Report On Paper Mill

A Study Of Financial Performance Based On RATIOS
At WEST COAST PAPER MILLS LIMITED DANDELI
Executive Summary
Introduction
Literature review
Statement of Problem
Purpose of the study
Scope of the Study
Objective of the study
BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA) 1

Executive Summary
As we know paper meets the basic needs for modern society by contributing to
Communication, Education, Packaging, and Hygiene. The demand for paper in
India is highly skewed towards the low cost varieties.
West Coast Paper Mills Company Ltd. was promoted by Shree
Digvijay Cement Company Limited, Sikka,

Sikka, Gujarat State in 1955 and located
at Dandeli in Karnataka. The Company was incorporated on 25th March, at
Mumbai. The Companys object is to manufacture of paper, pulp and other raw
materials. The Company manufactures printing papers, writing papers,
wrapping papers etc. The company is one Indias premier paper manufacturers
and also manufacturers optical fiber cables and jelly filled telecom cables to
cater to the requirements of the countries telecom sector. West coast has won 13
productivity awards from the National Productivity Council (Govt. of India)
and other organizations. It has also been awarded ISO 9001: 1994 certification
as an endorsement of the companies initiatives to protect quality and
consistency.
Financial statements provide summarized view of the financial position and
operation of the company. Therefore, now a day it is necessary to all companies to
know as well as to show the financial soundness i.e. position and operation of
company to their stakeholders. It is also necessary to company to know their
financial position and operation of the company.

In this report I made an effort to know the financial position of the WEST
COAST PAPER MILLS LIMITED DANDELI, by using the Annual Reports of
the company. The Financial analysis of this report will show the Strength and
weakness of the WEST COAST PAPER MILLS LIMITED DANDELI.
Financial analysis will help the company to take decision.
The study is done on various calculations of liquidity, turnover, leverage,
and profitability of the firm with the help of Ratio Analysis. Ratio Analysis is
widely used to analyze the solvency, liquidity, and profitability of the firm.
Interpretations are drawn through the sources of primary and secondary data.
Graphs, diagrams, tabulation methods are used to analyze and interpret the data
collected.
From the analysis, it can be interpreted that the company should
improve its liquidity and profitability position. However turnover ratios and
leverage ratios hold well in the company.
OBJECTIVES OF STUDIES
1. Main objective is to study different ratios.
2. To determine Profitability trend of the concern.
3. To determine the liquidity of the business
4. To study financial performance of the organization and suggest measures to
management for improvement of profits
5. To study the efficiency of organization. ( proper utilization of resources)

INTRODUCTION
When we observed the financial statements comprising the balance sheet and the
profit and loss account is that they do not give all the information regarding the
financial operation of a firm, they provide some extremely useful information to the
extent the balance sheet shows the financial position on a particular date in terms of
structure of assets, liabilities and owners equity and profit and loss account shows
the result of operation during the year. Thus the financial statements will provide a
summarized view of the financial position and operations of a firm. Therefore in
order to learnt about the firm from a careful examination of its financial statements
as invaluable documents through RATIOS as a tool of financial analysis.
Meaning:
Ratio analysis is one of the powerful techniques of financial analysis where
ratios are used as a yardstick for evaluating the financial condition & performance
of a firm.
The idea of ratio analysis was introduced by Alexander Wall for the first time
in 1919. Ratios are quantitative relationship between two or more variables taken
from financial statements. This relationship can be expressed as (i) Percentages (ii)
Fraction (iii) Proportion of numbers
It is defined as the systematic use of ratios to interpret the financial
statement so that the strengths & weaknesses of a firm as well as its historical
performance & current financial condition can be determined.

In the financial statement we can find many items are co-related with each
other. For example current assets and current liabilities, capital and long term debt,
gross profit and net profit, purchases and sales etc.
Whole taking managerial decision the ratio of such items reveal the
soundness of financial position. Such information will be useful for creditors,
shareholders, management, and all other people who deal with company.
Importance of ratio analysis
1. Analyze financial statement: Ratio analysis the important tool available for
analyzing the financial statement i.e. profit and loss account of balance sheet.
Ratio tells the whole story of changes in the financial condition of the business.
2. To improve future performance: Ratio analysis indicates weak spot of the
business. This helps the management in overcoming such weakness and
improving the overall performance of the business in future.
3. Facilitates Inter-firm comparison: Ratio analysis provides data for inter
firm comparison. Ratio highlights the factors associated with successful and
unsuccessful firms. They also reveal strong firms and weak firms over-valued
and under-valued firms.
4. Makes Intra firm comparison: Ratio analysis also makes possible
comparison of the performance of the different divisions of the firm. The ratios
are helpful in deciding about their efficiency or otherwise in the past and likely
performance in the future.

5. Helps in planning: Ratio analysis helps in planning and forecasting. Over a
period of time a firm or industry develops certain norms that may indicate
future success or failure.
6. Useful in judging the efficiency of a business: It helps in judging the
efficiency of business liquidity, solvency, profitability etc of a business can be
easily evaluated with the help of various accounting ratios like current ratio,
liquid ratio, debt equity ratio and net profit ratio etc. such an evaluation enables
the management to judge the operating efficiency of the various aspects of
business.
7. Useful in simplifying accounting figures: Complex accounting data
presented in balance sheet and profit and loss account is simplified, summarized
and systematized with the help of ratio analysis so as to make it easily
understandable for example gross profit ratio, net profit ratio, operating ratio
etc.
Limitation of the ratios
1. Comparative study required: Ratios are useful in judging the efficiency of
the business only when they are compared with the past results of the business
or with the results of a similar business. However, such a comparison only
provides a glimpse of the past performance and forecasts for future may not be
correct since several other factors like market conditions, management policies,
etc., may affect the future operation.

2. Limitation of financial statement: Ratios are based only on the
information which has been recorded in the financial statements, Statements
suffer from number of limitation, the ratios derived there from, therefore, are
also subject to those limitations. For example, non financial changes though
important for the business are not revealed by the financial statements. If the
management of the company changes, it may have ultimately adverse effects on
the future profitability of the company but this cannot be judge by having a
glance at the financial statements of the company. Similarly, the management
has choice about the accounting policies. Different accounting policies may be
adopted by management of different companies regarding valuation of
inventories, depreciation, research and development expenditure and treatment
of deferred revenue expenditure, etc. The comparison of one firm with another
on the basis of ratio analysis without taking into account the fact of companies
having different accounting policies, will be misleading and meaningless
3. Ratios alone are not adequate: Ratios are only indicators; they cannot be
taken as final regarding good or bad financial position of the business. Other
things have also to be seen. The value of a ratio should not be regarded as good
or bad. It may be an indication that a firm is weak or strong in a particular area,
but it must never be taken as proof.
4. No fixed standards: No fixed standards can be laid down for ideal ratios.
For example, current ratio is generally considered to be ideal if current assets
are twice the current liabilities. However, in case of those concerns which have
adequate arrangements with their bankers for providing funds when they

require, it may be perfectly if current assets are equal to slightly more tan
current liabilities. It is therefore, necessary to avoid many rules of thumb.
Financial analysis is an individual matter and value for a ratio which is perfectly
acceptable for one company or one industry may not be at all acceptable in case
of another.
5. Ratios are a composite of many figures: Some cover a time period, others
are at an instant of time while still others are only averages. A balance sheet
figure shows the balance of the account at one moment of one day.
It may, therefore, be concluded that ratio analysis, if done
mechanically, is not only misleading but also dangerous.
Standard of Comparison
The ratio analysis involves comparison for a useful interpretation of the
financial statement. A single ratio in it self does not indicate favourable or
unfavourable condition. It should be compared with some standard. Standards of
comparison of may consist of:
Time series analysis: When financial ratios over a period of time are
compared, it is known as the Time series analysis.
Cross-sectional analysis: Another way of comparison is to compare ratios of
one firm with some selected firms in the same industry at the same point in
time. This kind of comparison is known as the Cross-sectional analysis. This
kind of comparison indicates the relative financial position and performance of
the firm.

Industry analysis: To determine the financial condition and performance
of a firm, its ratio may be compared with average ratios of the industry of which
the firm is a member. This sort of analysis, known as the industry analysis, helps
to ascertain the financial standing and capability of the firm vis--vis other firm
in the industry. Industry ratios are important standard in view of the fact that
each industry has its characteristics which influence the financial and operating
relationships.
Pro Forma Analysis: Sometimes future ratios are used as the standard of
comparison. Future ratios can be developed from the projected or pro forma,
financial statements. The comparison of current or past ratios with future ratios
shows the firms relative strengths and weakness in the past and the future.
In my project, I am going to take standard of comparison based on
Time series analysis, on financial Performance of WCPM Ltd Dandeli of last 5
years. It gives an indication of the direction of change and reflects whether the
firms financial performance has improved, deteriorated, or remained constant
over a time.
CLASSIFICATION OF RATIOS:
Ratio can be classified into different categories depending upon the basis of
classification.
TRADITIONAL CLASSIFICATION:
The traditional classification has been on the basis of the financial
statement to which the determinants of a ratio belong. On this basis the ratio could
be classified as,

Profit & loss account ratio
Balance sheet ratio
Composite ratios
However the above basis of classification has been found to be crude &
unsuitable because analysis of balance sheet & income statement cannot be done in
isolation. They have to be studied together in order to determine the profitability
and solvency of the business. In order that ratio serves as a tool for financial
analysis,
They are now classified as:
1) Liquidity ratio
2) Capital structure ratio
3) Turnover ratio
4) Profitability ratio
In this project, it considered all the following ratios for WCPM ltd
Dandeli for calculation. To know the reason for decline in profits and give
suggestion to overcome the problems. This also includes the theoretical aspects
of the different ratios.
LIQUIDITY RATIOS ARE
1. Current Ratio
2. Quick Ratio
3. Absolute Liquid Ratio / Cash Ratio
4. Working Capital Ratio

CAPITAL STRUCTURE RATIOS ARE
1. Debt Ratio
2. Debt Equity Ratio
3. Proprietary Ratio
4. Interest Coverage Ratio
TURNOVER RATIOS ARE
1. Inventory Turnover Ratio
a. For Raw Material
b. For Work In Progress
c. For Finished Goods
2. Debtors Turnover Ratio
3. Creditors Turnover Ratio
4. Assets Turnover Ratio
a. Net Assets Turnover Ratio
b. Total Assets Turnover Ratio
c. Fixed Assets Turnover Ratio
d. Current Assets Turnover Ratio
e. Working Capital Turnover Ratio

PROFITABILITY RATIO ARE
1. Profitability in relation to Sales
a. Gross Profit ratio
b. Net Profit ratio
c. Operating Expenses Ratio
d. Operating Profit ratio
2. Profitability in relation to Investment
a. Return On Investment
b. Return on Equity
c. Earning Per Share
d. Dividend Per Share
e. Dividend payout ratio

LITERATURE REVIEW
Paper financials 20052006
Indias current contribution of 2 per cent to global paper production presents
an opportunity to paper makers in the country. According to Research and
Marketing Reports, the Indian paper industry is already growing at 5 per cent
compared to the 3 per cent annual growth rate in the rest of the world. Other
sources such as the IPP Star Industry Survey of the Indian Printing Industry project
even higher growth rates for paper consumption in India.The paper industry is
witnessing structural changes, as major paper manufacturers plan and execute
consolidation and restructuring measures. The strategies of the major Indian players
and their financial performance in 20052006 are analyzed here.
JK Paper
JK Paper Ltd has reported an 8 per cent increase in its net profit at Rs 8.65 crore for
the companys third quarter ending March 31 against Rs 8.01 crore in the
corresponding period last year. The companys total income grew by 17.77 per cent
to Rs 213.26 crore in the third quarter compared to Rs 181.08 crore in the
corresponding quarter of the previous year.

