CHAPTER I

INTRODUCTION

1.1 INTRODUCTION ABOUT THE TOPIC

Financial Analysis

Financial analysis refers to the process of examining the strength and weakness of
an enterprise with the help of information provided by the Balance Sheet and Profit and Loss
Account. It involves a systematic attempt to look into the financial statements. The objective
of financial analysis is to gain an insight into the profitability of business operations and
financial position so to judge whether progress is adequate or the position has improved. For
this purpose it may be necessary to compare income, expense and profits of one year with
those of previous years. Or, it may be helpful to compare changes in expenses relatively
income, profits in relation to capital invested, short term liabilities in relation to short term
assets and so on.

Types of Financial Analysis

TYPES OF FINANCIAL ANALYSIS

ACCORDING TO MATERIAL ACCORDING TO MODE OF ACCORDING TO OBJECTIVE

USED OPERATION OF ANALYSIS

EXTERNAL INTERNAL HORIZONTAL VERTICAL SHORT TERM LONG TERM

ANALYSIS ANALYSIS ANALYSIS ANALYSIS ANALYSIS ANALYSIS

1
Tools of Financial Analysis

Comparative Financial Statement

Common Size Statement
Trend Analysis
Statement of Changes in Working Capital
Fund Flow and Cash Flow Analysis
Ratio Analysis

Objectives of Financial Analysis

Assessment of past performance.

Assessment of current position.
Prediction of profitability and growth prospects.
Prediction of bankruptcy and failure.
Assessment of operational efficiency.

Financial Forecast

A financial Forecast is an estimate of future financial outcomes for a company. Using

historical internal accounting and sales data, in addition to external market and economic
indicators, a financial forecast is an economist's best guess of what will happen to a company
in financial terms over a given time periodwhich is usually one year. It i is simply a
financial plan or budget for your business. It is an estimate of two essential future financial
outcomes for a business your projected income and expenses.

Sales Forecast

Sales forecasts are estimates of your sales for the forecast period. The sales forecast
establishes the level of activity used in all the other forecasts and budgets for the business. If
your sales forecast varies wildly from your actual results, your cash flow and profitability
forecasts will similarly be inaccurate. Regularly updating forecasts ensures current market
intelligence, buying signals from clients and the efforts behind the marketing strategy can be
taken into account for the next forecast.

2
Pro Forma Statements

A business's pro forma is the forecast financial statements based on either anticipated
future events or potentially changing business performance in upcoming periods. This is in
contrast to regular financial statements that are financial summaries on a business's past.
Businesses use pro forma statements to assist in their planning activities, both short term and
long term. Strategic planning typically covers three to five years into the future; and five-year
pro forma can provide a fuller view into how a business might fare under various assumed
future conditions. Many areas of a business's operations, such as realizable sales or required
capital investment, may change as time goes by. The more accurate a pro forma is calculated,
the better prepared a business may be in responding to future needs for resource allocation.

1.2 REVIEW OF LITERATURE

Abid, N. (Naimatullah) (2013) ratio analysis is a commonly used analytical tool for
verifying the performance of a firm. While ratios are easy to compute, which in part explains
their wide appeal, their interpretation is problematic, especially when to or more ratios
provide conflicting signals. Indeed ratio analysis is often criticised on the grounds of
subjectivity that is the analyst must pick and choose ratios in order to assess the overall
performance of a firm.

Andrew C. Worthington (2001), a sample of thirty listed Australian gold producers is used
to compare the financial performance measures provided by accounting based financial
ratios, and production performance as measured by efficiency indices. The results indicate
that simple ratios are unlikely to provide efficiency rankings similar to those obtained from
multiple-input, multiple-output methodologies. However, whilst the two methods can
disagree substantially on the relative performance of individual decision making units, when
used jointly the results can offer valuable insights into the concept of firm performance.

Doron Nissim, Sthephen H. Penman (2001), financial statement analysis has traditionally
been seen as a part of the fundamental analysis required for equity valuation. But the analysis
has typically been ad hoc. Drawing on recent research on accounting based valuation, this
paper outlines a financial statement analysis for use in equity valuation. Standard profitability
analysis is incorporated, and extended, and is complemented with analysis of growth. An
analysis of operating activities is distinguished from the analysis of financing activities. The
perspective is one of the forecasting payoffs to equities. So financial statement analysis is

3
presented as a matter of pro-forma analysis of the future, with forecasted ratios viewed as
building blocks of forecasts of payoffs. The analysis of current financial statement is seen as
a matter of identifying current ratios as predictors of the future ratios that determine equity
payoffs. The financial statement analysis is hierarchical, with ratios lower in the ordering
identified as finer information about those higher up.

Ronald L. Jacobs, Michael J. Jones and Sue Nell (2006), this case study sought to
compare the forecasted financial benefits of unstructured and structured forms of on-the-job
training (OJT). It contributes to the limited empirical literature on OJT and expands the
reported use of the financial benefits forecasting model. The study was conducted in three
task setting with a large truck-assembly plant, each task setting differed in task difficulty and
turnover rate. The results showed that structured OJT was forecasted to provide
approximately twice the financial benefits and five times the efficiency compared to
unstructured OJT across all three task settings. In general, turnover rate more than task
difficulty affected the size of benefits. It was concluded that structured OJT should be
preferred training option over structured OJT should be the preferred training option over
unstructured OJT when considering financial benefits alone.

Gerardine Desanctis and Sirkka L. Jarvenpaa (1989), little formal, scientific study has
been devoted to assessing the effectiveness of different reporting formats in presenting
accounting data for forecasting purpose. A laboratory study was conducted to compare the
impact of numeric and graphical reporting formats of users judgement heuristics and
judgement accuracy in forecasting financial statement information. Three different reporting
formats were evaluated with a learning environment: (1) reports containing only numerical
data; (2) reports containing only graphical data; and (3) reports combining both numerical
and graphical data. Results suggested some modest support for contention that graphical
formats can improve the accuracy of forecast judgements.

Yaser S. Abu-Mostafa, Amir F. Atiya(1996), this paper provides a brief introduction to

forecasting in financial markets with emphasis on commodity futures and foreign exchange.
We describe the basic approaches to forecasting, and discuss the noisy nature of financial
data. Using neutral networks as a learning paradigm, we describe different techniques for
choosing the inputs, outputs, and error function. We also describe the learning from hints
technique that augments the standard learning from examples method. We demonstrate the
use of hints in foreign exchange trading of the U.S Dollar versus the British Pound, the

4
German Mark, the Japanese Yen, and the Swiss Franc, over a period of 32 months. The paper
does not assume a background in financial markets.

Beth B. Kern(2003), this paper documents a method of structuring financial statement

analysis projects to enhance the development of students critical thinking skills. The project
is structured in a cooperative learning framework in which a student accesses financial
statement information from the World Wide Web, performs a financial statement analysis,
and then engages in an exercise with other students who have analysed firms in the same
industry. Both the individual and team phase of the project offer opportunities for sytudents
to develop several important critical thinking skills.

Alice C. Lee and John C. Lee (2009), based on the authors' extensive teaching, research and
business experiences, and this book reviews, discusses and integrates both theoretical and
practical aspects of financial planning and forecasting. The book is divided into six parts:
Information and Methodology for Financial Analysis, Alternative Finance Theories and Their
Application, Capital Budgeting and Leasing Decisions, Corporate Policies and Their
Interrelationships, Short-term Financial Decisions, Financial Planning and Forecasting, and
Overview. The theories used in this book are pre-Modigliani-Miller Theorem, Modigliani-
Miller Theorem, Capital Asset Pricing Model and Arbitrage Pricing Theory, and Option
Pricing Theory. The interrelationships among these theories are carefully analysed.
Meaningful real-world examples of using these theories are discussed step-by-step, with
relevant data and methodology. Alternative planning and forecasting models are also used to
show how the interdisciplinary approach is helpful in making meaningful financial
management decisions.

