is used for the preparations of shrimp
feed, a few big companies were willing to start the production of shrimp feed for aqua
cultivators. M/s Avanti feeds company Limited also is one of them.
The shrimp Feed Product is mainly used to prawns for this quick and healthy
growth .The aqua cultivators growth depend on prawn growth. So aqua cultivators
always provide good quality feed, which does not contain any hormones and antibiotics.
Shrimp Feed is finely packed in factories and supplied to aqua cultivators. The cultivators
use this feeding in prescribed manner as per instructions given by feed exports. The
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cultivators feed them very carefully because their depends on prawn extensive growth.
The prawns are supplied to their countries in large quantities. Prawns have good demand
in foreign countries.
The producers of shrimp fed not only produced prawn feed they also concerted on
productions of fish fed which also has demand in market .The fish feed have demand in
local market, but the prawn feed has demand in local markets as well as foreign market
.For this reason the producers mostly concentrate on shrimp feed rather than fish feed.
In India the cultivators of aqua culture cultivate prawns in large quantity because
it has large demand in other countries foreign countries are mostly interested to buy the
prawns because of its quality and reliability. In olden days India was importing shrimp
feed from other countries such as Thailand, Taiwan, Laos, Vietnam and other some
shrimp feed cultivated countries.
But now the improvement in technology India can also produce quality shrimp
feed for home cultivators and other foreign country aqua cultivators.
Shrimp feed is produced by many factories in India like Avanti Feed Ltd.,
Thailand company, located in Madras, Thapas Waster Base Company Ltd., (Nellore),
Grow Bert Co., (madras) Egasy Culture Co.,(Cochin). These companies produced not
only shrimp feed they also supply fish feed to their customers ( aqua cultivators ). But
these companies produce shrimp feed more than the fish feed because they have good
price in foreign markets for shrimp feed.
DEMAND OF SHRIMP FEED

Shrimp feed has good demand in local market as in foreign market. The
cultivators who purchase the shrimp feed they have demand in foreign countries for their
prawns. The cultivators supply prawns to Srilanka, Iraq and Gulf countries. Aqua
cultivators mainly export feed to the above countries and other major countries. Total
foreign exchange for selling of prawns is 4500 crores. Each prawn is Rs 150 in foreign
market.
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Shrimp feed producers have demand in market because they produce international
quality feed from best quality imported raw material. Its ideals water stability in water
is minimum 2 to 4 hours. And the feed is nutritionally well balanced with less residual
and excellent palatability and early digest by prawn. And the most important things is that
the fresh feed with good attraction readily available to the door step of aqua cultivator.
Avanti feeds is a prawn feed based industry .Just like the human body needs
vitamins and minerals other living organisms in the world also need protein based food to
grow. So Avanti feeds is one such industry producing and exporting the feeds for prawns.
A prawn feed based industry was born with the motive of providing the qualitative feeds
to prawns and fish etc... The industry is growing rapidly today. The feed industry plays a vital role
in the survival of the sea based living organisms.
The oilseed scenario in the country has undergone a substantial change during the
past few years. World production forecasts for oilseed oils and oil meals are encouraging.
When the Blue revolution characterized by proliferation of aqua farms needed
support for their growth, Mr.Alluri Venkateswara Rao took lead with a vision to take the
aqua industry into new heights, established Avanti Feeds Limited in Kovvur, the central
coastal belt, West Godavari District, Andhra Pradesh, India, in the year 1994 with a
technology tie-up with Pingtai Enterprises, Taiwan and introduced international quality
shrimp feeds for shrimp farming in India. Thus the Aqua Industry had seen light in India.
He had further taken it to the heights creating sustainable markets for the shrimps
produced by the farmers in India by establishing Aqua Products Processing & Export
Division (APED) meeting International standards with state-of-art infrastructure facilities
in 1998 near Ravulapalem, East Godavari District, Andhra Pradesh, India. APED offers
complete hygienic and value added aqua products for exports to USA, Japan, Australia
and UK. Thus the Aqua Industry further developed in India creating its charisma globally.
Feeds has, to its credit pioneering effort and service for over two decades in
development of prawn culture, processing and exports with its state-of-art shrimp and
fish feeds and processing plants.
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CHAPTER-III
COMPANY PROFILE OF AVANTI FEEDS LIMITED
sAVANTI-THE STRONG BEGINNING:

Sri Alluri Venkateswara Rao, Founder Chairman of Avanti Feeds Limited,
born on 7th July, 1933 in the Agriculturalists & Industrialists family in Kovvur, West
Godavari District, Andhra Pradesh. He was always inspiring the development. He had
rich experience in the fields of
Steel Rerolling
Solvents Extraction
Fertilizer & Pesticides
Tobacco
Amino Acids
Aqua Feeds Manufacturing
Aqua Products Processing & Exports
When the Blue revolution characterized by proliferation of aqua farms needed

support for their growth, Mr.Alluri Venkateswara Rao took lead with a vision to take the
aqua industry into new heights, established Avanti Feeds Limited in Kovvur, the central
coastal belt, West Godavari District, Andhra Pradesh, India, in the year 1994 with a
technology tie-up with Pingtai Enterprises, Taiwan and introduced international quality
shrimp feeds for shrimp farming in India. Thus the Aqua Industry had seen light in India.
He had further taken it to the heights creating sustainable markets for the shrimps
produced by the farmers in India by establishing Aqua Products Processing & Export
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Division (APED) meeting International standards with state-of-art infrastructure facilities
in 1998 near Ravulapalem, East Godavari District, Andhra Pradesh, India. APED offers
complete hygienic and value added aqua products for exports to USA, Japan, Australia
and UK. Thus the Aqua Industry further developed in India creating its charisma globally.
He started AVR Trust in 1999 with a vision to support Education Sector and
fulfilled his dream by establishing a Degree and PG College by name ABN & PRR
College of Sciences, Kovvur, West Godavari District, Andhra Pradesh. The College has
modern infrastructure facilities and offers Graduate and Post Graduate courses in Arts,
Commerce and Sciences with utmost discipline by eminent faculty. Thus he supported
Educational Sector in the needy region.
Sri Venkateswara Rao helped several Institutions by his munificent donations. He

donated liberally to Educational Institutions, Hospitals and to Social service Activities.
Avanti has started its commercial operations in 1993 under the able leadership of
Late Sri Alluri Venkateswara Rao in technical collaboration with Pingtai Enterpries,
Taiwan. Later his son Sri Alluri Indra Kumar expanded the capacity and enhanced
technical and marketing capabilities by bringing on board Thai Union Frozen Products
PCL., Thailand, the world's largest seafood manufacturers and also having Feed Mill and
Prawn Hatchery in Thailand. Today Thai Union is closely associated with Avanti Feeds
with equity participation, technical collaboration and marketing tie-up in India.
HISTORY OF THE ORGANIZATION:

The Avanti Feeds Ltd. was established in the year 1993 under the Indian
Companies Act1956. The License No is 01-15214. The main product of this Avanti
Feeds Ltd is manufacturing of Shrimp/Prawn Feed and Shrimp Exports. It is colabaration
with Pingatai Ltd. of Taiwan and Thai Union Feed Mill Limited. Taiwan.
Avanti Feeds limited is one of the largest shrimp feed manufacturer and Shrimp
Exports in Andhra Pradesh. The Capacity of the Shrimp Feed is 20,000 Metric tons per
annum. It is also the largest supplier of shrimp feed in the entire coast of India
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With a great vision to serve the aqua farmers, the renowned industrialist, Late Sri
Alluri Venkateswara Rao, Founder Chairman and Managing Director, founded the
company in the year 1993. the company has shrimp feed division. Aqua product export
division and shrimp shell meal plant, The Chairman and Managing Director is Sri Alluri
Indra Kumar garu.
SHRIMP FEED DIVISION :
Two Feed Manufacturing plants I & II with combined capacity of producing

30000 M.Tons per annum, located at Kovvur and Vemuluru, West Godavari Dist,
A.P.
With the sophisticated and fully computerized missionary from Taiwan.
Technical and Marketing Collaboration with the worlds leading shrimp
manufacturers, the M/s.Pingtai Enterprises Co., Ltd., Taiwan and Thai Union Feed
mill Co., Ltd., Thailand (formerly Aqua star Ltd.,)
Use world standard quality raw materials from Chile, Taiwan, Thailand, Brazil,
Korea, Japan etc.
Produces scientifically formulated and nutritionally balanced International
Quality Shrimp Feed in 7 sub-brands.
AQUA PRODUCTS EXPORT DIVISION:
Established in the year 1998 with a capacity of 1200 MTs per annum at
Gopalapuram, East Godavari District.
Processing and Exporting of Black Tiger and Scampi Shrimps as Pan Frozen and
IQF shrimps to USA, EU, UK, Japan, Australia etc.
European approved plant, HACCP complaint and USFDAA List
SHRIMP SHELL MEAL :
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Shrimp shell Meal Manufacturing Plant with a capacity of 1000 mts, located at
Eathakota, East Godavari District.
Having latest technical know and imported machinery.
INFRASTRUCTURE & PRODUCTION FACILITIES:

The Plant, certified ISO 22000: 2005, has capacity of 1800 MT per annum comply
with HACCP and has accreditation from USFDA, European Union and BRC Global
Standards and Certified BY ACC for best aquaculture practices. The major facilities
include:
PLATE FREEZERS
BLAST FREEZER
IQF
STATE-OF-ART COLD STORAGE FACILITY
FLAKE ICE MANUFACTURING FACILITY
BLOCK ICE MANUFACTURING FACILITY
QUALITY :
Avanti has in-house Laboratory to conduct special tests to detect the presence of
micro organisms and anti-biotics to ensure the end product is absolutely contamination
free.
Quality is monitored at every level and Quality is maintained through out the process
right from shrimps transportation from farms till Export of the finished product. Stringent
31
quality measures are implemented at every stage and Avanti has been rated as one of the
leading exporters from India.
LOGISTICS:
The Company has a fleet of insulated as well as refrigerated vehicles to transport the
harvested shrimp from the farms to the processing plant and the processed goods to the
port of shipment in order to maintain the freshness of product.
Transportation of raw shrimps and finished product is given as much importance
as given to processing and storing.
TECHNICAL SERVICES:
Avanti Feeds limited is providing technical services to the Shrimp culture farmers
at their ponds through more than 60 qualified well experienced Technical Officers in all
the coastal belt of India.
Established Aqua Laboratories to serve the farmers in testing Seed, water, soil
and other key parameters of Aqua farms.
KEY BENEFITS:
Farmers need not worry in selecting the quality seed. Avanti Labs can help them
in getting the seed tested and select the best and disease free seed.
By testing the water and soil before stocking will help them in maintaining pond
scientifically and get good survival rate and reduce the pond water contamination etc.
Our Laboratories are
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PCR LABS:
Avanti Aqua Lab, Kakinada
Avanti Aqua Lab, Nellore
AQUA LABS:
Avanti Aqua Lab, Amalapuram