BILT
Ballarpur Industries Ltd in April 2006 reported 27 per cent increase in consolidated
profit after tax for the third quarter ended March 2006. The companys profit after
tax for the quarter under review stood at Rs 56.06 crore as against Rs 44.21 crore in
the corresponding quarter in the previous financial year, an increase of 26.8 per
cent. The consolidated revenue during the quarter stood at Rs 468.39 crore as
against Rs 393.02 crore in the same period last year, up 19.18 per cent.
AP Paper
Investment advisors have given a buy recommendation on Andhra Pradesh Paper
Mills (AAPM) with a price target of Rs 224. APPM is already showing positive
results of its on-going Rs 635 crore expansion program begun in Q1of FY05. The
expansion will enable the company to double its EBTIA margins to around 26.2 per
cent in FY08. It is expected that a good increase in margins will result in a CAGR
growth of 38 per cent in profit after tax from FY05 to FY08. Sales growth of 15.2
per cent, improved return ratios on capital employed of 14.7 per cent, and return on
equity of 15.1 per cent are expected in this period.
West Coast Paper
During the year under review, the company earned a net profit of Rs 42.73 crore on
a turnover of about Rs 525 crore, when its total production touched around
1,76,000 tons of writing and printing paper, and duplex board. Of the total
production, duplex board would be about 67,000 tons. Last year, it produced about
1,73,000 tons, including duplex board of the same quantity. (Source: www. Indiainfoline.com)

Raw Materials
Raw materials account for nearly 40 to 50% of the total cost of production for
paper. The cellulose fibre sourced from softwoods, bamboo, agro-residues or from
recycled waste paper, is the major input for paper.
An important factor which affect the comparative advantage of the Indian
paper industry is the increased cost of production. The cost of capital, coal and
power make the Indian paper 25% to 30 % costlier than the paper produced
in other countries.
The following table gives the breakup of the costs as % of net

sales (1999-2000) :
Cost Components % of net sales
Cost of production
86.5
Raw Material
48.8
Wages
6.8
Power and Fuel

22.6
Other Costs
8.3
Selling Cost
5.4
Administrative
8.9
Operating Profit
-0.8
Source: CMIE, April 2000 (Industry-Financial Aggregates & Ratios)

Impact Analysis
The impact on the paper sector has been marginal. There has been no change in
customs duty of newsprint and paper & paperboards. The excise duty on the
producers using >75% non-conventional raw materials has increased from 8% to
16% and would affect their bottomlines. The impact of imposition of 7.5% MAT
would be mixed and differs from company to company.
Courtesy: Indiainfoline

Statement of the problem:
Management Problem:
Company wants to know the reason for decline of profit for last 5 years,
which affected financial stability.
Research Problem:
To study financial performance of West Coast Paper Mills Limited and find
the reason for decline of profits through ratios.
Purpose of the study:
The purpose of the study is to find out the financial performance of the firm for
last 5 years through ratio analysis and their by suggest the company to take better
decision for improvement of profits.
The financial performance of the company is known by calculating financial
statement and ratio.
Scope of the study:
Scope of the study is limited to financial aspects of West Coast Paper Mills Ltd
Dandeli.

Objectives of the study:
1. Main objective is to study different ratios.
2. To determine Profitability trend of the concern.
3. To determine the liquidity of the business
4. To study financial performance of the organization and suggest
measures to management for improvement of profits
5. To study the efficiency of organization. ( proper utilization of resources)

Industry profile
Organization profile
Organization chart
Methodology and data collection

INDUSTRY PROFILE
Paper History
Paper has a long history beginning with the ancient Egyptians and continuing to
the present day. For thousands of years, hand made methods dominated and then,
during the 19th century, paper production became industrialized. Originally intended
purely for writing and printing purposes, a wide variety of paper grades and uses
are now available to the consumer.
3200 BC
Paper derives its name from papyrus the material used by ancient Egyptians,
Greeks and Romans. Papyrus, however, is only one of the predecessors of paper
that together are known by the generic term tapa and are made mostly from the
inner bark of paper mulberry, fig, and Daphne
105 AD
Chinese invented the paper making from textile waste using rags. Later Chinese
papermakers developed a number of specialties such as sized, coated, and dyed
paper, and paper protected against ravages by insects, but they had great problems
satisfying the growing demands for paper for governmental administration. They
also used a new fibre-yielding plant -bamboo
14th century
In the course of rapid expansion of trade, more and more merchants dealt in the
commodity called paper that was growing in importance for public and
intellectual life.
1980 0nwards

The evolution of new sheet-forming principles and chemical pulp processes has
been the main process improvements.
GLOBAL OVERVIEW:
A majority of global market for paper & paperboard was dominated by North
America (23 percent), Western Europe (16 percent), & Asia (33 percent). In the
global paper consumption was estimated at 360 mn tones 2004. Writing & printing
paper constituted 30 per cent of the global paper consumption followed by
corrugated materials at 21 percent.
During this period, India has also emerged as the second most preferred
investing (Foreign direct) destination in the world, with permissible investment
limits rising across every sector.
2003 2004 2005
China China China
US US India
Mexico India US
Poland UK UK
Germany Germany
India France
UK Australia
In industrialized countries, like in the United States (322 kilograms per capita
per year), Western Europe (around 220 kilograms per capita of the per year).
Industrialized nations, consume 87 percent of the worlds printing & writing papers.

India, Russia, & China are expected to be key in the industrys growth over the next
few years.
PAPER CONSUMPTION IN ASIA

The paper market in Asia is estimated at around 34% of global consumption. The
principal markets are China, Japan, India, Malaysia, Singapore, and Thailand. The
developing markets of Asia present a vibrant growth opportunity for paper
manufacturers. Japan enjoys the highest per capita consumption (249.66kg),
followed by Singapore (228kg), Malaysia (101kg), China (28kg), Indonesia (22kg)
and Philippines (11kg). Singapore tops in per capita consumption of paper.
Malaysia is second with 101kgs. Interestingly the market growth rates are varying
by grades.
INDIAN PAPER INDUSTRY
The first paper mill in India was set up at Sreerampur, West Bengal, in the
year1812. India is currently the 15th largest paper producing country. The paper
industry is categorized into forest-based, agro-based and others (waste paper
secondary fibre, bast fibres and market pulp). Their contribution in the
manufacturing sector is 42.9, 28.1, and 29.0 percent respectively.
There are, at present, about 515 units engaged in the manufacture of paper and
paperboards and newsprint in India.
POSITION:
The Indian paper industry is the fifteenth largest in the world in terms of
consumption and eighteenth in terms of production.

CAPACITY:
The total capacity of the Indian paper industry was estimated at 6.1 mn TPA
(excluding newsprint).
GLOBAL SHARE:
India accounted for 4.7 per cent of the Asian and 1.5 per cent of the global paper
consumption.
EMPLOYMENT:
The industry provided jobs for more than 1.3 mn people, contributing about
Rupees 25 billion to the exchequer.
CONSUMPTION:
Indias per capita consumption was around the lowest among developing nations
and the global average.
GROWTH:
The Indian paper industry demonstrated secular annual volume growth at about
six per cent over the last five years, broadly mirroring the Indian GDP growth.
INDUSTRY CHARACTERISTICS
CYCLICAL:
The industry is cyclical, marked by periods of overcapacity leading to low
realizations, shakeout, and gradual demand increase and increasing realizations.
FRAGMENTED:
There are about 600 paper mills in India with installed capacities ranging from
1,000 TPA to over 1,50,000 TPA

HIGH INVESMENT, LOW RETURN
The Indian paper industry generated a return of only about 11 per cent on its
employed capital, based on the historical costs of its gross block.
CLASSIFICATION:
Paper manufacturers derive their raw material from wood, waste paper, and
agricultural sources. A majority of the wood- based producers are large players
while most medium and small players are based on recycled fiber or agro-based
raw materials.
ENVIROMENT UNFRIENDLY:
The perception is that the paper industry destroys the green cover in its pursuit of
raw material, depletes coal reserves to generate power, and pollutes natural water
resources through the release of harmful chemicals (chlorine and compounds). The
paper industry maintains a green cover extending an approximate 10,00,000 acres
for four years, which is felled in the fifth and simultaneously replenished.
PRODUCT CLASSIFICATION
Paper is classified into two heads (based on its end use) writing/printing,
industrial and specialty grades. The industrial variety accounts for high volumes
and holds the potential for above- average growth; the writing/printing category
provides high margins; specialized grades provide increasing volumes and high
realization.
1) Writing / printing paper: Classified in to creamwove, maplitho (branded
copier) and coated varieties.