1.3 INTRODUCTION TO THE STUDY

1.3 .1 Objectives of the Study

To understand the financial position of the firm.

To understand liquidity position of the firm.
To understand long term solvency position of the firm.
To make intra firm comparison.
To make sales forecast.
To Prepare Pro Forma Income Statement.

5
1.3.2 Scope of the Study

The scope of finance is indeed vast and it is determined by the financial needs of an
enterprise. Analysis of financial statements is a process of evaluating the relationship
between the component parts of financial statements to obtain a better understanding of
firms position and performance. Various decisions regarding acquisition of assets, where
money is to be invested and the composition of its liabilities are covered under the scope of
finance function.

The study is conducted at the unit of TRAVANCORE SUGARS AND CHEMICAL

LTD, THIRUVALLA. This study is mainly designed to cover the analysis of the financial
performance of Travancore Sugars and Chemicals LTD, Thiruvalla. This study also includes
the profitability, liquidity, solvency and forecasting. It is done on the basis of figures reported
in the financial reports of the company.

1.3.3 Limitations of the Study

This study uses only the secondary sources of data. It will affects the accuracy of data.
Chance of window dressing. As the analysis is done only from the annual reports of
the company. There is a chance of data manipulation.
The time for the study is limited so it doesnt allow to go in-depth.
The study is limited to the period of 5 years (2009-10 to 2013-14).

6
 CHAPTER II

INDUSTRY AND COMPANY PROFILE

2.1 INDUSTRY PROFILE

India has a population of more than 1.150 Billion which is just behind China.
According to the national sample survey; by 2030 India population will be around 1.450
Billion and will surpass China to become the World largest in terms of population. Beverage
Industry which is directly related to the population is expected to maintain a robust growth
rate. The price stability throughout the year has contributed to the increase in domestic liquor
sales. The Indian beverage market offers hot options. In India, various positive factors drive
the beverage markets. One is the rising number of people in the middle class with extra
money to spend on new beverages like wine new brands of imported whiskey, or the fancy
energy drinks, some of which are really good to enable people to work longer, to listen longer
during conferences, and even to party longer and have fun.

MAJOR MARKET UNDER INDIAN BEVERAGE INDUSTRY

1. Indian Non-Alcoholic Beverage Market

2. Indian Soft Drink Market
3. Indian Tea Market
4. Indian Alcoholic Beverage Market
5. Indian Beer Market
6. Indian Wine Market
Liquor production is one of the profitable businesses in todays world. In
India several private, public and government companies are producing liquor and making
huge profits. But this liquor consumption is injurious to human body. It will spoil the life of
young generations of a country. The government cannot stop the production and distribution
of liquor because it accelerates the revenue in the form tax. The turnover tax of liquor
(IMFL) sales is 96%.
KSBC (Kerala State Beverages Corporation) has the monopoly right to
distribute the liquor throughout the state and any other selling activities within the state are
illegal and are subject to serve punishment including imprisonment.
The Kerala State Beverages (M&M) Corporation handles potable liquor
made out of Extra Neutral Alcohol. Potable liquor is a consumable item containing potable

7
Alcohol and other chemicals. The role the KSBC is channelizing all kinds of
liquor/beer/wine from manufactures throughout the country for the consumers in Kerala. As
such KSBC is not restricting purchase of liquor from any manufacturer who is prepared to
enter into a valid contract. KSBC performs the role of procuring liquor and take adequate
steps to ensure the quality standards of liquor and place them to the consumer through the
various channels of distribution enabling the consumer to take his preference. The liquor
brought through KSBC contains the holographic stickers pasted on the bottle caps. The
activity of KSBC confines to contracts for procurement and distribution. Consumer has to
know hid health condition while deciding to drink. Alcohol is not a freely marketable item
like any other consumable but can be sold only through license. In this point of view there
is a message that consumer has to check his health while consuming liquor.
The judicial commission of inquiry appointed by the Government to streamline the liquor
trade in the state recommended-
To provide genuine liquor at reasonable price, through Government agencies
Exploitation through increased taxation and exploitation by middleman should be
stopped and consumer protection must be the guiding policy.
For achieving the above, nationalization of entire liquor trade was suggested.

In line with the suggestion the Government decided to set up a Public Sector
Corporation to procure spirit and arrange blending, bottling, sealing and distribution of arrack
and also for dealing with the sale of IMFL. An amendment was made in the Abkari Act in
1984 to give effect to the same.

KSBC was formed on 23.2.1984 to take over the wholesale distribution of liquor in a phased
manner and to eventually set up distilleries and blending units to produce spirit, arrack and
IMFL. Since then the distribution of liquor has been brought under the control of the
Corporation. By a decision in 2001 the majority of the retail outlets also have been entrusted
to the Corporation. As at present the whole activity of IMFL from procurement to
distribution and sale to the consumer is controlled by the Corporation except for loose
vending of liquor by Bars/Clubs and a small portion of the retails by Consumer Federation.

Objectives

1. To provide genuine quality liquor to consumers at reasonable prices

2. To make available supplies of liquor commensurate to demand

8
3. To evolve a proper system to prevent misuse, distribution of spurious liquor through
unauthorized sources and evasion of duties and taxes by middlemen
4. Consumer protection and satisfaction

Corporate Objectives of the Company

To build lasting relationships with customers based on trust and mutual benefit
To uphold highest ethical standards in conduct of our business
To create and nurture a culture that supports flexibility, learning and is proactive to
change
To chart a challenging career for employees with opportunities for advancement and
rewards
To value the opportunity and responsibility to make a meaningful difference in
peoples lives
To maintain the Quality of the product

9
2.2 COMPANY PROFILE

COMPANY NAME: Travancore Sugars & Chemicals Ltd.

OWNER: Government of Kerala

LOCATION: Valanjavattom

FULL ADDRESS: Travancore Sugars & Chemicals Ltd.

Valanjavattom, Thiruvalla -689 104

Tel: 0471-2332632
E-mail: travancoresugars@yahoo.co.in

The Travancore Sugars and Chemicals Ltd (TSC Ltd) was incorporated in June 1937
with an authorized share capital of Rs.60, 00,000 with an objective to acquire carryon and
transact the traders and business of planets, general merchants and importers, manufactures of
dealers in sugar, wine and spirits. Now the Company is concentrating on Indian made fine
liquor (IMFL) production. There is no marketing department in the company because the
sales of IMFL products are only done through the Kerala State Beverage Corporation
(KSBC) Ltd. This government company registered under the joint stock Companies Act 1956
and its share capital as at 2008 is Rs.1, 31, 56,890

Manpower of the Company is 218 employees at present and turnover approximately for the
year ended 2007-2008 is 83 lakhs. The operations of the company are highly sophisticated
over the years and the company has developed very high reputation for the quality of its
products. The products are resilient, inexpensive and hygienic. The Company follows strict
quality control measures.

LOCATION

Selection of proper location for a new plant is essential for the smooth functioning
of the company. Travancore sugars and chemicals Ltd is situated at the place called
Valanjavattom near Thiruvalla.

Major reason for the selection of this location is availability of transportation facilities,
banking facilities and well skilled labour forces etc.

10
LOGISTICS:

Internal Movement

Trolley and vehicles are used to move semi-finished goods from one process station to
another process station.

