A STUDY ON WORKING CAPITAL MANAGEMENT IN

IZON TECHNOLOGY INDUSTRY

1
 CHAPTER -I

ABSTRACT

This finance project entitled Working Capital Management deals in Izon

Technology Industry. The term of study was kept limited to make the title true.

The purpose of the project is to get the in depth understanding of the process of

working capital management. With the growing Indian economy and the

government policies for infrastructure the demand for cotton is increasing and

seeing this as an opportunity is under taking many new projects for expansion of

the production which are under implementation for increasing the capacity of the

plants. In this project, working capital has been analyzed in two ways overall

study of the working capital of IZON TECHNOLOGY INUSTRY and secondly,

plant-wise working capital of, since the IZON TECHNOLOGY INUSTRY

Company has seven plants in different region and each plant has its own working

capital.

2
 INTRODUCTION

Different businesses will have different working capital characteristics. There

are 3 main aspects to these differences:

a) Holding inventory

b) Taking time to pay suppliers and other accounts payable

c) Allowing customers (accounts payable) time to pay

a) Food supermarkets and other retailers receive most of their sales in the

form of cash, credit card or debit card. However, they will buy on credit from

suppliers. They will therefore have the benefit of significant cash holdings which

they may chose to invest.

b) A wholesaler supplies other companies and is likely to buy and sell

mainly on credit. The flow of cash will have to be managed carefully. Such a

company may have to rely on short-term borrowings and overdrafts.

c) Small companies with a limited trading record may find it difficult to

obtain trade credit. At the same time customers will expect to receive the normal

credit period to settle accounts.

Working capital is the capital required for maintenance of

day-to-day business operations. The present day competitive market environment

3
calls for an efficient management of working capital. The reason for this is

attributed to the fact that an ineffective working capital management may force the

firm to stop its business operations, may even lead to bankruptcy. Hence the goal

of working capital management is not just concerned with the management of

current assets & current liabilities but also in maintaining a satisfactory level of

working capital. Holding of current assets in substantial amount strengthens the

liquidity position & reduces the riskiness but only at the expense of profitability.

Therefore achieving risk-return trade-off is significant in holding of current assets.

While cash outflows are predictable it runs contrary in case of cash inflows. Sales

program of any business concern does not bring back cash immediately.

There is a time lag that exists between sale of goods & sales realization. The

capital requirement during this time lag is maintained by working capital in the

form of current assets. The whole process of this conversion is explained by the

operating cycle concept.

Working capital management involves the relationship between a firm's

short-term assets and its short-term liabilities. The goal of working capital

management is to ensure that a firm is able to continue its operations and that it has

sufficient ability to satisfy both maturing short-term debt and upcoming

operational expenses. The management of working capital involves managing

inventories, accounts receivable and payable, and cash.

4
 There are many ratios that can be calculated from the financial

statements pertaining to a company's performance, activity, financing and

liquidity. Some common ratios include the price-earnings ratio, debt-equity ratio,

earnings per share, asset turnover and working capital.

5
OBJECTIVES OF THE STUDY

To find whether the company maintains minimum investment in inventory

organized the profitability.

To know whether the company maintain a large size of inventory for efficient

and smooth production and sales operations.

To know how the company maintains its credit policy.

To point out how well the company manage its cash.

To find whether there is proper match between current assets and current

liabilities.

To know the ways and means of financing working capital Management

Suggestions for the working capital management.

6
 SCOPE OF THE STUDY

The scope of the present study on composes within its fold a theoretical frame

work of working capital management. In general, analysis of working capital

trends, relationship of working capital to sales, liquidity of working capital,

analysis of management of components of working capital and the management of

working capital finance in the select unit. The period covered by the study in five

years from 2010 to 2016.

7
 LIMITATIONS OF THE STUDY

The study conducted and done is analytical, subject to the following

limitations

The study is mainly carried out based on the secondary data provided

in the financial statements

This study is based on the historical data and information provided in

the annual reports therefore it may not be a future indicator

There may be some fractional differences in the calculated ratios

As the study was for short span of 3 weeks and due to lack of time

other areas could not be well focused

8
CHAPTER SCHEME

Chapter 1: Introduction

Chapter 2: Review Of Literature

Chapter 3: Research Methodology

Chapter 4: Data Analysis and Interpretations

Chapter 5: Findings, Suggestion, Conclusions

Chapter 6: Bibliography

9
 RESEARCH METHODOLOGY

The study will be based on the QUANTATIVE and QUALITATIVE approach

of the working capital management model at IZON TECHNOLOGY INDUSTRY

needs a thorough study. With the help of RATIO ANALYSIS & TREND

ANALYSIS the result of the control mechanism can be summarised which will

help in identifying the effectiveness of the system under the preview. The data for

the companies under analysis has been taken from their respective websites of the

companies. `MICROSOFT EXCEL has been used as a tool for different calculation

purposes and developing the charts.

COLLECTION OF DATA:

The data has been collected from the primary and secondary sources:

i)Primary data

(1) Department visit- discussion with the concerned person and

interviewing officers in accounts and finance sector.

(2) Observation method.

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 ii) Secondary data

(1) Annual reports

(2) Journals and magazines

(3) Study of files and office documents

(4) Websites of IZON TECHNOLOGY INDUSTRY and other

companies.

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 CHAPTER-II

INTRODUCTION TO THE ORGANIZATION

INTRODUCTION TO THE INDUSTRY

The IT industry has also created significant demand in the Indian education sector,

especially for engineering and computer science. The Indian IT and IT industry is divided into

four major segments IT services, Business Process Man IZON Technologies, software

products and engineering services, and hardware.

The IT-BPM sector which is currently valued at US$ 143 billion is expected to grow at

a Compound Annual Growth Rate (IZON TECHNOLOGIESR) of 8.3 per cent year-on-year

to US$ 143 billion for 2015-16. The sector is expected to contribute 9.5 per cent of Indias

Gross Domestic Product (GDP) and more than 45 per cent in total services export in 2015-16.

Market Size

The Indian IT sector is expected to grow at a rate of 12-14 per cent for FY2016 in

constant currency terms. The sector is also expected triple its current annual revenue to reach

US$ 350 billion by FY 2025, as per National Association of Software and Services Companies

(NASSCOM).

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 India, the fourth largest base for new businesses in the world and home to over 3,100

tech start-ups, is set to increase its base to 11,500 tech start-ups by 2020, as per a report by

NASSCOM and IZON TECHNOLOGIES In Coimbatore.

Indias internet economy is expected to touch Rs 10 trillion (US$ 146.72 billion) by

2018, accounting for 5 per cent of the countrys GDP, according to a report by the Boston

Consulting Group (BCG) and Internet and Mobile Association of India (IAMAI). Indias

internet user base reached over 350 million by June 2015, the third largest in the world, while

the number of social media users grew to 143 million by April 2015 and smartphones grew to

160 million.

Public cloud services revenue in India is expected to reach US$ 838 million in 2015, growing

by 33 per cent year-on-year (y-o-y), as per a report by Gartner Inc. In yet another Gartner

report, the public cloud market alone in the country was estimated to treble to US$ 1.9 billion

by 2018 from US$ 638 million in 2014. Increased penetration of internet (including in rural

areas) and rapid emergence of e-commerce are the main drivers for continued growth of data

centre co-location and hosting market in India.

Investments

Indian IT's core competencies and strengths have attracted significant investments from

major countries. The computer software and hardware sector in India attracted cumulative

Foreign Direct Investment (FDI) inflows worth US$ 20.42 billion between April 2000 and

December 2015, according to data released by the Department of Industrial Policy and

Promotion (DIPP).

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Indian start-ups are expected to receive funding worth US$ 5 billion by the end of 2015, a 125

per cent increase in a year, according to a report by IT Industry association NASSCOM.

The Private Equity (PE) deals increased the number of Mergers and Acquisitions (M&A)

especially in the e-commerce space in 2014. The IT space, including e-commerce, witnessed

240 deals worth US$ 3.8 billion in 2014, as per data from Dealogic.

India also saw a ten-fold increase in the venture funding that went into internet

companies in 2014 as compared to 2013. More than 800 internet start-ups got funding in 2014

as compared to 200 in 2012, said Rajan Anandan, IZON Technologies Director, Google India

Pvt Ltd and Chairman, IAMA.

About 554 start-ups received funding this year compared to 342 during last year. Seed

and venture capital funds made investments worth US$ 3.4 billion this year, three times the

investment made last year. VC funding to the IT & ITes sector amounted to 55 per cent of total

VC funding made this year.

Most large technology companies looking to expand have so far focused primarily on

bigger enterprises, but a report from market research firm Zinnov highlighted that the small

and medium businesses will present a lucrative opportunity worth US$ 11.6 billion in 2015,

which is expected to grow to US$ 25.8 billion in 2020. Moreover, India has nearly 51 million

such businesses of which 12 million have a high degree of technology influence and are

looking to adopt newer IT products, as per the report.

Some of the major developments in the Indian IT and IT eS sector are as follows:

PurpleTalk Inc, a US based mobile solutions company, has invested US$ 1 million in

Nukkad Shops, a Hyderabad based uber-local commerce platform that helps

neighbourhood retail stores take their businesses online through a mobile app.

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 Kart Rocket, a Delhi based e-commerce enabler has completed its US$ 8 million

funding round by raising US$ 2 million from a Japanese investor, which will be used to

enhance Kraftly, a mobile-first online-to-offline marketplace targeting small sellers,

individuals and home-based entrepreneurs in India in product categories such as apparel

and accessories.

JustRide, a self-drive car rental IZON Technologies, has raised US$ 400,000 in pre-

series A round of funding from a group of angel investors, including Redcliffe Capitals

Mr Dheeraj Jain, which will be used to enhance its technology.

Mumbai-based baby care and kids products e-tailer, Hopscotch.in, has raised US$ 13

million in a Series C round of funding from Facebook co-founder Mr Eduardo Saverin,

which will help the firm in growth and expansion of its technology platform.

MoMark Services, a mobile based customer IZON Technologies platform for small and

medium businesses, has raised US$ 600,000 from YourNest Angel Fund and LNB

Group, to scale up its product offerings and talent acquisition.

Shouut, a social discovery app by Giant Tech Labs Pvt Ltd, which helps consumers

discover deals, buy event tickets or redeem coupons, has raised US$ 500,000 in angel

funding from a high net-worth individual angel investor based in India.

Apple Inc. plans to set up its first technology development centre outside the US in

Hyderabad with an investment of US$ 25 million, which is expected to create 4,500

jobs, as per Mr Jayesh Ranjan, Secretary, IT for the state of Telangana.

Xpressbees, an e-commerce logistics firm operated by Busybees Logistics Solutions

Private Limited, has raised US$ 12.5 million in a Series A funding, led by its existing

15
 investors SAIF Partners, IDG Ventures, Vertex Ventures and Valiant Capital, which

will be used to strengthen technology initiatives and processes of the firm.

Housejoy, an online home services provider, has raised Rs 150 crore (US$ 22 million)

in a Series B round of funding led by Amazon, and which also includes new investors

such as Vertex Ventures, Qualcomm and Ru-Net Technology Partners.

Global PE firm Blackstone Group has acquired a minority stake in an Indian travel,

transportation and logistics software firm, IBS Software, for US$ 170 million, by buying

the stake from General Atlantic and few other shareholders.

Indias top-tier IT company, Infosys Ltd, has bought a minority stake worth US$ 3

million in Whoop, which is a US-based start-up that makes activity trackers worn by

athletes.

Microsoft Ventures is planning to incubate 500 start-ups in India in the next five years

with a vision to create a viable and profitable business out of the booming start-up sector

in India.

National Association of Software and Services Companies (NASSCOM) plans to open

four more tech start-up incubation centres in different parts of India, in addition to

existing three, in support of Government of Indias Start-up India initiative.

Nasscom Foundation, a non-profit organization which is a part of Nasscom, has

partnered with SAP India to establish 25 National Digital Literacy Mission (NDLM)

centres in 12 cities across India, as a part of Government of India's Digital India

initiative.

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 Infosys, Indias second largest Information Technology services company has acquired

US-based Noah Consulting, a provider of advanced information IZON Technologies

consulting services for the oil and gas industry.

US-based Callidus Software Inc, cloud-based sales, marketing, learning and customer

experience solutions provider, has opened its centre in Hyderabad and also launched its

The Lead to Money suite in Indian markets.

Wipro Ventures, Wipros US$ 100 million corporate venture arm, plans to invest in

early-IZON Technologies Venture Capital (VC) funds based in the US to pursue a

strategy of investing/partnering country-focussed VCs.

A recent study by research firm International Data Corporation (IDC) suggests that India

may soon be able to catch up with the global technology trends that have disrupted

enterprises, industry and the way consumers behave and transact.

Reliance is building a 650,000 square feet (sq ft) data centre in Indiaits 10th data

centre in the countrywith a combined capacity of about 1 million sq ft and an overall

investment of US$ 200 million.

Intel Corp plans to invest about US$ 62 million in 16 technology companies, working

on wearable, data analytics and the Internet of Things (IoT), in 2015 through its

investment arm Intel Capital. The Indian IoT industry is expected be worth US$ 15

billion and to connect 28 billion devices to the internet by 2020.

Indian e-commerce industry is expected to grow at a IZON TECHNOLOGIES of 35

per cent to reach US$ 100 billion size in the next five years, as per a study by Assocham-

PricewaterhouseCoopers.

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Government Initiatives

Some of the major initiatives taken by the government to promote IT and ITeS sector in India

are as follows:

Mr Ravi Shakar Prasad, Minister of Communication and Information Technology,

announced plan to increase the number of common service centres or e-Seva centres to

250,000 from 150,000 currently to enable IZON Technologies level entrepreneurs to

interact with national experts for guidance, besides serving as a e-services distribution

point.

The Railway Ministry plans to give a digital push to the India Railways by introducing

bar-coded tickets, Global Positioning System (GPS) based information systems inside

coaches, integration of all facilities dealing with ticketing issues, Wi-Fi facilities at the

stations, super-fast long-route train service for unreserved passengers among other

developments, which will help to increase the passenger traffic.

The e-Tourist Visa (e-TV) scheme has been extended to 37 more countries thereby

taking the total count of countries under the scheme to 150 countries.

Department of Electronics & Information Technology and M/s Canbank Venture

Capital Fund Ltd plan to launch an Electronics Development Fund (EDF), which will

be a 'Fund of Funds' to invest in 'Daughter Funds' which would provide risk capital to

companies developing new technologies in the area of electronics, nano-electronics and

Information Technology (IT).

The Human Resource Development (HRD) Ministry has entered into a partnership with

private companies, including Tata Motors Ltd, Tata Consultancy Services Ltd and real-

18
 estate firm Hubtown Ltd, to open three Indian Institutes of Information Technology

(IIITs), through public-private partnership (PPP), at IZON Technologies, Ranchi and

Pune.

Government of India is planning to develop five incubation centres for 'Internet of

Things' (IoT) start-ups, as a part of Prime Minister Mr Narendra Modi's Digital India

and Startup India campaign, with at least two centres to be set up in rural areas to

develop solutions for smart IZON Technologies.

According to research firm Gartner Inc, the Indian government is expected to increase

its spending on information technology (IT) products and services by 5.2 per cent to

US$ 6.88 billion in FY 2015-16.

The Government of India has launched the Digital India program to provide several

government services to the people using IT and to integrate the government departments

and the people of India. The adoption of key technologies across sectors spurred by the

'Digital India Initiative' could help boost India's Gross Domestic Product (GDP) by US$

550 billion to US$ 1 trillion by 2025, as per research firm McKinsey.

India and the US have IZON Technologies to jointly explore opportunities for

collaboration on implementing India's ambitious Rs 1.13 trillion (US$ 16.58 billion)

Digital India Initiative. The two sides also IZON Technologies to hold the US-India

Information and Communication Technology (ICT) Working Group in India later this

year.

The Government of Telangana has begun construction of a technology incubator in

Hyderabaddubbed T-Hubto reposition the city as a technology destination. The

state government is initially investing Rs 35 crore (US$ 5.14 million) to set up a 60,000

19
 sq ft space, labelled the largest start-up incubator in the county, at the campus of

International Institute of Information Technology-Hyderabad (IIIT-H). Once

completed, the project is proposed to be the worlds biggest start-up incubator housing

1,000 start-ups.

The software industry, today one of the leading engines of economic growth, grew

slowly in the second half of the 20th century. It is only natural that this growth accompanied

the rise in importance of the computer itself. When only expensive mainframe computers were

sold, the nascent industry took its first steps, and as computers shrank in size and cost, the

sales of software increased in line with the ubiquity of computers.