2) Industrial paper: Classified into paperboard and Kraft; paperboard can be
subdivided into Duplex Board with Grey Back, White Board and MG
Poster/ Board
3) Speciality paper: Comprises security and tissue paper
The country almost self-sufficient in manufacture of most varieties of paper and
paperboards. Imports, however, is confined only to certain specialty papers. To
meet part of its raw material needs the industry has to rely on imported wood pulp
and waste paper
MAJOR PLAYERS IN THE PAPER INDUSTRY
COMPANY PRODUCTION
(TONNES) 2004
Ballarpur Industries Limited 375000
Tamilnadu 233000
Newsprint & Paper Limited
J K Paper Limited 127000
The West Coast Paper Mill Limited 163714
The Andhra Pradesh Paper Mills 157600
Limited
The Sirpur Paper Mills Limited 83550
Star Paper Mills Ltd 67875
Rama Newsprint 138000
Hindustan Paper Corporation Ltd 320113

PRODUCTION IN ALL SEGMENTS
Product Key Players Features

Cream wove (WPP) HPC, TNPL Largest sub segment in WPP;
fragmented low quality paper
Maplitho (WPP) BILT, JK Paper, TNPL, AP Use din copier and printers.
Paper Fastest growing sub segment
in WPP
Coated (WPP) BILT, JK Paper Best quality paper used in
catalogues etc.
Second fastest growing sub
segment in WPP
Bonds (WPP) BILT, JK Paper Smallest and slowest growing
sub segment in WPP
Kraft (industrial) ITC, Star Paper, Used for corrugated boxes and
Seshasayee Paper carry bags
Duplex (industrial) ITC, West Coast, Sirpur Used for small cartons in retail
Newsprint HNL, Mysore Paper, TNPL Significant import dependence
Consumption
. The scope for growth in consumption is considerable when compared with the
paper consumption of the other Asian developing economies

COMPANY PROFILE
About WEST COAST PAPER MILLS LIMITED
The Company was promoted by Shree Digvijay Cement Company Limited, Sikka,
Sikka,
Gujarat State in 1955 and located at Dandeli in Karnataka. The Company was
incorporated on 25th March, at Mumbai. The Companys object is to manufacture
of paper, pulp and other raw materials. The Company manufactures printing papers,
writing papers, wrapping papers etc.
This Mill is located at Dandeli in the middest of forest area of Uttar Kannada
district of Karnataka. Dandeli is 56kms from Dharwad and from Pune-Bangalore
Pune highway No.4 31kms from Alnavar railway station on Miraj Bangalore
Network.
In 1956 the factory started with an authorized capital of Rs.5 crore and the trial
production commenced with effect from 18th November 1958. Shri Morarji Desai,
Hon. Finance Minister, Union Government has inaugurated the factory on 19th May
1959. There after regular production continued.
The availability of basic raw material like Bamboo and the wood in abundance
and the availability of water in al seasons from the Kali River and the railway link
to transport raw materials as well as finished products promoted the promoters to
set up this huge plant in this remote forest area.
Bangur- Somani Groups promoted the West Coast Paper Mills Ltd. It is one of the
renounced and reputed companies in the paper industry. It is one of the large- scale
companies in India.

VARIOUS REGISTRATION DATES
Date of Incorporation 25-03-1955
Date of Commencement 05-05-1955

of business.
Commencement of trial 17-11-1958

production
Commencement of 16-5-1959
commercial Production
The mill location was opted as the most suitable and advantageous, Dandeli being
situated in the heart of thick forests on the bank of river Kali. The prospects of
continued supply of forest-based raw materials on the assurance of the then State
Government of Karnataka, perennial availability of water, assured power supply,
and vicinity of rail and road linkages were the major factors that weighed in favour
of Dandeli.
The Company was granted license in December 1964 for 45,000 MT/P.A.
capacities and the balancing equipments programme was completed in 1972 to
increase the production to 45,000 MT/P.A. The company also implemented the
Crash programme in 1974 to increase production capacity to 60,000 MT/P.A.
the license capacity was re-endorsed for 69,000 MT/P.A. in November 1991 on the
basis of actual production. The Paper Industry has been de-licensed from July 1997.

VISION:
To excel in servicing the growing demands of the paper and paper products
worldwide and enhance the shareholder value with consistent and sustained
performance
OBJECTIVES
To build on strength and synergies.
To seek out opportunities and to achieve them with commitment with
quality.
To forge ahead in an increasingly competitive world.
CORPORATE INFORMATION
Registered office
Bangur Nagar DANDELI.
Corporate office
Kasturba Road, BANGALORE
Zonal Offices
North Zone NEW DELHI
East Zone KOLKATA
West Zone MUMBAI
South Zone CHENNAI
QUALITY POLICY

WCPM are committed to provide quality products and services through the TQM
approach to ensure the customers satisfaction on a sustained basis
ENVIRONMENTAL POLICY
WCPM is committed to
Comply with all applicable environmental legislations.
Continually improve upon the environmental performance by:
Afforestation by social and farm forestry on degraded and unproductive
lands by clonal technology supported by micro and macro propagation.
Recycle critical resources like water, lime, mud and pulp mill fibrous
solid waste.
Generate and use energy efficiently and to become self
Set environmental objectives and targets and periodical review them.
Upgrade al plants with state of the art technologies and operating
practice to minimize generation of pollution at source sufficient in
power.
Green belt development to protect and preserve the ecosystem.

ecosystem.
TOTAL ENERGY MANAGEMENT POLICY
WCPM are committed to achieve total energy management approach by
adopting
Progressive reduction of the specific energy consumption.
Induction of energy efficient equipments by continuous absorption of
latest technology and process development for saving resources and in
environment.

Perpetual energy auditing for continuous improvement of process and
optimization of energy cost.
Involvement of employees to minimize energy waste through small
group activities.
TECHNICAL PROCESS
The mill is based on conventional Kraft process using wood as the main raw
material. The wood is Casuarinas, Eucalyptus, Subabul and Acacia. Wood are
chipped in Chippers and fed to digesters for cooking in which cooking chemicals
are added. After cooking the pulp is washed, screened, cleaned, bleached, and
stored. The company has two old streams of Brown Stock Washers and of bleach
plants. 96-95% of chemicals used for cooking process are recovered in the recovery
plant and in the process of this recovery substantial steam is also generated.
The pulp is refined in the Stock Preparation section and treated with sizing
chemicals, dyes and loading materials before being transferred to the Paper
Machine section for manufacturing paper. The company has three machines, which
are of standard design consisting of wire part, press part, and dryer section. The
company has fully equipped finishing and converting sections for rewinding,
cutting and packing of the paper in reels or sheets.
The company has also PM IV & V to manufacture multilayer board (Duplex
Board).

. These machines uses recycled fiber and are therefore Eco-friendly. However some
quantity of mill made pulp is also used in top layer to improve the quality and to
reduce the cost.
The company has gone for process automation and installed Basis weight and
moisture control system and ash control system on machines.
ORGANISATION CULTURE
The West Coast Paper Mills Limited has many value and aspirations such as:
1. Treating others with uncompromising truth.
2. Lavish trust on their work associates.
3. The Manager should act as mentor unselfishly.
4. The members should be receptive to new ideas regardless of their origin
5. The employee/ manager should not hesitate to the risks for the
organizations sake.
6. The credit should be given where it is due.
7. Corruption should not be encouraged.
8. The interests of others must be given importance than the interest of self in
organization.

MARKET LEADER
1. Leader in MICR cheque paper in India with a market share of about 70 percent.
2. Strong presence in Indias writing, printing, and packaging/wrapping papers,
accounting for about 3.2 percent of the total market.
3. Ability to customize production in line with the demanding needs of end
(consumer and industrial) users.
SWOT analysis:
STRENGTHS OPPORTUNITIES
Large and growing domestic market Enormous domestic market potential
Low personnel and fuel cost Forest plantation potential
Well developed printing industry Development of the industry based on FDI
Know how in wood pulping and Low labor cost and export potential
application
WEAKNESS THREATS
Highly skilled and job specific Mills lacking international competition
Environmental problems Environmental pressures
Obsolescence of technology Delayed forest plantation and deficit of
fibres
Short term plans for raw materials

EXPANSION PROGRAMME
In the present era of globalization along with projected and sustainable growth of
the industry, development-cum-induction of energy efficient technology is the need
of the day. The development that meets the needs of the present without
compromising ability, needs and expectations of future generation shall become the
bench mark for a sustained growth. Constant efforts are to be made with efficient
fiber and energy management system to further strengthen and usher in the realm of
sustainable operations of the industry.
The company keeping in view the availability of raw materials in future and its
vision, has embarked upon the expansion and modernization programme with an
outlay of Rs.1100 crore for increased production facilities in its existing mills at
Dandeli with main emphasis on technology up gradation, improvement in quality,
reduction in cost of production and manufacturing of value added products. The
capacity of the plant shall be increased from present production by 1, 26,000 TPA.
The programme will be funded by term loan of Rs. 725 Crores from banks and
institutions and Equity/ Internal accruals of Rs. 375 Crores, totaling to Rs.1100
Crores.
The expansion programme envisaged by the Company broadly consists of
installation of the following:
a) Pulp Mill
b) Chemical Recovery
c) Paper Machine
d) Utilities

e) Effluent Treatment Plant
PROJECTS UNDER CONSIDERATION- RS 1100 CRORES
Complete fiber line of 650 TPD bleached pulp capacity comprising of wood
chipper, chip screen, chip silo, modified batch cooking system, brown stock
washing & screening, oxygen dezincification of pulp, ECF bleaching and
chlorine dioxide generation plant.
New paper machine comprising continuous stock preparation, QCS & DCS
systems, converting equipments, mechanized handling paper in converting,
finishing, and godown stages.
Black liquor evaporators of 160m3/hr water evaporation capacity.
Chemical Recovery boiler of 1000TPD black liquor solid firing capacity.
Caustisizing section comprising liquor clarification equipments, rotary lime kiln
etc.
Power plant comprising two boilers and one turbine to meet additional
requirement of steam and power.
Additional equipment for effluent treatment plant, environmental protection and
to improve basic infrastructure.
The production capacity will go upto 3,00,000 TPA after completion of the said
investment programme as against 1,63,750 TPA at present.
MILESTONES
YEAR
1955: Promotion of West Coast Paper Mill Limited
1959: Commercialization of Operation

1972: The commissioning of a well equipped R&D Centre managed by a well
qualified team and recognition by the Department of Science & Technology,
Government of India
1989: Amendment of Karnataka Forest Act, leaving the Company without an
assured supply of Bamboo from 1989. The Company develops a new technology
that eliminates the need of bamboo in paper making. Recipient of the National
Award for higher productivity and energy conservation in the industry.
1994: Completion of the first phase of a modernization cum diversification
programme of rebuilding of paper machine adopting state of the art technology and
installing modern machinery for the manufacture of value added speciality paper.
1995: Installation and commissioning of a 75 TPD Duplex Board Machine helping
develop a new product light weight coated Duplex Board through the use of eco-
friendly recycled fibres.Commissioning of Nine DG sets of 1 MV each to augment
captive power generation.
1998: Commissioning of a 250 TDP bleach plant to make high bright paper.
Commissioning of one 3.8 MW capacity multi-fuel based Power generating set for
power self sufficiency.
1999: Commissioning of one 4.0 MW Multi-fuel based power generating set with a
complete self-sufficiency in power requirement.
2000: Installation of the falling film evaporators a modern evaporation technique
for steam recovery. Commissioning of a 4.0 MW Multi-fuel based power plant.
Rebuilding of the paper machine for enhancing capacity by 5000tpa.

2001: Installation of new 500 TPD Chemical recovery Boiler for the generation of
steam and power.
2002: Installation of a 100 TPD Duplex Board Machine and 350 TPD Brown Stock
Washing equipments.
SHEER LONGEVITY
West Coast has succeeded and survived across five decades. This has created one of
the most significant industry strength. This comprises rich goodwill, process and
product knowledge, trend-reading capability and distribution depth. Its competitive
strengths are based on low historical costs in what is otherwise a capital-intensive
business.
Product mix
West Coast makes al kind of writing, printing and duplex board paper varieties.
Its rich understanding of customer needs has translated into the production of
around 100 kinds of paper. This wide choice de-risks the companys revenues from
a temporary slackness in any one product.
PRODUCTS IN EVERYDAY LIVES

West Coast prides in making products that are used by people in a variety of ways
in their everyday lives The end use of paper/paperboard manufactured by the
company comprises diaries, calendars, multi-colour printing, ledgers, share
certificates, annual reports, catalogues, envelopes, coating base paper etcThis
comprehensive range makes the company a virtual one-stop shop for consumer
needs .