Avanti Aqua Lab, Bhimavaram
Avanti Aqua Lab, Narasapuram
Avanti Aqua Lab, Malkipuram
Avanti Aqua Lab, Gudivada
The company provides technical services to the aqua shrimp farmers at their
ponds with a workforce of more than 60 highly qualified and experienced technical sales
officers in all the coastal belt of India.
In order to assist shrimp culturing farmers in getting the best quality seed before
stocking and testing the soil and water quality before and after stocking, the company set
up per aqua labs in Kakinada and Nellore and Aqua Labs in Amalapuram, Bhimavaram,
Narasapuram, Malkipuram, Gudivada etc.
FEATURES OF AVANTI SHRIMP FEEDS:
These features give AVANTI FEEDS, a competitive edge over its competitors in
feed industry.
33
High quality shrimp feed
Ideal for all types of shrimp farming
International Quality Shrimp Feed at reasonable price.
The newly developed feed tested successfully at number of farms.
The right feed for better harvesting with less expenditure
Fresh feed speedily supplied at your doorsteps
PROCESS DESCRIPTION:-
The main raw materials such as Fish Meal, Shrimp Meal, Soya Bean Meal etc. are
fed through the hopped and then mixed thoroughly. The mixed material is then prevailed
to obtain a homogenous mixture of the particles of the required size. The material is then
prevailed to obtain a homogenous mixture of the particulars of the required size. The
materials then conditioned with steaming, which leads to gentrification of study materials
and better water stability. The conditioned mixture is then palletized. The pellets are
dehydrated in dyers cooled and then crumbled into small particle size by passing them
through crublers. Finally they are subjected to screening them through rollers. Finally
they are subjected to screening for maintenance of physical standards and appearance.
Feed varies in size and protein content depending on the growth stage of the shrimp the
stages being starter, grower and finisher. As the process is batch process the different
feeds are made as per requirement, the different being only in the mix of ingredients and
size of the pellets. The product is then packed in the bagging machines.
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PRAWN & FISH FEED PRODUCTS:
PRODUCTS & SALIENT FEATURES:
Avanti produces the following international quality feeds for Prawn and fish in
collaboration with worlds renowned Prawn & Fish feed manufacturers Thai Union Feed
Mill Co.Ltd., Thailand and Pingtai Enterprises Co.Ltd., Taiwan.
PRAWN FEED:
PROFEED
TITAN
MANAMEI
CHAMP
SCAMPI FEED:
CLASSIC
SCAMPRO
FISH FEED:
MERMAID
SALIENT FEATURES:
Made from international quality raw-materials
Nutritionally well balanced and Excellent FCR
Ideal Water Stability and maintains eco-friendly water quality
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Greater appetite, faster Growth with high Survival rate of shrimps / fish
Higher yields Higher Profits
GRADE-1 AVANTI TIGER

GRADE-2 AVANTI QUEEN
Grade-1 is premium to Grade-2 "Headless-BT' Black Tiger Prawns are exported

from here which are the expensive ones in the world.
The plant has storage capacity of 2000 tones. Finished product can be preserved for
3 months. Feed packaging can be done at KOVVUR bags are sold in range of 25kg,
10kg. The standard is 25kg, 10kg and 15kg. Bags are used for shrimps, which are in
growing stage for which the pellet size would be very small.
Sri A. Indra Kumar is the Managing Director of the company, and having registered
office at Hyderabad.
For packaging, processing and exporting shrimp, the factory is having its AVANTI
AQUA EXPORTS DIVISION (AAED) at Gopalapuram near Ravulapalem.
The company is maintaining very good harmonious relation with the employees with
direct participation thus enabling good industrial relations.
Provision stipulated under the factories act is being implemented towards labour
welfare. Norms of minimum wages act is being followed in payment of wages and
salaries. Compensation is paid according to the stipulations of workmen compensation
Act.
Even today, for the most part, Indian Shrimp Cultivators largely rely on imported
feeds, which involve storage, transportation and most importantly lack of freshness in
feed.
By providing international quality shrimp feed in the country Avanti Feed's present a
fresh, cost-effective alternative, without and compromise in quality. In addition, the feed
is ideally suited to local conditions.
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THE OTHER FEATURE OF "AVANTI:
Good dealer network
Backed by well-experienced technical staff
Excellent palatability and easy digestibility
No antibiotics or growth hormones added to the feed
Faster growth with high survival rate reuniting in maximum profitability
Good appearance, smells and taste.
Nutritional well balanced witness residual effect
Ideal water stability of 2 to 3 hours minimum

International quality feed manufactured with fully computerized, sophisticated,
imported raw materials and imported machinery.
BOARD OF DIRECTORS OF AVANTI FEEDS LIMITED:
CHAIRMAN & MANAGING DIRECTOR : A. Indra Kumar
JOINT MANAGING DIRECTOR &

COMPANY SECRETARY : C. Ramachandra Rao
DIRECTORS : A.V.Achar
N. Ram Prasad
K. Ram Mohan Rao
37
B.V. Kumar
M. Venkateswara Rao
M.S.P. Rao
AUDITORS : Karvy & Company

Chartered Accountants
Hyderabad
BANKERS : STATE BANK OF INDIA
WEBSITE : www.avantifeeds.com
www.avantiindia.com
CHAPTER-IV
THEORETICAL ANALYSIS
Financial Statement Analysis is the process of identifying the finance strengths

and weakness of the firm by properly establishing relationship between the items of the
balance sheet and the profit and loss account. Financial analysis can be undertaken by
management of the firm or by parties outside the firm, viz. owners, creditors, investors
and others to form judgment about the operating performance and financial position of
the firm. Users of the financial statements can get better insight about the financial
strength and weakness of the firm if they properly analyze the information reported in the
statements.
38
Management should be interested in knowing the financial strength of the firm to
make their best use to be spot out the financial weakness of firm to take suitable
corrective actions. The future plans of the firm should be laid down in the view of the
firms financial strength and weakness. Thus financial analysis is the starting point for
making plans, before using any sophisticated forecasting and planning procedures.
Understanding the past prerequisite for anticipating the future. The natures of the
analysis were differing depending on the purpose of the analysis. For example, trade
creditors are interested in the firms ability to their claims over a short period of time.
They will give the preference to the evaluation of the firms liquidity position.
The suppliers of long term debt are concerned with the firms profitability over
time, its ability to generate cash to be able to pay interest and repay principal and the
relationship between various sources of funds. Investors, who have invested their money
in the firms shares, are more concerned about the firms earnings. They restore more
confidence in those firms that steady growth and earnings.
The analysis of financial statements is a process of evaluating the relationship between

component parts of financial statements to obtain a better understanding of the firms
position and performance. The first task of the financial analysis is to select the
information relevant to the decision under consideration in the financial statements. The
second step is to arrange the information in a way to highlight significant relationships.
The final step is interpretation and dragging inferences and conclusions. In brief,
financial analysis is the process of selection, relation and evaluation.
MEANING AND CONCEPT OF FINANCIAL ANALYSIS:

The term financial analysis also known as analysis and interpretation of
financial statements refers to the process of the determining financial strengths and
weakness of the firm by establishing strategic relationship between the items of the
balance sheet, profit and loss account and other operative data.
39
Financial statement analysis is largely a study of relationship among the various
financial factors in a business as disclosed by single set of statements and a study of the
trend of these factors as shown in a series of statements.
John Mayer
The analysis and interpretations of financial statements reveal each and every aspect
regarding the well-being financial soundness, operational efficiency and creditworthiness
of the concern concerned.
Kennedy and Muller
There are various methods or techniques used in analysis financial

statements such as comparative statements, trend analysis, common size statements,
schedule of changes in working capital, funds flow and cash flow analysis Cost Volume
Analysis and Ratio Analysis.
OBJECTIVES OF FINANCIAL ANALYSIS:
Analysis of financial statements may be made for a particular purpose in views.

However the following are generally considered to be the objectives of financial
analysis.
To find out the financial stability and soundness of business enterprise.
To assess and evaluate the earning capacity of the business.
40
To eliminate and evaluate the fixed assets, stock etc... of the concern.
To estimate and determinate the possibilities of future growth of business.
To assess and evaluate the firms capacity and ability to repay short-term and
long-term loan.
To evaluate the administrative efficiency of the business enterprise.
SIGNIFICANCE OF FINANCIAL ANALYSIS:
Analysis of financial statement is carried out to measure the enterprises liquidity,

profitability, solvency and other indications to assess its operating efficiency , financial
position and performance. Financial analysis serves the following purpose:
1. To assist in decision- making.
41
2. To know the operational efficiency of the business.
3. Helpful in measuring the solvency of firm.
4. Comparison of past and present results.
5. Helps in measuring the profitability
6. Inter-firm comparison.
7. Helps in judging the solvency of the undertaking.
8. Bankruptcy and failure.
LIMITATIONS OF FINANCIAL ANALYSIS:
Every coins as two sides same in the case with analysis of financial statements.
Although this financial analysis has must significant and usefulness yet it has certain
limitations. Financial analysis may not provide exact answers to these questions, but it
does indicate what can be expected in the future. The limitations of financial statement
analysis are given below:
Interim and not final reports.
Historical cost.
Do not reveal exact position.
Ignoring of non-monetary aspects.
Personal judgement.
Lack of uniformity.
Inflation.
Convention of conservation.
Lack of standard terminology.
Affects of price level changes.
42
Non-consideration qualitative aspect.
Misleading results.
TYPES OF FINANCIAL ANALYSIS:
Financial analysis can be classified in to different categories depending up on
On the basis of material used.

On the basis of modules operandi.
1. On the basis of material used:
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According to the basis, financial analysis can be of two types:
A. Internal Analysis:
This analysis is done by persons who have access to the books of the
account and at other business related to the business. Such as analysis can be done by
executives and employees of the organization. The analysis is done depending up on the
objective to be achieved through this analysis.
B.External Analysis:
This analysis is done by those who are outsiders for business. These
persons mainly depend up on the published financial statements. Their analysis serves
only a limited purpose.
2. On the basis of modules operandi:

According to this financial analysis can also be of two types
A. Horizontal Analysis:
In case of this type of analysis, financial statements for a number of years
are reviewed and analyzed the current years figures are compared with the standard or
base year. The analysis statement usually contains figures for two or more year and the
change are shown regarding each item from the base year usually in the form of
percentage. Since this type of analysis based on the data from year to year rather than on
date, it is also termed as Dynamic analysis
B. Vertical Analysis:
44
In case of this type of analysis a study is made of the qualitative
relationship of various items in the financial statement on a particular date. Since this
analysis depends on the data for one period, this is not very conductive to a proper
analysis of the companys financial position. It is also called static analyses as it is
frequently used for referring to ratio developed on one date or for one accounting period.
TECHNIQUES OF FINANCIAL ANALYSIS
A financial can adopt one or more of the following techniques/tools of

financial analysis:
Techniques of Financial Analysis
Comparative Common Funds Ratio Trend

Statement Size Flow Analysis analysis
Analysis Analysis Statement
COMPARATIVE FINANCIAL STATEMENTS:
The statements which have been designed in a way so as to provide time

perspective to the consideration of various elements of financial position embodied in
such statements figures for two or more period side by side to facilitate comparison.
Both the income statement and balance sheet can be prepared in the form
of comparative financial statements.
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The comparative financial statements contain the following items.
o Absolute figures (amount in Rs. as given in the final accounts).

o Absolute figures expressed in terms of percentages.
o Increase or decrease in absolute figures in terms of money value.
o Increase or decrease in terms of percentages.
o Comparison expressed in ratios.
o Percentages of total.
1. Comparative income statements:

The income statement (Profit & Loss A/C) gives the results of the
operations during a definite period. It reveals the profit carried or loss incurred by the
cancers. The comparative study if income statement for more than 1 year may enable us
to know the program of the concern. First two columns figures of various items for two
years. The third and fourth column used to show increase or decrease in figures in
absolute adopted in preparing comparative balance sheets.
The income statement discloses net profit or net loss on account of operations.
The comparative income statement will show the absolute figures for two or more
periods, the absolute change from one period to another and if desired the change in
terms of percentages.
In first step, find out the changes in absolute figures i.e., increase or decrease
should be calculated. In second step percentage of change should be calculated with the
help of following formula.
Change in amount
Percentage of change = x 100
Base year amount
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Guidelines for interpretation:
The increase or decrease in sales should be compared with increase or decrease in

cost of goods sold.
If increase in sales is more than the cost of goods sold. It means that the
probability of the concerns is increased.
The amounts of gross profit should be studies.
Operating profits should be studied. The express should be deducted from gross
profit to find out operating profit and then operating incomes should be added.
The next step is some of the non operating expenses are to be deducted from the
operating profits and non operating incomes should be added to get net profit.
2. Comparative balance sheet:

The balance sheet prepared on a particular date reveals the financial
position of the concern on the date to study the trends of business over a period of time
comparative balance sheet reveals the cause for changes in the financial position on
amount of various transactions.
The comparative balance sheet consists of two columns for the original data. A
third column used to show increase or decrease in various items. A south column
containing the percentage of increase or decrease may be added.
Guidelines for interpretation of balance sheet:
The short term financial position can be studied by the comparing the working
capital of both years.
To study the liquidity position changes in liquid assets must be ascertain if there is
any increase in liquid assets. We must understand that is an improvement in the
liquidity position of the concern and vice versa.
47
A high increase in sundry debtors and bills receivable mean in increase in risk in
collecting the amount of dues.
Long term financial position of the business concern car is analyzed by studying
the changes in fixed assets, long term liabilities and capital
Fixed assets must be compared with long term loans and capital. If the increase in
fixed assets is more than the increase in long term financiers from the working
capital which is not good.
COMMON SIZE STATEMENTS:
The Common Size Statement, Balance Sheet and Income Statement are shown in
analytical percentages. The figures are shown as percentages of total assets, total
liabilities and sales. The total assets are taken as 100 and different assets are expressed as
percentage of the total. Similarly various liabilities are taken a part of total liabilities.
These statements are also shown as component parentage or 100% statements

because every individual item is stated as a percentage of the total short statements
because every individual item is stated as the total 100 the short comings in comparative
statements and trend percentages where changes in item could not be compared with the
total have been covered up. The common size statements may be prepared in the
following way:
o The totals of assets and liabilities are taken as 100.

o The individual assets are expressed as a percentage of total assets i.e., 100 and
different liabilities are calculated in relation to that liability.
1.Common Size Income Statement:
The items in income statement can be shown as percentages of sales to show the
relation of each item to sales. A significant relationship can be established between items
of income statement and volume of sales. The increase in sales will certainly increases
48
selling expression and volume of sales. The increase in sales will certainly increases
selling expresses and not administrative or financial expenses.
In case the volume of sale increases to a considerable extent, administrative and
financial expenses may go up. In case the sales are declining, the selling expenses should
be reduced at once.So, a relationship is established between sales and other income
statement and this relationship is helpful in evaluating operational activities of the
enterprises.
The common size income statement for a number of years is very helpful
in pointing out efficiencies and inefficiencies. Common size percentages must be
supplemented for making detailed analysis of financial and operating data.
2. Common size balance sheet:
Statement in which balance sheet items are expressed as the ratio of each asset to
total assets and the ratio of total liabilities is called common size balance sheet. The
common size balance sheet is a horizontal analysis. The comparison of figures in
different periods is not useful becomes total figure may be affected by a number of
factors. It is not possible to establish standard norms for various assets. The trends of year
to year may not be studied and even they may not give proper results.
Common size balance sheet is prepared by stating the total assets as 100 percent
and reducing individual assets into percentage of the total. Thus, the common size
balance sheet percentage shows the relation of each asset item to total assets and of ach
liability and owners equity item to total liabilities owners equity.
49
TREND ANALYSIS:
Trend analysis is an important tool of horizontal financial analysis. Trend analysis

is in making a comparative study of financial statement for several years. By studying the
trends of each item you can the direction of changes. Based upon the direction of
changes, the opinion can be formed.
Trend can be analyzed in any of the following ways:
By calculating trend ratio or percentage.
By plotting on graph paper of chat.
TREND RATIO OF PERCENTAGE:
The method of calculating trend ratio or percentage involves calculating of

percentage relationship that each item bears to the same item in the base year. Any year
may be taken as base year. It is usually the earliest year.
The value of one particular item out of several items shown in the financial
statements is converted into ratio or percentage taking of that item is the base year as
equal to 100.
PROCEDURE FOR CALCULATING TREND RATIOS:
Select any year as base year. Selected year should be the normal year. For base the
trend value is taken as 100
Trend ratio or percentage for each item should be calculating by using the
following formula.
Current year value
50
Trend ratio = -------------------------------- * 100
Base year value
FUNDS FLOW STATEMENT:
Funds flow statement is widely used tool in the hands of financial executives for
analyzing the financial performance of a concern. The traditional statement, balance sheet
and profits & loss account of a business tell little about its floe of funds i.e financing and
investing activities over the related period.
For successful running of the business the management must know various sources
from which funds are raised and they were utilized. To know this the management ill
prepare a statement know as funds flow statement.
Definitions:
The funds flow statement describes the sources from which additional funds were
derived and the uses to which these funds are put.
R. N. Anthony
A statements of sources and application of funds is a technical device designed to
analysis the changes in the financial condition of the business between two dates.
R. A. Foulk
It is a statement which highlights the underlying financial movements and explains the
changes of working from one point of time to anther
Bierman
Steps in preparation of funds flow statement:
Statement showing changes in working capital
Calculation of funds from operations
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Statement of sources and application of funds
CASH FLOW STATEMENT:
It is a statement which describes the inflow (sources) outflow (application) of

cash and cash equivalents in an enterprise during a specific period of time
Cash flow statement is a statement like funds flow statement. In cash flow
statement the term funds is used to mean cash only. Cash flow statement shows the
impact of transaction on cash position of the firm and includes all transaction have a
direct impact upon cash.
Definitions:
Cash flow statement can be defined as statement prepared from historical data
(income statement and balance sheet) showing sources and uses of cash is called cash
flow statement.
According to accounting standard (3) An enterprise should prepare or cash

flow statement and should presented.
The term cash, cash equivalent and cash flows are used in the statement with the
following measuring.
Cash comprises of cash on hand and demand deposits with banks
Cash equivalents are short term highly liquid investment that are readily
convertible into know amount of cash and which are subjective in
significant risk of changes in value.
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Cash flow is inflow and outflows of cash and cash equivalents.s
RATIO ANALYSIS:
Financial analysis depends to very large extents of the use of ratios

through there are other equality important tools of such analysis. Thus, a direct
examination of the magnitude of two released items is somewhat enlighten but the
comparison is greatly facilitated by expressing the relationship as a ratio.
The ratio analysis is one of the most powerful tools of financial analysis. It
is the process of establishing and interpreting various ratios (quantitative relationship
between figures and groups of figures). It is with the help of ratios that the financial
statements can be analyzed more clearly and decisions made from such analysis.
Ratios are among the best known and most widely used tools of financial
analysis. Ratio is defined formally as the indicated quotient of two mathematical
expressions. An operational definition of a financial ratio is the relationship between two
financial values.
Definitions:
According to Accountants Hand book by Wixon, Kelly and Bedford, a ratio is

an expression of the quantitative relationship between two numbers
According to Kohler, a ratio is the relation, of the amount; a, to another, b

expressed as the ratio of a to b; a: b (a is to b); or as a simple fraction, integer,
decimal fraction or percentage.
53
NATURE OF RATIO ANALYSIS:
Ratio analysis is a technique of analysis and interpretation of financial

statements. It is the process of establishing and interpreting various ratios for helping in
making certain decision. However, ratio analysis is not an end in itself. It is only a means
of better understandings of financial strengths and weaknesses of a firm.
There are a number of ratios which can be calculated from the information
given in the financial statements, but the analysts has to select the appropriate data and
calculate only a few appropriate ratios from the same keeping in mind the objective of
analysis.
SIGNIFICANCE OF RATIO ANALYSIS:
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as

The relationship between two or more things. In financial analysis, a ratio is used as a
benchmark for evaluating the financial position and performance of a firm.
The relationship between two accounting figures, expressed mathematically is

known as financial ratio. Ratio helps to summarize large quantities of financial data and
to make qualitative judgment about the firms financial position. It is used as a device to
analyze and interpret the financial health of enterprise.
54
It is the process of establishing and interpreting various ratios for helping
in making certain decisions. Ratio analysis is not an end in itself. It is only a means of
better understanding of financial strengths and weaknesses of a firm.
USES OF RATIO ANALYSIS:
1. MANAGERIAL USES OF RATIO ANALYSIS:
o Helps in decision making:

Ratio analysis helps in making decisions from the information provided in
these financial statements.
o Helps in Financial forecasting and planning:

Ratio analysis is of much help in financial forecasting and planning.
Planning is looking ahead and the ratios calculated for a number of years work as a guide
for the future. Meaningful conclusions can be drawn for future from these ratios. Thus,
ratio analysis helps in forecasting and planning.
o Helps in communication:
The information contained in the financial statements is conveyed in a
meaningful manner to the one for whom it is meant. Ratios help in communication and
enhance the value of the financial statements.
o Helps in co-ordination:
Ratios even help in co-ordination which is of utmost importance in
effective Business Management. Better communications of efficiency and weakness of an
enterprise results in better co-ordination in the enterprise.
55
o Helps in Control:
Ratio analysis even helps in making effective control of the business.
Standard ratios can be based upon perform a financial statements and variances or
deviations if any; can be found by comparing the actual with the standard so as to take a
corrective action at a right time.
LIMITATIONS OF RATIO ANALYSIS:
Difficulty in comparison:
One serious limitation of ratio analysis arises out of the difficulty

associated with the inter-firm comparison of ratios to draw inferences. But such
comparisons are of different procedures adopted by various firms (basis on inventory
valuation, depreciation methods, working life of assets etc).
Pricing level changes:
Financial accounting as it is currently practiced in India and most of the

countries do not take into account of change in price level.
As a result balance sheet figures are destroyed and profits are

misreckoned. Hence financial statement analysis can be considerably vitiated.
Window Dressing:
56
Firms may resort to window dressing to project a favorable financial
picture. For example a firm may prepare its balance sheet at a point when its inventory
level is very low.
As a result it may appear that the firm may has a very comfortable
liquidity position and a high turnover of inventories.
CLASSIFICATION OF RATIOS:
Ratio analysis is used to study the financial position, assessing the
operational efficiency, locating the week spots of the company and to compare the
performance. Ratios may be broadly classified into the following categories:
LIQUIDITY RATIOS:
Liquidity ratios measure the short-term solvency position of a company.
These ratios are calculated to comment up on the short-term paying capacity of a
company ability to meet its current obligations.
The important liquidity ratios are:
current ratio
quick ratio
absolute ratio
LONG-TERM SOLVENCY RATIOS:

The term solvency refers to the ability of a company to meet it long-term
obligations. Solvency ratios are important in analyzing the relationship between the debt
and equity components of the companys structure. This ratio shows how much of the
firms assets are financed by debt and equity and gives important about prospectus for
future financing. Usually the solvency ratio of a company is in the form of debt-equity
ratio.
The following solvency ratios are calculated:
debt equity ratio
equity ratio
57
fixed assets to net worth ratio
ACTIVITY RATIOS:
Turnover means the number of times and flows through a companys
operations and into sales. These ratios indicate the rate at which different assets are
turned over. These ratios are very important to judge how well facilities at the disposal of
the company are being used.
Turnover ratios indicate the effectiveness with which different assets are
utilized in a company. These ratios are usually calculated on the basis of sales or cost of
sales and are expressed in times rather than as a percentage. High turnover ratio indicates
its efficiency.
The following are the important Turnover ratios:
inventory turnover ratio

debtors turnover ratio
working capital turnover ratio
capital employed turnover ratio
fixed assets turnover ratio
PROFITABILITY RATIOS:
A company should earn profits to survive and grow over a long period of time.
Profits are essential but it would be wrong to assume that every action initiated by
management of a company. With the aim of maximizing profits, irrespective of social
consequences is right. These are used to measure the operational efficiency of the
company.
GENERAL PROFITABILITY RATIOS:

net profit ratio
total expenses ratio
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OVERALL PROFITABILITY RATIOS:
return on share holders investment
return on capital employed
CHAPTER-V
DATA ANALYSIS AND INTERPRETATIONS
Table: 5.1
PARTICULARS 2007 2008 CHANGE CHANGE

(Rs.) (Rs.) (Rs.) (%)
59
Sales 1,21,73,98,660 1,02,83,30,179 18,90,68,481 15.53
(-) cost of sales 1,09,20,02,401 91,54,16,560 17,65,85,841 16.17
Gross profit 12,53,96,259 11,29,13,619 1,24,82,640 9.95
(-)OPERATING
EXPENSES:
Personnel cost 4,32,28,526 5,03,36,287 71,07,761 16.44

Finance charges 3,27,31,287 5,00,30,429 1,72,99,142 52.85
Depreciation 3,68,67,966 3,87,78,343 19,10,377 5.18
11,28,27,779 13,91,45,059 2,63,17,280 23.32

Total
Operating profit 1,25,68,480 2,62,31,440 1,36,62,960 108.70
Total income 1,22,36,78,056 1,06,76,92,891 15,59,85,165 12.75

(-)Total expenditure 1,20,48,30,180 1,05,45,61,619 15,02,68,561 12.47
Profit before tax 1,88,47,876 1,31,31,272 57,16,604 30.33

Deferred tax
liability 7,72,710 1,51,593 6,21,117 80.38
Fringe benefit tax 9,49,571 9,50,000 429 0.04
Current tax 19,91,977 14,80,000 5,11,977 25.70
Earlier year tax 0 17,46,506 17,46,506 100.00
Profit after tax 1,66,79,038 88,03,173 78,75,865 47.22
COMPARATIVE INCOME STATEMENT (2007 2008) (Rs in crores)

Sources of Data: Annual Reports of Avanti Feeds Ltd
INTERPRETATION:
The performance of Avanti feeds ltd for the year 2007 and 2008 is not satisfactory
because there is a decrease in sales by Rs.18,90,68,481 and profits are also decreased by
Rs.78,75,865. The causes for such changes can be seen in the related figures.
60
The sales decreased by 15.53% and the cost of sales is also decreased by
16.17% .On account of this the gross profit is also decreased by 9.95%.This changes does
not show satisfactory results.
The operating expenses like personnel cost and finance charges increased by
16.44% and 52.85%.
The results are evident to say that Avanti feeds ltd performance for the year 2007-
2008 is not a good sign.
Table: 5.2
COMPARATIVE BALANCE SHEET (2007-2008)
(Rs in crores)

(Rs.) (Rs.) (Rs.) (%)
61
FIXED ASSETS:
Net block 36,82,09,241 33,42,59,762 - 3,39,49,479 -9.2

Work-in-progress 24,11,781 13,93,948 -10,17,833 -42.20
Investments 29,10,57,900 28,82,70,022 -27,87,878 -0.95
Total 66,16,78,922 62,39,23,732 -3,77,55,190 -0.570
CURRENT
ASSETS:
Interest accrued 16,19,280 21,09,235 4,98,955 30.98

Inventories 36,01,44,793 26,69,71,442 -93,17,335 -25.87
Cash & bank 7,31,97,462 3,97,50,706 -3,34,46,756 -45.69
balance 15,49,53,283 13,53,64,375 -1,95,88,908 -12.64
Sundry debtors 13,83,77,384 13,72,50,270 -11,27,114 -0.814
Loans & advance
72,82,83,202 58,14,46,028 -14,68,37,174 -20.16
Total
Total Assets 1,38,99,68,124 1,20,53,69,760 -18,45,92,364 -13.2
SHAREHOLDERS
FUNDS:
Share capital 6,54,00,000 6,54,00,000 0 0

Reserves & surplus 64,49,02,951 64,60,54,652 11,51,701 0.078
Secured loans 48,34,86,114 33,46,32,094 -14,88,54,020 -30.78
Unsecured loans 5,89,62,295 5,89,62,295 0 0
Deferred tax 1,75,14,098 1,76,65,692 1,51,594 0.86
liability 11,96,96,666 8,26,55,027 -3,70,41,639 -30.94
Current liabilities
1,38,99,62,124 1,20,53,69,760 -18,45,92,364 -13.2
Total
INTERPRETATION:-
In case of AVANTI FEEDS Ltd there is a decrease in working capital by
Rs.49,87,91,001.
62
The fixed assets for the year 2007-2008 were decreased by Rs.3,39,49,479 and the
long-term debt decreased by Rs.14,88,54,020 and share holders funds increased by
Rs.11,51,701. It means that fixed assets were fully financed out of long-term finances.
And part of the working capital is also not financed out of long-term finances which are
good sign.
If we observe the long-term finances the company has raised money from the public
by the issue of shares and debentures and repaid its institutional loans. This means the
company is enjoying the investors confidence.
Of the current assets debtors decreased by 12.64%. It means the company is able to
collect the money from its debtors promptly.
The liquidity position is not in a good sign and the same can be witnessed in the
cash and bank balances.
There is a decrease in the general reserve by 100.00%. It means the companys
profits decreased in the year 2007-2008.
Table: 5.3
COMPARATIVE INCOME STATEMENT (2008 2009)
(Rs in crores)
63
(Rs.) (Rs.) (Rs.) (%)
Sales 1,02,83,30,179 72,99,59,428 29,83,70,751 29.01

(-) cost of sales 91,54,16,560 68,23,40,484 23,30,76,076 25.46
Gross profit 11,29,13,619 4,76,18,944 6,52,94,675 57.82
(-)OPERATING
EXPENSES:
Personnel cost 5,03,36,287 4,88,95,109 14,41,178 2.86

Finance charges 5,00,30,429 7,09,14,448 2,08,84,019 41.74
Depreciation 3,87,78,343 3,34,15,329 53,63,014 13.82
13,91,45,059 15,32,24,886 1,40,79,827 10.12

Total
Total income 1,06,76,92,891 73,58,87,296 33,18,05,595 31.08

(-)Total expenditure 1,05,45,61,619 83,55,65,370 21,89,96,249 20.76
Profit before tax 1,31,31,272 9,96,78,074 8,65,46,802 659.08

Deferred tax
liability 1,51,593 2,99,30,663 2,97,79,070 19644.09
Fringe benefit tax 9,50,000 5,52,094 3,97,906 41.88
Current tax 14,80,000 0 14,80,000 100.00
Earlier year tax 17,46,506 0 17,46,506 100.00
Profit after tax 88,03,173 7,02,99,505 6,14,96,332 698.57
INTERPRETATION:
64
The performance of Avanti feeds ltd for the year 2008 and 2009 is not satisfactory
because there is a decrease in sales by Rs.29,83,70,751 but the profits are also increased
by Rs6,14,96,332.. The causes for such changes can be seen in the related figures.
The sales decreased by 29.01% and the cost of sales is also decreased by
25.46% .On account of this the gross profit is also decreased by 57.82%.This changes
does not show satisfactory results.
The operating expenses like personnel cost and finance charges increased by
2.86% and 41.74%.
2009 is not a good sign.
Table: 5.4
(Rs in crores)
65
CHANGE
PARTICULARS 2008 2009 CHANGE
(%)
(Rs.) (Rs.) (Rs.)
FIXED ASSETS:
Net block 33,42,59,762 30,05,44,952 -3,37,14,810 -10.00

Work-in-progress 13,93,948 ---- -13,93,948 -100.00
Investments 28,82,70,022 28,49,84,147 -32,85,875 -1.14
Deferred tax asset ----- 1,22,64,971 1,22,64,971 100.00
Total 62,39,23,732 59,77,94,070 -3,83,94,633 -6.15
CURRENT
ASSETS:
Interest accrued 21,09,235 5,79,248 -15,29,987 -72.53

Inventories 26,69,71,442 20,38,32,378 -6,31,39,064 -23.65
Cash , bank balance 3,97,50,706 8,99,41,460 -5,01,90,754 126.26
Sundry debtors 13,53,64,375 15,42,11,506 -1,88,47,131 13.92
Loans & advances 13,72,50,270 13,99,64,270 -27,14,000 1.98
Total 58,14,46,028 5,88,528,862 -70,82,834 238.33
Total Assets 1,20,53,69,760 1,18,63,22,932 -1,08,67,36,828 90.14
SHAREHOLDERS
FUNDS:
Share capital 6,54,00,000 8,00,00,000 -1,46,00,000 22.32

Reserves & surplus 64,60,54,652 61,95,55,147 -2,64,99,505 -4.10
Secured loans 33,46,32,094 30,81,89,596 -2,64,42,498 -7.90
Unsecured loans 5,89,62,295 5,89,62,295 0 0
Deferred tax 1,76,65,692 ---- -1,76,65,692 -100.00
liability 8,26,55,027 11,96,15,894 0 44.00
Current liabilities
Total 1,20,53,69,760 11,86,322,932 -1,08,67,36,828 90.14
INTERPRETATION:-
66
In case of AVANTI FEEDS Ltd there is a decrease in working capital by Rs.46,
89,12,968.
long-term debt decreased by Rs.2,64,42,498 and share holders funds are decreased by
Rs.1,18,99,505 . It means that fixed assets were not fully financed out of long-term
finances. And part of the working capital is not financed out of long-term finances which
are good sign.
Of the current assets debtors increased by 13.92%. It means the company is
unusable to collect the money from its debtors promptly.
The liquidity position improved substantially the same can be witnessed in the cash
and bank balances
Table: 5.5
(Rs in crores)
67
(Rs.) (Rs.) (Rs.) (%)
Sales 72,99,59,428 96,16,10,193 23,16,50,765 31.73

(-) cost of sales 68,23,40,484 93,94,95,966 25,71,55,482 37.68
Gross profit 4,76,18,944 2,21,14,227 2,55,04,717 53.56
(-)OPERATING
EXPENSES:
Personnel cost 4,88,95,109 4,64,16,142 24,78,967 5.06

Finance charges 7,09,14,448 3,12,73,802 3,96,40,646 55.89
Depreciation 3,34,15,329 2,78,26,961 2,44,11,632 73.05
15,32,24,886 10,55,16,905 4,77,07,981 31.13

Total
Total income 73,58,87,296 1,02,22,59,159 28,63,71,863 38.91

(-)Total expenditure 83,55,65,370 1,04,50,12,871 20,94,47,501 25.07

Deferred tax
liability 2,99,30,663 1,08,01,602 1,91,29,061 63.91
Fringe benefit tax 5,52,094 0 5,52,094 100.00
Current tax 0 0 0 0
Earlier year tax 0 0 0 0
Profit after tax 7,02,99,505 1,19,52,110 5,83,47,395 82.99
INTERPRETATION:
68
The performance of Avanti feeds ltd for the year 2009 and 2010 is satisfactory
because there is a increase in sales by Rs.23,16,50,765 but the profits are decreased by
Rs5,83,47,395.. The causes for such changes can be seen in the related figures.
The sales increased by 31.73% and the cost of sales is increased by 37.68% .On
account of this the gross profit is also decreased by 53.56%.This changes does not show
satisfactory results.
The operating expenses like personnel cost and finance charges decreased by5.06
% and 55.89%.
2010 is in a good sign because the sales are increased and the expenses are also
decreased.
Table: 5.6
69
(Rs in crores)
CHANGE
(%)
(Rs.) (Rs.) (Rs.)
FIXED ASSETS:
Net block 30,05,44,952 27,85,51,127 - -7.317