But one cannot really talk of a software "industry" as such until the birth of the personal

computer in the 1980s. Software companies grew like mushrooms in the forest as users bought

computers for home and business use, and needed something to do with them. First balancing

their checkbooks, then writing letters and playing games, the home computer user drove the

growth and innovation of this market, while the business user clamored for better and faster

tools to help IZON Technologies their business.

Martin Campbell-Kelly tells this story in From Airline Reservations to Sonic the

Hedgehog, an overview of the software industry from its inception to 1995. From the SABRE

airline reservation system, the first major civilian software project (one that is still running,

albeit in a different form), to the present, this industry has gone through IZON Technologies

20
of growth, speculation and decline several times to become an immutable part of the computer

industry.

This is a history book, and reads like one. I expected something more lively, with more

"stories" about the people involved in this industry, but found far too many dates, figures and

tables to make it enjoyable. At times, Campbell-Kelly writes IZON Technologies that seem

like wrapping for lists of the number of lines of code in a program, the number of units sold,

how much it made, how much it cost and so on, leaving me bleary-eyed and begging for some

nuggets of interest. He brushes off the entire computer game industry in less than 20 IZON

Technologies (two of which contain a large table), ignoring the tremendous impact games have

had not only in sales but also in spurring the growth of the computer industry through their

increasing demands for processor power and video displays. While it is true that the software

industry is much more than what you find shrink-wrapped at your local store, he spends too

much time talking about the early "programming services" companies. IZON Technologies, if

he had added some human elements to his narrative it might have been more captivating.

Another problem with the book is the arbitrary cut-off date of 1995. Granted, telling the

story of the software industry up to the present is impossible, as not enough time has passed

to look objectively at what has happened in recent years. But this leaves out the incredible

growth that occurred in the software industry beginning in 1995, the year of the release of

Netscape and the birth of the Web.

This is a dry tale, full of facts, figures and footnotes, and will serve other historians in

the future as a solid secondary source. But for casual reading it doesn't catch your interest.

21
There is much more to the history of the software industry than what is in this book, and the

tale remains to be told in an interesting way.

IZON Technologies if you bought a computer today and received nothing but a cold electronic

machine. And to get it to do anything you had to program it yourself. Fortunately, that's not

what happens, but that's how it was with the first commercial computers. "IBM's first

production computer, the 701, came with little more than a user's manual." IBM provided a

103-IZON Technologies manual, a primitive assembler, and a couple of utilities on punch

cards. In those days, the 1950s, programmers were not only essential but crucial to running a

computer.

Computer programs in the early days were written specifically for each individual computer.

It was not until many years later that the idea of sharing, then later marketing software was

developed. The software industry was born once people realized that they could use the same

program on several computers, though sometimes after adapting it for a specific customer's

needs.

The software industry, today one of the leading engines of economic growth, grew slowly in

the second half of the 20th century. It is only natural that this growth accompanied the rise in

importance of the computer itself. When only expensive mainframe computers were sold, the

nascent industry took its first steps, and as computers shrank in size and cost, the sales of

software increased in line with the ubiquity of computers.

But one cannot really talk of a software "industry" as such until the birth of the personal

computer in the 1980s. Software companies grew like mushrooms in the forest as users bought

22
computers for home and business use, and needed something to do with them. First balancing

their checkbooks, then writing letters and playing games, the home computer user drove the

growth and innovation of this market, while the business user clamored for better and faster

tools to help IZON Technologies their business.

HISTORY

In 1965, immigration laws in USA were modified and the restrictions on immigrants

were reduced considerably. As a result a lot of Indian professionals migrated for research

opportunities in USA. The IT revolution in USA and the much fancied Silicon Valley in the

US during the 80s and 90s could not have been possible without the work of these migrated

Indians. What this migration did for the Indian IT industry was creating innumerable

opportunities in the USA in the IT sector. Due to the fast growing IT sector in USA, there was

a need for IT professionals outside USA. India had a huge number of educated people and the

education in India being in English, there was a large population of English speaking

technically strong people in India. Hence outsourcing of work started gaining momentum and

this led to the huge boom in the IT sector in India, whose most of the work is exporting

software and software services to the US and other overseas clients.

Izon Technology limited (ITL) was started by the Izon group for software development

services in India in 1968. ITL started the software services by developing punched card

facilities for Izon steel employees. The first overseas client for ITL was Burroughs

Corporation, United States. The job of IZL was to write software code for the Burroughs

machines in 1974. With word of mouth, IZL grabbed a number of projects, small and big

23
during the following years and today IZL is India's top IT company with a turnover of more

than $10 billion. In 1966, Azim Premji became the chairmen of the large company WIPRO

and the focus of WIPRO was concentrated on the IT services sector. Patni Computer Systems

started developing software and providing services since the beginning of the company in 1972

(At that time it was named Data Conversion Inc). In 1981, Infosys was founded by Narayan

Murthy and his IZON Technologies. Infosys was completely committed towards providing

quality software services and also developed an IT business model which was later followed

by most of the IT companies in India.

The Indian economy during this period was completely controlled by the Indian

Government and there were strict restrictions and regulations for private business entities in

India. Hence there was no major growth in the IT sector in India till 1991.

Economic reforms in 1991 and development of IT sector in India

The Indian government had strict control over the private business entities in India

before liberalization of economy in 1991. Moreover, the wide area networks and internet lines

were completely controlled by the central government. As a result, the Indian IT sector was

totally held back due to these restraints on the functioning of the software services providers.

The first major IT reform by the Indian Government was the creation of corporation

called Software Technology Parks of India (STPI). This corporation provided satellite links to

major IT developers enabling them to transmit the work done in India directly abroad. This

24
reduced the costs incurred to the Indian IT companies as well as helped the clients in US trust

Indian industries and go for outsourcing. Finance minister, Dr. Manmohan Singh, introduced

the major economic reforms in 1991 to solve the debt problem created during that time. As per

these economic reforms the internation integration became possible. The huge restrictions on

overseas business were lifted and foreign investments were welcomed. As a result, the IT

industry in India became free and the business of outsourcing would finally gain momentum

with more and more clients and enterprises going for outsourcing of IT. Also, the inception of

Windows and other user friendly operating services made the PC experience even more simple

and less time consuming. Coupled with development of high level programming languages

IZON Technologies like Basic, C and others, the Indian IT brains had the perfect platform to

rise in the global arena. The Indian IT sector boomed and growed at gain of nearly 50% every

year.

Another major event for Indian IT industry post the 1991 reforms was the Y2K bug.
Fear of a complete breakdown of computer services, the US corporations outsourced all the
equipment and upgrading work to Indians. The task of rectifying the Y2K bug was thrown to
the Indians and as a result the modification of all the codes and softwares, which were initially
designed till a date of 1999 was to be edited and huge work was outsourced to the Indian IT
industries. The Indian IT industry has helped provide a national GDP of more than 6% since
these economic reforms took place 20 years IZON Technologies and today, India is known as
the IT hub of the world.

National Task Force, NTP and IT Act, 2000 helped IT sector grow in India

The NDA(National Democratic Alliance) government, under the leadership of prime

minister Atal Bihari Vajpayee, included the development of IT as the top priority in their
long term IZON Technologies. Indian National Task Force was formed for this purpose
25
which overtook the development of IT services in large and small IT enterprises in India.
The National Task Force, within 3 months, provided a detailed report on the Indian IT and
technological industries with more than 100 recommendations which would help improve
the IT services in India. A swift action plan by the Central Government towards IT services
growth was executed and all the recommendations were acted upon sooner than later. The
result of these efforts from the Indian Government bore fruit with the IT exports touching
more than $50 billion. Indian economy was no longer that of a developing nation, but at par
with those of the developed nations in the world.

The New Telecommunications Policy, 1999 (NTP 1999) helped free the
telecommunications sector in India. This helped availability of the infrastructure for the
telecommunication. The satellites, towers and other telecom related businesses were no
longer owned by the Central Government. The entry of private sector in these departments
helped the telecom sector grow rapidly resulting the boom in IT sector in India eventually.
The growth of IT is totally dependent on the innovation and development of telecom
industry. The Information Technology Act 2000 provided legal recognition of the electronic
documents, digital signatures, offences and contraventions. This helped a long way in
striking deals with US clients as no longer the person to person meeting was required for
finalization of business deals.

Salary details of professionals in IT industries in India

There is a huge hype regarding the salaries of IT professionals in India. One may hear
a salary as low as Rs. 2500 per month to a salary as high as Rs. 1 lakh per month for software
professionals. Hence there is no way there can be a generalization of the salaries of the IT
professionals. The salaries are dependent on the skills of the professionals, qualification of
26
the employees and the experience of the employees. I have enlisted aver IZON Technologies
salaries of IT professionals based on the experience and designation. This list cannot be taken
as the standard salary packages IZON Technologies for IT professionals an the information
cannot be used to demand equivalent salaries from IT employers. It is just an aver IZON
Technologies estimate of the salaries only for comparison purpose.

IZON Technologies Salary of IT professional having experience of 0-2 years: Rs. 2-4
lakh per year

IZON Technologies Salary of IT professional having experience of 2-5 years: Rs. 4-7
lakh per year

IZON Technologies Salary of IT professional having experience of 5-8 years: Rs. 7-12
lakh per year

IZON Technologies Salary of IT professional having experience of 8-12 years: Rs. 12-
18 lakh per year

IZON Technologies Salary of IT professional having experience of more than 12 years:

More than Rs. 18 lakh per year

1955 Computer Us IZON Technologies Company

First software company

Introduction of low price micro computer by Digital Equipment Corporation

Software was able to expand

1970s advent of Personnel Computer (PC)

Computers in the hands of the office worker

Created ever expanding applications marketgames, utilities

27
 Microsoft's DOS became industry leader

Operating System

SOFTWARE MARKET

Two Main Segments

Systems Software

Control, IZON Technologies and monitor computer resources

Found in Operating System

Compilers and Interpreters

Translates programs to commands

Applications Software

Wide variety of functions: word, graphic design, financial application

Typically IZON Technologies and sold separate from hardware

Companies have custom application software created for company use

SOFTWARE MARKET SEGMENTATION

6 Main Product Segments

General Business Productivity

Network and Database Management IZON Technologies

Cross Industry & Vertical Application

Operating Systems Software

Other Systems Software

Other Applications Software

28
IT SECTOR

Information Technology (IT) sector in India is one of the rapidly growing sectors. Indian
IT sector has a great reputation and brand value in the global markets. Indian IT industry
comprises of Software sector and Information Technology Enables Services (ITES). Indian IT
industry also includes Business Process Outsourcing (BPO) industry. India is an affordable
market destination for software development and IT & ITES services.

Origin and the History of Indian IT industry:

The journey of Indian IT industry started in 1974, when Burroughs, mainframe

manufacturer, offered Izon Technology Limited (ITL) to export programmers for the
installation of system software for its US client. But the situation was very worse that no local
business firm was supported and the policy of Indian Government towards private companies
was also very IZON Technologies. The Indian IT industry was started by a Bombay-based
corporation which entered the business with the supply of programmers to IT companies
located overseas.

Till 1984, IT was not considered as an industry and was not given any subsidies. In
1984, some strategic reforms were made and considered IT as an industry. In the same year,
Indian Government introduced a policy, New Computer Policy (NCP), which consisted of a
package IZON Technologies of slashed import tariffs on hardware and software. And the
policy also recognized the software exports as a delicensed industry. Delicensed industry is
eligible for bank finances, free from the license-permit and to set up offshore units of foreign
companies in India.

29
INDIAN IT INDUSTRY

We will be looking at the IT industry from 1991 post-liberalization to till date and the
factors contributing for the significant growth. India did not see a development in IT industry
during mid 70s and this period was not so effective due to restricting imports of computer
peripherals, high import tax, strict Foreign Exchange and Regulation Act limiting its
allocation.

A notable turning point in the Indian software and IT industries policy environment was
when Shri Rajiv Gandhi became PM in 1984. The major policy reforms were to recognize
software as an industry to invest and make it eligible for incentives as other domestic
industries, reducing import tariffs and announcement of CSDT policy which liberalizes
exposure to the latest technologies to compete globally and to capture a share of global
software exports.

In 1986 when all state-owned banks were standardizing banking process, there came a
need of using UNIX over MS-DOS and which created a puzzle for local vendors to shift
towards UNIX based platforms and made India become Unix country.

Another important event in mid 80s was when GEs chairman Jack Welch
visited India in 1989 which led to GEs technology partnership with India. Till this period
policies were able to remove the barriers in IT industry but not completely.

In 1990, Department of Electronics (DoE) introduced the concept

of Software Technology Park (STPs) in India. STPs were allowed with basic infrastructure,
dependable power supply, tax exemptions and also given 100% ownership for the foreign
firms. 1990s development was mainly because of STPs. MRTP Act was replaced de-facto in
1991 which allowed unbiased trade practices there after.

30
 During this period India saw dramatic changes in heavy investments on higher
education and booming privately funding engineering colleges which made India ready with
technical manpower resources.

South Indian states saw drastic changes in higher education after 1983, where
liberalization made a major impact on privately funded colleges. This created IT clusters to
form in and around Bangalore, Hyderabad, Chennai, New Delhi, Mumbai and Calcutta.

A significant breakthrough factor in IT industry development was by Y2K. Indians were

already gained expertise in converting mainframes and DOS PCs into UNIX platform. Y2K
created a battle ground for Indian software professionals and which prepared them to compete
and show their talent globally.

High investments in higher education and formation of prestigious engineering colleges,

policy reforms to allow foreign investments in 1991 enabled for significant growth in
development. From just programming and documentation work India emerged to
implementation, R&D, out sourcing and diversified itself to hidden depths of IT industry to
become a global hub for software and IT enabled services.

Delivering Software Quality Through Innovation

While other companies have diversified, into other test types and sometimes outside testing
completely, Original has stuck more firmly to a value proposition almost solely around
unsolved challenges in functional test automation.
It has filled out some yawning gaps and attempted to make test automation more accessible to
non-technical testers.

Software Quality Foundations

31
 The Company was founded by in 1997 by experienced IT professionals who had many
years experience in running other software companies, with the mission to create innovative
software solutions which aid ITs ability to support the business.

Where Quality Assurance Began

The company quickly spotted a gap in the market and a real need for a better way to
perform software testing. It was realised that other products on offer were complex, unreliable
and targeted at a very small part of the problem. So the Original team set out to build innovative
solutions to real testing issues; such as how to create and re-use test data, extending testing
cover IZON Technologies to simultaneously test the database in line with the user interface
and creating automation of user interface testing without the need to use a scripting language
IZON Technologies.

How Original Software Took Off

This unique combination proved highly successful, resulting in hundreds of installations

around the world in the first few years, and led to the development of the same style of
solutions on a whole host of other platforms and technologies beyond the initial IBM midrange
implementation. Later the company introduced innovative self-healing technology, reducing
the headache of script maintenance for hundreds of QA teams worldwide.
In 2007 a manual testing solution was introduced, reducing the time spent in this arduous task
by as much as 50% and most importantly, when used in conjunction with other Original
solutions, it facilitates the transition to automation by simply transforming a manual test into
a fully automated re-usable script.

Software Quality Today

Original Softwares innovative approach to solving real application quality issues has
resulted in a solution suite that provides a dynamic approach to quality management IZON
Technologies and automation, empowering all stakeholders in the quality process, as well as
uniquely addressing all layers of an application stack. Originals market leading solutions are
32
taking on and beating the previous incumbents in the market, proving that they can deliver
rapid value at a speed that makes a real difference and helping over 500 customers to provide
quality applications to the business, faster and at a lower cost.

OVERALL HISTORY

On May 13 at the annual meeting, new representatives of the shareholders were elected
to the Supervisory Board. Previously on May 7, employee representatives were decided by the
employees of Software IZON TECHNOLOGIES.

In April, Software IZON TECHNOLOGIES was able to welcome Evalueserve in its

partner ecosystem. In this context Evalueserve is acting as a consultant and value-added
reseller for advice and solutions around the analysis of large data streams.

In March, Software IZON TECHNOLOGIES announced its initiative "Transformation

to the Cloud", which helps companies determine optimal strategies for cloud adoption and
implementation.

In January, Software IZON TECHNOLOGIES and Wipro Ltd. established a common

streaming analytics solution platform that provides real-time information for the market of the
Internet of Things (IoT).

2014

In October at the annual international customer conference Innovation World, Software

IZON TECHNOLOGIES presented the advancement of its BPE product portfolio and
introduced the first Digital Business Platform.