External Environment

In the case of road Transport TSC has made contract with various transport companies like
K.R.S (Kerala Roadways Transport Ltd ) and A.C cargo management. Other mode of
transportation is rail.

Mission of the Company

To provide full employment to its employees & to keep financial stability of the concern

Vision of the Company

To increase its production as double and to attract more customers

BOARD OF DIRECTORS

CHAIRMAN: Mr. C.K. VISWANATHAN IAS.

DIRECTORS: Mr. T.K. MANOJ KUMAR

Mr. N.SHANKAR REDDY IPS

Mr. MANAPANDIYAN IAS

MANAGING DIRECTOR: Mr. N VIJYAANAND

SENIOR MANAGER (FINANCE) & SECRETORY IN CHARGE:

Mr. ALEX P. ABRAHAM, FCA.

AUDITORS: M/S SRIDHAR & Co.

Chartered Accounts,

Thiruvananthapuram.

11
BANKERS: State Bank of Travancore

State Bank of India

Indian Overseas Bank

Government Treasury

Pathanamthitta District

Co-operative Bank

LEGAL ADVISERS: M/S MENON AND PAI

Ernakulum

Product Profile

Travancore Sugars and Chemicals Ltd produce variety of product which are given
below;

1) INDIAN MADE FINE LIQUOR (IMFL)

During the FY 2013-14 the company sold 9091440 bulk litres of IMFL valued Rs.
353502383. Now the company produces so many brands of liquor which are given below;

a) Major Premium Brandy

This brand is especially produced for high class segments. Normally this brand
is costlier than other products. It is one of the brands which have a great move in the market.
This product is advancement of its earliest product named Commander VSOP Brandy.

b) Festival XXX Rum

Festival XXX rum is a leading brand in middle class segment.

c) Jawan XXX Rum

During the year 2013-14 as per the sales report this is the most profit making
brand of the company. These brands target mainly on middle class segment. Price of this
product is around Rs.380 for 750ml bottle. The main ingredients are ceramic colour, essence,
and extra 96% neutral alcohol + food flavour.

12
 d) Cheers XXX Rum

This is a special brand for low class segment, these brands also keep good
sales report, but low compared to others.

2) DENATURED AND METHYLATED SPIRIT

During the year 2013-14 the company sold 625 bulk litres of Denatured spirit
valued at Rs48125 and 15505 bulk litres of Methylated spirit costing Rs.1195225. The
earnings from these were much high compared to its earning in the previous year.

3) RECTIFIED SPIRIT

During the year 2013-14 the company sold 15657 litres of Rectified spirit
valued Rs. 1047726. It contains 94% alcohol.

Department Profile

In TSC Ltd the work activities are undertaken by 7 departments. They are;

1. PRODUCTION DEPARTMENT
2. QUALITY CONTROL DEPARTMENT
3. PRODUCTION PLANNING DEPARTMENT
4. MATERIAL DEPARTMENT
5. FINANCE DEPARTMENT
6. HUMAN RESOURCE DEPARTMENT
7. PERSONNEL AND ADMINISTRATIVE DEPARTMENT
1. Production Department

The production department is divided into two sections that are liquor production
and Packing & Dispatching section. The liquor production is working in three shifts and
packing 7 dispatching section in one shift. The capacity of production is 1500 of 750 ml
bottles or 3000 of 375 ml bottles per day. Liquor production section includes following steps;

A. Receiving the Work Order

On receiving the work order from the production planning department the
production in charge will mention the necessary raw materials required to the store
department as the production can start only after receiving the raw materials from the store.

13
 B. Receiving Raw Materials

On getting the order, the raw materials will be received from the store department.
The proper functioning of the store department results the proper working of the production
department.

C. Blending Process

Blending machine is used to blend the ingredients of liquor. Blending machine use
three large tanks for blending purpose. These tanks are in huge size which helps to mix bulk
quantities of liquor. The blending process is the important process in the production of liquor.

D. Filling Process

After the blending process the liquor come into the filling machine. With the help
of this machine liquor is filled into the empty bottles. This process helps filling process with
great speed and effectively.

E. Screening Process

In this stage liquor bottles are checked by screening machine, to make sure that
bottle doesnt contain any dust or another items. It is done as a matter of safety measure and
quality assurance.

F. Cap Sealing Process

Cap sealing machines are used for putting caps on bottle. It is a process through
which bottles are capped and sealed.

G. Labeling Process

In this stage different labels are pasted on different brands of bottles.

Packing and Dispatching Section

This section does the job related packing and displacing the product. The process
will start with the receipt of the work order from the planning department. This section is
headed by a strict supervisor. This section works only in first shift and if required the work
will be given overtime. Following process are included on this section.

A. Packing Process

14
 After labelling various brand liquor bottles are packed with various card board
boxes and make a seal on each boxes and kept in warehouse.

B. Dispatching Process

Dispatching of product is made on the basis of delivery order.

Manufacturing Process Flow Chart

BLENDING PROCESS

FILLING PROCESS

SCREENING PROCESS

CAP SEALING PROCESS

LABELING PROCESS

PACKING PROCESS

DISPATCHING PROCESS

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 2. Quality Control Department

In Travancore Sugars and Chemicals strict quality control measures are

implemented. It starts from taking of raw materials for the production onwards. Product
quality and customer satisfaction are the priorities of the company always. Quality begins
right from the raw materials. The company ensures strict quality control measures in their
factory due to which their liquor products are well accepted all over Kerala.

Quality Policy

Travancore Sugars and Chemicals is committed to manufacture and supply of high

quality products in Kerala markets by focusing on;

Customer satisfactory and regulatory requirements.

Upgrading the skills of workers and employees by providing training.
Continuous up gradation of manufacturing facilities.

Structure

Quality control department is under the control of Quality control manager. Under
the quality control superintend there are two inspectors and lab assistants. Lab in the factory
is BIS approved. One quality inspector will present in a shift. He will check the quality of the
products at different stages of production and advises the workers whenever there is some
quality related matters occurs at the production unit after the passing of stringent examination
only the products will be passed after pulling quality control seal.

3. Production Planning Department

Production planning department is under the supervision of planning engineer. This

department is responsible for the entire production. Planning in constitution with various
departments, proper communication with the department is necessary for the success of the
production. This is mainly because every activity in the plant in some way or the other way
related to this department. This department plans monthly as well as daily the production
planning and monitors the same.

Procedure for Liquor Production Planning

At the end of each month store will provide the closing stock of various type
brands of liquor and department will collect the estimated requirement for the next month

16
from material department. By analysing these reports, planning engineers will prepare
monthly production schedule and sent the copies to all other departments for making
comment and necessary arrangement to fulfil the production.

The material department will break this schedule in to daily targets. Every day
morning planning engineer will break daily production order to the production floor
superintend and copy of the same will be given to all other department concerned.

4. Maintenance Department

Maintenance is an important function in a manufacturing organization and keeping

the machine in perfect operating condition is not only necessary to avoid interruption but also
to keep production cost low, to keep the product quality high and maintain safe working
conditions, and to avoid late shipments to customers.

Type of Maintenance Function in TSC

Maintenance department is working under the production engineer. Under him

there is maintenance superintend and a maintenance workshop. In maintenance workshop,
there are four members of technicians. The workshop will undertake shop level repairs.

Repair or Breakdown Maintenance

Traditionally manufacture has applied the principles of specialization to

maintenance workers. But in TSC workers are being given the responsibility for repairing
their own machines or assist repair specialist in machine repair.