Work-in-progress ----- ---- 2,19,93,825 -----
Investments 28,49,84,147 32,33,06,400 0 13.44
Deferred tax asset 1,22,64,971 2,30,66,573 3,83,22,253 88.06
1,08,01,602
Total 59,77,94,070 62,49,24,100 4.538
2,71,30,030
CURRENT ASSETS:
Interest accrued 5,79,248 12,88,435 122.43

Inventories 20,38,32,378 27,27,48,568 7,09,187 33.81
Cash& bank balance 8,99,41,460 3,40,77,378 6,89,16,190 -62.11
Sundry debtors 15,42,11,506 8,93,27,212 - -42.07
Loans & advances 13,99,64,270 13,39,46,267 5,58,64,082 -4.299
-
Total 5,88,528,862 53,13,87,860 6,48,84,294 -9.709
-60,18,003
Total Assets 1,18,63,22,932 1,15,63,11,960 -2.529
-
SHAREHOLDERS 5,71,41,002
FUNDS:
-
Share capital 8,00,00,000 8,00,00,000 3,00,10,972 -----
Reserves & surplus 61,95,55,147 60,76,03,037 -1.929
Secured loans 30,81,89,596 25,82,93,622 -16.19
Unsecured loans 5,89,62,295 7,43,39,016 -----
Deferred tax liability ----- ----- -----
Current liabilities 11,96,15,894 13,60,76,285 0 -----
-1,19,52,110
Total 11,86,322,932 1,15,63,11,960 - -2.529
4,98,95,974
0
0
0
-
3,00,10,972
70
INTERPRETATION:
There is an decrease in working capital by Rs. 39,53,11,575.
long-term debt and share holders funds decreased by Rs.4,98,95,974 and Rs.1,19,52,110
respectively. It means that fixed assets were not fully financed out of long-term finances.
And part of the working capital is not financed out of long-term finances which are good
sign.
Of the current assets debtors decreased by 42.07%. It means the company is able to
The liquidity position is not in a good sign and the same can be witnessed in the
cash and bank balances.
71
Table: 5.7
(Rs in crores)

(Rs.) (Rs.) (Rs.) (%)
Sales 96,16,10,193 2,07,74,88,194 1,11,58,78,001 116.04

(-) cost of sales 93,94,95,966 1,69,04,14,060 75,09,18,094 79.62
Gross profit 2,21,14,227 38,70,74,134 38,49,59,907 1740.78
(-)OPERATING
EXPENSES:
Personnel cost 4,64,16,142 5,96,93,452 1,32,77,310 28.60

Finance charges 3,12,73,802 4,39,22,150 1,26,48,348 40.44
Depreciation 2,78,26,961 2,88,22,416 9,95,455 3.57
10,55,16,905 13,24,38,018 2,69,21,113 25.51

Total
Total income 1,02,22,59,159 2,11,69,66,031 1,09,47,06,872 107.09

(-)Total expenditure 1,04,50,12,871 2,06,58,52,078 1,02,08,39,207 97.68

Deferred tax
liability 1,08,01,602 98,90,866 9,10,736 8.43
Fringe benefit tax 0 0 0 0
Current tax 0 70,43,444 70,43,444 100.00
Profit after tax 1,19,52,110 3,41,79,643 2,22,27,533 185.97
72
INTERPRETATION:
because there is a increase in sales by Rs.1,11,58,78,001 and the profits are increased by
Rs2,22,27,533. The causes for such changes can be seen in the related figures.
account of this the gross profit is also increased by 174.78%.This changes shows
The operating expenses like personnel cost and finance charges increased
by28.60 % and 40.44%.
2010 is in a good sign because the sales are increased and even the expenses are also
increased which does not justify.
73
Table: 5.8
(Rs in crores)
CHANGE
(%)
(Rs.) (Rs.) (Rs.)
FIXED ASSETS:
Net block 27,85,51,127 26,62,31,857 -1,23,19,270 -4.42

Work-in-progress ---- ----- 0
Investments 32,33,06,400 39,48,29,790 7,15,23,390 22.12
Deferred tax asset 2,30,66,573 1,31,75,707 -98,90,866 -42.87
Total 62,49,24,100 67,42,37,354 4,93,13,254 7.89
CURRENT ASSETS:

Inventories 27,27,48,568 3,90,50,092 -23,36,98,476 -85.68
Cash, bank balance 3,40,77,378 4,10,00,686 69,23,308 20.31
Sundry debtors 8,93,27,212 23,00,77,235 14,07,50,023 157.56
Loans & advances 13,39,46,267 11,22,50,699 -2,16,95,568 -16.19
Total 53,13,87,860 77,56,31,627 -10,72,07,059 20.17
Total Assets 1,15,63,11,960 14,49,86,898 29,35,57,021 25.38
SHAREHOLDERS
FUNDS:
Share capital 8,00,00,000 8,00,00,000 0 0

Reserves & surplus 60,76,03,037 63,24,84,880 2,48,81,843 4.09
Secured loans 25,82,93,622 43,51,60,603 17,68,66,981 68.48
Unsecured loans 7,43,39,016 8,37,28,523 93,89,507 12.63
Deferred tax liability ----- ----- 0 0
Current liabilities 13,60,76,285 21,84,94,975 8,24,18,690 60.56
Total 1,15,63,11,960 1,44,98,68,981 29,35,57,021 25.38
74
INTERPRETATION:
In case of AVANTI FEEDS Ltd there is an increase in working capital by

Rs.7,53,78,16,652.
long-term debt and share holders funds increased by Rs.17,68,66,981 and
Rs.2,48,81,843 respectively. It means that fixed assets were fully financed out of long-
term finances. And part of the working capital is also financed out of long-term finances
which are good sign.
Of the current assets debtors increase by 157.56%. It means the company is unable
to collect the money from its debtors promptly.
and bank balances.
There is an increase in the general reserve by 100.00%. It means the companys
profits increased in the year 2010-2012.
75
Table: 5.9
(Rs in crores)

(Rs.) (Rs.) (Rs.) (%)
Sales 2,07,74,88,194 3,93,41,48,000 1,85,66,59,806 89.37

(-) cost of sales 1,69,04,14,060 3,13,00,85,000 1,43,96,70,940 85.16
Gross profit 38,70,74,134 1,05,25,96,806 66,55,22,672 171.94
(-)OPERATING
EXPENSES:
Personnel cost 5,96,93,452 34,99,96,000 29,03,02,548 486.32

Finance charges 4,39,22,150 4,06,90,000 32,32,150 7.36
Depreciation 2,88,22,416 4,00,42,000 1,12,19,584 38.93
13,24,38,018 43,07,28,000 29,82,89,982 225.22

Total
Total income 2,11,69,66,031 3,96,76,76,000 1,85,07,09,969 87.42

(-)Total expenditure 2,06,58,52,078 3,56,08,13,000 1,49,49,60,922 72.36

Deferred tax
liability 98,90,866 2,29,98,000 1,31,07,134 132.52
Current tax 70,43,444 9,66,00,000 8,95,56,556 1271.49
Profit after tax 3,41,79,643 28,07,02,000 24,65,22,357 721.25
76
INTERPRETATION:
because there is a increase in sales by Rs.1,85,66,59,809 and the profits are increased by
Rs.24,65,22,357 The causes for such changes can be seen in the related figures.
account of this the gross profit is also increased by 171.94%.This changes shows
The operating expenses like personnel cost is increased by Rs.486.32% and
finance charges decreased by 7.36 %.
2012 is in a good sign because the sales are increased and even the expenses are also
increased which does not justify.
77
Table: 5.10
(Rs in crores)
CHANGE
(%)
(Rs.) (Rs.) (Rs.)
FIXED ASSETS:
Net block 26,62,31,857 44,76,10,000 18,13,78,143 68.13

Work-in-progress 0 0 0 0
Investments 39,48,29,790 45,76,16,000 6,27,86,210 15.91
Deferred tax asset 1,31,75,707 0 -1,31,75,707 -100
Total 67,42,37,354 90,52,26,000 23,09,88,646 34.26
CURRENT ASSETS:

Inventories 3,90,50,092 42,15,26,000 38,24,75,908 979.45
Cash, bank balance 4,10,00,686 22,04,23,000 17,94,22,314 437.60
Sundry debtors 23,00,77,235 15,50,51,000 -7,50,26,235 -32.61
Loans & advances 11,22,50,699 13,27,99,000 2,05,48,301 18.30
Total 77,56,31,627 93,20,23,000 15,63,91,373 20.16
Total Assets 14,49,86,898 1,83,72,49,000 38,73,80,019 26.72
SHAREHOLDERS
FUNDS:
Share capital 8,00,00,000 9,08,30,000 1,08,30,000 13.53

Reserves & surplus 63,24,84,880 8,74,941,000 24,24,56,120 38.33
Secured loans 43,51,60,603 42,77,16,000 -74,44,603 -1.71
Unsecured loans 8,37,28,523 9,82,27,000 1,44,98,477 17.32
Deferred tax liability 0 0 0 0
Current liabilities 21,84,94,975 35,55,41,000 11,70,46,025 53.57
Total 1,44,98,68,981 1,83,72,49,000 38,73,80,019 26.72
78
INTERPRETATION:
In case of AVANTI FEEDS Ltd there is an increase in working capital by

Rs.57,64,82,000.
The fixed assets for the year 2011-2012 were increased by Rs.18,13,78,143 and the
long-term debt decreased by Rs.74,44,603 and share holders funds increased by
Rs.25,32,86,120 . It means that fixed assets were fully financed out of long-term
finances. And part of the working capital is also financed out of long-term finances which
are good sign.
Of the current assets debtors decrease by 32.61%. It means the company is able to
and bank balances.
There is an increase in the general reserve by 900.00%. It means the companys
profits increased in the year 2011-2012.
79
Table: 5.11
COMMON SIZE INCOME STATEMENT (2007 2008)
(Rs in crores)
PARTICULARS 2007 CHANGE 2008 CHANGE

(Rs.) (%) (Rs.) (%)
Sales 1,21,73,98,660 100.00 1,02,83,30,179 100.00

(-) cost of sales 1,09,20,02,401 89.69 91,54,16,560 89.02
Gross profit 12,53,96,259 10.30 11,29,13,619 10.98
(-)OPERATING
EXPENSES:
Personnel cost 4,32,28,526 3.56 5,03,36,287 4.89

Finance charges 3,27,31,287 11.93 5,00,30,429 4.86
Depreciation 3,68,67,966 2.69 3,87,78,343 3.77
11,28,27,779 9.26 13,91,45,059 13.53

Total
Operating profit 1,25,68,480 1.03 2,62,31,440 2.55
Total income 1,22,36,78,056 100.51 1,06,76,92,891 103.83

(-)Total expenditure 1,20,48,30,180 98.97 1,05,45,61,619 102.53
Profit before tax 1,88,47,876 1.55 1,31,31,272 1.28