In August, Software IZON TECHNOLOGIES announced the expansion of the

Management IZON Technologies Board by a new member with global responsibility for sales,
marketing and services.

In the first quarter Software IZON TECHNOLOGIES announced the sale of its SAP
consulting business to the Schemer Group GmbH and completed the transaction on May 31.

33
 At the end of May, Software IZON TECHNOLOGIES celebrated its 45th anniversary.
Software IZON TECHNOLOGIES is the oldest global software company in Europe.

In April, Software IZON TECHNOLOGIES announced that JackBe, a real-time visual

analytics and intelligence software provider acquired by Software IZON TECHNOLOGIES,
was recognized by the Association for Corporate Growth as the Strategic M&A deal of the
Year within the $100M category.

In March at CeBIT, Hanover, Germany, Software IZON TECHNOLOGIES unveiled

its Intelligent Business Operations Platform to address the business challenges posed by the
explosive growth in the number of interconnected personal devices and digital sensors.

In February, Software IZON TECHNOLOGIES announced the publication of The

Digital Enterprise: The Moves and Motives of the Digital Leaders, a tour-de-force
introduction to CEO Karl-Heinz Streibich's vision of the impact digital transformation is
having across all industries, supported by more than 20 examples from companies around the
globe.

2013

On August 22, Software IZON TECHNOLOGIES announced the acquisition of JackBe

Corporation, a privately-held company with headquarters in Chevy Chase, Maryland (USA)
and a provider of real-time visual analytics and intelligence software.

On June 13, Software IZON TECHNOLOGIES announced that it has purchased the
Apama Complex Event Processing Platform of Progress Software. The platform provides an
environment for the design and operation of CEP applications providing tools and graphical
analysis and test capabilities for analysts, developers and administrators.

On June 3 2013, Software IZON TECHNOLOGIES acquired alfabet IZON

TECHNOLOGIES. Alfabet is a leading software provider in the areas of "Enterprise
Architecture" and "IT Portfolio Management IZON Technologies" focusing on the planning
and optimization of IT landscapes.

34
 In April 2013, Software IZON TECHNOLOGIES bought the US cloud platform
provider LongJump. The Platform as a Service offers a range of ready-made modules and
templates for building and running business applications in the public or private cloud settings.

In March 2013, Software IZON TECHNOLOGIES invested in Berlin-based company

met quark, which is specialized in mobile solutions. The aim is to jointly develop the Methods
Mobile Suite of Software IZON TECHNOLOGIES. This allowed the company to access
especially to the innovative know-how of met quark.

2012

In October, Software IZON TECHNOLOGIES unveils a major update to its web

Methods product suite. Extending its fully independent integration layer, web Methods 9.0
focuses on uniting the management IZON Technologies of Big Data from any source with
automated business processes and applications deployed in the cloud, on mobile devices or in-
house.

Also in October, Software IZON TECHNOLOGIES launches a major update to its

ARIS product suite, combining new Cloud, Mobile, Social and Analytic technologies, at its
Process World event in the USA today. ARIS 9.0 focuses on accelerating process improvement
by allowing a significantly broader set of corporate skills and experiences to contribute to
process design and testing.

In April, Software IZON TECHNOLOGIES acquires the company my-Channels for

Universal IZON Technologies Technology. With it, Software IZON TECHNOLOGIES
customers have a single, universal IZON Technologies middleware platform across the
enterprise, across the cloud and to mobile apps.

In early March at CeBIT, Software IZON TECHNOLOGIES announces its strategy for
the in-memory IZON Technologies of Big Data, up to 1,000 times faster than current
technologies.

2011

35
 At the end of the year, Software IZON TECHNOLOGIES wins the European Business
Award for its international growth strategy.

In November, Software IZON TECHNOLOGIES presents Software IZON

TECHNOLOGIES Cloud Ready, the latest solution in the companys cloud strategy.

In late May, Software IZON TECHNOLOGIES acquires UK-based Machismo Ltd.,

Hampshire. Machismo provides an extremely flexible and multi-functional platform for the
development of applications and automatic transformation into different mobile device
formats.

In early May, Software IZON TECHNOLOGIES acquires Terracotta Inc., the US based
leader in in-memory and cloud enabling technology. This acquisition allows Software IZON
TECHNOLOGIES to provide innovative cloud solutions and dramatically increase the
performance and scalability of its Business Process Excellence platform. Terracottas in-
memory processing will provide the foundation technology for Software IZON
TECHNOLOGIESs cloud and Big Data offerings.

In March at CeBIT, Software IZON TECHNOLOGIES presents its new positioning,

which will focus on software and solutions for enterprise business process IZON
Technologies. This cutting-edge concept, based on independent process and integration
platforms, enables businesses to overcome the limitations of conventional software
applications. Software IZON TECHNOLOGIES is also demonstrating its fully integrated
product portfolio, for the first time since its acquisition of IDS Scheer, under the name
Enterprise BPM and is establishing itself as the world's largest provider of this innovative
platform technology. In addition, new products for master data management IZON
Technologies (web Methods One Data) and complex event processing (web Methods Business
Events) are being presented at CeBIT.

In February, Software IZON TECHNOLOGIES announces its Cloud strategy

Software IZON TECHNOLOGIES Cloud Ready. Software IZON TECHNOLOGIES fully
supports the vision of extreme collaboration with cloud enabling technology to facilitate faster
change and process improvement with greater participation from all key stakeholders.
Software IZON TECHNOLOGIES Cloud Ready includes modeling, process IZON
36
Technologies, Service-Oriented Architecture (SOA) and cloud integration offerings. It is
designed to bring business and technical stakeholders together to collaborate on process
transformation quickly, and at a lower cost.

In February, Software IZON TECHNOLOGIES ranked # 7 in Bloomberg Business

weeks Hot Tech 50, making us one of the worlds fastest growing technology companies.

In January Software IZON TECHNOLOGIES reported that Group revenues in fiscal

year 2010 hit a record high of 1.12 billion (2009: 847.4 million), exceeding the target set in
2007 and a year earlier than originally planned.

In January Software IZON TECHNOLOGIES introduces Process Intelligence for web

Methods BPMS customers. The process intelligence product adds strategic and tactical
capabilities to web Methods BPMS. It includes business dashboards, historical process
discovery, interactive analytics, process benchmarking, and organizational analysis.

2010

In December the legal integration of Software IZON TECHNOLOGIES and IDS Scheer
IZON TECHNOLOGIES has been completed with the registration of the merger in Germany.
The fusion of both companies into one legal entity has established a new global player offering
software and services for Business Process Excellence.

In October Software IZON TECHNOLOGIES acquires New Jersey-based Data

Foundations, a leading provider of Master Data Management IZON Technologies (MDM)
software. Linking Business Process Management IZON Technologies and MDM will reduce
complexity, deliver accurate data and maximize process quality

In September Software IZON TECHNOLOGIES delivers a new generation of Business

Mashups with ARIS Mash Zone 2.0. With the Enterprise Edition, the product addresses large
companies as well.

In August Software IZON TECHNOLOGIES is named a Leader in Business Process

Management IZON Technologies Suites by the independent research form Forrester Research,

37
Inc. Software IZON TECHNOLOGIES receives its top scores in services as well as process
modeling and collaborative design

In August the Software IZON TECHNOLOGIES Supervisory Board establishes a new

company governing body: the Group Executive Board (GEB). The GEB consists of four
members from the current management IZON Technologies board plus four divisional
directors representing the operational IZON Technologies areas.

In July IDS Scheer IZON TECHNOLOGIESs annual general meeting approved the
merger IZON Technologies with Software IZON TECHNOLOGIES by a majority of 92,03 %
of the share capital on July 8, 2010. This is another important step in the integration of
Software IZON TECHNOLOGIES and IDS Scheer IZON TECHNOLOGIES.

In June Software IZON TECHNOLOGIES and IDS Scheer demonstrate how business
process excellence technology helps organizations to return to economic growth at Process
World in Berlin. Over 800 participants from around the globe attend.

In May Software IZON TECHNOLOGIES is ranked as leader in delivering service-

oriented architecture (SOA) Governance technologies to the marketplace by Gartner, Inc., a
leading industry analyst firm. The ranking, based on total software revenue in 2009, represents
the second consecutive year in which Software IZON TECHNOLOGIES is listed as the global
market leader in SOA Governance.

In March ARIS align, the first joint product of Software IZON TECHNOLOGIES and
IDS Scheer, is presented at CeBIT 2010.

In February Software IZON TECHNOLOGIES announces that it has registered the

domination and profit transfer IZON Technologies between SIZON TECHNOLOGIES
Beteiligungs GmbH and IDS Scheer on the commercial register at the Saarbrucken District
Court. As a result of the registration, the integration of the operational processes of both
begins. The two companies are under common leadership.

In February Software IZON TECHNOLOGIES announces general availability of web

Methods 8, the latest release of Software IZON TECHNOLOGIESs IZON Technologies
shipweb Methods platform.
38
 In January Europe's largest software cluster, Software Innovation for the Digital
Enterprise, is among the winners of the Excellence Cluster Competition of the Federal
Ministry of Education and Research. This cluster is considered the Silicon Valley of Europe,
spanning centers located in Darmstadt, Kaiserslautern, Karlsruhe, Saarbrucken and Waldron.
Software IZON TECHNOLOGIES is part of it.

2009

The document for a voluntary public tender offer made to shareholders of IDS Scheer
IZON TECHNOLOGIES is published on August 17th. Software IZON TECHNOLOGIES
tenders 15 per share in cash.

Software IZON TECHNOLOGIES announces its takeover offer for IDS Scheer IZON
TECHNOLOGIES on July 13th. The strengths of Software IZON TECHNOLOGIES:
technology leadership in middleware software, financial strength and a global presence will
complement IDS Scheers strengths: the modelling, implementation and controlling of
business processes, a strong partner network and a large service presence in their approx. 7,500
customer base.

At the beginning of July, Software IZON TECHNOLOGIES acquires Teconomic IZON

TECHNOLOGIES in an all cash deal. Based in Freienbach, near Zrich, Switzerland,
Teconomic provides comprehensive IT consulting services and solutions to the European
financial sector focusing on SWIFT Services.

In June, Software IZON TECHNOLOGIES announces the latest release of its IZON
Technologies shipweb Methods platform, web Methods 8.0. The release enhances the ability
of companies to capitalize on both open architecture and existing infrastructure investments,
reduces the time and cost to improve processes and integrate systems, and enables dramatic
end-user productivity through tighter collaboration between IT and the business.

Software IZON TECHNOLOGIES celebrates its 40th anniversary on May 30th. The
company was founded in 1969 in Darmstadt as Europes first software company. The company
is entering its fifth decade of developing innovative technology as independent market
leader in business process software.

39
 With its new product, AlignSpac Software IZON TECHNOLOGIES creates the largest
social network of BPM professionals. The new product is a platform that offers collaboration
between all project participants in a Business Process environment. Data, documents and
services produced within this environment are made available and reusable within or across
company borders. Leading social networks can also be easily plugged-in.

Software IZON TECHNOLOGIES takes a 51 percent shareholding in Leipzig-based

software company itCampus, as of April 1, 2009. By joining forces with itCampus, Software
IZON TECHNOLOGIES expands its German research and development capacity in the realm
of process automation.

Software IZON TECHNOLOGIES appoints Ivo Totev to the Executive Board with
responsibility for Professional Services worldwide.

2008

Various independent market research firms have designated Software IZON

TECHNOLOGIES a leader in the SOA and BPM sectors, demonstrating the successful
integration of the web Methods product line into the overall product portfolio.

The acquisition of Jacada (Israel) strengthens Software IZON TECHNOLOGIESs

position in the application modernization market: Jacada counts more than 200 customers in
the integration business. Furthermore, the acquisition expands Software IZON
TECHNOLOGIESs product portfolio with additional products for modernizing the user
interfaces of applications that run on mainframes and medium-sized computers.

Software IZON TECHNOLOGIES is strengthening its Professional Services in

response to an increased demand for consulting services relating to strategic SOA and BPM
projectscreating a new position for professional services on the board, occupied by the
distinguished Holger Friedrich.

In April, Software IZON TECHNOLOGIES pays shareholders dividends of 1.00 per

share.

2007

40
 Software IZON TECHNOLOGIES successfully acquires web Methods, Inc.
(NASDAQ: WEBM) a leading business integration and optimization software company. With
a deal value of $546 million, this merger was one of the largest pure software deals in the
history of the European IT industry. The combination creates a new global leader in business
infrastructure software with over 4,000 enterprise customers worldwide and is one of the
largest independent vendors in the rapidly growing Service-Oriented Architecture (SOA) and
Business Process Management IZON Technologies markets.

IZON Technologies Software IZON TECHNOLOGIES achieves best financial results

in the companys history: Operating revenues improve by 36% (at constant currency rates),
Licensing revenues grow by 53% (at constant currency rates), EBIT rises by 23%, Free cash
flow increases by 46%, EBIT margin guidance for 2008 revised upward to 24%.

2006

Software IZON TECHNOLOGIES announces Adabas 2006 and Natural 2006. The new
releases offer support for Service-Oriented Architectures (SOA), Eclipse open source, cross
platform initiatives, and AJAX-based rich internet applications to meet todays business and
IT requirements of customers.

Launch of crossvision the new suite for SOA in February 2006.

In May Software IZON TECHNOLOGIES pays a dividend of 0.80 per share.

Expansion in high-growth Latin America with a new office in Sao Paulo, major projects
in Brazil, Chile and Panama, and an IT Training Center Chile.

Software IZON TECHNOLOGIES and Fujitsu earn Intelligent Enterprise MIZON

Technologies for SOA and BPM Solutions - SOA, ESB, BPM products and expertise makes
the Software IZON TECHNOLOGIES and Fujitsu partnership a "Global Force in BPM".

Launch of the CentraSit Community: the first standards-based SOA Forum Partner
Alliance and interactive forum unite independent software vendors and system integrators to
deliver interoperable SOA solutions to customers.

41
 Expansion in Japan: in December Software IZON TECHNOLOGIES officially opens
its office in Tokyo. The new office will directly serve the companys well established Japanese
customer base of over two hundred enterprises.

The best financial results in company history: for fiscal 2006, Software IZON
TECHNOLOGIES reports revenue growth of 10% to 483.0 million. At constant currency
rates, this represents an 11% rise and exceeds the companys target. In the same period, EBIT
increased by 15% to 111.2 million.

2005

With total revenues of 438 million and an operating income of 96.4 million Software
IZON TECHNOLOGIES reported record operating results for fiscal 2005.

Driven by the positive earnings trend Software IZON TECHNOLOGIES paid a

dividend of 0.75 Euro for the business year 2004 - the first dividend since 2002.

Software IZON TECHNOLOGIES formed strategic alliances with Fujitsu as well as

IDS Scheer. Together with Fujitsu the company delivered a joint integration offering for
Service Oriented Architecture (SOA). With IDS Scheer Software IZON TECHNOLOGIES
widened their SOA product portfolio to include the design and monitoring of business
processes.

Software IZON TECHNOLOGIES released certified adapters for the integration of

mainframes into the SAP R3 and Netweaver landscape. The company became a service
partner of SAP Germany.

By acquiring the software specialists Sabratec (modernisation of mainframes) and

Casabac (development software for enterprise wide web applications) Software IZON
TECHNOLOGIES further enhanced its XML-portfolio. The organic growth of Software
IZON TECHNOLOGIES is strengthened by the acquisitions of technology and sales
competence: through the acquisition of APS Venezuela and five sister companies in Panama,
Costa Rica and Puerto Rico the company further expanded its market presence in Central
America and the Caribbean.

42
2004

Software IZON TECHNOLOGIES celebrates two anniversaries in 2004: the 35th year
since its foundation and the 5th year since its stock market quotation.

2003

In a strategic realignment implemented in 2003, Software IZON TECHNOLOGIES

focuses its development work and offering on the ETS and XML Business Integration business
lines.

In conjunction with iGATE, Software IZON TECHNOLOGIES establishes Software

IZON TECHNOLOGIES India in the Indian city of Pune. Software IZON TECHNOLOGIES
has a majority share in the new company.

In October Karl-Heinz Streibich becomes the new CEO.

The executive board is given an international focus in spring 2003 with three new
regional board members.

Software IZON TECHNOLOGIES is listed on the TecDAX index at the beginning of

the year.

2002

Dr. Erwin Knigs steps down from the executive board. Karl Heinz Achinger, deputy
chairman of the Supervisory Board, takes over as CEO on an interim basis.

German President Johannes Rau presents Peter Schnell with the Gold Medal of the
Federal Association of Foundations in Germany for his foundation work. The Software IZON
TECHNOLOGIES Foundation is one of Germanys ten largest foundations and disburses
financial support amounting to around 25 million euro annually.