Wen breakdown occurs; the employee in the operation himself will try to rectify it.
If he could not rectify it, he will inform the same to the maintenance superintend and he will
inspect machine and if required, he may call the workshop technicians for repairing work.
These technicians with the help of operators will make the repair job. If more workforces are
required the other workers help will be utilized, that means, in this organization team
maintenance concept is using.

5. Material Department

The Travancore Sugars & Chemicals Ltd has its own material department. The
main function of this department is;

17
 Purchase raw materials at lowest price with high quality.
Store these raw materials in their own warehouses.
Supply the necessary raw materials when required in the production department.

Raw Materials

The main raw materials used in TSC Ltd are;

D.M Water
E.N.A Spirit
Chemicals
Empty glass bottles
Lubricants/oils
Packing materials
o D.M Water

D.M Water is the most important raw material and 50% of the total raw material
constitutes D.M Water available locally so the company can reduce the cost for this purpose.
Average monthly requirement of D.M Water is 65000 proof liters.

o E.N.A Spirit

It is another important raw material and it is an expensive raw material. 35% of the
product is E.N.A Spirit. Firm purchased E.N.A Spirit from outside states likely Karnataka,
Maharashtra, Tamil Nadu and Andhra Pradesh.

o Chemicals

Essence, Urea, Yeast, Turkey red oil, denaturants and molasses are different
chemicals used for production. 15% of the product includes chemicals. These are purchased
from the manufacture or their dealers.

Purchase Function

A minimum quantity of safety stock is fixed for each raw material. On reaching
this level purchase department start the procurement process.

18
Procurement Process

At the beginning of each month the planning department will prepare a production
schedule and one copy will be forwarded to the material department. From this schedule the
raw material required for the month will be known and accordingly the purchase will be
scheduled and one copy of schedule will be given to finance department for arranging the
finance.

In the case of non-routine items the department which require the material, has to
make the purchase requisition and forward it to material department with proper authorisation
as well as proper specification. On getting this requisition material department will start the
procurement.

The material department will identify the sources of materials or suppliers. After
that they will negotiate the price and issue the order to the party. Usually they will issue the
purchase order to the supplier whose name is listed in the company vender list.

6. Finance Department

Finance is the lifeblood of the business. Managing the finance is a tedious task in
any organization. The ambition and plans of a businessman would remain a merge dreams
unless adequate money is available to cover them into reality. Financial management is
concerned with the planning and controlling of the firms financial resources. The financial
management include deciding upon the investment, sources of fund, dividend, financing fund
allocation etc.

Financial Management in TSC Ltd

Senior finance manager manages the finance department and he reports to the M.D
directly about the functions of the department.

Basic Functions of Accounts Department

Planning and Allocating works to accounts staff.

Salary and wage administration.
Incentives and overtime payment etc.
Retirement, gratuity and other personal matters.
Verifying cash books.

19
 Verifying debtors statement.
Verifying stock statements.
Attending legal and departmental proceedings.
Verifying bank reconciliation statement.
Scrutinizing of purchase bill, expense bill etc.
Submitting periodicals to PF, ESI, and sales tax.
Legal security.
Monthly closing accounts.
Debit and credit note preparation.
TDS deduction and returns.
Renewal of various licenses.

Accounting Procedure

Travancore Sugars & Chemicals Ltd follows the double entry system of
accounting. Various books of accounts are maintained by the accounts department and also
by other departments. In recording the day to day transactions, cash receipt, rough cash books
are maintained manually. Finally the fair cash books are prepared on the basis of these in a
computerized method. During the year, personal ledger and agents ledger are prepared. The
sales report is also prepared. The journal entries are recorded in the journal register. Working
capital recorded by the sale of goods. The accounts of the company are fully utilized.

Accounts of the company are based on companies Act 1956. Accounts work is
based on the software package tally. Half year and yearly auditing is done. Long term loans
are raised from term loans.

20
 CHAPTER III

RESEARCH METHODOLOGY

3.1 RESEARCH METHODOLOGY

Methodology is the systematic, theoretical analysis of the methods applied to a field of study.
It comprises the theoretical analysis of the body of methods and principles associated with a
branch of knowledge

Research Design

A research design is the arrangement of condition for collection and analysis of data
in a means that aims relevance to the research purpose with economy in procedure. In this
study the analytical research is followed.

3.2 SOURCES OF DATA

The major source of data of this study is from secondary sources.

Secondary data

Secondary data is the data collected by some other person for some other purpose. The
sources are;

Annual reports of the company

Journals

Internet

3.3 Tools Used

Comparative Financial Statements.

Trend Analysis
Ratio Analysis
Forecasting using Regression Analysis
Pro Forma Statements (Percent of Sales Method)

21
 CHAPTER IV

DATA ANALYSIS AND INTERPRETATION

4.1 Comparative Statement

4.1.1 Comparative Income Statement 2009-2010

Table No. 4.1.1

ABSOLUTE PERCENTAGE
PARTICULARS 2009 2010 CHANGE CHANGE

Income
59.85562617
Gross Sales 93669746 149736359 56066613
-29.16496881
Less: Central Excise Duty 127612 90394 -37218
59.9770698
Net Sales 93542134 149645965 56103831
-16.77758987
Other Income 5058605 4209893 -848712
9.743033761
Stock Differential 262875 288487 25612
55.91615435
Total 98863614 154144345 55280731

Expenditure
63.81170747
Raw Material Consumed 42221304 69163439 26942135
Manufacturing, Administrative &
29.88565477
Selling Expense 53029934 68878277 15848343
24.810273
Depreciation 468568 584821 116253
658.7231398
Provision for Leave Encashment 56310 427237 370927
227.4072235
Provision for Gratuity 749058 2452470 1703412
46.60035112
Total 96525174 141506244 44981070
440.4500864
PBIT 2338440 12638101 10299661

22
 0
Prior Period Adjustment 15202 0 0
-100
Provision For Taxation 24998 0 -24998
0
Income Tax 0 4786266 4761268
0
Deferred Tax 0 1166856 1166856
287.2936782
PAIT 2328644 9018691 6690047

Interpretation

The Comparative Income Statement 2009-2010 shows that there is an increase of

60% in the net sales in the year 2010, an increase of 59% in total income, an increase of 47%
in the total expenditure and there is also an increase of 287% in profit after tax in the year
2010 compared to the year 2009.

23
 4.1.2 Comparative Income Statement 2010-2011

Table No. 4.1.2

PERCENTAGE
ABSOLUTE
CHANGE
PARTICULARS 2010 2011 CHANGE

Income
52.89203406
Gross Sales 149736359 228934965 79198606
Less: Central Excise
133.8031285
Duty 90394 211344 120950
52.84315952
Net Sales 149645965 228723621 79077656
9.789916276
Other Income 4209893 4622038 412145
-78.39417374
Stock Differential 288487 62330 -226157
51.42170087
Total 154144345 233407989 79263644

Expenditure
Raw Material
53.07642236
Consumed 69163439 105872918 36709479
Stores & Packing
56.19978428
Materials Consumed 20847306 32563447 11716141
Manufacturing,
Administrative &
37.92760509
Selling Expense 48030971 66247968 18216997
8.533380299
Depreciation 584821 634726 49905
Provision for Leave
16.52806288
Encashment 427237 497851 70614
-29.84374936
Provision for Gratuity 2452470 1720561 -731909
46.66311898
Total 141506244 207537471 66031227
104.7025736
PBIT 12638101 25870518 13232417

24
 68.33767701
Income Tax 4786266 8057089 3270823
-82.82881521
Deferred Tax 1166856 200363 -966493
163.47227119
PAIT 6684979 17613066 10928087

Interpretation

The Comparative Income Statement 2010-2011 shows that there is an increase of

55% in the net sales in the year 2011, an increase of 51% in total income, an increase of 47%
in the total expenditure and there is also an increase of 163% in profit after tax in the year
2011 compared to the year 2010.