Deferred tax
liability 7,72,710 0.06 1,51,593 0.01
Fringe benefit tax 9,49,571 0.08 9,50,000 0.09
Current tax 19,91,977 0.16 14,80,000 0.14
Earlier year tax 0 0 17,46,506 0.16
Profit after tax 1,66,79,038 1.37 88,03,173 0.86
80
INTERPRETATION:
The performance of Avanti feeds ltd for the year 2007 looks better than 2008.
In case of 2007 the cost of goods sold is more than 2008 by16.17%.
The operating expenses in the year 2007 is more than that of 2008 by 23.32%
The overall efficiency of Avanti feeds ltd in the year 2007 is satisfactory when
compared with the year 2008.
81
Table: 5.12
COMMOM SIZE BALANCE SHEET (2007-2008)
(Rs in crores)
PARTICULARS 2007 CHANGE 2008 CHANG

(Rs.) (%) (Rs.) E
(%)
FIXED ASSETS:
Net block 36,82,09,241 26.49 33,42,59,762 27.73

Work-in-progress 24,11,781 0173 13,93,948 0.11
Investments 29,10,57,900 20.93 28,82,70,022 23.91
Total 66,16,78,922 47.60 62,39,23,732 51.76
CURRENT ASSETS:
Interest accrued 16,19,280 0.11 21,09,235 0.17

Inventories 36,01,44,793 25.91 26,69,71,442 22.14
Cash & bank balance 7,31,97,462 5.26 3,97,50,706 3.29
Sundry debtors 15,49,53,283 11.14 13,53,64,375 11.23
Loans & advances 13,83,77,384 9.95 13,72,50,270 11.38
Total 72,82,83,202 52.39 58,14,46,028 48.23
Total Assets 1,38,99,68,12 100 1,20,53,69,76 100

4 0
SHAREHOLDERS
FUNDS:
Share capital 6,54,00,0 4.705 5.425

Reserves & surplus 00 46.397 6,54,00,000 53.59
Secured loans 64,49,02,951 34.784 64,60,54,652 27.76
Unsecured loans 48,34,86,114 4.242 33,46,32,094 4.89
Deferred tax liability 5,89,62,295 1.260 5,89,62,295 1.465
Current liabilities 1,75,14,098 8.6115 1,76,65,692 6.85
11,96,96,666 8,26,55,027
Total 100 100
1,38,99,62,12 1,20,53,69,76
4 0
82
INTERPRETATION:
In AVANTI FEEDS Ltd the current assets in 2007 is Rs.72,82,83,202 and in

2008 is Rs.58,14,46,028 and current liabilities in 2007 is Rs.11,96,96,666 and in 2008 is
Rs.8,26,55,027.It means the working capital position and liquidity position are favorable.
The fixed assets in AVANTI FEEDS Ltd are in 2007 is Rs.36,82,09,241 & in
2008 is Rs.33,42,59,762 and the aggregate of long-term debt and share holders in 2007
is Rs.1,19,37,89,065 and 2008 is 1,04,60,86,746. It means of the fixed assets are fully
financed out of short-term funds which is a healthy sign.
It means the working capital is financed out of long-term funds which is a good
practice the overall financial position of the AVANTI FEEDS Ltd as in good position.
83
Table: 5.13
(Rs in crores)

(Rs.) (%) (Rs.) (%)
Sales 1,02,83,30,179 100.00 72,99,59,428 100.00

(-) cost of sales 91,54,16,560 89.02 68,23,40,484 93.48
Gross profit 11,29,13,619 10.98 4,76,18,944 6.52
(-)OPERATING
EXPENSES:
Personnel cost 5,03,36,287 4.89 4,88,95,109 6.70

Finance charges 5,00,30,429 4.86 7,09,14,448 9.71
Depreciation 3,87,78,343 3.77 3,34,15,329 4.58
13,91,45,059 13.53 15,32,24,886 20.99

Total
Total income 1,06,76,92,891 103.83 73,58,87,296 100.81

(-)Total expenditure 1,05,45,61,619 102.53 83,55,65,370 114.47

Deferred tax
liability 1,51,593 0.01 2,99,30,663 4.10
Fringe benefit tax 9,50,000 0.09 5,52,094 0.07
Current tax 14,80,000 0.14 0 0
Earlier year tax 17,46,506 0.16 0 0
Profit after tax 88,03,173 0.86 7,02,99,505 9.63
84
INTERPRETATION:
In case of 2008 the cost of goods sold is more than 2009 by 25.46%.
The overall efficiency of Avanti feeds ltd during the year 2008-2009 is
satisfactory which is a good sign.
85
Table: 5.14
(Rs in crores)

(Rs.) (%) (Rs.) E
(%)
FIXED ASSETS:
Net block 33,42,59,762 27.73 30,05,44,952 25.33

Work-in-progress 13,93,948 0.12 0 0
Investments 28,82,70,022 23.92 28,49,84,147 24.02
Deferred tax asset 0 0 1,22,64,971 1.03
Total 62,39,23,732 51.76 59,77,94,070 50.39
CURRENT ASSETS:

Inventories 26,69,71,442 22.15 20,38,32,378 17.18
Sundry debtors 13,53,64,375 11.23 15,42,11,506 13.0
Loans & advances 13,72,50,270 11.39 13,99,64,270 11.80
Total 58,14,46,028 48.24 5,88,528,862 49.61
Total assets 1,20,53,69,76 100 1,18,63,22,93 100

0 2
SHAREHOLDERS
FUNDS:
Share capital 5.43 6.74

Reserves & surplus 53.60 52.22
Secured loans 6,54,00,000 27.76 8,00,00,000 25.98
Unsecured loans 64,60,54,652 4.89 61,95,55,147 4.97
Deferred tax liability 33,46,32,094 1.47 30,81,89,596 0
1,76,65,692 0
Total 8,26,55,027 100 11,96,15,894 100
1,20,53,69,76 11,86,322,932
0
86
INTERPRETATION:
In AVANTI FEEDS Ltd the current assets in 2008 is Rs.5,81,44,60,28 and in

Rs.11,96,15,894.It means the working capital position and liquidity position are
favorable.
is Rs.1,04,60,86,746 and in 2009 is Rs.1,00,77,44,743. It means of the fixed assets are
fully financed out of short-term funds which is a healthy sign.
87
Table: 5.15
(Rs in crores)

(Rs.) (%) (Rs.) (%)
Sales 72,99,59,428 100.00 96,16,10,193 100.00

(-) cost of sales 68,23,40,484 93.48 93,94,95,966 97.70
Gross profit 4,76,18,944 6.52 2,21,14,227 2.30
(-)OPERATING
EXPENSES:
Personnel cost 4,88,95,109 6.70 4,64,16,142 4.82

Finance charges 7,09,14,448 9.71 3,12,73,802 3.25
Depreciation 3,34,15,329 4.58 2,78,26,961 2.89
15,32,24,886 20.99 10,55,16,905 10.97

Total
Total income 73,58,87,296 100.81 1,02,22,59,159 106.3

(-)Total expenditure 83,55,65,370 114.46 1,04,50,12,871 108.65

Deferred tax
liability 2,99,30,663 4.10 1,08,01,602 1.12
Fringe benefit tax 5,52,094 0.07 0 0
Current tax 0 0 0 0
Profit after tax 7,02,99,505 9.63 1,19,52,110 1.24
88
INTERPRETATION:
In case of 2009 the cost of goods sold is less than that of 2010 by 37.68%.
satisfactory which a good sign is.
89
Table: 5.16
(Rs in crores)

(Rs.) (%) (Rs.) E
(%)
FIXED ASSETS:
Net block 30,05,44,952 25.33 24.09

Investments 28,49,84,147 24.02 27,85,51,127 27.96
deferred tax asset 1,22,64,971 1.03 32,33,06,400 1.99
2,30,66,573
Total 59,77,94,070 50.39 54.04
62,49,24,100
CURRENT ASSETS:
Interest accrued 5,79,248 0.05 0.11

Inventories 20,38,32,378 17.18 12,88,435 23.59
Sundry debtors 15,42,11,506 13.0 3,40,77,378 7.73
Loans & advances 13,99,64,270 11.80 8,93,27,212 11.58
13,39,46,267
Total 5,88,528,862 49.61 45.96
53,13,87,860
Total assets 1,18,63,22,932 100 100
1,15,63,11,960
SHAREHOLDERS FUNDS:
Share capital 8,00,00,000 6.74 6.92

Reserves & surplus 61,95,55,147 52.22 8,00,00,00 52.55
Secured loans 30,81,89,596 25.98 0 22.34
Unsecured loans 5,89,62,295 4.97 60,76,03,037 6.43
Deferred tax liability 0 0 25,82,93,622 0
0
Total 11,86,322,932 100 13,60,76,285 100
1,15,63,11,960
90
INTERPRETATION:
In AVANTI FEEDS Ltd the current assets in 2009 is Rs.58,85,28,862 and in 2010
is Rs.53,13,87,860 and current liabilities in 2009 is Rs.11,96,15,894 and in 2010 is
favorable.
91
The fixed assets in AVANTI FEEDS Ltd are in 2009 is Rs.s30,05,44,952 & in
is Rs.1,00,77,44,743 and 2010 is Rs.94,58,96,659. It means of the fixed assets are fully
Table: 5.17
(Rs in crores)

(Rs.) (%) (Rs.) (%)
92
Sales 96,16,10,193 100.00 2,07,74,88,194 100.00
(-) cost of sales 93,94,95,966 97.70 1,69,04,14,060 81.37
Gross profit 2,21,14,227 2.30 38,70,74,134 18.63
(-)OPERATING
EXPENSES:
Personnel cost 4,64,16,142 4.82 59,693,452 2.87

Finance charges 3,12,73,802 3.25 4,39,22,150 2.11
Depreciation 2,78,26,961 2.89 2,88,22,416 1.39
10,55,16,905 10.97 13,24,38,018 6.37

Total
Total income 1,02,22,59,159 106.3 2,11,69,66,031 101.9


Deferred tax
liability 1,08,01,602 1.12 98,90,866 0.47
Current tax 0 0 70,43,444 0.34
Profit after tax 1,19,52,110 1.24 3,41,79,643 0.58
INTERPRETATION:
93
satisfactory which a good sign is.
Table: 5.18
(Rs in crores)

(Rs.) (%) (Rs.) (%)
94
FIXED ASSETS:
Net block 27,85,51,127 24.09 26,62,31,857 18.36

Investments 32,33,06,400 27.96 39,48,29,790 27.23
deferred tax asset 2,30,66,573 1.99 1,31,75,707 0.91
Total 62,49,24,100 54.04 67,42,37,354 46.50
CURRENT ASSETS:

Inventories 27,27,48,568 23.59 3,90,50,092 2.69
Sundry debtors 8,93,27,212 7.73 23,00,77,235 15.87
Loans & advances 13,39,46,267 11.58 11,22,50,699 7.74
Total 53,13,87,860 45.96 77,56,31,627 53.50
Total assets 1,15,63,11,960 100 14,49,86,898 100
SHAREHOLDERS
FUNDS:
Share capital 8,00,00,000 6.92 8,00,00,000 5.52

Secured loans 25,82,93,622 22.34 43,51,60,603 30.01
Unsecured loans 7,43,39,016 6.43 8,37,28,523 5.77
Total 1,15,63,11,960 100 1,44,98,68,981 100
INTERPRETATION:
95
In AVANTI FEEDS Ltd the current assets in 2010 is Rs.53,13,87,860 and in
favorable.
is Rs.94,58,96,659 and 2011 is Rs.1,14,76,45,483. It means of the fixed assets are fully
Table: 5.19
(Rs in crores)
96
(Rs.) (%) (Rs.) (%)
Sales 2,07,74,88,194 100.00 3,93,41,48,000 100.00