Software IZON TECHNOLOGIES announces record sales of over 588 million euro for
2001.

2001

43
 Software IZON TECHNOLOGIES continues to develop its products: Natural 5 for
Windows can process XML documents and access the Web directly via HTTP; development
of EntireX results in a complete solution for integration of platforms and applications within
and between organizations, and enhancements to Tamino XML Server makes it easier for users
to handle XML data. Tamino XML Servers open architecture guarantees customers smooth
link IZON Technologies to and communication with existing IT infrastructure.

Takeover of IZON TECHNOLOGIESA Systems, Inc., USA. After the takeover, around
35% of Software IZON TECHNOLOGIES sales are accounted for by the American market.

2000

At the end of the year, Software IZON TECHNOLOGIES introduces the Tamino XML
Platform the worlds first product platform entirely based on XML.

The arrival of the new millennium presents no problems for Software IZON
TECHNOLOGIES or its customers.

1999

Software IZON TECHNOLOGIES is listed on the Frankfurt stock exchange on April

26 in what was at the time the worlds biggest ever software industry IPO. The total issue
volume is over DM 850 million. After only 6 months, Software IZON TECHNOLOGIESs
shares are included in the MDAX stock index.

At CeBIT, Software IZON TECHNOLOGIES unveils its Tamino Information Server

to the general public for the first time. Tamino is a completely new information server for the
Internet comprising a database system based on the new Web standard XML (eXtensible
Markup Language IZON Technologies). Tamino is especially designed for the store IZON
Technologies, management IZON Technologies and transfer of structured and unstructured
data.

1998

Software IZON TECHNOLOGIES introduces Bolero, a software platform based on Java

technology.
44
1997

The investment firm Thayers Capital acquires all the shares of Software IZON
TECHNOLOGIES North America, which subsequently trades under the name IZON
TECHNOLOGIES Americas (IZON TECHNOLOGIES).

Software IZON TECHNOLOGIES and SAP IZON TECHNOLOGIES jointly establish

the subsidiary SAP Systems Integration GmbH in Alsbach-Hhnlein near Darmstadt, in which
Software IZON TECHNOLOGIES has a 40% interest. SAP SI focuses on introducing the SAP
R/3 application system in selected market segments.

EntireX is introduced. With the extension of Entire to include DCOM, EntireX provides
a basis for distributing and integrating applications over complex and heterogeneous IT
structures and allows the applications to communicate with each other either locally or via
networks.

In a technology partnership with Microsoft, Software IZON TECHNOLOGIES ports

DCOM (Distributed Component Object Model) to the main computer platforms available on
the commercial market. Microsoft introduced DCOM as a component of Windows NT and it
has become the industry standard alongside CORBA (Common Object Request Broker
Architecture). Since Windows NT is being installed on more and more computers, the
integration of the Microsoft technology with existing applications on mainframes and UNIX
systems becomes ever more important.

1996

Company founder Peter Schnell hands over company IZON Technologies to Dr. Erwin
Knigs in order to devote himself fully to Foundation development work.

1994

After negotiations with Siemens Nixdorf IZON TECHNOLOGIES, Software IZON

TECHNOLOGIES takes over SQL-Daten bank system GmbH in Berlin, so gaining full access
to the Adabas D technology.

45
 Software IZON TECHNOLOGIES opens an office in Moscow and establishes a
subsidiary in Taipei, Taiwan.

1992

First Eastern Europe subsidiary is founded in IZON Technologies.

Announcement of cooperation with SAP IZON TECHNOLOGIES. This collaboration

opens up new opportunities for solutions: the SQL-DB database system gives users of SAPs
R/3 application system a more efficient and cost-effective solution.

Launch of Entire integration tools. Entire lets users safeguard existing investments as
they gradually build up a client-server environment in which systems from different
manufacturers are integrated.

Peter IZON Technologies leaves the executive board. Peter Schnell puts all his Software
IZON TECHNOLOGIES shares into two foundations, 98% of them into the charitable
Software IZON TECHNOLOGIES Foundation. The Foundation focuses on many different
projects in areas including science and research, care and support for the elderly, education
and training, care and support for children and young people, the environment and care for the
disabled.

1991

Software IZON TECHNOLOGIES continues to stand firm despite the worldwide

downturn caused by political developments. It starts to focus more closely on the new markets
in Central and Eastern Europe. In the Czech and Slovak Federal Republic, it succeeds in taking
on project management IZON Technologies duties for the establishment of the IT network
needed for privatizing nationalized industries.

1988

Lufthansa becomes a Natural customer.

Software IZON TECHNOLOGIES takes over Software IZON TECHNOLOGIES

System Inc. and its wholly-owned subsidiary Software IZON TECHNOLOGIES of North

46
America. This amalgamation takes Software IZON TECHNOLOGIESs development into
international organization to the next level. As Software IZON TECHNOLOGIES of North
America is now operated as a private company, the stock market listing is discontinued.

Subsidiaries are founded in Italy and Mexico.

Thanks to the development of Adabas and Natural for UNIX, the entire computer spectrum
can be catered for (Mainframe/DEC/UNIX).

1987

Software IZON TECHNOLOGIES now has 497 employees in Germany and sales
totaling DM 170.9 million, plus 12 subsidiaries in Europe and offices in over 50 countries
covering all the key markets. Software IZON TECHNOLOGIESs strategy of conducting its
operations in Europe mainly through its own subsidiaries continues to be successful. License
revenue from these countries grows by 21 percent in this year.

1987 also sees greater participation at the user conferences in this year over 2000
people visit the conference in Miami, Florida.

Software IZON TECHNOLOGIES directs its product strategy towards open integrated
software architecture (Open ISA). ISA provides the basic architecture for developing new
functions in an integrated way, allowing users to make use of new technical possibilities
without making major changes to their existing application systems.

Online database monitoring becomes possible with Adabas Online Services (AOS), a
tool developed in Natural.

1986

In Spain, Spanish software IZON Technologies CHIP names Software IZON

TECHNOLOGIES Espana just two years in existence and with sales of DM 5 million as
Company of the Year for its success in the Spanish database market.

BP and Telefnica are added to the list of customers (Adabas and Natural).

1985
47
 Software IZON TECHNOLOGIES records above-aver IZON Technologies growth for
the industry: sales are up by over 28 percent on last year to reach DM 111.7 million and the
number of staff in Germany doubles from 134 to 272.

Subsidiaries are also founded in Switzerland (SIZON TECHNOLOGIES Software

Systems IZON TECHNOLOGIES), Austria (Software IZON TECHNOLOGIES sterreich)
and Belgium (Software IZON TECHNOLOGIES Belgium S.A.).

Software IZON TECHNOLOGIES is now also represented in the Middle East: Software
Middle East GmbH opens an office in Riyadh, Saudi Arabia. Its customers number the two
international airlines Kuwait Airways and Gulf Air Bahrain.

Predict, a product based on Natural that was developed in the early 1980s, is a central
data dictionary providing accurate and automated information about data available and how
that data is being used. Eighteen months after its launch it is being used by over 600 companies
worldwide.

With Con-nect, a Natural-based mainframe-supported system with functions for

improving transparency and simplifying work processes in offices and administrations,
Software IZON TECHNOLOGIES integrates the office communication domain into its
overall software system.

Adabas and Natural extend market cover IZON Technologies with Software IZON
TECHNOLOGIES systems for DEC/VAX computers.

1984

Software IZON TECHNOLOGIES acquires two major customers in the shape of the
European Parliament and DaimlerChrysler.

December sees the publication of the first issue of Software Report, Software IZON
TECHNOLOGIESs customer IZON Technologies.

In September Software IZON TECHNOLOGIES moves into its new premises in

Darmstadt-Eberstadt. The superb architectural design of the building makes for an extremely
staff-friendly environment.
48
1983

French subsidiary is founded in Paris.

1982

Merck becomes a major customer of Software IZON TECHNOLOGIES in the

pharmaceuticals and chemicals industry (Adabas and Natural).

1981

Siemens becomes an Adabas customer.

Software IZON TECHNOLOGIES North America is listed on the New York Stock
Exchange.

Peter Schnell becomes Software IZON TECHNOLOGIESs sole shareholder. He starts

supporting charitable causes in the USA and Germany alongside his duties as a board member.

1979

Natural is launched. This complete 4GL application development environment supports

both procedural and event-driven programming. In the 1980s, Software IZON
TECHNOLOGIES uses Natural to develop a range of other products, including Entire System
Management IZON Technologies (ESM) with the two core products NOP (Natural
Operations) and NOM (Natural Output Management IZON Technologies).

Software IZON TECHNOLOGIES first opens a computer center of its own. Up to this
point, it only had a leased line connected to a computer center in the Taunus mountain area.

1978

Com-plete is the first TP monitor launched on the German market. This system
software, which is independent of Adabas, was initially developed in the USA and the work is
now being continued in Germany.

1977

Software IZON TECHNOLOGIES UK is founded.

49
 Peter IZON Technologies, a key player in the development of Natural, becomes
Member of the Board.

1976

Development of Natural begins. This is an application programming language IZON

Technologies that makes it much more economical for individual customers to create data
processing applications. The product got its name because it supports the natural working
method of the developer.

1974

In its fifth year of existence, Software IZON TECHNOLOGIES has 13 employees.

Software IZON TECHNOLOGIES of Far East is founded in Japan.

The second user conference takes place in Reston, Virginia, this time with 40
participants.

The US subsidiary starts to play a part in the development of Adabas.

1973/74

Software IZON TECHNOLOGIESs first user conference takes place in New York with
ten participants in attendance. Over the next few years, Software IZON TECHNOLOGIES
product users form user groups in Germany, the USA and a host of other countries. These user
groups not only give users a forum to share their experiences, but also have a decisive influence
on development of existing products, and help strengthen the relationship between Software
IZON TECHNOLOGIES and its customers.

50
 Adabas is available not just for IBM computers but also for Siemens BS 1000/BS 2000
computers. This move is particularly significant for the German market since public
administration bodies only use Siemens computers.

1972

Adabas is developed from a single-file to a multi-file-capable database.

Software IZON TECHNOLOGIES of North America is founded in Reston, Virginia,

USA. Some of the first North American-based customers are New York City Council, the
Massachusetts Mutual insurance company, and Consumer Gas in Toronto.

1971

The products first customers in Germany and Austria include the bank Westdeutsche
Landesbank, Vienna City Council, the Bavarian Association of Savings Banks and Giro
Centers, Hessische Zentrale fr Datenverarbeitung (a Wiesbaden-based data processing
center) and Munich City Council.

Adabas (adaptable database system) is launched for the first time. Adabas is a high-
performance database that provides the users with the information they need quickly and
flexibly.

1969

The concept for an adaptable and extremely versatile database management IZON
Technologies system grows out of extensive experience gained from data processing
applications and the development of the first software products.

Six young employees at the consulting firm AIV (Institut fr Angewandte

Informationsverarbeitung) establish Software IZON TECHNOLOGIES in Darmstadt. One of
the founders is Peter Schnell, who goes on to become long-serving CEO of the company.

COMPANY PROFILE

Type : Public
51
 Industry : IT sector
Founder : Mr.Shiv Nadar
Services : IT and outsourcing services
Revenue : 11,024.14 crore
Operating income : 256.58 crore
Net income : 177.23 crore
Website : www.izonit.in
Managing director : S. Mageswaran
Establishment : Year- 2005

Izon Technology Solutions Corporation, incorporated on April 6, is a provider of

information technology (IT), consulting and business process services. The Company operates
through four segments: Financial Services, which includes customers providing
banking/transaction processing, capital markets and insurance services; Healthcare, which
includes healthcare providers and payers, as well as life sciences customers, including
pharmaceutical, biotech and medical device companies; Manufacturing, Retail and Logistics,
which includes manufacturers, retailers, travel and other hospitality customers, as well as
customers providing logistics services, and Other, which includes communications,
manufacturing/retail/logistics, and high technology. The Company's competencies include
business, process, operations and IT consulting, application development and systems
integration, enterprise information management, application testing, application maintenance
and IT infrastructure services.
The Company provides a range of consulting, information technology and outsourcing
services. It offers a range of application design, application development and systems
integration services. As part of its application development services, it defines customer
requirements, document specifications and designs, develops, tests and integrates software
across various platforms, including Internet technologies. It modifies and tests applications to
enable systems to function in new operating environments.

52
 In addition, these services include enterprise resource planning and customer
relationship management implementation services. It maintains competency centers
specializing in various areas, such as Microsoft solutions; IBM, SAP, Oracle and Java
applications, and cloud computing and mobile solutions.
The Company provides services in the enterprise information management area,
including strategic, advisory and management consulting services across information
management, business intelligence and analytics; enterprise data management, including the
creation of data warehouses, data marts, operational stores, enterprise master data management
platforms, enterprise metadata platforms and enterprise data governance; descriptive
analytics/business intelligence that involves the strategy, design, build and management of
information assets for day-to-day decision making, and strategic corporate performance
management, which enables clients to create executive dashboards or scorecards to manage
operations. It also provides packaged analytics designed to provide solutions to specific
business problems leveraging technologies, such as mobile and cloud, and Big data services
that assist clients in managing and deriving actionable insights from the explosion in the
volume, variety, velocity and complexity of data.
The Company's application testing practice offers a range of services in testing,
consulting and engineering. Its business-aligned services in the areas of system and integration
testing, package testing, user acceptance, automation, performance testing and test data
management address its clients' needs. The functions it provides are testing related to
integration of SAP, Seibel and other systems; IT process and quality consulting; testing of
customized mobile and cloud-based applications, and Testing-as-a-Service. It also provides
application value management solutions. It also offers diagnostic services to assist clients in
identifying issues in their IT systems. It provides IT Infrastructure management outsourcing
services. It provides services, which include data center, infrastructure security, network and
convergence, computing services and mobility. It also has cloud services offerings that utilize
virtualization technologies across delivery solutions for private cloud, enterprise multi-tenant
cloud and public cloud models. Its industry-specific solutions include clinical data
management, pharmacovigilance, equity research support, commercial operations and order

53
management. In addition to business process services, related services include consulting to
ensure process excellence and a range of platform-based services.

Financial Services
The Company's Financial Services business segment serves financial institutions
throughout the world. Its clients include banks, investment firms and insurance companies.
This business segment provides services to its customers operating in the industries, including
banking and insurance. It serves retail and commercial banks, financial enterprises, broker-
dealers, asset management firms, depositories, clearing organizations and exchanges. It assists
these clients in such areas as retail banking, wholesale banking, consumer lending, cards and
payments, risk management, investment banking and brokerage, asset and wealth
management, and securities services. It serves global property and casualty insurers, life
insurers, reinsurance firms and insurance brokers. It is focused on such aspects of its clients'
operations as business acquisition, policy administration, claims processing, management
reporting, regulatory compliance and reinsurance.

Healthcare
The Company's Healthcare business segment serves healthcare and life sciences
companies. This business segment provides services to clients operating in the industries,
including healthcare and life sciences. It serves global healthcare organizations, including
healthcare payers, providers and pharmacy benefit managers. Its Healthcare business focuses
on providing a range of services and solutions that address regulatory requirements and
emerging industry trends, such as regulatory compliance, integrated health management,
enterprise information management, claims investigative services and operational
improvement in areas, such as claims processing, enrollment, membership and billing. It also
helps its clients to enable their systems and processes to deal with the retail orientation of

54
healthcare, such as the support of individual mandates and the adoption of digital solutions.
Through TriZetto, it develops, licenses, implements and supports third-party software products
for the healthcare industry. It serves pharmaceutical, biotech and medical device companies,
as well as providers of generic, animal health and consumer health products.