Customers of WCPM
Indian Aluminum Co. Ltd,
Godfrey Philips India Ltd.
Kores (India) Ltd.
Paper Products Ltd.
State Bank of India, Bank of Baroda, Central Bank of India, Syndicate Bank
Canara Bank, Punjab & Sindh Bank, Corporation Bank, Dena Bank, Indian
Bank, Indian Overseas Bank, Standard Chartered Bank, HSBC, etc.
Security Printing Press, Government of India, Hyderabad and Nasik
Madras Security Printers
Calcutta Security Printers
Manipal Power Press
Speciality Coatings & Laminations Pvt. Ltd., Gurgaon
Gateway Coated Papers, Haryana
Surya Coats Pvt Ltd., Ahmedabad
Sarda Coats, Mumbai
Malhotra Book Depot, Delhi
Rohit Pulp & Paper Board Pvt Ltd., Mumbai
Lakhanpal Batteries, Baroda
Kiran Datta Forms, Mumbai
Vijay Flexible Containers - VFC
New Man Press, Chennai
Reliance Printers, Bangalore

Swadhya Printers & Packaging, Indore
Cartoon World, Cochin
Coromandal Cartons & Containers, Visakha Pattanam
Eagle Flask Ind. Ltd., Tategaon
Polite Printers, Goregaon
Metal Box (I) Ltd., Mumbai
CERTIFICATION OF WCPM LTD DANDELI
ISO 9001 Quality Management System International certified by Det
Norske Veritas, Netherland.
The company has been certified the ISO 14001 Environmental Management
System International Certificate.
The company has embarked upon prepatory phase for getting certified to
Occupational Health and Safety assessment serie
Description of the product classification is as follows.
PAPER SUITED END USE DEMAND DRIVERS

SEGMENT FOR
Writing /
Printing
Cream Black and Textbooks Government accounts for a sizeable share
wove white and of demand. Government spending and
printing Notebooks demand for text books and notebooks
influence demand.

Maplitho Printing Premium Demand is linked to economic growth and
notebooks, national literacy. Corporate literature and
writing books account for a significant share of
pads, demand.
diaries,
calendars
and annual
reports.
Coated High Printing, Demand influenced by corporate margins
paper quality publicity and health of the national economy
printing material,
books,
magazines
and office
stationery
among
others.
Industrial
paper
Kraft paper Packaging Packaging Corrugated boxes and carry bags.
purposes purposes
Duplex Packaging Small Driven by the industrial demand as a
board purposes cartons for packaging material from the pharma,
the retail cigarettes, hosiery, and matchbox demand.
market.
CORPORATE SOCIAL RESPONSIBILITY
WCPM sponsoring and supporting of Dandeli Education society, which imparts quality
education to thousands of pupils and students in around Dandeli from the pre- primary
level to the post graduation courses.

The company maintains its own residential colony around the mill site with decent and
adequate civic facilities and amenities such as roads, lights, water supply, shopping
complex, Hospitals, Temples, Community hall, Auditorium etc.
Rural health services provided to the surrounding needy people of the villages with
regular visits of doctors, free health check up and medicines.
The company has also taken up the responsibility of providing drinking water supply to
nearby villages through pipes, jointly with the government agencies.
In addition to these, the Company continues to fund and support Community and rural
development projects, social service clubs, local educational institutions, a public
library, medical camps organized by government, semi government, and NGO.
COMPETITORS OF WCPM LTD DANDELI
1. ITC Bhadrachalam
2. Ballarpur Industries
3. Sheshasai Paper Mills Ltd
4. JK Paper Industries
5. Sirpur Paper Industries
6. Andhra Paper Mills Limited Rajahmundry
Credit Policies at WCPM
The credit policies include the following:
The pay will be given 30 days period for the payment without interest
If the party makes the payment in 15 days then the company will give 3%
cash discount

If the party makes payment in between 16-21 days then the company will
give 1.5% cash discount
If the party makes the payment within 21-30 days then there is no cash
discount and even the interest will not be charged
If the party makes the payment within 30 days then the company will
provide 15 days grace period for the payment by charging 21% of interest
If the party does not make the payment in 45 days then the company will
charge interest for the whole 45 days at the rate of 21%.
ENTERPRISE RESOURCE PLANNING
The WCPM Ltd have adopted ERP. ERP is used for
West Coast has embarked on an ERP solution to enhance informed
decision making
Solution to connect all branches, dealers, suppliers across the
country
To enable the company to know what inventory is lying where for
timely allocation
To enable volumes to be scaled without increasing people
Rs.250 lakh ERP solution being commissioned by Tata Consultancy
Service Ltd.

Executive Director
Administrative
(President)
Technical General
(President ) (President)
Commercial Finance Operation Maintenance

(Asst. Vice President) (Asst. Vice President (Asst. Vice President) H.R
(Asst. Vice president)
Medical Accounts department Pulp mill Pulp mill

(G.M) (G.M)
GMIR
Stores Stores account department Deputy General Manager Paper machine Personal
(G.M) Manager
Transport Sales account department Asst. General Manager Chemical recovery

(G.M)
Costing department Senior Manager Work shop

(G.M)
Secretarial and shares department Manager Power house

(G.M)
Shift in charge
Workers
Workers
Organizational Chart
Workers
Paper mill operation

(G.M)
Chemical recovery
(G.M)
Converting
(G.M)
Finishing
(G.M)
Stock Preparation
(G.M)

Power house
(G.M)
ACCOUNTS DEPARTMENT
Asst. Vice President
A/Cs and Finance
Senior Manager A/Cs
Managers A/Cs
Section officers A/Cs
Senior Account Assistant
Accounts Assistant

METHODOLOGY AND DATA COLLECTION
Methodology:
Methodology:
The methodology includes the personal interaction with the head of
different departments of WCPM LTD DANDELI relating to A/Cs and
Finance.
Selection of data: From the Annual Reports of the WCPM LTD DANDELI
for last five years; i.e. from
Annual Report for the year 2001-02
Period: The Study covers a period of five years data from 2001-02, 2002-
03, 2003-04, 2004-05.and 2005-06 to mean an Accounting year of the
company consisting of 365 working days.
DATA COLLECTION METHOD:
1. PRIMARY DATA: The information is collected from the personal
interaction with head of different departments of WCPM LTD DANDELI
relating to A/Cs and Finance.
2. SECOUNDARY DATA: This is been collected through WCPM Ltd
ANNUAL REPORTS, & WEBSITES.

TECHNIQUE / STATISTICAL TOOLS:
Accounting Ratios.
Financial Statements of the Company
ANALYTICAL TECHNIQUE:
Statistical technique used for calculation of ratios is in terms of
percentage and proportion of numbers.
LIMITATION OF THE STUDY:
The accuracy of the ratios is subject to the validity of information provided
through Balance sheet, Profit and Loss A/c and interactions with
Management.
The standard for the ratios are suitably modified to prudently reflect the
financial position keeping in mind the peculiarities of the industry /
company.

Analysis and Interpretation
Findings
Suggestion
Conclusion

1) Liquidity ratios
Liquidity ratio means ability of the firm to meet its current obligation. These ratios
are also termed as working capital ratio or short term solvency ratio. Liquidity
ratios establishing a relationship between cash and other current assets to current
obligations provide a quick measure of liquidity.
The most common ratios which indicate the extent of liquidity or lack of
it are: (i) Current ratio (ii) quick ratio. Other ratios include cash ratio, interval
measure and net working capital.
Current ratio: This ratio is an indicator of the firms commitment to meet its short-
term liabilities. It is expressed as follows:
Current assets
Current liabilities
An ideal current ratio is 2:1. Current assets means those assets which
can, in the ordinary course of business, be converted into cash within a short period
of time, normally not exceeding one year, and include cash and bank balances,
marketable securities, inventory of raw materials, semi-finished(work-in-progress)
and finished goods, debtors net of provision for bad and doubtful debts, bills
receivable, and pre-paid expenses. The current liabilities defined as liabilities which
are short- term maturing obligation to be met, as originally contemplated, within a
year, consist of trade creditors, bills payable, bank credit, and provision for
taxation, dividends payable and outstanding expenses.

TABLE-1
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Current Assets 18025.56 16581.26 16791.44 22843.32 20911.42
Current liabilities 11259 38 13881.12 15024.42 14649.88 14087.72

Current ratio 1.60 1.19 1.12 1.56 1.48
Note: Bank borrowings from secured loan against current assets (inventories and
book debts) are added in current liabilities.
SOURCE: ANNUAL REPORTS OF COMPANY
GRAPH-1
Interpretation: The current ratio of last five years is less than ideal ratio 3:1, i.e.
fluctuating. This indicates that firms commitment to meet its short liabilities was
not so good. In 2001-02 and 2004-05 the current ratios are good compare to 2002-
03, 2003-04, and 2005-06.

Quick ratio: Quick ratio establishes a relationship between quick, or liquid, assets
and current liabilities. An asset is liquid if it can be converted into cash immediately
or reasonably soon without a loss of value. Cash is the most liquid assets. Other
assets which are considered to be relatively liquid and included in quick assets are
debtors, bills receivables, and marketable securities (temporary quoted
investments). Inventories are considered to be less liquid. Inventories normally
require some time for realizing into cash; their Value also has a tendency to
fluctuate. The quick ratio is found out by dividing quick assets by current liabilities.
Current assets--- (Inventories+ Prepaid expenses)

Quick ratio =
Current liabilities
A quick ratio of 1:1 is considered to represent a satisfactory current
financial condition.