25
 4.1.3 Comparative Income Statement 2011-2012

Table No. 4.1.3

ABSOLUTE PERCENTAGE
PARTICULARS 2011 2012 CHANGE CHANGE
Revenue from Operations 228710836 290739393 62028557 27.12095242
Other Income 4634823 5742264 1107441 23.89392216
Total Revenue 233345659 296481657 63135998 27.0568556
Cost of Materials Consumed 138436365 175833032 37396667 27.01361524
Changes in Inventories -62330 650278 712608 -1143.282528
Employee Benefit Expenses 25144835 24088853 -1055982 -4.199598049
Finance Costs 23069 15611 -7458 -32.32909966
Depreciation 634726 826316 191590 30.18467811
Other Expenses 43298476 59103887 15805411 36.50338871
Total Expenses 207475141 260517977 53042836 25.56587538
PBIT 25870518 35963680 10093162 39.0141473
Current Tax 8057089 10909202 2852113 35.39880222
Deferred Tax 200363 425378 225015 112.3036688
PAT 17613066 24629100 7016034 39.83425714

Interpretation

The Comparative Income Statement 2011-2012 shows that there is an increase of

27% in the net sales in the year 2012, an increase of 27% in total income, an increase of 26%
in the total expenditure and there is also an increase of 39% in profit after tax in the year
2012 compared to the year 2011.

26
 4.1.4 Comparative Income Statement 2012-2013

Table No. 4.1.4

ABSOLUTE PERCENTAGE
PARTICULARS 2012 2013 CHANGE CHANGE
Revenue from Operations 290739393 245378657 -45360736 -15.60185413
Other Income 5742264 11456138 5713874 99.5055957
Total Revenue 296481657 256834795 -39646862 -13.37245022
Cost of Materials Consumed 175833032 155932558 -19900474 -11.31782451
Changes in Inventories 650278 914783 264505 40.67568025
Employee Benefit Expenses 24088853 22856017 -1232836 -5.117869248
Finance Costs 15611 14020 -1591 -10.19153161
Depreciation 826316 1351034 524718 63.50088828
Other Expenses 59103887 51970553 -7133334 -12.0691453
Total Expenses 260517977 233038965 -27479012 -10.54783717
PBIT 35963680 23795830 -12167850 -33.8337178
Current Tax 10909202 6701991 -4207211 -38.56570811
Deferred Tax 425378 448470 23092 5.428583519
Income Tax Previous Years 0 5171405 5171405 nil
PAT 24629100 11473964 -13155136 -53.41297896

Interpretation

The Comparative Income Statement 2012-2013 shows that there is a decrease of

16% in the year 2013, 13% decrease in total revenue, 10% decrease in total expenditure and
53% decrease in profit after tax in the year 2013 compared to the year 2012.

27
 4.1.5 Comparative Income Statement 2013-2014

Table No. 4.1.5

ABSOLUTE PERCENTAGE
PARTICULARS 2013 2014 CHANGE CHANGE
Revenue from Operations 245378657 355993964 110615307 45.07943289
Other Income 11456138 15558624 4102486 35.81037519
Total Revenue 256834795 371552588 114717793 44.66598578
Cost of Materials
Consumed 155932557 254148034 98215477 62.98586959
Changes in Inventories 914783 -1738704 -2653487 -290.0673712
Employee Benefit
Expenses 22856017 46994808 24138791 105.6124127
Finance Costs 14020 2825 -11195 -79.85021398
Depreciation 1351034 1207741 -143293 -10.60617275
Other Expenses 51970554 75737676 23767122 45.73190041
Total Expenses 233038965 376352380 143313415 61.49761908
PBIT 23795830 -4799792 -28595622 -120.1707274
Current Tax 6701991 nil nil nil
Deferred Tax 448470 -1812106 -2260576 -504.06404
Income Tax Previous
Years 5171405 nil nil nil
PAT 11473964 -2987686 -14461650 -126.0388302

Interpretation

The Comparative Income Statement 2013-2014 shows that there is an increase of

45% in net sales, 45% increase in the total revenue, 61% increase in total expense. There is a
decrease of 126% in profit after tax in the year 2014 compared to 2013.

28
 4.1.6 Comparative Balance Sheet 2009-2010

Table 4.1.6

ABSOLUTE PERCENTAGE
PARTICULARS 2009 2010 CHANGE CAHNGE
Sources of Fund
Share Capital 13156890 13156890 0 0
Reserves & Surplus 14885079 14889028 3949 0.026529923
Loan Funds
Unsecured Loans 2407006 1450000 -957006 -39.75918631
Total 30448975 29495918 -953057 -3.130013408
Application of Funds
Fixed Assets
Gross Block 13387258 14279496 892238 6.664830094
Less: Depreciation 10194121 10778942 584821 5.736845776
Net Block 3193137 3500554 307417 9.627429077
Plantation 1 1 0 0
Investments
Deferred Tax Assets 0 1166856 1166856 nil
Current Assets, Loans & Advances
Inventory 15108601 5585810 -9522791 -63.02893961
Sundry Debtors 11645932 35597885 23951953 205.6679792
Cash & Bank Balances 2084616 2451397 366781 17.59465532
Loans & Advances 7536199 7794135 257936 3.422627242
Less: Current Liabilities & Provisions 40678782 49141300 8462518 20.80327282
Net Current Assets -4303434 2287927 6591361 -153.1651467
Profit & Loss Account 31559271 22540580 -9018691 -28.57699406
Total 30448975 29495918 -953057 -3.130013408
Interpretation

The Comparative Balance Sheet shows that there is an increase of 0.02% in Reserves and
surplus, 9.6% in fixed assets, 205% increase in sundry debtors and 18% increase in cash. There
is a decrease of 40% in unsecured loan, 63% in inventories and 153% in net current assets.

29
 4.1.7 Comparative Balance Sheet 2010-2011

Table No. 4.1.7

ABSOLUTE PERCENTAGE
PARTICULARS 2010 2011 CHANGE CAHNGE
Sources of Fund
Share Capital 13156890 13156890 0 0
Reserves & Surplus 14889028 14889028 0 0
Loan Funds
Unsecured Loans 1450000 1000000 -450000 -31.03448276
Total 29495918 29045918 -450000 -1.525634835
Application of Funds
Fixed Assets
Gross Block 14279496 15552642 1273146 8.915902914
Less: Depreciation 10778942 11196474 417532 3.87358982
Net Block 3500554 4356168 855614 24.44224543
Plantation 1 1 0 0
Investments
Deferred Tax Assets 1166856 966493 -200363 -17.17118479
Current Assets, Loans & Advances
Inventory 5585810 15735477 10149667 181.7044797
Sundry Debtors 35597885 31139712 -4458173 -12.5237019
Cash & Bank Balances 2451397 1920297 -531100 -21.66519744
Loans & Advances 7794135 8830143 1036008 13.29214852
Less: Current Liabilities & Provisions 49141300 38829887 -10311413 -20.98319133
Net Current Assets 2287927 18795742 16507815 721.5184313
Profit & Loss Account 22540580 4927514 -17613066 -78.13936465
Total 29495918 29045918 -450000 -1.525634835

30
Interpretation

The comparative Balance Sheet 2010-2011 shows that there is an increase of 24% in fixed
assets, 181% increase in inventories and 721% increase in net current assets. It also shows a
decrease of 31% in unsecured loan, 12% in sundry debtors and 21% decrease in cash in the
year 2011 compared to 2010