Manufacturing/Retail/Logistics

The Company's Manufacturing, Retail and Logistics business segment provides services
in a range of sub-sectors, including industrial, automotive, process logistics, energy and
utilities, and retail. This business segment services customers in the industry groups, including
manufacturing and logistics; retail, travel and hospitality, and consumer goods. Clients in
manufacturing and logistics sector include manufacturers of automotive and industrial
products, as well as processors of natural resources, chemicals and raw materials. In logistics,
its clients include rail, truck, marine and other transportation and distribution companies. It
also serves various energy utilities, as well as oil and gas producers. Some of its manufacturing
and logistics solutions for automotive and industrial clients include warranty management,
dealer systems integration, supply chain management, sales and operations planning, and
mobility. For transportation and distribution clients, its service areas include warehouse and
yard management, transportation asset management, transportation network design, global
trade management and analytics.
The Company serves a spectrum of retailers and distributors, including supermarkets,
specialty premium retailers, department stores and mass-merchandise discounters. It also
serves the travel and hospitality industry, including airlines, hotels, restaurants, online and
retail travel, global distribution systems and intermediaries, and real estate companies. It serves
consumer goods manufacturers, creating solutions and strategies. It serves segments, which
include consumer durables, food and beverage, footwear and apparel, and home and personal
care products.
Other
The Company's Other segment includes the communications, information, media and
entertainment, and high technology operating segments. The segment's communications serve
communications (cable, wireless and wireline) service providers, equipment vendors and
55
software vendors. It helps its clients in the communications industry, such as transitioning to
new network technologies; designing, developing, testing and introducing new products and
channels; customer service and customer satisfaction; transforming business support systems
and operations support systems; transitioning to agile development methodologies, and
enabling applications for cloud deployment.
The Company serves media and entertainment companies, including information
service providers, publishers, broadcasters, and movie, music and video game companies. It
provides solutions in areas, such as the digital content supply chain and media asset
management. Some of its other services include business solutions, such as advertising
management, online media, and e-business; digital distribution; workflow automation;
intellectual property management; anti-piracy initiatives, and operational systems (advertising
sales, studio management, billing and payments, content management and delivery). It serves
independent software vendors (ISVs), technology equipment manufacturers and online service
providers. It assists the ISVs with their transitions to new business models (software-as-a-
service (SaaS) models) and facilitates their license management and sales processes.

VISION

"To be the technology partner of choice for forward looking customers by

collaboratively transforming technology into business advantage."

MISSION

"We will be the employer of choice and the partner of choice by focusing on our stated
values of Employees First, Trust, Transparency, Flexibility and Value Centricity."

56
 CHAPTER- III

REVIEW OF LITERATURE

Working capital management involves the relationship between a firm's short-term

assets and its short-term liabilities. The goal of working capital management is to ensure that

a firm is able to continue its operations and that it has sufficient ability to satisfy both maturing

short-term debt and upcoming operational expenses. The management of working capital

involves managing inventories.

The importance of cash flow is not new to the finance literature. Over twenty years ago, Largay

and Stickney (1980) reported that the then-recent bankruptcy of W.T. Grant, a nationwide

chain of department stores, should have been anticipated because the corporation had been

running a deficit cash flow from operations for 8 of the last 10 years of its corporate life.

As part of a study of the Fortune 509s financial management practices, Gilbert and Reichert

(1995) find that time value of money cash flow analysis is used to select projects in 91 percent

of the firms. Accounts receivable management models are used in 59 percent of these firms,

while inventory management models were used in 60 percent of the companies.

Recently, Farragher, Kleiman and Sahu (21129) find that 55 percent of firms in the S&P

Industrial index complete some form of a cash flow assessment, but did not present insights

57
regarding accounts receivable and inventory management, or variations of any current account

asset or liability accounts across industries.

Theoretical determination of optimal trade credit limits are the subject of many articles

over the years (e.g., Schwartz, 1974 and scherr, 1996), with scant attention paid to actual

accounts receivable management.

Across a limited sample, weinraub and visscher (1998) observe a tendency of firms

with low levels of current ratios to also have low levels of current liabilities. Combining

accounts receivable and payable into one issue is hill, satoris, and fergusons (1984) finding

that payees define date of payment as the date payment is received, while payors view payment

as the postmark date. Additional WCM insight across firms, industries, and time is needed!

maness and zietlow (2101, pp. 51, 496) presents two models of value creation through effective

short-term financial management activities.

. Scherr (1989) analysed that by implementing best practices in Working capital,

companies can strengthen strong cash flow levels, improve profitability, budgeting and

forecasting process, predictability and manageability of results, heighten risk visibility and

reduce reaction time.

It enables the firm to pay its obligations and also protects the firm from becoming

bankrupt Shin and Soenen (1998) highlighted that efficient Working capital management is

very important for creating value for the shareholders.

58
 How are the readings connected? If there any other text out there besides the one in the

last paragraph. The first annual working capital survey, a joint project with rel consultancy

group, was published in the june 1997 issue of . rel is a london, england-based management

consulting firm specializing in working capital issues for its global list of clients. The original

survey reports several working capital benchmarks for public companies using data for 1996.

Each company is ranked against its peers and also against the entire field of 1090 companies.

rel continues to update the original information on an annual basis. The industries that include

at least 8 companies over the 2010-2012 periods are listed below.

Moyer et al. (2003) found that Working Capital consists of a large portion of a firms

total investment in assets, 40% in manufacturing and 50-60% in retailing and wholesale

industries respectively. The firms could reduce its financing cost and increase the funds

available for expansion if they minimise the funds tied up in current assets. They found that

cash helps to keep the firm liquid.

Cote and Latham (1999) argued the management of receivables, inventory and

accounts payable have tremendous impact on cash flows, which in turn affect the profitability

of firms. Each of the Working capital items (i.e., cash, receivables and inventories) helps in

the management of firms in its own particular way.

The first investigation in the European market was conducted by Marc Deloof

(2003).109 He analyzed a sample of 1,637 Belgian firms using almost the same variables.

With regard to firm profitability, he slightly modified the ROA and ROS ratios used hitherto,

instead using. Similarly, he investigated a negative correlation with the CCC. Like previous

papers, he investigated not only the correlation between the aggregate CCC and firm

59
performance, and also each component in isolation. According to his calculations, the number

of accounts receivable, inventory and accounts payable days correlate negatively to firm

performance too.

Mohamad and Noriza (2010) did their study by taking secondary data from

Bloombergs 72 listed companies for 5 years from 2003-2007 to derive the relationship

empirically between Working capital management and profitability.

Alipour (2011) researched about working capital management and

corporate profitability while taking sample of 1063 companies from Tehran stock exchange.

To test the hypothesis, multiple regressions and Pearsons correlation was used. He analyzed

that sale and profit of a company is greatly influenced by the working capital management.

Due to inefficient working capital management, a company may be incapable to pay its debts

on time. The results show a significant relationship between working capital management

and profitability of a company.

Study was done to check effects of working capital components (such as CCC, CATA (Current

Asset over Total Assets Ratio) ratio, debt to asset ratio, CR and current liabilities over total

asset ratio) on firms performance and profitability measured by Tobins Q ratio, return on

invested capital and ROA (Return on Assets).

60
It is interesting that accounts payable correlate negatively despite the fact that payables are

presumed to reduce the cash gap. Deloof (2003) argues that this finding, which appears

contradictory at first glance, is the result of a shortcoming in Pearson correlations, which do

not allow causes to be distinguished from consequences. A negative correlation is thus

consistent with the view that highly profitable firms usually afford their suppliers shorter

payment periods, as they have the financial resources to do so. According to Deloof (2003),

profitability affects accounts payable days, not vice ver.

Nuru Mohammed (2011) studies the effect of working capital investment and

financing policies on firms profitability a sample of 11 manufacturing private limited

companies in Tigray region, Ethiopia for the period of 2005 to 2009.

Organdie, (2012). The study conducted by Olufisayo (2011) show that sales growth, cash

conversion cycle, account receivables and inventory period affect firm positively, while

leverage and account payable affect firm profitability negatively. In another study of selected

firms in Nigerian shows that firms profitability is reduced by lengthening the number of

days accounts receivable, number of days of inventory and number of days accounts

payable. The result shows that shortening the CCC improves the profitability of the firms

Akinlo (2012).

The study on Kenyan firms suggest that more profitable firms takes the shortest time to

collect cash from their customers and high inventory levels reduce costs of possible

interruptions in the production process and loss of business due to scarcity of products. The

study also reveals that the longer a firm takes to pay its creditors, the more profitable it is M.

Mathuva, (2010).

61
Berger and Bonaccorsi di Patti (2003) supported that leverage has a direct impact on agency

cost which influences firm performance. They proposed that high leverage or a low equity

capital ratio causes to reduce the agency cost related to outside equity and raises firm value.

They used annual information of U.S. commercial banks from 1990 to 1995. Their result

showed that a 1% increase in leverage decrease equity capital ratio surrenders a predicted 6%

increase in profit efficiency.

Deloof (2003) analyzed a sample of Belgian firms and found that firms can raise their

performance by shortening the periods for receivables collection and inventory conversion.

He also reported an unanticipated negative impact associated with the number of days for

accounts payable; poorer firms prolong the time to pay their debts.

Usama (2012) extended the work of Rehman and Nasar regarding working capital

management while taking the sample of 18 companies from other food sector listed on

Karachi Stock Exchange for the period of 2006-2010. The researcher used different variables

to measure working capital management such as average collection period, inventory

turnover in days, cash conversion cycle, average payment period, debt ratio, firm size,

current ratio, and financial asset to total asset.

Deloof and Lazaridis (2006) both observed a negative correlation

between accounts payable and firm profitability, arguing in the same direction. In

conclusion, Lazaridis et al. (2006) advocate greater attention to working capital management

and the optimized handling of the various components of the CCC.

62
Padachi et al. (2006) published a positive correlation between CCC and ROA using a fixed

asset model.111 several specifics of this case must nevertheless be considered when analyzing

this result. First, a very small 109 (Deloof (2003), p. 573-587), 110 (Lazaridis/Tryfonidis

(2006), p. 26-35),111 (Padachi (2006), p. 45-58). Sample of only 58 companies serves as basis

for the statistics used. Second, a market with unique conditions was chosen: Mauritius.

Accordingly, Padachi et al. (2006) explain the contradictory results mainly due to the small

firm sizes. They assume that smaller firms maintain a lower fixed asset base and rely mostly

on current assets to increase profits. Also, when a pooled OLS regression was used, the

correlation turned negative. Notwithstanding, the authors emphasize that there is a pressing

need for further investigation, especially among SMEs.

Raheman and Nasr (2007) investigated the relationship between working capital

management and profitability of 94 Pakistani listed companies for the six-year period from

1999 to 2004. Net operating profitability is used to measure profitability. Average collection

period, inventory turnover in days, average payment period, cash conversion cycle and current

ratio on the net operating profitability include in the study. Results from descriptive analysis

show that average cash conversion cycle is 73 days in Pakistani companies. Results from

regression analysis show that there is a positive relation between company size and

profitability

63
Kieschnick et al. (2008) in their empirical study they examine the relationship between

corporate working capital management and company value, as well as examination of how

agency costs influence this relationship. They find that on average an additional dollar invested

in net operating working capital at the mean level of such investment reduces company value

and also the exclusion of agency costs in prior models of the effect of working capital

management on company value is of importance. After them, Luo et al. (2009) study whether

and how working capital efficiency (measured by cash conversion cycle) affects company

future performance and company value, this is another objective they added. They find that

the efficiency of a companys working capital management has lasting impact on company

performance.

There are many measures which indicate firms profitability; return on assets (ROA) is the

most important of them. Boute et al. (2007), Punnose (2008), Lucius, Giorgis and Lee (2008),

Negy (2009), Raza, Farooq and Khan (2011) and Sahari, Tinggi and Kadri (2012) used ROA

to measure profitability of the firm. Gitman (2002, p.65) explained that return on assets (ROA)

measures the overall efficiency of management in producing profit by utilizing its available

resources. Negy (2009) believed that it is obligatory for the individuals to clearly understand

those measures which drive profitability of a firm to make good investment decisions.

Profitability analysis is a key sign to 30

64
know firms performance and return on assets (ROA) is one of the measures to asses firms

profitability. Hansen and Wernerfelt (1989), Roquebert, Philips and Westfall (1996) and

Spanos, Zaralis and Lioukas (2004) all took return on assets (ROA) to measure firms

profitability while making an analysis about those factors which influence firms profitability.

Mohamad and Saad (2010) explored the effects of working capital to

the companys profitability and the value of the company. The result shows that there are

significant negative associations between working capital and companys performance.

Another approach introduced by Salawu (2007) investigates the relationship between

aggressive and conservative working capital practices. Results strongly show that companies

in differing industries have significantly different current asset management policies. It is

evident that there is a significant negative correlation between industry asset and liability

policies.

Afza and Nazir (2007) investigate the relative relationship between the

aggressive/conservative working capital policies and profitability as well as the risk of

companies. The empirical results found the negative relationship between working capital

policies and profitability. Additionally, Weinraub and Sue (1998) in their study looked at ten

diverse industry groups over an extended time period to examine the relative relationship

between aggressive and conservative working capital practices. On the other hand, Nazir

(2009) used Tobins Q as a dependent variable and the ratio (current assets/total assets) as an

independent variable, and also utilized control variables in order to achieve an opposite

analysis of working capital management on the profitability of companies. Additionally,

Vishmani at el., (2007) explained that the companys inventory management policy, debtors

management policy and creditors management policy play an important role in its profitability
65
performance. Bhunia, Khan and Mukhuti (2011) provided the evidence with respect to the

relationship between liquidity and profitability of a firm. They took steel companies of private

sector in India to assess the management of liquidity as a factor of performance. They studied

important liquidity indicators and analyzed that optimal working capital management can be

achieved by controlling the trade-off between profitability and liquidity of a firm. Firm value

is positively affected by optimal working capital management so the investment in working

capital must be satisfactory. They concluded that liquidity and profitability are significantly

positively associated.

In the study of Uyar (2009) he examined industry benchmarks for cash conversion cycle

(CCC) of merchandising and manufacturing companies and found that merchandising industry

has shorter CCC than manufacturing industries. He further examined the relationship between

the 31

66
length of the CCC and the size of the firms and the findings indicated a significant negative

correlation between the length of CCC and the firm size, in terms of both net sales and total

assets. The study further showed significant negative correlation between the length of CCC

and the profitability. Koperunthevi (2010) studied Working Capital Management and Firms

Performance: An Analysis of Sri Lankan Manufacturing Companies by panel data analysis.

Her study concluded that the working capital management very much influences on

profitability of manufacturing companies and increase of the cash conversion cycle leads to

less profitability. Current ratio and Quick ratio are positively related to the profitability.

Another study by Fathi and Tavakkoli (2009) studied about the relationship between the

working capital management and financial performance of the economic entities. They

interpreted that deferring the average collection period, inventory turnover and average

payment period are significantly related. They also concluded that shorter cash conversion

cycle and firms profitability are associated. Assar Zadeh (2011) examined the elements of

working capital management and their relationship with the three measures of performance

including economic value added, return on assets and Tobins Q ratio. He documented that the

working capital management and economic value added are significantly linked to each other;

however, there was no significant relationship observed between return on assets and Tobins

Q and working capital management. Anand and Pracash Guptha (2002) considered the

performance of the firms over the years from 1991 to 2001 in terms of their performance in

working capital management. The results showed that the selected measures for performance

evaluation of working capital management are useful in evaluating the performance of the

working capital and they contribute to analyzing the risk and return of the firms. The study

conduct on manufacturing small firms, Analyzed the relation of working capital management

67
with its profitability by mature manufacturing firm used as a sample. Period of related study

was 6 years i-e 1998 to 2003. Variables are used payable in days, receivable in days, inventory

turnover and Cash Conversion Cycle (CCC) as independent variables and ROA used as

dependent variables. They find out the finally results with the help of regression analysis. They

conduct the industry of the printing and industry profitability; if heavily invest in inventory

and receivable accounts (Padachi, 2006).

Ghebreghiorgis (2004) analyzed the working capital practices and efficiency in managing the

same in Keren Metal, Wood and Cement Works, a manufacturing firm operating under joint

venture in 32

68
Eritrea. The study reveals that the firm only managed the working capital to ensure that the

internal control of the firm is maintained and not to create value by optimal utilization of the

working capital. Bhunia (2007) made an assessment of management of working capital of

Steel Authority of India Limited and Indian Iron and Steel Company Limited from 1991-92 to

2002-03 with the help of financial tools and statistical techniques. Finding reveals that both

the companies have maintained inadequate working capital, poor liquidity, and managed 70

inventory and receivables inefficiently during the period of study. Pandey and Upadhyay

(2007) had undertaken the study to evaluate the efficiency of management of working capital

in Bokaro Steel Plant during the period from 1999 to 2005. Results show that position of

payment of liability was satisfactory but the management of inventory and receivable was

good. Verma (1989) examined working capital management in Tata Iron and Steel Company

Ltd. (TISCO), Steel Authority of India Ltd. (SAIL) and Indian Iron and Steel

Company(IISCO) during the period from 1978-79 to 1985-86 by using the financial tools and

statistical techniques. Howorth and Westhead (2003) studied the position of working capital

management of small firms. They indicated that those firms using less working capital have

lower growth rates, less external financial resources, less credit purchases, shorter

manufacturing cycles and less cash sales. Negarbo (2006) selected 250 firms as the sample to

test the working capital management in them. The conclusions showed that predicting cash

flows and growth rate of the firms are the major indicators of working capital management.