TABLE-2
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Quick Assets 9138.91 6871.1 6741.84 8335.4 8845.26
Current Liabilities 11259.35 13881.12 15024.42 14649.88 14087.72
Quick Ratio 0.81 0.49 0.45 0.57 0.63
GRAPH-2
Interpretation:
The ideal ratio is
1:1. The quick ratio
is also fluctuating
and it is less than
ideal ratio. In 2001-02 the ratio is satisfactory because it is near to 1 compare to
2002-03 and 2003-04 where ratio is 0.5. But it is increasing in 2004-05 and 2005-
06. Still overall the quick ratio is not satisfactory, means liquidity position of the
company is not good.
Cash ratio or Absolute liquid ratio or super quick ratio: This ratio is calculated
by dividing the super quick assets by the current liabilities of a firm. The super

quick current assets are cash bank and marketable securities. The ratio is the most
rigorous and conservative test of a firms liquidity position.
Cash + Bank + Marketable securities

Cash ratio=
Current liabilities
TABLE-3
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Absolute liquid 1702.81 811.00 584.06 591.55 1459.36
Current Liabilities 11259.35 13881.12 15024.42 14649.88 14087.72
A. L. ratio 0.15 0.06 0.04 0.04 0.1
GRAPH-3
Interpretation: In 2001-02 the ratio is 15% of its liabilities, but in 2002-03 it
decline to 6%, where as in 2003-04 and 2004-05 it remains 4%. But in 2005-06 it
increase to 10%. Overall the liquidity position is not good, or indicates that there is
a poor liquidity position of the company and there is poor firms commitment to
meet its short-term liabilities.
Net Working Capital Ratio: The difference between current assets and current
liabilities excluding short term borrowing is called net working capital or net

current assets. Net working capital used as a measure of liquidity. Net working
capital measures the firms potential reservoir of funds. It can be related to Net
assets.
Net Working Capital

Net Working Capital Ratio =
Net Assets
TABLE-4
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06

Net working capital 10239.58 7907.38 7203.36 13081.04 10296.25
Net assets 26735.97 32002.69 34093.22 39292.38 34226.39

Net Working Capital ratio 0.38 0.25 0.21 0.33 0.30
Source: ANNUAL REPORTS OF COMPANY
GRAPH-4
Interpretation:
Interpretation: This ratio also fluctuating, overall this ratio is declining only. In
2001-02 38% of total net assets, but in 2002-03 and 2003-04 it declining to
21%.However in 2004-05 it increase to 33%, but in 2005-06 it decreases to 30%.

2) Capital Structure ratio
The second category of financial ratio is leverage or capital structure ratio. The
leverages or capital structure ratio may be defined as financial ratios which
through light on the long-term solvency of a firm as its reflected in its ability to
assure the long term creditors with regard to: (i) Periodic payment of interest
during the period of loan and (ii) Repayment of principal on maturity or in pre-
determined installments at due dates. There are two different, but mutually
dependent and inter-related, types of leverage ratios. First ratio which are based
on the relationship between borrowed funds and owners capital. These ratios
computed from the balance sheet and have many variations such as: Debt equity
ratio, Proprietary ratio etc. Interest and leased charge ratio
Debt Ratio: It expresses out side liabilities i.e. both long -term and short-term in
relation to total capitalization of firm.
It is calculated as follows:
Total Debt
= ______________
Capital Employed
Generally creditors will prefer low debt ratio, since lower the ratio, higher the
caution against creditors losses in the event of liquidation.
Conversely, owners may prefer high debt ratio either
To magnify earnings or
Because issuing new share means giving up some degree of control

But a high debt ratio may create problem with respect to future financing since
creditors may reluctant to lend the firm more money unless equity base is
increased.
NOTE:
In WCPM Ltd Dandeli, they are considering the following items for calculation.
Total Debt = Secured loan + Un Secured loan + Present value of Lease
Capital Employed = Total Debt + Net Worth
Net Worth = Equities + Reserve and Surplus + Deferred Tax Liability
TABLE-5
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
TD 16042.94 17552.57 20105.94 22922.02 16587.53
+Value of lease
Capital Employed 29502.27 34155.83 39019.03 43767.37 38831.03
(TD+VL+NW)
Debt ratio 0.54 0.51 0.52 0.52 0.43
NOTE: TD= Total Debt, VL= Present Value of lease, NW= Net Worth
GRAPH-5

Interpretation: Overall the entire debt ratio is declining. In 2001-02 it is 54% of
total capital employed but in 2005-06 it is only 43%. It indicates that the companys
reliance on debt is decreased year by year. This shows that the company has less
long term borrowings from financial institutions.
Debt equity ratio: The relationship between borrowed funds and owners capital is
a popular measure of the long-term financial solvency of a firm. The relationship
shown by the debt equity ratios. These ratios reflect the relative claims of creditors
and shareholders against the assets of the firm. Alternatively, this ratio indicates the
relative proportion of debt and equity in financing the assets of a firm
When a company obtains the use of fixed assets under long term lease
agreements, it commits itself to a series of fixed payments. The value of lease
obligation is thus equivalent to debt
Total Debt + Value of lease

Debt equity ratio=
Net Worth + Deferred Tax liability
TABLE-6
(Amount in Lakhs)
Year 2201-02 2002-03 2003-04 2004-05 2005-06
TD+VL 16042.94 17552.57 20105.94 22922.02 16587.53
NW+DTL 13459.33 16603.26 18913.09 20845.35 22243.50
DE ratio 1.19 1.06 1.06 1.1 0.75
TD= Total Debt, VL= Present Value of lease, DTL= Deferred Tax Liability,
DE= Debt equity ratio

GRAPH-6
Interpretation: The debt proportion declining. In 2001-02 the debt is 1.19 rupees
as compare to 1 rupee in equities i.e. debt proportions are more than equities. In
2002-03 and 2003-04 the debt ratio are same, it is decline to 1.06, in 2004-05 it
increase to 1.1 times. In 2005-06 it declined to 0.75 i.e. 0.75 paisa as debt in
proportion of total capital employed where as equities are 1 rupee proportion of
total capital employed. The WCPM Ltd Dandeli depends more on internal sources
than on external sources i.e. it indicates that company depends upon insiders i.e. on
shareholders fund & and it also indicates that company is having sound financial
position.

Proprietary ratio: This ratio relate to the owners / proprietors funds with total
assets. This is called the proprietary ratio. The ratio indicates the proportion of total
assets financed by owners. Symbolically it is equal to:
Proprietors fund
Total Assets
TABLE-7
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Proprietors fund 13459.33 16603.26 18913.09 20845.35 22243.5
Total Assets 34521.95 40676.57 44941.06 49054.66 44841.56
Proprietary Ratio 0.39 0.41 0.42 0.43 0.5
Note: Proprietors fund= Net Worth
Total Assets= Fixed Assets + current Assets
GRAPH-7
Interpretation: The proprietary ratio is increasing from last five years i.e. in 2001-
02 is 0.39, 2002-03 it increase to 0.41, 2003-04 it increase to 0.42, 2004-05 it
increase to 0.43 and in 2005-06 it increase to 0.5. It indicates that there is a
continuously increasing in proprietors fund in total assets. It shows that the
financial position of the company is strong. This is increasing year by year.

Coverage ratio: The second category of leverage ratios are coverage ratios. These
ratios are computed from information available in the profit and loss account. The
soundness of a firm, from the view point of long-term creditors, lies in its ability to
service their claims. The interest coverage ratio shows the number of times the
interest charges covered by funds that are ordinarily available for their payment.
Since taxes are computed after interest, interest coverage is calculated in relation to
before tax earnings. Depreciation is non-cash items. Therefore funds equal to
depreciation are also available to pay interest charges.
EBDIT
Interest Coverage Ratio=______________________
Interest + Lease Charge
EBDIT= Earning Before Depreciation Interest and Tax
TABLE-8
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
EBDIT 7494.75 8139.12 7377.11 7387.46 8710.49
Interest + Lease 2560.45 1915.33 1320.05 1738.65 1788.06
Charged
Ratio 2.93 4.25 5.59 4.25 4.87
Note: The West Coast Paper Mills Ltd Dandeli also paying lease rental, therefore
the coverage ratio calculating by considering Lease rental also.
GRAPH-8

Interpretation: In 2001-02 the coverage ratio is very low i.e. 2.93, in 2002-
03 it increase to 4.25, in 2003-04 it increasing only and it increase by 5.59. But in
2004-05 it decrease to 4.25, however in 2005-06 it increase to 4.87.

3) Turnover ratio
Funds of creditors and owners are invested in various assets to generate sales
and profits. The better the management of assets, the larger the amount of sales.
Turnover ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. These ratios are also called Activity ratios.
Turnover ratios indicate the speed with which assets are being converted or
turned over into sales.
Inventory Turnover ratio: This ratio indicates the number of times inventory is
replaced during the year. It measures the relationship between the cost of goods
sold and the inventory level.
Cost of goods sold

Inventory turnover=
Average inventory
In a manufacturing company inventory of finished goods is used to calculate
inventory turnover. The manufacturing firms inventory consists of two more
components: (i) raw materials (ii) work-in-process, it is calculated to know the
levels of raw material inventory and work in process inventory held by the firm on
an average. The raw material inventory should be related to material consumed, and
work in process to the cost of production.
Material Consumed
Raw material turnover ratio = Average raw material inventory
Cost of production
Work in process turnover =
Average work in process

General guidelines for Inventory turnover ratio: The raw material should not
exceed 2-4 months, consumption of the year. The finished goods should not exceed
2-3 months, sales and for WIP should not exceed15-30 days, cost of sales.
a) For Raw Material
Raw Material Consumed=

Consumed= Opening Stock of RM + Purchases + Direct Expenses
Less closing Stock of RM.
TABLE-9(i)
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Material Consumed 10867.29 11027.23 13516.12 18077.88 20107.49
Avg R.M Inventory 1972.53 2268.02 2580.4 3529.59 4093.24
R.M. Inventory 5.51 4.86 5.24 5.12 4.91

T. Ratio
R.M.H. Period(Days) 65 74 69 70 73
=365/R.M.I.T.Ratio
Note: Avg R.M. Inventory = Average Raw Material Inventory, T= Turnover,
Avg. Inventory = Opening Stock + Closing Stock

____________________________
2
R.M.H.Period = Raw Material Holding Period, R.M.I.T.Ratio = Raw Material
Turnover Ratio
SOURCE: ANNUAL REPORT OF COMPANY

GRAPH-9(i)
Interpretation: The ratios are fluctuating, in 2001-02 the ratio is 5.51 and holding
period is 65 days but now it decrease to 4.91 i.e. 73 days.

days. It means holding period
of raw material increases. It is good to the firm because they are purchasing raw
material more to store it, therefore holding period of raw material is increasing and
it leads to increase the sales of the firm. According to general guidelines the ratios
are good

(b) For Work In Progress
Cost of Production = Material Consumed + Manufacturing Expenses +
Administrative overhead +opening WIP less closing WIP.
TABLE-9 (ii)
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Cost of Production 28074.65 32650.25 36427.4 41252.43 46709.73
Avg. Work in Progress 125.25 195.48 219.99 449.6 690.34
W.I.P.T.Ratio 224.15 167.02 168.59 91.75 67.66
W.I.P. Holding period 1.63 2.19 2.17 3.98 5.39
(Days) (39hrs) (52hrs) (52 hrs) (96 hrs) (130hrs)
Note: W.I.P = Work in progress
GRAPH- 9(ii)
Interpretation: The ratio is decreasing continuously, i.e. 224 to 67.66. i.e. work in
progress holding period is continuously increasing 1.63days to 5.39 days. It is not
good for firm because the holding period is increasing means their efficiency in
conversion of raw material to work in progress is very low. It is affected adversely
to sales

(c) For Finished Goods
Cost of Goods sold = Cost of Production + Opening Stock of Finished Goods Less
Closing Stock of Finished Goods.
TABLE-9(iii)
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Cost of goods sold 30257.54 33027.72 36209.34 39597.68 47878.38
Avg Finished goods 2715.88 2014.04 1934.33 2870.74 3113.79
F.G.I.T. ratio 11.14 16.40 18.72 13.79 15.38
Holding period 33 22 20 27 24
(days)
Note: F.G.I.T= Finished Goods Inventory Turnover Ratio
GRAPH-9 (iii)
Interpretation: The ratios are fluctuating. In 2001-02 it is 11.14, in 2002-03 it is

increase to 16.4, in 2003-04 it increase to 18.72. But in 2004-05 it decrease to
13.79and in 2005-06, it increase to 15.38. The holding period of finished goods is
fluctuating it means conversion of finished goods to sale is taking in 2001-02 is
33days, in 2002-03 it is 22days, 2003-04 it decrease to 20 days, but in 2004-05 it
increase to 27 days and in 2005-06 it decrease to 24days.