(-) cost of sales 1,69,04,14,060 81.37 3,13,00,85,000 79.56
Gross profit 38,70,74,134 18.63 1,05,25,96,806 26.75
(-)OPERATING
EXPENSES:
Personnel cost 5,96,93,452 2.87 34,99,96,000 8.89

Finance charges 4,39,22,150 2.11 4,06,90,000 1.03
Depreciation 28822416 1.39 4,00,42,000 1.02
13,24,38,018 6.37 43,07,28,000 10.94

Total
Total income 2,11,69,66,031 101.9 3,96,76,76,000 100.85


Deferred tax
liability 98,90,866 0.47 2,29,98,000 0.58
Current tax 70,43,444 0.34 9,66,00,000 2.45
Profit after tax 3,41,79,643 0.5 28,07,02,000 0.58
INTERPRETATION:
97
The operating expenses in the year 2011 is less than that of 2012 by 4.57%
The overall efficiency of Avanti feeds ltd for the year 2012 is satisfactory when
compared with the year 2011 which is a good sign.
Table: 5.20
(Rs in crores)

(Rs.) (%) (Rs.) (%)
98
FIXED ASSETS:
Net block 26,62,31,857 18.36 44,76,10,000 24.36

Investments 39,48,29,790 27.23 45,76,16,000 24.90
deferred tax asset 1,31,75,707 0.91 0 0
Total 67,42,37,354 46.50 90,52,26,000 49.27
CURRENT ASSETS:

Inventories 3,90,50,092 2.69 42,15,26,000 22.94
Sundry debtors 23,00,77,235 15.87 15,50,51,000 8.44
Loans & advances 11,22,50,699 7.74 13,27,99,000 7.23
Total 77,56,31,627 53.50 93,20,23,000 50.72
Total assets 14,49,86,898 100 1,83,72,49,000 100
SHAREHOLDERS
FUNDS:
Share capital 8,00,00,000 5.52 9,08,30,000 4.95

Secured loans 43,51,60,603 30.01 42,77,16,000 23.28
Unsecured loans 8,37,28,523 5.77 9,82,27,000 5.35
Total 1,44,98,68,981 100 1,83,72,49,000 100
INTERPRETATION:
99
In AVANTI FEEDS Ltd the current assets in 2011 is Rs.77,56,31,627 and in 2012
is Rs.93,20,23,000 and current liabilities in 2011 is Rs.21,84,94,975 and in 2012 is
favorable.
2012 is Rs.44,76,10,000and the aggregate of long-term debt and share holders in 2011
is Rs.1,14,76,45,483and 2012 is Rs.1, 39,34,87,000. It means of the fixed assets are fully
practice the overall financial position of the AVANTI FEEDS Ltd is in good position.
Table: 5.21
TREND ANALYSIS
(Rs in crores)
100
Year
2007-2008 2008-2009 2009-2010 2010-2011 2011-2012
Current
58,14,46,028 58,85,28,862 53,13,87,860 7,75,63,11,627 93,20,23,000
Assets
Trends 100.00 101.21 91.39 1333.97 160.29
Current
8,26,55,027 11,96,15,894 13,60,76,285 21,84,94,975 35,55,41,000
liabilities
Trends
100.00 144.72 164.63 264.34 430.15
Net
working
49,87,91,001 46,89,12,968 39,53,11,575 7,53,78,16,652 57,64,82,000
capital
Trends 100.00 94.01 79.25 1511.22 115.57

101
Fig: 5.1
INTERPRETATION:-
In AVANTI FEEDS Ltd the pace of growth in the indices of current assets
greater than that of the current liabilities throughout the study period from 2007-2012
under observation. The net working capital indices also confirm it.
AVANTI FEEDS Ltd could enjoy positive net working capital throughout the
period 2007-2012under reference. But the company net working capital had fluctuated
very intensively. Overall, the AVANTI FEEDS Ltd net working capital condition was
satisfactory.
102
RATIO ANALYSIS:
The ratio analysis is one of the most powerful tools of financial analysis. It
is the process of establishing and interpreting various ratios (quantitative
relationship between figures and groups of figures). It is with the help of ratios that
the financial statements can be analyzed.
PROFITABILITY RATIOS:
A company should earn profits to survive and grow over a long period of
time. Profits are essential but it would be wrong to assume that every action
initiated by management of a company. With the aim of maximizing profits,
irrespective of social consequences is right. These are used to measure the
operational efficiency of the company.
GROSS PROFIT RATIO:

It measures the relation between gross profit to net sales.
GROSS PROFIT RATIO = (GROSS PROFIT / SALES)*100
Table: 5.22
YEARS GROSS PROFIT SALES RATIO

2007-08 11,21,13,619 1,02,83,30,179 10.90
2008-09 4,76,18,944 72,99,59,428 6.52
2009-10 2,21,14,227 96,16,10,193 2.30
2010-11 38,70,74,134 2,07,74,88,194 18.63
2011-12 1,05,25,96,806 3,93,41,48,000 26.75
103
Fig: 5.2
INTERPRETATION:
The gross profit ratio for the year may 2007-2008 is 10.90 but it was decreased in
the year 2008-2009 to 6.52 and in the year 2009-2010 the ratio is decreased to 2.30. In
the year 2010-2011 the ratio is increased to 18.63 and in the year 2011-2012 the ratio is
increased to 26.75.
The fluctuations are due to decrease in units sold and increase in cost of goods
sold the minimum gross profit ratio is 75% so the gross profit ratio is not satisfactory.
104
NET PROFIT RATIO:
It establishes a relationship between net profits after tax and net sales, and
indicates the efficiency of the management in manufacturing, selling, administrative
and other activities of the company.
NET PROFIT RATIO = (NET PROFIT AFTER TAX / NET SALES) * 100
Table: 5.23
PROFIT AFTER
YEARS SALES RATIO
TAXES
2007-08 88,03,173 1,02,83,30,179 0.85
2008-09 7,02,99,505 72,99,59,428 9.63
2009-10 1,19,52,110 96,16,10,193 1.24
2010-11 3,41,79,643 2,07,74,88,194 1.64
2011-12 28,07,02,000 3,93,41,48,000 7.13

105
Fig: 5.3
INTERPRETATION:
The net profit ratio for the year 2007-2008 is 0.85 but it was increased in the year
2008-2009 is 9.63 and in the year 2009-2010 the ratio is decreased to 1.24. In the year
2010-2011 the ratio is slightly increased to 1.64 and in the year 2011-2012 the ratio is
increased to 7.13.
The fluctuations are due to increase and decrease of net profit and the sales value
the minimum net profit ratio is 15 to 20%so the net profit of the firm is not satisfactory.
106
OPERATING PROFIT RATIO:
This ratio expresses the relationship between operating profit and sales. It is
worked out by dividing operating profit by net sales. With the help of this ratio one can
judge the managerial efficiency which may not be reflected in net profit ratio.
OPERATING PROFIT RATIO = OPERATING PROFIT / NET SALES * 100
Table: 5.24
OPERATING
YEARS SALES RATIO
PROFIT
2007-08 2,62,31,440 1,02,83,30,179 2.55
2008-09 10,56,05,902 72,99,59,428 14.47
2009-10 8,34,02,678 96,16,10,193 8.67
2010-11 25,46,36,116 2,07,74,88,194 12.25
2011-12 62,18,68,806 3,93,41,48,000 15.81

107
Fig: 5.4
INTERPRETATION:
The operating ratio for the year may 2007-2008 is 2.55 but it was increased in the
year 2008-2009 is 14.47 and in the year 2009-2010 the ratio is decreased to 8.67. In the
year 2010-2011 the ratio is increased to 12.25 and in the year 2011-2012 the ratio is
continued to increase and it is recorded as 15.81. This is due to fluctuations in percentage
of net sales.
108
SOLVENCY RATIOS:
The term solvency refers to the ability of a company to meet it long-term

obligations. Solvency ratios are important in analyzing the relationship between the
debt and equity components of the companys structure. This ratio shows how much
of the firms assets are financed by debt and equity and gives important about
prospectus for future financing. Usually the solvency ratio of a company is in the
form of debt-equity ratio.
DEBT -EQUITY RATIO:
This ratio explains the relationship between the owners funds to borrowed funds.
The owners funds is also known as internal equities or shareholders funds. This ratio is
also known as external internal equity ratio.
DEBT EQUITY RATIO = EXTERNAL FUNDS / SHAREHOLDERS FUNDS
YEARS EXTERNAL SHAREHOLDERS RATIO

FUNDS FUNDS
2007-08 39,35,94,389 71,14,54,652 0.55
2008-09 36,71,51,891 69,95,55,147 0.52
2009-10 33,26,32,638 68,76,03,037 0.48
2010-11 51,88,89,126 71,24,84,880 0.72
2011-12 52,59,43,000 96,57,71,000 0.54

Table: 5.25
109
Fig: 5.5
INTERPRETATION:
The debt equity ratio for the year 2007-2008 is 0.55 but it was decreased in the
year 2008-2009 is 0.52 and in the year 2009-2010 the ratio is decreased to 0.48 and in
the year 2010-2011 the ratio is increased to 0.72 and in the year 2011-2012 the ratio is
again decreased to 0.54.
If the debt is more than two times the equity and the state of long term creditors
are more and it indicates weak financial structure. In the observation period that is from
2007-2012, the ratios are depressed. Under this there is more debt than equity.
110
PROPRIETORS RATIO:
This ratio explains the relationship between the shareholders funds to total assets
of the business. This ratio is also known as equity ratio.
PROPRIETORS RATIO = PROPRITORS FUNDS / TOTAL ASSETS
Table: 5.26
PROPRIETORS
YEARS TOTAL ASSETS RATIO
FUNDS
2007-08 71,14,54,652 91,57,05,790 0.78
2008-09 69,95,55,147 88,90,73,814 0.79
2009-10 68,76,03,037 80,99,38,987 0.84
2010-11 71,24,84,880 1,04,18,63,484 0.68
2011-12 96,57,71,000 1,37,96,33,000 0.70
111
Fig: 5.6
INTERPRETATION:
The proprietors ratio for the year 2007-2008 is 0.78 but it was increased in the
year 2008-2009 is 0.79 and in the year 2009-2010 the ratio is slightly increased to 0.84
and in the year 2010-2011 the ratio is decreased to 0.68 and in the year 2011-2012 the
ratio is increased to 0.70.
The long term financial position of the firm is not satisfactory. The shareholders
share in the total assets of the firm is less than half.
112
NETWORTH TO SALES RATIO:
This ratio shows the relationship between owners funds to sales. This ratio is one
among the long term solvency ratios which explains the relation between the sales and
shareholders funds.
NET WORTH TO SALES RATIO = SALES / OWNERS FUNDS
Table: 5.27
YEARS SALES OWNERS FUNDS RATIO
2007-08 1,02,83,30,179 71,14,54,652 0.78
2008-09 72,99,59,428 69,95,55,147 0.79
2009-10 96,16,10,193 68,76,03,037 0.84
2010-11 2,07,74,88,194 71,24,84,880 0.68
2011-12 3,93,41,48,000 96,57,71,000 0.70