31
 4.1.8 Comparative Balance Sheet 2011-2012

Table No. 4.1.8

ABSOLUTE PERCENTAGE
PARTICULARS 2011 2012 CHANGE CAHNGE
Equity & Liability
Shareholders Fund
Share Capital 13156890 13156890 0 0
Reserves & Surplus 9961514 34590614 24629100 247.2425376
Total 23118404 47747504 24629100 106.5346033
Non-Current Liabilities
Long Term Borrowings 3519887 3623442 103555 2.941997854
Other Long Term Liabilities 20418895 20435963 17068 0.083589244
Long Term Provisions 3756174 2633395 -1122779 -29.89155987
Total 27694956 26692800 -1002156 -3.618550613
Current Liabilities
Short Term Borrowings 2262928 2314886 51958 2.296051841
Trade Payables 3357508 1268070 -2089438 -62.23181002
Other Current Liabilities 4732586 6642958 1910372 40.36634517
Short Term Provisions 1778000 2560129 782129 43.98925759
Total 12131022 12786043 655021 5.399553311
TOTAL 62944382 87226347 24281965 38.57685822
Non-Current Assets
Fixed Assets 4356168 10810506 6454338 148.1654977
Deferred Tax Assets 966493 541115 -425378 -44.01252777
Long Term Loans &
Advances 6514447 6577508 63061 0.9680177
Total 11837108 17929129 6092021 51.46545085
Current Assets
Inventories 15735477 13820637 -1914840 -12.1689352
Trade Receivables 31138427 40569560 9431133 30.28776309
Cash & Cash Equivalents 1920297 11178699 9258402 482.1338574
Short Term Loans & 2090573 2494247 403674 19.30925158

32
 Advances
Other Current Assets 222500 1234075 1011575 454.6404494
Total 51107274 69297218 18189944 35.59169288
TOTAL 62944382 87226347 24281965 38.57685822

Interpretation

The Comparative Balance Sheet 2011-2012 shows that there is an increase of 247% in
reserves and surplus, 5% increase in current liabilities, 51% increase in non-current assets
and 35% increase in total current assets in the year 2012. The statement also shows that there
is a decrease of 3% in non-current liability in the year 2012 compared with the year 2011.

33
 4.1.9 Comparati5ve Balance Sheet 2012-2013

Table No. 4.1.9

ABSOLUTE PERCENTAGE
PARTICULARS 2012 2013 CHANGE CAHNGE
Equity & Liability
Shareholders Fund
Share Capital 13156890 13156890 0 0
Reserves & Surplus 34590614 46064578 11473964 33.17074395
Total 47747504 59221468 11473964 24.03050011
Non-Current Liabilities
Long Term Borrowings 3623442 4227044 603602 16.65824926
Other Long Term
Liabilities 20435963 23891358 3455395 16.90840309
Long Term Provisions 2633395 1428690 -1204705 -45.74721984
Total 26692800 29547092 2854292 10.69311575
Current Liabilities
Short Term Borrowings 2314886 3042422 727536 31.42858871
Trade Payables 1268070 12704188 11436118 901.8522637
Other Current Liabilities 6642958 774811 -5868147 -88.33635558
Short Term Provisions 2560123 2050000 -510123 -19.92572232
Total 12786037 18571421 5785384 45.24767135
TOTAL 87226341 107339981 20113640 23.05913531
Non-Current Assets
Fixed Assets 10810506 11790049 979543 9.061028226
Deferred Tax Assets 541115 92645 -448470 -82.87887048
Long Term Loans &
Advances 6577508 1500660 -5076848 -77.18497644
Total 17929129 13383354 -4545775 -25.35413182
Current Assets
Inventories 13820637 4504362 -9316275 -67.40843421
Trade Receivables 40569560 64064045 23494485 57.9116091
Cash & Cash Equivalents 11178699 12726613 1547914 13.84699597

34
Short Term Loans &
Advances 2494247 11779200 9284953 372.2547526
Other Current Assets 1234075 882407 -351668 -28.49648522
Total 69297218 93956627 24659409 35.58499131
TOTAL 87226347 107339981 20113634 23.05912685

Interpretation

The Comparative Balance Sheet 2012-2013 shows that there is an increase of 33% in reserves
and surplus, 10% increase in total non-current liability, 45% increase in current liability and
35% increase in total current assets in the year 2013. It also shows a decrease of 25% in total
non-current assets

35
 4.1.10 Comparative Balance Sheet 2013-2014

Table No. 4.1.10

ABSOLUTE PERCENTAGE
PARTICULARS 2013 2014 CHANGE CAHNGE
Equity & Liability
Shareholders Fund
Share Capital 13156890 13156890 0 0
Reserves & Surplus 46064578 43076893 -2987685 -6.485862087
Total 59221468 56233783 -2987685 -5.044935732
Non-Current Liabilities
Long Term Borrowings 4227044 1000000 -3227044 -76.34280599
Other Long Term
Liabilities 23891358 6905785 -16985573 -71.09505035
Long Term Provisions 1428690 0 -1428690 -100
Total 29547092 7905785 -21641307 -73.24344135
Current Liabilities
Short Term Borrowings 3042422 4259739 1217317 40.01144483
Trade Payables 12704188 15242467 2538279 19.97986018
Other Current Liabilities 774811 16939199 16164388 2086.236256
Short Term Provisions 2050000 17761884 15711884 766.4333659
Total 18571421 54203289 35631868 191.8639828
TOTAL 107339981 118342857 11002876 10.25049185
Non-Current Assets
Fixed Assets 11790049 10608170 -1181879 -10.02437734
Deferred Tax Assets 92645 1904751 1812106 1955.967402
Long Term Loans &
Advances 1500660 13118911 11618251 774.2094145
Total 13383354 25631832 12248478 91.52024224
Current Assets
Inventories 4504362 23848778 19344416 429.4596216
Trade Receivables 64064045 48655325 -15408720 -24.05205603
Cash & Cash 12726613 15904005 3177392 24.96651701

36
 Equivalents
Short Term Loans &
Advances 11779200 3725603 -8053597 -68.37134101
Other Current Assets 882407 577314 -305093 -34.57508837
Total 93956627 92711025 -1245602 -1.325720218
TOTAL 107339981 118342857 11002876 10.25049185

Interpretation

The Comparative Balance Sheet 2013-2014 shows that there is a decrease of 6% in reserves
and surplus, 73% decrease in total non-current liability and 1% decrease in total current
assets. The statement also shows that there is an increase of 191% in total current liability and
91% increase in total current assets in the year 2014 compared to year 2013.

37
 4.2 Trend Analysis

4.2.1 Sales Trend

Table No. 4.2.1

YEAR SALES TREND PERCENTAGE

2009-10 149645965 100

2010-11 228723621 153

2011-12 290739393 194

20012-13 245378657 164

2013-14 355993964 238

Interpretation

The sales showed an increasing trend. The sales have continuously increased in all
the years up to 2014. The percentage has increased up to 238 in the year 2014 from 100 in the
year 2010.

Chart No. 4.2.1

Sales trend
250
238

200 194
164
150 153

100 100

50

0
2009-10 2010-11 2011-12 20012-13 2013-14

TREND PERCENTAGE

38
4.2.2 Profit Trend

Table No. 4.2.2

YEAR PROFIT BEFORE TAX TREND PERCENTAGE

2010 12638101 100

2011 25870518 205

2012 35963680 285

2013 23795830 188

2014 -4799792 -38

Interpretation

The Profit Trend shows an increasing trend till the year 2012. Then it starts to decrease. In
the year 2014 the percentage has been decreased to -38% from 100 in 2010.