Debtors Turnover Ratio: Debtors turnover is found out by dividing credit sales by
average debtors. There are three ratios to judge the quality or liquidity of debtors.
(a) Debtors turnover:
Debtor turnover indicates the number of times debtors turnover each year.
Credit sales
Debtors turnover =
Average debtors
(b) Collection period: The average number of days for which debtors remain
outstanding is called average collection period, and computed as follows
365
Average collection period =
Debtors turnover
(c) Aging schedule: the average collection period measures the quality of debtors in
an aggregative way. Through aging schedule breaks down the debtors according to
the length of time for which they have been outstanding.
Assumption: Lack of Information I assumed sales are on credit basis.
NOTE:
1) Net Sales = sales --- Exercise Duty --- Inter Division Transfer
But From 2004-05 the Company discontinued Inter Divisions Transfer as per ICAI
AS-9
Opening + Closing
2) AVERAGE DEBTORS = _______________
2

TABLE -10
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Credit Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Average debtors 4654.92 4526.79 4025.61 4002.42 3918.43
D.T.R 7.51 8.69 12.79 12 13.22
Debtors Collection 49 42 34 30 28
Period (days)
Note: D.T.R= Debtors Turnover Ratio
GRAPH-10
AGING schedule
Year 2001-02 2002-03 2003-04 2004-05 2005-06

Within 6 months 92.45% 89.38% 89.79% 92.45% 85.43%
Over 6 months 7.55% 10.62% 10.21% 7.55% 14.57%
Interpretation: The ratios are increasing year by year. In 2001-02 7.51 where in
2005-06 it increases to 13.22. Collection period of WCPM is improving year by
year i.e. days are decreasing, i.e. from 49 days to only 28 days. It shows the
payments of debtors are very prompt. Through aging schedule the collection period
of within 6 month is decreasing and over 6 month collection period goes on
increasing.

Creditors Turnover Ratio: It is similar to Debtors turnover ratio. It indicates the
speed with which the payments for credit purchases are made to the creditors. The
ratio can be computed as follows:
Credit Purchase
= ____________________
Average creditors
A Higher creditors turnover ratio or Lower credit period enjoyed ratio. Signifies
that the creditors are being paid promptly thus enhancing the credit worthiness of
the company.
TABLE- 11
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Credit purchase 20978.63 23217.25 26950.94 34646.41 35296.21
Average Creditors 7077.34 7387.52 8126.72 8359.19 8618.05
C.T.R 2.96 3.14 3.32 4.14 4.1
Creditors Payment 123 116 110 88 89
period in days
Note: C.T.R= Creditors Turnover ratio
Assumption:
Due to lack of information about credit purchase, assumed that all
purchases are on credit basis only.
.There is no information about opening stock and closing stock of spares
parts, chemicals, coal and oil, assumed that the consumption of above
material are purchased during the year.
GRAPH-11

Interpretation: The ratios are increasing. In 2001-02 2.96 times and now it
increase to 4.1 times. The creditors payment period is decreasing i.e. in 2001-02 is
123 days; it is decreasing continuously and in 2005-06 it become 89 days. It
signifies the creditors are being paid promptly. It shows companies are credit
worthiness.

ASSETS TURNOVER RATIO: Assets are used to generate sales. Therefore, a
firm should manage its assets efficiently to maximize sales. The relationship
between sales and assets is called asset turnover. Several asset turnover ratios can
be calculated.
(i) Net assets turnover: is computed by dividing sales by net assets
Net Sales
Net assets turnover =
Net assets
Net assets=Net fixed assets + Net current assets (Current Assets less Current
Liabilities)
Net Sales= sales ---- Exercise duty--- Inter division Transfer
TABLE-12
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Net Assets 26735.97 32002.69 34093.22 39292.38 34226.39
Net Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Net Assets Turnover 1.31 1.23 1.27 1.22 1.51
Ratio
GRAPH-12

Interpretation: The ratios are fluctuating. In 2001-02 the ratio is 1.31 and in 2002-
03 it decrease to 1.23, in 2003-04 it increase to 1.27 but 2004-05 it decrease to 1.22.
However in 2005-06 it increases to 1.51. I.e. one Rupee of investment they are
making sales. Overall it shows they are improving their sales.

(ii) Total assets turnover: This ratio shows the firms ability in generating sales
from all financial resources committed to total assets.
Net Sales
Total assets turnover =
Total assets
Total assets include net fixed assets and current assets
TABLE-13
(Amounts in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Total Assets 34521.95 40676.57 43681.31 49054.66 44841.56
Total Assets turnover 1.01 0.97 0.99 0.96 1.16
Ratio
GRAPH-13
Interpretation: In 2001-02 it increase to 1.01, in decrease to 0.97 and in 2003-04 it
increase to 0.99, but 2004-05 it decrease to 0.96. However in 2005-06 it increases
to 1.16. Overall they have to make proper utilization of resources.

(iii) Fixed and Current Assets Turnover: To know its efficiency of utilizing fixed
assets and current assets separately.
Net Sales
Fixed assets turnover =
Net fixed assets
Net Sales
Current assets turnover =
Current assets
TABLE-14
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Fixed Assets 16496.39 24095.31 26889.86 26211.34 23930.14
F.A.T.R 2.12 1.63 1.61 1.83 2.17
GRAPH-14
Interpretation: In 2001-02 the ratio is 2.12, in 2002-03 it decrease to 1.63,

in 2003-04 again decrease to 1.61 but in 2004-05 increase to 1.83 and in 2005-06
it increase to 2.17. It means in the year 2005-06 fixed assets are properly utilized
i.e. there is a better efficiency in utilization of fixed assets compare to past years but
still they have to make better utilization of resources. The reciprocal of the ratio of
5 years are 0.47, 0.61, 0.62, and 0.55 respectively. It means a generating a sale of
one Rupee, the company needs 0.47, 0.61, 0.62, 0.55 investment in fixed assets

Current Assets Turnover Ratio
TABLE-15
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Current Assets 18025.56 16581.26 16791.45 22843.32 20911.42
C.A.T.R 1.94 2.37 2.57 2.1 2.48
Note: C.A.T.R= Current Assets Turnover Ratio
GRAPH-15
Interpretation: The ratios are fluctuating in 2001-02 is 1.94, in 2002-03 2.37,
in 2002-03 it increase to 2.37,in 2003-04 also increase to 2.57 but in 2004-05
it decrease to 2.1. However in 2005-06 it increases to 2.48. Overall they are
making better efficiency in utilization of current assets. The reciprocal of the ratio
of 5 years are 0.52, 0.42, 0.39, 0.48 and 0.40 respectively. It means a generating a
sale of one Rupee, the company needs 0.52, 0.42, 0.39, 0.48, 0.40 paisa
investment in current assets. Due to prompt payment by debtors.

(iv) Working Capital Turnover: A firm may also like to relate net current assets
(net working capital) to sales. This ratio indicates the efficiency or inefficiency in
the utilization of working capital in making sales. It is computed as follows:
Net Sales
Working capital turnover =
Net working capital
TABLE-15
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Net Working Capital 10239.58 7907.38 7203.36 13081.04 10296.25
W.C.T.R 3.41 4.98 5.99 3.67 5.03

GRAPH-15
Interpretation: The ratios are fluctuating in 2001-02 the ratio is 3.41 times, in
2002-03 it increase to 4.98, in 2003-04 increase to 5.99. But in 2004-05 it decline to
3.67.And in 2005-06 it become 5.03. Overall this ratio indicates that working
capital has been effectively utilized in making sales except in 2004-05 and in 2001-
02.Still they have to make better utilization of working capital.

4) Profitability Ratio
INTRODUCTION: A company should earn profit to survive and grow over a long
period of time. Profit is the ultimate output of company and company will have no
future if it fails to make sufficient profits. Therefore company should continuously
evaluate the efficiency of the company in terms of profits.
Profit is the difference between revenue and expenses. Over a period of
time (usually one year). Profit is the ultimate output of a company, and it will
have no future if it fails to make sufficient profit.
The profitability ratios are calculated to measure the operating efficiency
of the company. Besides management of the company, creditors and owners also
interested in the profitability of the firm. Creditors want to get interest and
repayment of principal regularly. Owners want to get a required rate of return on
their investment. Generally, two major types of profitability ratios are calculated:
Profitability in relation to sales
Profitability in relation to investment.
INTRESTED PARTIES IN PROFITABILITY RATIOS:
MANAGEMENT
CREDITORS
OWNERS
Profit ratio related to sales
Indicates the amount of profit per rupee of sales
The profitability ratios based on sales are an important indicator of the operational
efficiency of a manufacturing enterprise.

Gross profit ratio: This ratio expresses the relationship between gross profit and
sales. This ratio indicates the average spread between the cost of good sold and the
sales revenue.
Gross profit
Gross profit ratio= * 100
Net Sales
Gross Profit= Sales ___ Cost of goods sold
TABLE-16
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Gross profit 4700.97 6323.84 6955.96 8165.35 3934.05
Gross Profit Ratio 13.45% 16.07% 16.11% 17% 7.59%
GRAPH-16
Interpretation: The ratios are fluctuating in 2001-02 it is 13.45%, in 2002-03 it
increase to 16.07%, in 2003-04 it increase to 16.11%, again it increase to 17% in
2004-05. In 2005-06 it decreases to 7.59%. Due to acquisition of raw material
(Wood) at the high cost it adversely effect on high cost of production.