113
Fig: 5.7
INTERPRETATION:
This ratio expressed the relationship between sales and owners funds. In the
year 2007-08 the ratio is 1.44 and in the year in 2008-09 the ratio is slightly decreased to
1.04.In the year 2009-10 the ratio is 1.4 and again in the year 2010-11 it is increased to
2.92 and in the year 2011-12 the increase continued and stood at 4.07.This ratio shows
that the firm is at good sign.
114
TURN OVER RATIOS:
Activity ratio measures the efficiency of business in utilizing the assets. This ratio
measures the speed with which the assets are converted into sales and as such there are
known as turnover ratios. these ratios calculated with reference to sales that is cost of
sales to sales, debtors to sales etcThese ratios are also known as performance ratios or
velocity ratios.
STOCK TURNOVER RATIO:
This ratio indicates the number of times the stock is sold out during the year, the
cost of sales is compared with the cost in trade. This ratio indicates the efficiency in
inventory management. The ideal ratio is 8 times.
STOCK TURNOVER RATIO = COST OF SALES / AVERAGE STOCK
Table: 5.28
AVERAGE
YEARS COST OF SALES RATIO
STOCK
2007-08 91,54,16,560 3,13,55,81,175 0.29
2008-09 68,23,40,484 23,54,01,910 2.89
2009-10 93,94,94,966 23,82,90,473 3.94
2010-11 1,69,04,14,060 3,31,62,47,445 0.51
2011-12 3,13,00,85,000 40,60,13,460 7.71

115
Fig: 5.8
INTERPRETATION:
This particular bar diagram shows the net sales and inventory turnover in the
last five financial years and in the year 2007-08 and in the year 2010-11 the lowest
inventory turnover ratio is observed with 0.29 and 0.51 respectively and 2009-10 the
highest inventory turnover ratio is observed with 3.94.
On observation throughout the periods from 2007-2012 the stock turnover
ratio shows satisfactory results.
116
DEBTORS TURNOVER RATIO:
This ratio indicates the average time lag in number of days between sales and cash
collection from debtors. This ratio will indicate the number of days credit enjoyed by the
debtors that is time taken in converting sales into cash. This ratio is also known
receivable turnover ratio.
DEBTORS TURNOVER RATIO = SALES / DEBTORS
YEARS SALES DEBTORS RATIO
2007-08 1,02,83,30,179 13,53,64,375 7.59
2008-09 72,99,59,428 15,42,11,506 4.73
2009-10 96,16,10,193 8,93,27,212 1.07
2010-11 2,07,74,88,194 23,00,77,235 9.02
2011-12 3,93,41,48,000 15,50,51,000 25.37

Table: 5.29
117
DEBTORS TURN OVER RATIO
Fig: 5.9
INTERPRETATION:
The ratio in the beginning year 2007 is 7.59. The ratio in the ending year 2012 is
25.37.In the year 2008-09 the ratio is decreased to 4.73 and the decrease continued to
2009-10 and it is recorded as 1.07 and in the year 2010-11 the ratio is increased to 9.02
and in the year 2011-12 the ratio continued to increase and it stood at 25.37.
In between 2007 and 2012 there are fluctuations in the debtors turnover ratio.
The higher ratio is an indicator of high speed with which debtors or account receivables
are collected. The company has been adopting conservative credit policy.
118
WORKING CAPITAL TURNOVER RATIO:
This ratio indicates the relationship between sales to working capital. The ratio
shows number of times the working capital results in a series. Working capital as usual is
excess of current assets over the current liabilities. The following formula is used to
measure this ratio
WORKING CAPITAL TURNOVER RATIO = NET SALES / WORKING CAPITAL
Table: 5.30
WORKING
YEARS SALES RATIO
CAPITAL
2007-08 1,02,83,30,179 49,87,91,001 2.06
2008-09 72,99,59,428 46,89,12,968 1.56
2009-10 96,16,10,193 39,53,11,575 0.24
2010-11 2,07,74,88,194 7,53,78,16,652 0.27
2011-12 3,93,41,48,000 57,64,82,000 6.82

119
WORKING CAPITAL TURNOVER RATIO
Fig: 5.10
INTERPRETATION:
This ratio is relationship between the sales and working capital. The reciprocal
of this ratio indicates the amount of net current assets needed to sales one rupee. The ratio
shows the number of times the working results into sales. The highest ratio in the year
2011-12 is 6.82. The lowest ratio value is 0.24 is observed in 2009-10.There are various
fluctuations in between 2007 and 2012. In the year 2007-08 the ratio is 2.06 an din the
year 2008-09 it is decreased to 1.56 and in the year 2009-10 the decrease continued and it
stood at 0.27. but in the year 2010-11 there is a slight increase in the ratio and the ratio is
0.27. at the end of my observation period the ratio is increased to 6.82.
120
CHAPTER-VI
FINDINGS, SUGGESTIONS & SUMMARY
FINDINGS:
The financial statement analysis reflects the financial performance of a firm by

covering the areas of financial management. This statement analysis acts as an indicator
of financial health of the organization.
Comparative statements, common size statements, trend analysis and ratios are
calculated to evaluate financial health of Avanti feeds ltd.
It can be observed in comparative income statement from 2007-2012 that the
expenditure is subjected to changes. Initially in 2007-08 it is recorded as 12.47%
and in 2011-12 it is 72.36%.The expenditure is increased.
From the comparative balance sheet it can be observed that the fixed assets are
decreased from 2007-2010. But at the end of my observation period it is increased
to 68.13%. at the beginning of observation period it was -9.2%.
From the common size income statement it be observed that the expenses are less
incurred i.e.., in 2007 it is 13.53% but in 2012 it is reduced to 10.94%.
From the income statements the profit position is evaluated before taxes and after
taxes to know the financial performance.
From the trend analysis it can be observed that the trends of net working capital
are showing the positive trend which is satisfactory.
From the ratio analysis the debt-equity ratio explains relationship between the
debt and equity sources. The company is maintaining these two sources at equal
rate.
Fixed assets disclose the strength of the firm. The company is maintaining the
fixed assets at average rate only.
121
The Net profit ratio will determine the performance of the company. Whenever
this is increasing rate the company performance is good. But the company is not
doing well.
SUGGESSTIONS:
The following suggestions are made to have better financial performance of

Avanti feeds ltd
1. It is suggested that the company need to reduce the expenses which in turn
leads to profits.
2. There is an increase in fixed assets though it was decreased initially. It is
suggested to maintain the same growth in case of fixed assets because these assets help
the company in carrying on its activities.
3. From the common size income statement it is observed that the expenses are
less incurred. And it is recommended to maintain the same standards to gain more profits.
4. From the trend analysis it is clear that there is a positive networking capital
which can be suggested to maintain the same in future.
5. From the ratio analysis the debt-equity ratio explains relationship between the
debt and equity sources and the company is maintaining these two sources at equal rate. It
can be suggested to maintain in the ratio of 2:1 for better results.
6. AVANTI FEEDS LTD is maintaining them at low rate it can be suggested to
maintain in a high rate in order to increase production and reduce cost.
7. It can be suggested to take remedial measures to increase the net profit ratio
such that it leads in increasing the companys performance.
8. It can be suggested to maintain the same in case of common size balance sheets
that the expenses should be less incurred.
122
SUMMARY:
This work title FINANCIAL STATEMENT ANALYSIS is carried out at the

best of AVANTI FEEDS LIMITED . The basic purpose of the empirical work done is
to understand the financial abilities, growth. Management should be interested in
knowing the financial strength of the firm to make their best use to be spot out the
financial weakness of firm to take suitable corrective actions
Finance is an integral part of modern economic life and occupies an important

place in all economic activities. Finance is the science of money and life blood of
industrial system. Financial management is that managerial activities. This is concerned
with the planning and controlling of the firms financial resources. Financial
management in its infancy deal with the financing of corporate enterprises to meet their
financing needs because of its central emphasis on the procurement of funds.
The first chapter deals with the introduction to financial management and
introduction to project title financial statement analysis. It also deals with the need,
objectives, methodology and limitations of the study.
The second chapter deals with the industry profile of Avanti feeds limited. The
origin of the feeds industry is described in this chapter.
The third chapter deals with the company profile. The profile of Avanti feeds
limited and its operational strategies, performance is explained in this chapter.
The fourth chapter deals with the theoretical analysis of the study.
The fifth chapter deals with data analysis and interpretation of financial statement
analysis through the sources available from Avanti feeds limited.
The sixth chapter deals with the findings and suggestions to Avanti feeds limited
based on the data analyzed in the study.
123
The last chapter deals with the bibliography i.e.., the details of the sources which I
used to analyze the financial statement analysis of Avanti feeds limited.
BIBILOGRAPHY:
FINANCIAL STATEMENT ANALYSIS - GOKUL SINHA
FINANCIAL ACCOUNTING - R. NARAYANA SWAMY
FINANCIAL MANAGEMENT - SUDHINDRA BHAT
FINANCIAL MANAGEMENT - G. SUDARSHANA REDDY
FINANCIAL MANAGEMENT - M.Y. KHAN & PK. JAIN
FINANCIAL MANAGEMENT - I.M PANDEY
FINANCIAL MANAGEMENT - PRASANNA CHANDRA
FINANCIAL MANAGEMENT - M.Y.KHAN & JAIN
WEBSITES:
www.avantifeeds.com
www.avantiindia.com
124

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CHAPTER-I

INTRODUCTION TO FINANCIAL MANAGEMENT

Financial management is that managerial activity which is concerned with the

The subjects of financial management are of immense interest to both

The modern thinking in financial management accords a far greater importance to

Financial Management is an area of financial decision making, harmonizing individual

Financial Management is the operational activity of a business that is responsible for

It is a process of evaluating the relationship between component parts of a financial

Metcalf and Titard

Financial statement analysis is largely a study of relationship among the various

1. To reduce the misuse of funds:

2. To maximize the profit in long run:

3. To maximize the wealth of company:

a) To increase dividend per share

b) To increase earnings per share

c) To analyze the value of share in market.

Three most important activities of a business firm are

A dividend decision is the third major financial decision. The financial

Financial statements comprise Income Statement, Balance Sheet and other

Meaning of Financial Statement Analysis:

Financial statement analysis enables investors and creditors to evaluate past

Now the day analysis of financial statements has become of general

SIGNIFICANCE TO FINANCIAL INSTITUTIONS:

Provide information needs of various present and prospective stakeholders about

Observe legal formation.

Enhance credibility of the enterprise and increase its market acceptability.

Build up better performance of the enterprise.

Users of a financial statement should be aware of the advantages of the

Through analyzing these statements, an idea about the existing economic

These statements present facts in numbers, personal observing the events

It is difficult for individual households to examine the financial statements of

Financial statements relate to individual enterprises. But analysts consider

The tools of financial statement analysis help in establishing significant

Financial Statements present comparative information for the current year

This is the proportional expression of each item on a financial statement to

Comparative Common Funds Ratio Trend

The published financial statements do not always convey to the reader

Common Size Analysis:

Comparative Statement Analysis:

Another technique used in analyzing financial data is the Comparative

Increase or decrease in absolute data in terms of money values,

Comparative Balance Sheet:

Funds Flow Analysis:

Funds Flow Statement:

Preparation of funds flow statement is an attempt to record and report the

Explain the financial consequences of business operations.

Cash Flow Analysis:

Cash flow refers to the management of cash into or out of a business, or

Cash flow analysis helps to:

To determine a projects rate of return,

Cash flow statement is divided into three main heads:

a) Cash flow from business operation,

Financial statements published by enterprises are major sources of

The management is interested in learning the growth trend of their

Difference between the Terms Analysis and Interpretation:

The present study carried out is FINANCIAL STATEMENT ANALYSIS of

1. To provide reliable information about economic resources and obligations ie..,

2. To provide reliable information about changes in net resources of AVANTI

3. To provide financial information that assists in estimating the future capacity of

4. To provide information needs of various present and prospective stake holders

6. To provide information about changes in resources and obligations resulting from

sources such as transactions between AVANTI FEEDS LTD and it owners.

7. To observe legal formalities of AVANTI FEEDS LTD.

Methodology describes the method of achieving the objectives through