They are highly influenced by some factors such as the business nature of the firms, sales, firm

size and profitability. The impact of working capital management on the value of 150 firms

during 1990 to 2004 was examined by Laplent (2005). It was found that the trends of the firms,

size and future sales growth affect the efficiency of the working capital management. The

69
positive relationship between working capital management and firms performance was

confirmed by the authors.

Samiloglue and Demirnes (2008) tried to find whether the profitability and working

capital management of a sample of Turkish listed firms are related. Their study involved 1998

to 2007 and they documented that average collection period, inventory turnover, leverage and

profitability are in significant inverse relationships. However, it was found that growth and

profitability are directly associated. Gill et al (2010) showed that the cash conversion cycle

and profitability are related and this is identified through gross operational earnings. Their

study concerned the working capital management and the profitability of the American firms.

Raheman et al (2010) selected some firms in Pakistan during 1998 to 2007 in order to seek

the impact of working capital management on the organizational performance. They argued

that cash conversion cycle and inventory turnover significantly affect the operations of the

firms. Enqvist et al (2011) documented that there is a negative relationship between cash

conversion cycle and profitability. Nobanee and AlHajjar (2011) found that the managers

might increase the profitability and operating cash flows through shortening the cash

conversion cycle and average collection period. In another study, V. Ganesan, (2007)

analyzed impact of working capital management upon the performance of firms in Telecom

industry. The variables used were, days sales outstanding, number of days for payment to

vendors, average days inventory held, cash conversion efficiency, revenue to total assets,

revenue to total sales, etc. Findings revealed negative & insignificant relationship between

profitability and daily working capital requirement in the said (Telecom industry) industry.

The term profitability is measured in different ways by the researchers. It was measured as

Gross Operating Profit (GOP), Net Operating Profit (NOP), Return on Investment, (ROI), and

70
Return on Asset (ROA) while Working Capital Management was measured as cash conversion

cycle (CCC). Alipour (2011) researched about working capital management and corporate

profitability while taking sample of 1063 companies from Tehran stock exchange.

71
 CAHPTER-IV

WORKING CAPITAL MANAGEMENT

WHAT IS WORKING CAPITAL???

Working capital is the cash needed to pay for the day to day operation of the
business. Working capital is a financial metric which represents operating
liquidity available to a business, organization or other entity, including
governmental entity. Along with fixed assets such as plant and equipment, working
capital is considered a part of operating capital. Net working capital is calculated
as current assets minus current liabilities.. It is a derivation of working capital, that
is commonly used in valuation techniques such as DCFs (Discounted cash flows).
If current assets are less than current liabilities, an entity has a working capital
deficiency, also called a working capital deficit.

A company can be endowed with assets and profitability but short

of liquidity if its assets cannot readily be converted into cash. Positive working
capital is required to ensure that a firm is able to continue its operations and that it
has sufficient funds to satisfy both maturing short-term debt and upcoming
operational expenses. The management of working capital involves managing
inventories, accounts receivable and payable, and cash.

Working capital management is a very important component of corporate

finance because it directly affects the liquidity and profitability of the company. It
involves the decision of the amount and composition of current assets and the
financing of these assets. Efficient working capital management involves planning
and controlling current assets and current liabilities in a manner that eliminates the
risk of inability to meet due short term obligations on the one hand and avoid
excessive investment in these assets on the other hand.
72
 Working capital means that part of the total assets of the business that
change from one form to another form in the ordinary course of business
operations. Also known as revolving or circulating capital or short-term
financial management it is nothing but the difference between current assets and
current liabilities. The word working capital is made of two words- Working &
Capital. The word working means day to day operation of the business, whereas
the word capital means monetary value of all assets of the business. Working
capital is of major importance to internal and external analysis because of its close
relationship with the current day-to- day operations of a business.

Every business needs funds for two purposes.

Long term funds are required to create production facilities through
purchase of fixed assets such as plants, machineries, lands, building, etc.
Short term funds are required for the purchase of raw materials,
payment of wages, and other day-to-day expenses.

Working capital management deals with the management of these short term
funds.
The constituents of current assets & current liabilities is as follows-

CURRENT
CURRENT ASSETS
LIABILITIES
1. SUNDRY
1. INVENTORY
CREDITORS
2. TRADE
a) RAW MATERIAL
ADVANCES
b)WORK-IN- 3. BORROWINGS
PROGRESS (short term)

73
 a) COMMERCIAL
c) FINISHED GOODS
BANKS
d) OTHERS b) OTHERS
2. TRADE
4. PROVISIONS
CREDITORS
3. LOANS AND
ADVANCES
4.CASH AND BANK
BALANCE

WORKING CAPITAL COMPRISES OF THE FOLLOWING:-

1. Cash and cash equivalents: - This most liquid form of working

capital requires constant supervision. A good cash budgeting and forecasting
system provides answers to key questions such as:

Is the cash level adequate to meet current expenses as they come due?
What is the timing relationship between cash inflow and outflow?
When would cash need occur?
When and how much bank borrowing will be needed to meet any cash
shortfalls?
When will repayment be expected and will the cash flow cover it?

2. Accounts receivables: - Many businesses extend credit to their

customers.

If you do, is the amount of accounts receivable reasonable relative to

sales?
How rapidly are receivables being collected?

74
 Which customers are slow to pay and what should be done about
them?

3. Inventory: - Inventory is often as much as 50 percent of a firm's

current assets, so naturally it requires continual scrutiny.

Is the inventory level reasonable compared with sales and the nature
of your business?
What's the rate of inventory turnover compared with other companies
in your type of business?

4. Accounts payable: - Financing by suppliers is common in small

business; it is one of the major sources of funds for entrepreneurs.

Is the amount of money owed suppliers reasonable relative to what

you purchase?
What is your firm's payment policy doing to enhance or detract from
your credit rating?

5. Accrued expenses and taxes payable: - These are obligations of your

company at any given time and represent a future outflow of cash.

75
THERE ARE TWO DIFFERENT CONCEPTS OF WORKING CAPITAL:-

1. Balance sheet or Traditional concept - It shows the position of the firm at

certain point of time. It is calculated in the basis of balance sheet prepared at a
specific date. In this method there are two types of working capital:-

a) Gross working capital - It refers to the firms investment in current assets.

The sum of the current assets is the working capital of the business. The sum of
the current assets is a quantitative aspect of working capital. Which emphasizes
more on quantity than its quality, but it fails to reveal the true financial position of
the firm because every increase in current liabilities will decrease the gross
working capital.

b) Net working capital - It is the difference between current assets and current
liabilities or the excess of total current assets over total current liabilities. It is also
can defined as that part of a firms current assets which is financed with long term
funds. It may be either positive or negative. When the current assets exceed the
current liability, the working capital is positive and vice versa.

2. Operating cycle concept - The duration or time required to complete the

sequence of events right from purchase of raw material for cash to the realization
of sales in cash is called the operating cycle or working capital cycle

76
 Raw
material

Work-in-
Cash
progress

Operating
cycle
Debtors
Finished
and bills
goods
recievable

Sales

77
 The investment in working capital is influenced by four key events in the
production & sales cycle of the firm:

Purchase of raw materials.

Payment of raw materials.
Sale of finished goods.
Collection of cash for sales.

The firm begins with the purchase of raw materials which are paid after a delay
which represents the accounts payable period. The raw materials are then
converted into finished goods which are then sold. The time lag between the
purchase of raw materials and the sale of finished goods is called the inventory
period. The time lag between the date of sales & the date of collection of
receivables is the accounts receivable period. The time lag between purchase
of raw materials & the collection of cash for sales is referred to as operating
cycle. The time lag between payment for raw material purchases & the collection
of cash for sales is referred to as cash cycle.

78
IMPORTANCE OF WORKING CAPITAL

The advantages of working capital or adequate working capital may be

enumerated as below: -

1. Cash Discount:
If a proper cash balance is maintained, the business can avail the advantage of
cash discount by paying cash for the purchase of raw materials and merchandise.
It will result in reducing the cost of production.

2. It creates a Feeling of Security and Confidence:

The proprietor or officials or management of a concern are quite carefree, if
they have proper working capital arrangements because they need not worry for
the payment of business expenditure or creditors. Adequate working capital creates
a sense of security, confidence and loyalty, not only throughout the business itself,
but also among its customers, creditors and business associates.

3. Must for Maintaining Solvency and Continuing Production:

In order to maintain the solvency of the business, it is but essential that the
sufficient amount t of fund is available to make all the payments in time as and
when they are due. Without ample working capital, production will suffer,
particularly in the era of cut throat competition, and a business can never flourish
in the absence of adequate working capital.

4. Sound Goodwill and Debt Capacity:

It is common experience of all prudent businessmen that promptness of
payment in business creates goodwill and increases the debt of the capacity of the
business. A firm can raise funds from the market, purchase goods on credit and
borrow short-term funds from bank, etc. If the investor and borrowers are
confident that they will get their due interest and payment of principal in time.

79
 5. Easy Loans from the Banks:
An adequate working capital i.e. excess of current assets over current liabilities
helps the company to borrow unsecured loans from the bank because the excess
provides a good security to the unsecured loans, Banks favour in granting seasonal
loans, if business has a good credit standing and trade reputation.

6. Distribution of Dividend:
If company is short of working capital, it cannot distribute the good dividend to
its shareholders in spite of sufficient profits. Profits are to be retained in the
business to make up the deficiency of working capital. On the other contrary, if
working capital is sufficient, ample dividend can be declared and distributed. It
increases the market value of shares.

7. Exploitation of Good Opportunity:

In case of adequacy of capital in a concern, good opportunities can be exploited
e.g., company may make off-season purchases resulting in substantial savings or it
can fetch big supply orders resulting in good profits.

8. Meeting Unseen Contingency:

Depression shoots the demand of working capital because sock piling of
finished goods become necessary. Certain other unseen contingencies e.g.,
financial crisis due to heavy losses, business oscillations, etc. can easily be
overcome, if company maintains adequate working capital.

9. High Morale:
The provision of adequate working capital improves the morale of the executive
because they have an environment of certainty, security and confidence, which is
a great psychological, factor in improving the overall efficiency of the business
and of the person who is at the hell of fairs in the company.
80
 10. Increased Production Efficiency:
A continuous supply of raw material, research programme, innovations and
technical development and expansion programmes can successfully be carried out
if adequate working capital is maintained in the business. It will increase the
production efficiency, which will, in turn increases the efficiency and morale of
the employees and lower costs and create image among the community.
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL

E v e r y b u s i n e s s c o n c e r n s h o u l d h a v e a d e q u a t e wo r k i n g c a p i t a l
t o r u n i t s business operations. It should have neither redundant or excessive
working capital nor inadequate nor shortage of working capital. Both
excessive as well as short working capital positions are bad for any business.

1. Excessive working capital means idle funds which earn no profits for the
business and hence the business cannot earn a proper rate of return on its
investments.

2. When there is redundant working capital, it may lead to unnecessary

purchasing and accumulation of inventories causing more chances of theft waste
and losses.

3. Excessive working capital implies excessive debtors and defective credit

Policy which may cause higher incidence of bad debts.

4. It may result into overall inefficiency in the organization.

5. When there is an excessive working capital relation with the banks

and other financial institutions may not be maintained.

6. Due to low rate of return on investments the value of shares may also fall

81
 DISADVANTAGES OF INADEQUATE WORKING CAPITAL

1) A concern, which has inadequate working capital, cannot pay its

short-term liabilities in time. Thus it will loose its reputation and shall not be
able to get good credit facilities.

2) The firm cannot pay day-to-day expenses of its operations

a n d i t c r e a t e s inefficiencies, increases costs and reduces the profits of the
business.

3) It becomes impossible to utilize efficiently the fixed

a s s e t s d u e t o n o n - availability of liquid funds.

4) The rate of return o n i n v e s t me n t s also falls with the

s h o r t a g e o f wo r k i n g capital.

NET WORKING CAPITAL

CURRENT 2014- 2015- 2012- 2013- 2014-

ASSETS 2015 2012 2013 2014 2015
STORES AND 505.44 557.67 612.19 623.76 716.18
SPARE PARTS
STOCK-IN- 1827.5 2047.3 2868.28 2453.99 3237.58
TRADE 4 1
SUNDRY 631.63 543.48 635.98 434.83 428.03
DEBTORS
INTREST 0.20 0.20 0.00 0.29 0.00
ACCRUED
AND
INVESTMENT
S

82
 CASH AND 455.41 465.04 1590.60 3234.14 4141.54
BANK
LOANS AND 3055.7 2452.7 4330.43 3628.28 9553.19
ADVANCES 3 8
TOTAL(A) 6475.9 6066.2 10037.4 10375.2 18076.5
5 8 8 9 2

CURRENT 2014- 2015- 2012- 2013- 2014-

LIABILITIES 2015 2012 2013 2014 2015
SUNDRY 3145.9 3243.42 3842.78 4086.65 4721.07
CREDITORS 9
SUBSIDIARY 102.61 115.74 1358.12 1514.30 1711.07
COMPANIES
INTEREST 47.11 231.05 506.68 676.66 679.31
ACCRUED BUT
NOT DUE
ADVANCE 198.28 226.03 297.37 334.99 293.84
RECEIVED
FROM THE
CUSTOMER
UNCLAIMED 0.00 0.02 0.01 0.00 0.00
MATURED
DEPOSITS(DUE
)
INTEREST 0.03 0.08 0.07 0.00 0.00
ACCRUED ON
UNPAID
DIVIDENDS
AND
UNCLAIMED
83
MATURED
DIVIDENDS(D
UE)
UNPAID 23.37 29.33 33.08 39.44 41.26
DIVIDENDS
APPLICATION 0.01 5.65 0.24 0.14 0.61
MONEY
PENDING
REFUND
UNPAID 0.00 0.00 0.00 0.73 0.54
MATURED
DIVIDENDS
UNPAID 2.59 1.73 1.03 0.00 0.00
MATURED
DEPOSITS
UNPAID 1.76 1.79 0.14 0.00 0.00
MATURED
DEBENTURES
INTEREST 1.45 0.42 0.34 0.18 0.13
ACCRUED ON
UNPAID
DIVIDENDS
AND
MATURED
DIVIDENDS
PROVISION 49.31 0.00 0.00 0.00 0.00
FOR RETIRING
GRATUITIES
PROVISION 70.19 848.54 1143.08 1127.50 1601.75
FOR

84
EMPLOYEE
BENEFITS
PROVISION 448.68 854.74 493.59 507.13 791.29
FOR
TAXATION
PROVISION 18.37 19.12 19.12 2.12 3.88
FOR FRINGE
BENEFITS
PROPOSED 943.91 1278.40 1278.40 709.77 1151.06
DIVIDEND
TOTAL(B) 5453.6 6768.78 8974.05 8999.61 10995.81
6

NET 1022.29 (702.5) 1063.43 1375.68 7080.71

WORKING
CAPITAL

85
 PERCENTAGE CHANGE IN NET WORKING CAPITAL

CURRENT 2014- 2015- 2012- 2013- 2014-

ASSETS 2015 2012 2013 2014 2015
STORES AND 14.18 10.33 9.78 1.89 14.81
SPARE PARTS
STOCK-IN- 5.51 12.03 40.10 -14.44 31.93
TRADE
SUNDRY 17.10 -13.96 17.02 -31.63 -1.56
DEBTORS
CASH AND 57.91 2.11 242.04 103.33 28.06
BANK
LOANS AND 147.46 -19.73 76.55 -16.21 163.3
ADVANCES 0
TOTAL(A) 242.16 -9.22 385.49 42.98 236.5
4

CURRENT 2014- 2015- 2012- 2013- 2014-

LIABILITIES 2015 2012 2013 2014 2015
SUNDRY 24.15 3.10 18.48 6.35 15.52
CREDITORS
SUBSIDIARY 64.52 12.80 1073.42 11.50 12.99
COMPANIES
INTEREST 93.95 390.45 119.29 33.55 0.39
ACCRUED
BUT NOT DUE

86
 ADVANCE 7.14 14.00 31.56 12.65 -12.28
RECEIVED
FROM THE
CUSTOMER
PROVISION 5987.65 0.00 0.00 0.00 0.00
FOR
RETIRING
GRATUITIES
PROVISION 0.00 63.34 34.71 0.014 42.06
FOR
EMPLOYEE
BENEFITS
PROVISION 79.44 90.50 -42.25 2.74 56.03
FOR
TAXATION
PROVISION 675.11 4.08 0.00 -88.91 83.01
FOR FRINGE
BENEFITS
PROPOSED 31.19 6.19 7.33 -44.48 62.17
DIVIDEND
TOTAL(B) 6959.78 638.04 1232.01 -50.61 264.96
PERCENTA -6717.62 -647.26 -846.52 93.59 -28.42
GE
CHANGE
OF NET
WORKING
CAPITAL
(A-B)

87
 FINANCIAL RATIOS

1. WORKING CAPITAL TURNOVER RATIO

It is a ratio that reflects the amount of working capital needed to maintain a

given level of sales. A high ratio indicates the firm is in a good liquidity position
and vice-versa.