Net profit ratio: Establishes a relationship between net profit and sales and
indicates management efficiency in manufacturing, administering and selling the
products. This ratio is the overall measure of the firms ability to turn each rupee
sales into net profit.
Net profit
Net profit ratio = * 100
Net Sales
TABLE-17
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Profit after tax 3186.47 3604.18 3234.06 3066.1 3202.94
Net profit ratio 9.12% 9.16% 7.5% 6.38% 6.18%
GRAPH-17
Interpretation: The net
profit ratio of WCPM
goes on decreasing
except in 2002-03. In
2001-02 it was 9.12%, in
2002-03 it increase to 9.16%. But 2003-04 onwards it decreases, i.e. in 2003-04 is
7.50%, in 2004-05 is 6.38%, in 2005-06 it become 6.18%. Due to increase in input
cost (Raw Material)

Operating expenses ratio: The operating expenses ratio explains the changes in
the profit margin (EBIT to sales) ratio. This ratio is computed by dividing operating
expenses viz. cost of good sold, raw material, manufacturing overhead,
Administrative over head and salaries to employee by sales.
Raw material consumed

(i) Raw material = * 100
Net Sales
TABLE-18
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Raw material consumed 10867.29 11027.23 13516.12 18077.88 20107.49
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Raw material 31% 28% 31% 38% 39%
Consumption ratio
GRAPH-18
Interpretation: The Ratios are goes on increasing. In 2001-02 the ratio is 31%, but
in 2005-06 it increase to 39%, due to high cost spend on acquiring wood i.e. they
acquire raw material on high cost.

Manufacturing expenses
(ii) Manufacturing overhead =
Net Sales
TABLE-19
( Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Manufacturing Expenses 11383.54 14102.38 15460.52 16626.84 17322.83
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Ratio 32.56% 35.84% 35.82% 34.62% 33.43%
GRAPH-19
Interpretation: The ratio of last five years is fluctuating year by year, but overall it
increases the manufacturing expenses. In 2002-03 and 2003-04 it increase to above
35%, then it declining to 34.62% and in 2004-05 again decline to 33.43%.Due to
heavy increase in input cost.
Administrative & Selling overhead

(iii) Adm. & Selling overhead =
Net Sales

TABLE-20
Year 2001-02 2002-03 2003-04 2004-05 2005-06

Adm & Selling Expenses 2251.47 2740.08 2697.74 2480.77 2765.24
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Adm & Selling Expenses 6.44% 6.96% 6.25% 5.16% 5.33%
(Amount in Lakhs)
GRAPH-20
Interpretation: The ratio goes on decreasing from last five years. But in 2005-06
it increases from 5.16% to 5.33%. It is good to the business. They are maintaining
properly.
Salaries to employee
(iv) Salaries to employee = * 100
Sales
TABLE-21
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06

Salaries to employee 3785.54 3783.39 4616.28 4382.39 4509.94
Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Employees salaries 10.83% 9.61% 10.69% 9.12% 8.70%
Expenses
GRAPH-21
Interpretation: The above ratio is decreasing continuously due to increase in sales.
In 2001-02 the sales of one rupee 10.83% of that spent on sales, but it declines to
9.61% in 2002-03, in 2003-04 it increase to 10.69%. From 2004-05 it is decreasing
Cost of goods sold

(v) Cost of goods sold ratio = * 100
Sales
TABLE-22
( Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06

Cost of goods sold Expenses 30257.54 33027.72 36209.34 39597.68 47878.38
Sales 34958.51 39351.56 43165.3 48033.03 51812.43

Cost of goods sold Expenses ratio 86.55% 83.93% 83.88% 82.44% 92.41%
GRAPH-22
Interpretation: The
ratios are fluctuating in
2001-02 it was 86.55%
of sales, in 2002-03 it
decrease to 83.93%, it increase in 83.8%, again it reduce to 82.44%. But in 2005-06
it increase to 92.41% .Due to increase in cost of raw material. Overall it increases
only and it shows in 100 rupee of sales 92.41 rupees spent for expenses, only 7.59
rupees is remained for payment of taxes, payment of interest etc.
Operating Profit Ratio:
This ratio is calculated as follows:
EBIT
= ________ * 100
Net Sales
TABLE-23
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
EBIT + lease charge 6285.99 6316.58 5688.61 5495.1 5015.4
Net Sales 34958.51 39351.56 43165.3 48033.03 51812.43
Operating Profit Ratio 17.98% 16.05% 13.17% 11.44% 9.68%

Note: EBIT= Earning before Interest and Tax
GRAPH-23
Interpretation: The operating profit ratio goes on decreasing. In 2001-02 it was
17.98%, in 2002-03 is decrease to 16.05%, in 2003-04 again decline and it become
13.17%in 2004-05 it decrease to 11.44% and in 2005-06 it declined to 9.68%. It
means for 100 Rupees of sale the operating profit is Rupees 9.68.The ratio are
decreasing due to increase in expenses ratio.
Profitability ratios related to Investments
Return on Investment= Profit after Tax

_______________ * 100
Total Capital Employed
TABLE-24
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Profit after Tax 3186.47 3604.18 3234.06 3066.1 3202.94
Capital employed 29502.27 34155.83 39019.03 43767.37 38831.03
Return on Investment 10.8% 8.97% 8.29% 7.01% 8.25%
ratio

GRAPH-24
Interpretation: The ROI ratio goes on declining. In 2001-02 the ratio was
10.80%, in 2002-03 it become 8.97%, in 2003-04 again decrease and it become
8.29% and in 2004-05 it decrease to 7.01%, but in 2005-06 it increase to 8.25%.
Overall the ratios are declining i.e. 100 Rupee of investment the return is Rs 8.25,
means the company had not use the capital employed efficiently.
Return on Equity: Common or ordinary shareholders are entitled to the residual
profits. The rate of dividend is not fixed; the earnings may be distributed to
shareholders or retained in the business. A return on shareholders equity is
calculated to see the profitability of owners investment.
PAT
Return on equity =
NW
Return on equity indicates how well the firm has used the
resources of owners. The shareholders equity or net worth will include paid up
share capital, share premium and reserves and Surplus less accumulated losses. Net
worth can also be found by subtracting total liabilities from total assets.

Return on Equity:
TABLE-25
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Profit after Tax 3186.47 3604.18 2844.17 3066.1 3202.94
Net Worth 13459.33 16603.26 18913.09 20845.35 22243.50
Return on Equity Ratio 23.67% 21.71% 15% 14.71% 14.40%
GRAPH-24

Interpretation: The return on equity also decreasing. In 2001-02 it was 23.67%,
in 2002-03 is 21.71%, and in 2003-04 is 15%, in 2004-05 is 14.71%and 2005-06 is
14.40%. It means 100 Rupees of Share holders fund 0nly Rupees 14.40
They get as return on their investment. Due to increase in cost of production..
Earning per share (EPS): The profitability of the common shareholders
investment can also be measured in many other ways. One such measure is to
calculate the earning per share. The earnings per share is calculated by dividing the
profit after taxes by the total number of common (ordinary) shares outstanding.
Profit after tax

EPS =
Number of common share outstanding

EPS shows the profitability of the firm on a per share basis, it does not reflect
how much is paid as dividend and how much is retained in the business. But as a
profitability index, it is a valuable and widely used ratio.
TABLE-26
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Profit after Tax 3186.47 3604.18 2844.17 3066.1 3202.94
Number of equity share 89.407 89.407 89.407 89.407 89.407
Earning per share 36 40 32 34 36

GRAPH-26
Interpretation: The earning per share of WCPM Ltd is fluctuating. In 2001-02
EPS is 36; in 2002-03 is decrease to 40. In 2003-04 it decrease to 32 but in 2004-05
it increase to 34 and in 2005-06 again it increase to 36.Overall the EPS is good

Dividend per share (DPS): The net profits after taxes belong to shareholders. But
the income which they really receive is the amount of earnings distributed as cash
dividends. DPS is the earnings distributed to ordinary shareholders divided by the
number of ordinary shares outstanding.
Earning paid to the shareholders (dividends)

DPS =
Number of ordinary shares outstanding
TABLE-27
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Earnings Paid to 581.14 759.96 894.07 1341.10 1341.10
shareholders
Number of equity shares 89.407 89.407 89.407 89.407 89.407
outstanding
Dividend per Share 6.50 8.50 10 15 15
GRAPH-27
Interpretation: The ratios are increasing.

increasing. In 2001-02 DPS is 6.5, in 2002-03 it
increase to Rs 8.5 and in 200304 it increase to Rs 10. In 2004-05 and 2005-06 DPS
is Rs15.It shows out of 36 rupees 15 as paid as dividend and remaining will be
retained as retained earning.

Dividend pay out ratio: The dividend pay out ratio is DPS divided by the EPS.
Dividend per Share

Payout ratio = * 100
Earning per Share
TABLE-28
(Amount in Lakhs)
Year 2001-02 2002-03 2003-04 2004-05 2005-06
Earning per share 36 40 32 34 36
Dividend per Share 6.50 8.50 10 15 15
Dividend Payout ratio 18.05% 21.25% 31.25% 44.12% 41.67%
GRAPH-28
Interpretation: The dividend payout ratio goes on increasing year by year. In
2001-02 the dividend payout ratio is 18.05%, in 2002-03 the ratio is 21.25%, in
2003-04 it increase to 31.25% and in 2004-05 it increase to 44.12%. But in 2005-06
it decrease to 41.67%. It means out of Rupees 100 earning 41.67 Rupees is given as
dividend and remaining 58.33 Rupees as retained in the business for future
requirement.
FINDINGS

1. The Current ratio is below the standard ratio and it is not good from
companys point of view. It shows that it is not good position to meet the
short term liabilities. The ratio in the year is 2005-06 is 1.48.
2. The liquidity ratio is not according to standard ratio (1:1) and it is not good
from companys point of view. The ratio in the year 2005-06 is 0.63.
3. The cash ratio is also low in all 5 years. When compared to standard ratio
(0.5:1) and it shows that there is poor firms commitment to meet its short
term liabilities. The company should depend upon bank borrowing only.
The ratio in the year is 2005-06 is 0.1 i.e. 10% of current liabilities.
4. The debt ratio and Debt equity ratio both are showing decreasing trend in all
the 5 years. It indicates that the company is depending more on internal
sources, a more internal funds means the shareholders fund, it shows that
the company s financially strong (i.e., a low debt company). Debt ratio in
the year 2005-06 is 43% and 0.75.
5. The proprietary ratio is increasing year by year, it shows that company is
becoming financially strong and indicates how much share funds are
invested in total assets of a firm. It also shows that the balanced risk on both
parties. The ratio in the year 2005-06 is 0.5, i.e. 1 Rupee of Total Assets
0.50 paisa through share funds.
6. The Coverage ratio shows improving and still they have to improve their
ratio. It shows the WCPM paying more interest from last years.
7. The inventory turnover ratios are good according to the general guidelines.
But from time series analysis the ratios are decreasing i.e. holding periods

are increasing in conversion of work in progress to finished goods. But in
transfer of finished goods to supplier the holding periods are decreasing.
8. The debtor turnover ratio is good. It shows the collection of debtors is very
prompt, and through aging schedule it decline in 6 months debtors
collection period and increase in over 6 months debtors collection period..
9. The creditors turnover ratio goes on increasing and creditors payment
period is decreasing. It signified creditors being paid promptly. But
companys point of view they are not taking credit benefits provided by
creditors.
10. In the year 2005-06 Net Assets turnover ratio 1.51 , Total Assets turnover
ratio is1.16, Fixed Assets turnover ratio is 2.17, Current Assets turnover
ratio is 2.48. it shows assets are properly utilized i.e. optimum utilization of
resources. But compare to current assets fixed assets are not efficiently
used.
11. It shows working capital is increasing. It shows that they are effectively
utilized in making sales. In 2005-06 the WCTR is 5.03.
12. It shows Gross Profits are declining due to firms inability to purchase raw
material at favourable terms and inefficient utilization of resources. In year
2005-06 the gross profit is 10%.
13. It Shows net profit are declining due to heavy increase in cost of raw
material. In the year 2005-06 the net profit is 6.18%.