Chart No. 4.2.2

PROFIT TREND
350

300
285
250

200 205
188
150

100 100

50

0
2010 2011 2012 2013 2014
-38
-50

-100

TREND PERCENTAGE

39
 4.3Ratio Analysis

4.3.1 Current Ratio

Table No. 4.3.1

YEAR CURRENT ASSET CURRENT LIABILITY RATIO

2009-10 51429227 30647524 1.68
2010-11 57625629 32241492 1.79
2011-12 69297218 12786043 5.41
2012-13 93956626 18571421 5.05
2013-14 92711025 54203289 1.71

Interpretation

In the year 2009-10, the current ratio was 1.68, in the year 2010-11 it was 1.79, in the year
2011-12 it shows the higher rate that is 5.41 and in the year 2012-13 it also shows 5. In the
year 2013-14 it was 1.71. So we can interpret that the liquidity position of the company is
good.

Chart No. 4.3.1

Current Ratio
6

5 5.41
5.05

1.68 1.79 1.71

1

0
2009-10 2010-11 2011-12 2012-13 2013-14

RATIO

40
4.3.2 Quick Ratio

Table No. 4.3.2

Year Quick Assets Current Liability Quick Ratio

2009-10 45813795 30647524 1.5
2010-11 41859722 32241492 1.3
2011-12 55444547 12786043 4.3
2012-13 89248558 18571421 4.8
2013-14 68798508 54203289 1.3

Interpretation

In the year 2010 the quick ratio was 1.5, in the year 2011 it was 1.3, in the year 2012 it was
4.8, in the year 2013 the quick ratio shows the maximum of 4.8 and in the year 2014 it was
1.3.

Chart No. 4.3.2

Quick Ratio
6

5
4.8
4 4.3

1 1.5
1.3 1.3

0
2009-10 2010-11 2011-12 2012-13 2013-14

Quick Ratio

41
4.3.3 Absolute Liquid Ratio

Table No. 4.3.3

Year Absolute Liquid Assets Current Liability A.L Ratio

2009-10 2585178 30647524 0.08
2010-11 1920297 32241492 0.05
2011-12 14300193 12786043 1.11
2012-13 24302106 18571421 1.30
2013-14 20048738 54203289 0.36

Interpretation

In the year 2010 the Absolute Liquid Ratio was 0.08, it was 0.05 in the year 2011, in the year
2012 it was 1.11, in the year 2012 it was 1.30 and in the year 2014 it was 0.36.

Chart No. 4.3.3

Absolute Liquid Ratio

1.4

1.2 1.3

1 1.11

0.8

0.6

0.4
0.36
0.2
0.08 0.05
0
2009-10 2010-11 2011-12 2012-13 2013-14

A.L Ratio

42
4.3.4 Debt Equity Ratio

Table No. 4.3.4

Year Outsiders Fund Shareholders Fund Debt Equity Ratio

2009-10 50591300 28045918 1.8
2010-11 39825978 28045918 1.4
2011-12 39478843 47747504 0.8
2012-13 48118513 59221468 0.8
2013-14 62109074 56233783 1.1

Interpretation

In the year 2010 the Debt Equity Ratio was 1.8, in the year 2011 it was 1.4, in the year 2012
and 2013 the ratio was the lowest that is 0.8 and in the year 2014 it was 1.1.

Chart No. 4.3.4

Debt-Equity Ratio
2
1.8
1.8
1.6
1.4
1.4
1.2
1 1.1
0.8
0.8 0.8
0.6
0.4
0.2
0
2009-10 2010-11 2011-12 2012-13 2013-14

Ratio

43
4.3.5 Proprietary Ratio

Table No. 4.3.5

Year Shareholders Fund Total Assets Proprietary Ratio

2009-10 28045918 56096638 0.5

2010-11 28045918 62944382 0.4

2011-12 47747504 87226347 0.5

2012-13 59221468 107339981 0.5

2013-14 56233783 118342857 0.5

Interpretation

In the year 2010 the Proprietary Ratio was 0.5, in the year 2011 it was 0.4 and in 2012, 2013
& 2014 the Proprietary Ratio was the same that is 0.5.

Chart No. 4.3.5

Proprietary Ratio
0.6

0.5
0.5 0.5 0.5 0.5
0.4
0.4
0.3

0.2

0.1

0
2009-10 2010-11 2011-12 2012-13 2013-14

Proprietary Ratio

44
4.3.6 Solvency Ratio

Table No 4.3.6

Year Outsiders Fund Total Assets Solvency Ratio

2009-10 50591300 56096638 0.9

2010-11 39825978 62944382 0.6

2011-12 39478843 87226347 0.4

2012-13 48118513 107339981 0.4

2013-14 62109074 118342857 0.5

Interpretation

In the year 2010 the Solvency Ratio was 0.9, in the year 2011 it has been decreased to 0.6, in
the year 2012 and 2013 the ratio was 0.4 and in the year 2014 there was a slight increase in
the ratio to 0.5.

Chart No. 4.3.6

Solvency Ratio
1
0.9
0.9
0.8
0.7
0.6
0.6
0.5
0.5
0.4
0.4 0.4
0.3
0.2
0.1
0
2009-10 2010-11 2011-12 2012-13 2013-14

Solvency Ratio

45
4.3.7 Gross Profit Ratio

Table No. 4.3.7

Year Gross Profit Sales G/P Ratio

2009-10 80482526 149645965 53%

2010-11 122850703 228723621 53%

2011-12 114906361 290739393 39%

2012-13 89446099 245378657 36%

2013-14 101845930 355993964 28%

Interpretation

In the year 2010 and 2011 the G/P Ratio of the company was 53%, in the year 2012 the ratio
was 39%, in the year 2013 it was 36% and in the year 2014 it was 28%.

Chart No. 4.3.7

G/P Ratio
60%

50% 53% 53%

40%
39%
36%
30%
28%
20%

10%

0%
2009-10 2010-11 2011-12 2012-13 2013-14

G/P Ratio

46
4.3.8 Net Profit Ratio

Table No. 4.3.8

Year Net Profit Sales N/P Ratio

2009-10 9018691 149645965 6%

2010-11 17613666 228723621 7%

2011-12 24629100 290739393 8%

2012-13 11473964 245378657 4%

2013-14 -2987606 355993964 -0.8%

Interpretation

In the year 2010 the n/p ratio was 6%, in the year 2011 it was 7%, in the year 2012 was 8%
and then the ratio starts to decline. In the year 2013 it was 4% and in the year 2004 it turns to
-0.8%.

Chart No. 4.3.8

N/P Ratio
9%
8%
8%
7%
7%
6%
6%
5%
4%
4%
3%
2%
1%
0%
2009-10 2010-11 2011-12 2012-13 -0.80%
2013-14
-1%
-2%

N/P Ratio

47
4.3.9 Operating Ratio

Table No. 4.3.9

Year Operating Cost Net Sales Ratio

2009-10 138041716 149645965 92%
2010-11 204684333 228723621 89%
2011-12 234936919 290739393 80%
2012-13 199977613 245378657 81%
2013-14 317506721 355993964 89%

Interpretation

In the year 2010 the operating ratio of the company was 92%, in the year 2011 it was 89%, in
the year 2012 it was 80%, 2013 it was 81% and in the year 2014 the operating profit was
89%.