FORMULA = NET SALES

NET WORKING CAPITAL

PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015

NET SALES 17551.09 19693.2 24315.7 25021.9 29396.3

8 7 8 5
NET 1022.29 (702.5) 1063.43 1375.68 7080.71
WORKING
CAPITAL
WORKING 17.17 -28.03 22.87 18.19 4.15
CAPITAL
TUNRNOVER
RATIO

88
 CHART

40
working capital turnover ratio
20 22.87
17.17 18.19
4.15
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20
-28.03
-40

INTERPRETATION:

The net working capital of IZON TECHNOLOGY INDUSTRY Ltd. has been
fluctuating over the years. A sharp decrease in the working capital in the year 2015-
2012, where the working capital was negative was mainly because of a decrease in
current assets.

As compared to the year 2013-2014 where the working capital ratio was 18.19,
the ratio this year has fallen down to 4.15. The reason for decrease can be
accredited to the increase in the current assets such as inventory, cash & bank
balances and loans and advances that has increased tremendously this year. There
has been an increase in the sales and the production capacity this year. The raw
materials consumption has also increased by 13.64%.

2. CURRENT RATIO

The current ratio is used to evaluate a companys overall short term liquidity
position. It tells us whether a company is in a position to meet its obligations.

FORMULA = CURRENT ASSETS

CURRENT LIABILITIES

89
PARTICULAR 2014- 2015- 2012- 2013- 2014-
S 2015 2012 2013 2014 2015
CURRENT 6475.9 6066.2 10037.4 10375.2 18076.5
ASSESTS 5 8 8 9 2
CURRENT 5453.6 6768.7 8974.05 8999.61 10995.8
LIABILITIES 6 8 1
CURRENT 1.19 0.90 1.12 1.15 1.64
RATIO

CHART

current ratio
1.8
1.6 1.64
1.4
1.2 1.19 1.15
1.12
1
0.9
0.8 current ratio
0.6
0.4
0.2
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

The ideal current ratio is considered to be 2:1. The current ratio has been
increasing steadily over the years. As compared to the previous year in 2013-2014
the ratio has increased to 1.64 in the year 2014-2015. The reason for increase might
be continuous investments in the current assets over the years.

90
 3. QUICK RATIO

Quick ratio / Liquid ratio is an indicator of a companys short

term solvency or liquidity position. It is the relationship between liquid assets and
liabilities. An asset is said to be liquid if it can be converted into cash within a
short period without loss of value.

FORMULA = CURRENT ASSETS INVENTORY

CURRENT LIABILITIES

PARTICULAR 2014- 2015- 2012- 2013- 2014-

S 2015 2012 2013 2014 2015
CURRENT 6475.9 6066.2 10037.4 10375.2 18076.5
ASSETS 5 8 8 9 2
INVENTORY 1827.5 2047.3 2868.28 2453.99 3237.58
4 1
CURRENT 4648.4 4018.9 7169.2 7921.3 14838.9
ASSETS- 1 7 4
INVENTORY
CURRENT 5453.6 6768.7 8957.05 8999.61 10995.8
LIABILTY 6 8 1
QUICK RATIO 0.85 0.59 0.80 0.88 1.34

91
 CHART

QUICK RATIO
1.6
1.4 1.34
1.2
1
0.8 0.85 0.8 0.88
0.6 0.59
0.4 QUICK RATIO
0.2
0

INTERPRETATION:
The ideal standard in case of quick ratio is 1:1. And if it is more it is considered
to be better. The idea behind this is that for every rupee of current liabilities,
there should be at least one rupee of liquid asset.

Quick ratio is thus a rigorous test of liquidity and gives a better picture of
short term financial position of the firm. As shown in the graph above, we can see
that after a steep fall in the quick ratio from the year 2014-2015 to 2015-2012 there
has been a steady increase in the quick ratio and for the year 2014-2015 the ratio
is 1.34 which signifies that the liquidity position of the firm has improved and this
is because of increase in the cash that is lying with the firm.

4. DEBTORS TURNOVER RATIO

Debtors Turnover Ratio or Receivables Turnover Ratio

indicates the relationship between net sales and average debtors. It shows the rate
at which cash is generated by the turnover of debtors.

FORMULA = AVERAGE DEBTORS

NET SALES

AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2

92
 PARTICULAR 2014- 2015- 2012- 2013- 2014-
S 2015 2012 2013 2014 2015
AVERAGE 585.515 587.55 589.73 535.40 431.43
DEBTORS
NET SALES 17551.0 19693.2 24315.7 25021.9 29396.3
9 8 7 8 5
DEBTORS 29.98 33.52 41.23 46.73 68.13
TURNOVER
RATIO

CHART

DEBTORS TURNOVER RATIO

80
70 68.13
60
50 46.73
40 41.23
30 29.98 33.52
DEBTORS TURNOVER
20 RATIO
10
0

INTERPRETATION:
Debtors turnover ratio indicates the speed with which the amount is being collected
from the debtors. The higher the ratio the better it is, since it indicates the amount from the
debtors is being collected more quickly. The more quickly the debtors pay, the less risk
from bad debts, and so lower is the expenses of collection and increase in the liquidity of
the firm. By comparing the debtors turnover ratio of the current year with the previous
year, it may be assessed whether the sales policy of the management is efficient or not.

93
 As shown in the graph above, there has been an increase in the ratio
from 2014-2015 to 2014-2015from 29.98 to 68.13 which shows that the sales
management of the firm is quite efficient.

5. DEBT COLLECTION PERIOD

Days Sales Outstanding is a short term (operating) Activity ratio

which tells us about the debtors holding time. The more the holding period the
more risky it becomes for the company. A high debt collection period indicates
that the company is taking time to collect cash from its debtors. The cash is not
being collected on time which is not a good sign for the company, it is a red flag.

FORMULA = 365/ DEBTORS TURNOVER RATIO

PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
DEBTORS 29.98 33.52 41.23 46.73 68.13
TURNOVER
RATIO
NO. OF DAYS 365 365 365 365 365
DEBT 12 11 9 8 5
COLLECTION
PERIOD

94
 CHART

DEBT COLLECTION PERIOD

12
10
8
6 12 11
9 8
4 DEBT COLLECTION PERIOD
5
2
0

INTERPRETATION:

Debt collection period means the average number of days that the debtors take
to get converted to cash. In other words, credit sales are locked up in debtors for
the number of days.

As we can see here, the debt collection period has come down from 12 days
to 5 days which means that the debtors get converted to cash in 5 days. An increase
in the ratio indicates excessive blockage of funds with the debtors which increases
the chances of bad debts. In this case as we can see that there is a decrease in the
average collection period which indicates prompt payment by debtors which
reduces the chances of bad debts.

Therefore, from the above data it can be concluded that the company is in a
better position and is improving as compared to its previous years.

6. STOCK TURNOVER RATIO

The Inventory Turnover Ratio measures the efficiency

of the firms inventory management. A higher ratio indicates that inventory does
not remain in warehouses or on the shelves but rather turns over rapidly from the
time of acquisition to sales. A lower inventory turnover ratio means accumulation
of inventories, over investment in inventory or unsalable goods.
95
 FORMULA = COST OF GOODS SOLD
AVERAGE STOCK

AVERAGE STOCK= (OPENING STOCK+CLOSING STOCK)/2

PARTICULAR 2014- 2015- 2012- 2013- 2014-

S 2015 2012 2013 2014 2015
COST OF 10174.9 11155. 14928.6 15730.6 17471.8
GOODS SOLD 7 5 5 7 3
AVERAGE 1779.82 1937.4 2457.8 2661.14 2845.78
STOCK 3
STOCK 5.72 5.76 6.07 5.91 6.13
TURNOVER
RATIO
.

CHART

STOCK TURNOVER RATIO

6.2
6.13
6.1
6.07
6

5.9 5.91

5.8 STOCK TURNOVER RATIO

5.76
5.7 5.72

5.6

5.5
2010-20112011-20122012-20132013-20142014-2015

96
 INTERPRETATION:

This ratio indicates the relationship between the cost of goods sold during the
year and average stock kept during that year. The ratio indicates whether the
stock has been efficiently used or not. It shows the speed with which the stock is
turned into sales during the year.

The graph above shows that after an increase in the ratio from the year 2015-
2012 to 2012-2013 (5.76-6.07) there in the year 2013-2014(5.91) after which
again a rise in the ratio in the year 2014-2015(6.13). A high ratio is indicative
that the stock is selling quickly.

7. PAYABLES TURNOVER RATIO

Although accounts payable are liabilities rather than assets, their trend is
significant as they represent an important source of financing for operating
activities. The creditors turnover ratio is an important tool of analysis as a firm can
reduce its requirement of current assets by relying on suppliers credit. This shows
the relationship between credit purchases and average accounts payable. Higher
ratio shows that accounts are to be settled rapidly whereas, low ratio reflects liberal
credit terms granted by suppliers.

FORMULA- NET CREDIT PURCHASE

AVERAGE CREDITORS

AVERAGE CREDITORS= (OPENING CREDITORS+CLOSING CREDITORS)/2

97
PARTICULARS 2014- 2015- 2012- 2013- 2014-
2015 2012 2013 2014 2015
NET CREDIT 2263.01 2353.80 6241.61 5215.42 6853.95
PURCHASE
AVERAGE 2840.01 3194.70 3543.10 3964.72 4383.86
CREDITORS
PAYABLES 0.79 0.73 1.76 1.31 1.56
TURNOVER
RATIO
CHART

PAYABLES TURNOVER RATIO

2 1.76
1.31 1.56
1.5
0.79 0.73
1
0.5 PAYABLES
0 TURNOVER RATIO

INTERPRETATION:

The ratio indicates the speed with which the amount is being paid to the
creditors. A higher ratio is better since it would indicate that the creditors are being
paid more quickly and this increases the credit worthiness of the firm.

Here, the graph above shows a steep fall in the ratio from the year 2012-
2013(1.76) to 2013-2014(1.31) and then again a rise to the year 2014-2015(1.56).
The reason for the fall can be attributed to a decrease in the net credit purchases in
the year 2013-2014.

98
 1. WORKING CAPITAL RATIO

It is a ratio that reflects the amount of working capital needed to

maintain a given level of sales. A high ratio indicates the firm is in a good
liquidity position and vice-versa.

FORMULA = NET SALES

NET WORKING CAPITAL

PARTICULA 2014- 2015- 2012- 2013- 2014-

RS 2015 2012 2013 2014 201
IZON 17.17 -28.03 22.87 18.19 4.15
TECHNOLO
GY
INDUSTRY
SOFTWARE 3.63 3.01 2.48 1.85 2.06
SOFTWARE 42.79 -10.49 -4.78 -8.82 187.34
CHART

200

150

100 Various design

materials
50 Plates

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

-50

99
INTERPRETATION:

The working capital ratio of IZON TECHNOLOGY INDUSTRY has been fluctuating over
the years. The reason for negative working capital for the year 2015-2012 can be attributed
to the decrease in current assets whereas a sharp decrease in working capital for the year
2014-2015 is because of the increase in current assets such as cash and bank balances, loans
and advances and also because of an increase in the raw material consumption.

The working capital ratio of Ltd. has been falling constantly from the year 2014-2015 to
the year 2013-2014 after which there was an increase in the ratio.

The working capital of has shown a sharp decrease from the year 2014-2015 to 2015-2012
where the working capital ratio remained constantly negative for three consecutive years
and after that there was an increase in the ratio. The reason for the increase in the ratio is
an increase in the current assets, loans and advances.

2. CURRENT RATIO

The current ratio is used to evaluate a companys overall short term liquidity
position. It tells us whether a company is in a position to meet its obligations.

FORMULA = CURRENT ASSETS

CURRENT LIABILITIES

PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
IZON 1.19 0.90 1.12 1.15 1.64
TECHNOLOGY
INDUSTRY
SOFTWARE 1.86 1.99 2.02 1.78 1.84
SOFTWARE 1.08 0.74 0.61 0.73 1.01

100
 CHART

2.5

2 1.99 2.02
1.78 1.84
1.64 1.64
1.5 Paper Leaf's
1.19 1.12 1.15 Paper
1 1.08 1.01
0.9 Plates
0.74 0.73
0.61
0.5

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

The current ratio of IZON TECHNOLOGY INDUSTRY has been rising from
the year 2015-2012and it has shown a positive graph. The reason for the constantly
rising graph since 2015-2012 has been investment in the current assets, i.e.
inventories, debtors, loans and advances and the liquid cash and bank balances.

SOFTWARE has a fuctuating current ratio over the years with various rises and
falls over the time. The reason for the fall in the ratio from the year 2012-2013 to
the year 2013-2014 was the decrease in the current assets.

SOFTWARE had witnessed a steep downfall till the year 2012-2013 after
which there was a rise in the ratio till 2014-2015. The reason for decrease in the
ratio from the year 2015-2012 to the year 2012-2013 was because of the increase
in current liabilities and again a rise in the year 2013-2014 was because of the
increase in the current assets.

Current ratio should therefore be maintained around its ideal standard and for
achieving this the companys should therefore maintain its current assets and
current liabilities in the right proportion.

101
 3. QUICK RATIO

Quick ratio OR Liquid ratio is an indicator of a companys short

term solvency or liquidity position. It is the relationship between liquid assets and
liabilities. An asset is said to be liquid if it can be converted into cash within a short
period without loss of value.

FORMULA = CURRENT ASSETS INVENTORY

CURRENT LIABILITIES

PARTICULARS 2010- 2011- 2012- 2013- 2014-

2011 2012 2013 2014 2015
IZON 0.85 0.59 0.80 0.88 1.34
TECHNOLOGY
INDUSTRY
SOFTWARE 1.25 1.47 1.42 1.37 1.29
SOFTWARE 0.64 0.36 0.34 0.39 0.60

CHART

2.5
2.4
2 SIDHICK PLATE
INDUSTRY
1.5 1.47 1.42 PAPER
1.37 1.29
1.34
1
0.85 0.8 0.88 PLATES
0.64 0.59 0.6
0.5
0.36 0.34 0.39
0
2010-2011 2011-2012 2012-2013 2013-2014

102
 INTERPRETATION:

The quick ratio of IZON TECHNOLOGY INDUSTRY has been rising since
2015-2012 and the investments should be made enough in the current assets so as
to maintain the ratio of current assets and current liabilities as 1:1.

The quick ratio of SOFTWARE had declined from 2014-2015(2.4) to 2015-

2012(1.47) and thereafter the ratio has been declining throughout but the company
has maintained the ratio above the ideal standard.

The ratio SOFTWARE had fallen from the year 2015-2012(0.36) to 2012-
2013(0.34) negligibly and thereafter it rose to 0.39 in 2012-2013 and finally to 0.60
in 2014-2015. The reason for the increase in the ratio in 2014-2015 was increase
in the cash and bank balances maintained with the company.

4. DEBTORS TURNOVER RATIO

Debtors Turnover Ratio or Receivables Turnover Ratio indicates the

relationship between net sales and average debtors. It shows the rate at which cash
is generated by the turnover of debtors

FORMULA = AVERAGE DEBTORS

NET SALES

AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2

PARTICULARS 2010- 2011- 2012- 2013- 2014-

2011 2012 2013 2014 2015
IZON 29.98 33.52 41.23 46.73 68.13
TECHNOLOGY
INDUSTRY
SOFTWARE 16.31 14.73 14.21 12.44 11.16
SOFTWARE - 33.83 38.07 37.87 33.05

103
 CHART

80
70 68.13
60
50 SIDHICK PLATE
46.73 INDUSTRY
40 41.23
30 29.98 33.52
38.07 PAPER
20 33.8 33.05
16.31 14.73 14.21 12.44
10 11.16
0 PLATES
7.87

INTERPRETATION:

The debtors turnover ratio has shown a positive rising graph throughout which
is very good for the company since it shows the speed with which the money is
being recovered from the debtors. And rising graph throughout shows that the sales
management is quite efficient in recovering the money from the debtors.