14. It shows the expenses ratios like raw material consumed, manufacturing
expenses, and cost of goods sold expenses are increasing, due to increase in
cost of input. The operating profits are declining due to above reason.
15. shows return on investment also declining, due to inefficiency of utilization
of total capital employed. Overall the ratios are declining i.e. 100 Rupee of
investment the return is Rs 8.25, means the company had not use the capital
employed efficiently.
16. It shows return on equity also declining due to high cost of production .In
2005-06 return on equity is 14.40%.
17. It shows Dividend per share is increasing.
18. It shows dividend pay out increasing It means out of Rupees 100 earning
41.67 Rupees is given as dividend and remaining 58.33 Rupees as retained
in the business for future requirement.

SUGGESTION
1. The company should increase its liquidity position to maintain a standard

current and quick ratio. The company should think on investing in short
term securities that will improve their liquidity position and profitability.
2. The company can think of restructuring their credit policies and appraise the
customers frequently, so that the timing and predictability of cash inflows
can be improved. However the current policy is quite satisfactory and the
suggested measure is only an enhancement to existing procedures.
3. In recent times, it is seen that the reliance of the company on debt has been
decreasing. This may be due to lower interest coverage ratio (i.e. not enough
profit cushions to lenders). But looking at the current economic scenario
where debt is available at reasonable cost, the company can plan for overall
restructuring of production through technology up gradation. This is a major
capital budgeting decision, which in my view should be sourced from debt,
as accelerated profit will easily surpass the low debt cost and leave a better
profit margin. Thus a balanced capital structure is ensured.
4. The company has a major drawback with their raw material situation, i.e. to
say that the availability of raw material (bamboo and hard wood) is subject
to government regulation, non-availability and higher cost. The company
has invested in plantation of hard wood to overcome these problems. But in
my view the management instead of diversifying (backward integration)
into cultivating business, can lease the land to local villagers or
agriculturists and form a co-operative or partnership type of set-up so that
the financial burden is shared, especially considering the unpredictability of
farming activity.

CONCLUSION
After the research finding it is concluded that
When we analyze its financial performance through ratios there is a
decline of its profits due to heavy increase in cost of inputs.
Liquidity position of the company is very low compare to standard
ratio to meet its current obligation.
The WCPM Ltd is a high capital invested company but with the low
return on investment as shown by the characteristic of Indian paper
industry.
The WCPM Ltd is increasing internal funds i.e. more depending on
shareholders funds.

BALANCE SHEET
As at 31st March 2001-02 2002-03 2003-04 2004-05 2005-06

Sources of funds
Shareholders fund
Share capital 894.07 894.07 894.07 894.07 894.07
Reserves & Surplus 10188.35 12935.21 14035.65 15572.56 17246.31
11082.42 13829.28 14929.72 16466.63 18140.38
Loan Funds
Secured loan 8546.96 9117.02 10195.88 11066.71 6695.00
Un Secured loan 5322.61 5215.23 7390.36 9985.95 8711.42
13869.57 14332.25 17586.24 21052.66 15406.42
Deferred tax liability 2376.91 2773.98 3983.37 4378.72 4103.12
Present value of lease 2173.37 3220.32 2519.698 1869.36 1181.11
Total 29502.27 34155.83 39019.03 43767.37 38831.03
Application of funds
Fixed Assets
Gross block 22721.96 28468.78 35761.40 36820.89 37848.82
Depreciation 8521.47 9806.45 11478.99 13077.50 15110.52
Net Block 14200.49 18662.33 24282.41 23743.39 22738.30
Capital Work In 122.53 2212.66 87.74 598.59 10.73
Progress
14323.02 20874.99 24370.16 24341.98 22749.03
Assets taken on lease 2173.37
Gross Block 8654.82 8654.82 8654.82 8654.82
Depreciation 5434.50 6135.12 6785.46 7473.71
Net Block 2173.37 3220.32 2519.698 1869.36 1181.11
16496.39 24095.31 26889.86 26211.34 23930.14
Investments 2766.31 2153.14 4925.81 4474.99 4604.64
Current Assets, Loans,
Advances and Deposit
Inventories 8622.12 9343.00 9581.05 13810.19 11214.67
Sundry Debtors 5010.89 4042.69 4008.53 3996.30 3840.56

Cash and Bank 1702.81 810.998 584.06 591.55 1459.36
balances
Loans, Advances and 2689.73 2384.57 2617.80 4445.28 4396.83
Deposits
18025.56 16581.26 16791.45 22843.32 20911.42
(Amount in Lakhs)
Less: Current 7785.97 8673.88 9588.09 9762.28 10615.17

Liabilities and
Provisions
Net Current Assets 10239.58 7907.38 7203.36 13081.04 10296.25
Total 29502.27 34155.83 39019.03 43767.37 38831.03
Profit and Loss Account
(Amount in Lakhs)
For the year ended 31st 2001-02 2002-03 2003-04 2004-05 2005-06
March
Income
Sales 47693.23 51858.44 57728.10 54989.64 59515.15
Income from lease 248.07 108.19 67.52 0.14 0.12
Other income 490.13 277.85 440.53 457.38 1586.73
Total 48431.43 52244.48 58236.15 55447.16 61102.00
EXPENDITURE
Raw Material coast 10781.42 10972.62 13521.70 17613.09 20090.79
Inter division transfer 7309.33 6778.86 8326.40 __ __
Manufacturing 11383.54 14102.38 15460.52 16626.84 17322.83
expenses
Payment to Employee 3785.54 3783.39 4616.28 4382.39 4509.94
Administrative 3404.16 3881.93 3697.57 3358.54 3606.02
expenses
Excise duty 5425.39 5728.02 6236.40 6956.61 7702.72
Interest and financing 14077.59 773.48 320.23 860.88 947.28

charges
Depreciation 1208.76 1822.54 1688.50 1892.36 3695.08
Total 44705.89 47843.22 53867.60 51690.71 57874.66
Profit before taxation 3725.54 4401.25 4368.55 3756.45 3227.34
Provision for taxation 295.00 400.00 315.00 295.00 300.00
Provision for deferred 244.07 397.07 1209.39 395.35 (275.60)
tax
Profit after taxation 3186.47 3604.18 2844.17 3066.10 3202.94
Investment __ __ 389.896 __ __
fluctuation reserve
written back
Net profit for the year 3186.47 3604.18 3234.06 3066.10 3202.94
Balance as per 321.46 374.71 264.90 51.93 888.84
balance sheet
Available for 3218.62 3641.66 3260.55 3118.03 4091.78
appropriation
Appropriation
Proposed dividend 581.14 759.96 894.06 1341.10 1341.10
Tax on proposed ____ 97.37 114.55 188.09 188.09
dividend
Investment 900.00 225.00 ___ ___ ___
fluctuation reserve
General reserve 1700.00 2532.84 2200.00 700.00 2500.00
Balance carried over 37.47 26.49 51.93 888.84 62.59
3218.62 3641.66 3260.55 3118.03 4091.78

Bibliography
Weekly Progress Report

BIBLIOGRAPHY
I.M. Pandey
Financial management, Vikas Publishing House
KHAN & JAIN
Management Accounting, Tata McGraw-Hill
S.N. Maheshwari
Elements of Management Accounting
WEB SITE:
www.westcoastpaper.com
www.answers.com
www.indianinfoline.com
www.idbicapital.com

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A Study Of Financial Performance Based On RATIOS

At WEST COAST PAPER MILLS LIMITED DANDELI

Purpose of the study

Scope of the Study

Objective of the study

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA) 1

Communication, Education, Packaging, and Hygiene. The demand for paper in

India is highly skewed towards the low cost varieties.

West Coast Paper Mills Company Ltd. was promoted by Shree

Digvijay Cement Company Limited, Sikka,

at Dandeli in Karnataka. The Company was incorporated on 25th March, at

materials. The Company manufactures printing papers, writing papers,

productivity awards from the National Productivity Council (Govt. of India)

as an endorsement of the companies initiatives to protect quality and

Financial statements provide summarized view of the financial position and

operation of the company. Therefore, now a day it is necessary to all companies to

company to their stakeholders. It is also necessary to company to know their

financial position and operation of the company.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA) 2

COAST PAPER MILLS LIMITED DANDELI, by using the Annual Reports of

weakness of the WEST COAST PAPER MILLS LIMITED DANDELI.

Financial analysis will help the company to take decision.

The study is done on various calculations of liquidity, turnover, leverage,

From the analysis, it can be interpreted that the company should

leverage ratios hold well in the company.

1. Main objective is to study different ratios.

2. To determine Profitability trend of the concern.

3. To determine the liquidity of the business

4. To study financial performance of the organization and suggest measures to

management for improvement of profits

5. To study the efficiency of organization. ( proper utilization of resources)

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA) 3

summarized view of the financial position and operations of a firm. Therefore in

as invaluable documents through RATIOS as a tool of financial analysis.

Ratio analysis is one of the powerful techniques of financial analysis where

Fraction (iii) Proportion of numbers

It is defined as the systematic use of ratios to interpret the financial

performance & current financial condition can be determined.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA) 4

gross profit and net profit, purchases and sales etc.

soundness of financial position. Such information will be useful for creditors,

Importance of ratio analysis

2. To improve future performance: Ratio analysis indicates weak spot of the

business. This helps the management in overcoming such weakness and

improving the overall performance of the business in future.

3. Facilitates Inter-firm comparison: Ratio analysis provides data for inter

and under-valued firms.

4. Makes Intra firm comparison: Ratio analysis also makes possible

performance in the future.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA) 5

future success or failure.

6. Useful in judging the efficiency of a business: It helps in judging the

efficiency of business liquidity, solvency, profitability etc of a business can be

the management to judge the operating efficiency of the various aspects of

7. Useful in simplifying accounting figures: Complex accounting data

and systematized with the help of ratio analysis so as to make it easily

Limitation of the ratios

1. Comparative study required: Ratios are useful in judging the efficiency of

or with the results of a similar business. However, such a comparison only

etc., may affect the future operation.

BELGAUM INSTITUTE OF MANAGEMENT STUDIES (MBA) 6

information which has been recorded in the financial statements, Statements

management of the company changes, it may have ultimately adverse effects on