Chart No. 4.3.9

Operating Ratio
94%
92%
92%
90%
88% 89% 89%
86%
84%
82%
80% 81%
80%
78%
76%
74%
2009-10 2010-11 2011-12 2012-13 2013-14

Ratio

48
4.3.10 Operating Profit Ratio

Table No. 4.3.10

Year Operating Profit Net Sales Ratio

2009-10 11604249 149645965 7%

2010-11 24039288 228723621 10%

2011-12 55802474 290739393 19%

2012-13 45401044 245378657 18%

2013-14 38487243 355993964 10%

Interpretation

In the year 2010 the operating profit ratio was 7%, in the year 2011 it was 10%, 2012 it was
19%, 2013 it was 185 and in the year 2014 the operating profit ratio was 10%.

Chart No. 4.3.10

Operating Profit Ratio

20%
18% 19%
18%
16%
14%
12%
10%
10% 10%
8%
6% 7%
4%
2%
0%
2009-10 2010-11 2011-12 2012-13 2013-14

Ratio

49
 4.4 FORECASTING

4.4.1 Regression Analysis of Sales

Table No. 4.4.1

Year Sales (Y) Year - 2012 (X) XY X

2010 149645965 -2 -299291930 4

2011 228723621 -1 -228723621 1

2012 290739393 0 0 0

2013 245378657 1 245378657 1

2014 355993964 2 711987928 4

total 1270481600 0 429351034 10

X =EX/n

= 0/5

=0

=EY/n

=1270481600/5

=254096320

b = EXY-nX

EX-nEX

=429351034

10

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 =42935103.5

a= -b*X

=254096320

Forecasted Sales for 5 Years

Table No. 4.4.2

Year Y=a+bX (Sales Forecast)

2015 382901630

2016 425836734

2017 468771837

2018 511706940

2019 554642044

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 4.5 PRO FORMA STATEMENT

4.5.1 Pro Forma Income Statement

Assumptions

Other income is 3.2% of net sales.

Raw material consumed is 57.57% of net sales.
Employee benefit is 6.73% of net sales.
Depreciation is 0.36% of net sales.
Other expenses is 30.42% of net sales.
Income tax is 30% of net profit.
Deferred tax is .12% of net sales.

4.5.2 Pro Forma Balance Sheet

Assumptions

There is no change in the Share Capital of the company.

Reserves and Surplus is 11.78% of Net Sales.
Non-Current Liability is 8.88% of Net Sales.
Current Liability is 12.63% of Net Sales.
Non-Current Assets is 29% of Net Sales
Current Assets is 28.99% of Net Sales.

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 CHAPTER V

FINDINGS, SUGGESTIONS AND CONCLUSION

5.1 FINDINGS

The Comparative Income Statement 2009-2010 shows that there is an increase of 60%
in the net sales in the year 2010 compared to 2009 and also an increase of around
280% in Profits in the year 2010 compared with 2009.
The Comparative Income Statement 2010-2011 shows that there is an increase of 53%
in sales in the year 2011 compared with 2010 and there is an increase of 163% in
profits in the year 2011.
The comparative Income Statement 2011-2012 shoes that there is an increase of 27%
in sales in the year 2012 and also an increase of 40% in profits in the year 2012
compared with 2011.
The Comparative Income Statement 2012-2013 shows that there is a decrease of 15%
in sales in the year 2013 and also a decrease of 53% in profits in the year 2013
compared to 2012.
The Comparative Income Statement 2013-2014 shows that there is an increase of 45%
in sales in the year 2014 but there is a decrease of 126% in profits in the year 2014
compared to 2013.
The Comparative Balance Sheet 2009-2010 shows that there is an increase of .02% in
Reserves and Surplus, an increase of 9% in fixed assets and there is a decrease of
153% in the net current assets in the year 2010 compared to 2009.
The Comparative Balance Sheet 2010-2011 shows that there is an increase of 24% in
fixed assets and also an increase of 721% in net current assets in the year 2011
compared to 2010.
The Comparative Balance Sheet 2011-2012 shows that there is a n increase of 106%
in reserves and surplus, 5% in current liabilities, 148% in fixed assets and an increase
of 35% in the current assets in the year 2012 compared to 2011.
The Comparative Balance Sheet 2012-2013 shows that there is an increase of 33% in
reserves and surplus, 45% in current liability, 9% in fixed assets and 35% increase in
current assets in the year 2013 compared to 2012.
The Comparative Balance Sheet 2013-2014 shows that there is decrease of 6% in
reserves and surplus, 10% decrease in fixed assets and 1% decrease in current assets.

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 There is an increase of 191% in the current liability in the year 2014 compared to
2013.
The Sales Trend shows an increasing trend. It was 238% in the year 2013-14 which
was 100 in the year 2009-10.
The Profit Trend shows an increasing trend till the year 2011-12 then it started to
decline and reaches -38% in the year 2013-14.
The Current Ratio of the Company is found satisfactory. It was 1.71 in the year 2013-
14. The highest ratio was in the year 2011-12 which was 5.41.
The Quick Ratio was just below the satisfactory level of 1:1. It was 0.5 in the year
2013-14. The highest was in the year 2009-10 which was 0.9.
The Absolute Liquid Ratio was not at all satisfactory. The satisfactory level is 0.5 and
the company achieved this in the year 2010-11 and 2011-12.
The Debt Equity Ratio of the organization can be said as satisfactory. The satisfactory
level is 1:1. The company achieved the level in almost all the years.
The Proprietary Ratio shows an average of 0.5% in all the years. And this shows the
long term solvency position of the firm and it is satisfactory.
The Solvency Ratio of 60% is considered as satisfactory and the company achieves it
in the first two years but it was low in the years 2012, 2013 and 2014.
The G/P Ratio shows a decreasing trend which was not favorable for the organization.
The N/P Ratio was increasing till the year 2012 but it declined to a low level in the
year 2014. It was -0.8% in the year 2014 which was not favorable for the
organization.
The Operating Ratio shows above 80% in all the years from 2010-14. This is
favorable for the organization.
The Operating Profit Ratio was around 10% to 20% and it was found satisfactory for
the organization.
The Sales Forecasted for the year 2015 is 382901630, 2016 it will be 425836734,
2017 it will be 468771837, 2018 it will be 511706940 and in the year 2019 the sales
will be 554642044.

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5.2 SUGGESTIONS

The organization have to take corrective measure to improve the profits. The profit is
showing a decreasing trend.
The organization should try to improve the quick assets of the company.
The sales shows an increasing trend but the profit shows the opposite. So the
organization should control the unnecessary expenses to improve the profit.
The organization should improve its liquidity position.
The G/P ratio as well as N/P ratio is decreasing year by year, organization should take
care to control this movement.

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 5.3 CONCLUSION
Financial Statement Analysis is the analysis of the financial statement of the
company and it helps the organization in decision making and planning the future prospects
of the business. So I take this opportunity to analyze the financial statements of Travancore
Sugars and Chemicals. The intention of the study was to make an analysis of the financial
statement and provide valuable suggestions to the organization. Through that my knowledge
in the Financial Statement Analysis has been increased. The financial analysis is the basis for
the forecasting so I included the forecasting in my study, to understand the future prospects of
the business. To conclude the financial position of the organization was not satisfactory
because the profit shows a decreasing trend. The liquidity position is satisfactory but the
organization has to improve it. Overall the organization has to make changes in their
operations in order to retrieve the organization into a profit making organization.
It was a nice experience in the organization. This study helped a lot to improve
my knowledge on the Financial Statement Analysis and Forecasting. Through this study I get
a practical exposure in the organization and I came to know the working of an organization.
Overall it was a nice experience.

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