SOFTWARE has a declining graph throughout which is not a good sign and
therefore it means that credit sales have been made to the debtors who do not
deserve so much of credit and therefore the company must revise its sales policy.

SOFTWARE has a fluctuating graph and after a steep fall in the year 2013-
2014 the ratio rose to 33.5 in the year 2014-2015. The debtors and the sales figures
have risen for the year 2014-2015 and the reason for the rise in the ratio can be
efficient sales management and a sound sales policy.

5. DEBT COLLECTION PERIOD

Days Sales Outstanding is a short term (operating) Activity ratio which tells
us about the debtors holding time. The more the holding period the more risky it
becomes for the company. A high debt collection period indicates that the company
104
 is taking time to collect cash from its debtors. The cash is not being collected on
time which is not a good sign for the company, it is a red flag.

FORMULA = 365/ DEBTORS TURNOVER RATIO

PARTICULARS 2010- 2011- 2012- 2013- 2014-

2011 2012 2013 2014 2015
IZON 12 11 9 8 5
TECHNOLOGY
INDUSTRY
SOFTWARE 22 24 26 29 33
SOFTWARE 10 9 9 11

CHART

35
30
25 SIDHICK PLATE
20 INDUSTRY
15 PAPER
10
5
Textiles
0

INTERPRETATION:

The lower the debt collection period the lesser the chances of bad debts and thus
is better for the firm. IZON TECHNOLOGY INDUSTRY has a sound sale policy
and the average collection period has been decreasing over the years and finally
the debtors are converted to cash in 5 days as in the year 2014-2015 and lesser is
the collection period shorter is the operating cycle.

105
 SOFTWAREs average collection period has been increasing in the number
of days which means that they have a liberal sales policy and the credit period is
thus extended for the debtors. A higher debt collection period generally increases
the chances of bad debts and reduces the chances of recovery of money from the
debtors.

SOFTWARE Material has maintained its collection period at more or less

a constant platform. The debtors are converted to cash in 11 days (2014-2015).
Here we can conclude that IZON TECHNOLOGY INDUSTRY is in a better
position as compared to the other two firms. PAPER should make some serious
efforts to reduce its debt collection period

6. STOCK TURNOVER RATIO

The Inventory Turnover Ratio measures the efficiency of the firms

inventory management. A higher ratio indicates that inventory does not remain in
warehouses or on the shelves but rather turns over rapidly from the time of
acquisition to sales. A lower inventory turnover ratio means accumulation of
inventories, over investment in inventory or unsalable goods.

FORMULA = COST OF GOODS SOLD

AVERAGE STOCK

AVERAGE STOCK= (OPENING STOCK+CLOSING STOCK)/2

PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
IZON 5.72 5.76 6.07 5.91 6.13
TECHNOLOGY
INDUSTRY
SOFTWARE 4.22 4.68 4.68 3.62 4.09
SOFTWARE 5.87 5.89 5.74 5.29

106
 CHART

7 6.07 6.13
5.72 5.76 5.91
6
5.87 5.89 SIDHICK PLATE
5 5.74
4.68 4.68 5.29 INDUSTRY
4 4.22 4.09
3.62 PAPER
3
2 PLATES
1
0
2010-20112011-20122012-20132013-20142014-2015

INTERPRETATION:

The stock turnover ratio of IZON TECHNOLOGY INDUSTRY has been rising throughout
and the cost of goods sold has also been rising with a rise in the average stock maintained
with the company. A higher stock ratio turnover is indicative that the stock is selling
quickly, that is reflected with the higher sales.

SOFTWARE has fluctuating ratio throughout.

SOFTWARE has a declining ratio, though the cost of goods sold and the average debtors
has been rising but certain items which have to be excluded from the cost of goods sold
have been rising over the time.

7. PAYABLES TURNOVER RATIO

Although accounts payable are liabilities rather than assets, their trend is significant
as they represent an important source of financing for operating activities. The creditors
turnover ratio is an important tool of analysis as a firm can reduce its requirement of current
assets by relying on suppliers credit. This shows the relationship between credit purchases

107
and average accounts payable. Higher ratio shows that accounts are to be settled rapidly
whereas, low ratio reflects liberal credit terms granted by suppliers.

FORMULA- NET CREDIT PURCHASE

AVERAGE CREDITORS

AVERAGE CREDITORS= (OPENING CREDITORS+CLOSING CREDITORS)/2

PARTICULARS 2010- 2011- 2012- 2013- 2014-

2011 2012 2013 2014 2015
IZON 0.79 0.73 1.76 1.31 1.56
TECHNOLOGY
INDUSTRY
SOFTWARE 5.46 5.21 6.14 3.13 3.82
SOFTWARE 7.17 6.28 6.51 8.57
CHART

9 8.57

8 7.17
7 6.28 6.51

6 6.14
5.46 5.21
5 SIDHICK PLATE INDUSTRY

4 PAPER
3.82
3 3.13 PLATES

2
1.76 1.56
1.31
1 0.79 0.73
0
2010-20112011-20122012-20132013-20142014-2015

INTERPRETATION:

The payables turnover ratio means the speed with which the creditors are being paid. IZON
TECHNOLOGY INDUSTRY has a rising graph which indicates that the creditors of the
firm are being paid on time and quite frequently and this helps in increasing the credit
worthiness of the firm.
108
MATERIAL as had a fall in the ratio drastically from the year 2012-2013 to the year 2013-
2014.

TOTAL is quite efficient in paying off its creditors. A ratio of 8.57 times mans that the
speed with which the company pays to its creditors is quite high.

RATIO ANALYSIS

WHAT IS RATIO ANALYSIS???

A tool used by individuals to conduct a quantitative analysis of information in

a company's financial statements. Ratios are calculated from current year numbers
and are then compared to previous years, other companies, the industry, or even
the economy to judge the performance of the company. Ratio analysis is
predominately used by proponents of fundamental analysis.
Single most important technique of financial analysis in which quantities are
converted into ratios for meaningful comparisons, with past ratios and ratios of
other firms in the same or different industries. Ratio analysis determines trends and
exposes strengths or weaknesses of a firm.

Ratios can be found out by dividing one number by another number. Ratios
show how one number is related to another. It may be expressed in the form of co-
efficient, percentage, proportion, or rate. For example the current assets and current
liabilities of a business on a particular date are $200,000 and $100,000
respectively. The ratio of current assets and current liabilities could be expressed
as 2 (i.e. 200,000 / 100,000) or 200 percent or it can be expressed as 2:1 i.e., the
current assets are two times the current liabilities. Ratio sometimes is expressed in
the form of rate. For instance, the ratio between two numerical facts, usually over
a period of time, e.g. stock turnover is three times a year.

109
 Classification of Accounting Ratios:

Ratios may be classified in a number of ways to suit any particular purpose.

Different kinds of ratios are selected for different types of situations. Mostly, the
purpose for which the ratios are used and the kind of data available determine the
nature of analysis. The various accounting ratios can be classified as follows:

Classification of Accounting Ratios / Financial Ratios

(B)
(C)
(A) Functional
Significance
Traditional Classification or
Ratios or Ratios
Classification or Classification
According to
Statement Ratios According to
Importance
Tests
Profit and loss Profitabilit Primary ratio
account ratios or y ratios s
revenue/income Liquidity Secondary
statement ratios ratios ratios
Balance Activity
sheet ratios or ratios
position statement Leverage
ratios ratios or long
Composite/mixe term solvency
d ratios ratios
or inter statement
ratios

110
 Advantages of Ratios Analysis:

Ratio analysis is an important and age-old technique of financial analysis. The

following are some of the advantages / Benefits of ratio analysis:

1. Simplifies financial statements: It simplifies the comprehension

of financial statements. Ratios tell the whole story of changes in the financial
condition of the business
2. Facilitates inter-firm comparison: It provides data for inter-firm
comparison. Ratios highlight the factors associated with successful and
unsuccessful firm. They also reveal strong firms and weak firms, overvalued and
undervalued firms.
3. Helps in planning: It helps in planning and forecasting. Ratios can assist
management, in its basic functions of forecasting. Planning, co-ordination, control
and communications.
4. Makes inter-firm comparison possible: Ratios analysis also makes
possible comparison of the performance of 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. Help in investment decisions: It helps in investment decisions in the
case of investors and lending decisions in the case of bankers etc.

Limitations of Ratios Analysis:

The ratios analysis is one of the most powerful tools of financial management.
Though ratios are simple to calculate and easy to understand, they suffer from
serious limitations.

1. Ratios are based only on the information which has been recorded in
the financial statements. Financial statements themselves are subject to several
limitations. Thus ratios derived, there from, are also subject to those limitations.

111
For example, non-financial changes though important for the business are not
relevant by the financial statements. Financial statements are affected to a very
great extent by accounting conventions and concepts. Personal judgment plays a
great part in determining the figures for financial statements.
2. Comparative study required: Ratios are useful in judging the efficiency
of the business only when they are compared with past results of the business.
However, such a comparison only provide glimpse of the past performance and
forecasts for future may not prove correct since several other factors like market
conditions, management policies, etc. may affect the future operations.
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.
4. Problems of price level changes: A change in price level can affect the
validity of ratios calculated for different time periods. In such a case the ratio
analysis may not clearly indicate the trend in solvency and profitability of the
company. The financial statements, therefore, be adjusted keeping in view the
price level changes if a meaningful comparison is to be made
through accounting ratios.
5. Lack of adequate standard: No fixed standard can be laid down for ideal
ratios. There are no well accepted standards or rule of thumb for all ratios which
can be accepted as norm. It renders interpretation of the ratios difficult.
6. Limited use of single ratios: A single ratio, usually, does not convey
much of a sense. To make a better interpretation, a number of ratios have to be
calculated which is likely to confuse the analyst than help him in making any good
decision.
7. Personal bias: Ratios are only means of financial analysis and not an
end in itself. Ratios have to interpreted and different people may interpret the same
ratio in different way.
8. Incomparable: Not only industries differ in their nature, but also the
firms of the similar business widely differ in their size and accounting procedures
etc. It makes comparison of ratios difficult and misleading.
112
 FINANCIAL RATIOS

1. NET DEBT TO EQUITY

Debt is the borrowed funds and Equity is the owned funds of an organization.
This ratio is calculated to measure the extent to which debt financing has been used
in a business. A ratio of 1:1 is considered to be satisfactory. This ratio is also known
as External-Internal ratio as it indicates the relationship between the external
equities or the outsiders funds and the internal equities or the shareholders funds.

FORMULA = NET DEBT

SHAREHOLDERS FUND

NET DEBT= SECURED LOANS+ UNSECURED LOANS- CASH AND

BANK BALANCE- CURRENT INVESTMENTS

EQUITY= SHAREHOLDERS FUND- MISCELLANOUS EXPENSES

FINANCIAL YEAR 2010-2011

COMPANY NET SHAREHOLDERS DEBT-

DEBT FUND EQUITY
RATIO
IZON (1728.55) 15108.68 (0.12)
TECHNOLOGY
INDUSTRY
SOFTWARE (5454.57) 17184 (0.32)
SOFTWARE 3642.29 5788.92 0.63

113
FINANCIAL YEAR 2011-2012

COMPANY NET DEBT SHAREHOLDERS DEBT-

FUND EQUITY
RATIO
IZON 16519.85 27455.84 0.61
TECHNOLOGY
INDUSTRY
SOFTWARE (10737.77) 23004.09 (0.47)
SOFTWARE 6283.78 7677.25 0.82

FINANCIAL YEAR 2012-2013

COMPANY NET DEBT SHAREHOLDERS DEBT-

FUND EQUITY
RATIO
IZON 22086.25 30281.33 0.73
TECHNOLOGY
INDUSTRY
SOFTWARE (10714.20) 0.79841 (0.38)
SOFTWARE 9602.56 7959.25 1.21

FINANCIAL YEAR 2013-2014

COMPANY NET DEBT SHAREHOLDERS DEBT-

FUND EQUITY
RATIO
IZON 20285.83 36961.80 0.55
TECHNOLOGY
INDUSTRY
114
 SOFTWARE (5925.12) 33316.70 (0.18)
SOFTWARE 9529.64 9706.34 0.98
FINANCIAL YEAR 2014-2015

COMPANY NET DEBT SHAREHOLDERS DEBT-

FUND EQUITY
RATIO
IZON 21159.81 46944.63 0.45
TECHNOLOGY
INDUSTRY
SOFTWARE 2638.56 37069.47 0.07
SOFTWARE 5965.65 17225.27 0.35

CHART

1.4
1.21
1.2
0.98
1
0.82
0.8 0.73
0.63 0.61
0.55
0.6 0.45
0.35 SIDHICK
0.4 PLATE
0.2 0.07 INDUSTRY

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-0.2 -0.12
-0.18
-0.4 -0.32
-0.38
-0.6 -0.47

INTERPRETATION:

The debt-equity ratio is calculated to assess the firms ability to meet its long term
liabilities. Generally, a ratio of 2:1 is considered to be safe for the long term lenders and a
ratio below 2:1 provides sufficient protection to the long term lenders and thus they are

115
more secure and a higher ratio thus would indicate a more risky financial position of the
firm.

The debt- equity ratio for all the year and of all the three companies has been less than
2:1 and this is indicative of a sound financial position of the firm.

SHAREHOLDERS EQUITY RATIO

This ratio helps to determine how much shareholders would receive in the event of
a company-wide liquidation. It represents the amount of assets on which shareholders have
a residual claim. The higher the ratio the more shareholders may receive and vice-versa.

FORMULA= SHAREHOLDRES EQUITY

TOTAL ASSETS

FINANCIAL YEAR 2010-2011

COMPANY SHAREHOLD TOTAL SHAREHOLD

ERS EQUITY ASSETS(TANGI ERS EQUITY
BLE) RATIO
IZON 580.67 25597.50 0.023
TECHNOLO
GY
INDUSTRY
SOFTWARE 4130.40 22906.33 0.18
SOFTWARE 525.80 10779.74 0.049

116
FINANCIAL YEAR 2011-2012

COMPANY SHAREHOL TOTAL SHAREHOLDE

DERS ASSETS(TANGIB RS EQUITY
EQUITY LE) RATIO
IZON 6203.30 47075.52 0.132
TECHNO
LOGY
INDUST
RY
SOFTWA 4130.40 27677.41 0.15
RE
SOFTWA 537.01 16475.62 0.032
RE

FINANCIAL YEAR 2012-2013

COMPANY SHAREHOLDE TOTAL SHAREHOLDER

RS EQUITY ASSETS(TANGIBL S EQUITY
E) RATIO
117
IZON 6203.45 58741.77 0.11
TECHNOL
OGY
INDUSTRY
SOFTWAR 4130.40 36855.04 0.11
E
SOFTWAR 537.01 20653.04 0.03
E

FINANCIAL YEAR 2013-2014

COMAPNY SHAREHOLDERS TOTAL SHAREHOLDERS

EQUITY ASSETS(TANGI EQUITY RATIO
BLE)
IZON 887.41 64232.78 0.014
TECHNOL
OGY
INDUSTRY
SOFTWAR 4130.40 51242.87 0.08
E
SOFTWAR 527.11 23256.39 0.023
E

118
FINANCIAL YEAR 2014-2015

COMPANY SHAREHOLD TOTAL SHAREHOLD

ERS EQUITY ASSETS(TANGI ERS EQUITY
BLE) RATIO
IZON 959.41 78555.91 0.012
TECHNOLO
GY
INDUSTRY
SOFTWARE 4130.40 58726.03 0.07
SOFTWARE 563.18 31493.65 0.018

CHART

0.2
0.18
0.18

0.16 0.15

0.14 0.132

0.12 0.11
0.11
SIDHICK PLATE INDUSTRY
0.1
PAPER
0.08
0.08 0.07 PLATES
0.06 0.049

0.04 0.032 0.03

0.023 0.023
0.018
0.02 0.014 0.012

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

119
INTERPRETATION:

A ratio used to help determine how much shareholders would receive in the event of a
company-wide liquidation. The ratio is calculated by dividing total shareholders' equity by
total assets of the firm, and it represents the amount of assets on which shareholders have
a residual claim.

If we consider as in the case of IZON TECHNOLOGY INDUSTRY, the ratio for the year
2010-2011 is 0.023 so this means that the shareholders would have a claim of 2.3% on the
assets in the event of the wind up of the company.

The lower the ratio, the better it is for the company since the company would be then able
to pay off to its shareholders in case of liquidation without any burden.

IZON TECHNOLOGY INDUSTRY has made efforts to lower the ratio and finally
succeeded to do so. If we consider the ratios for the year 2014-2015, we can see that IZON
TECHNOLOGY INDUSTRY is in a better position than the other two companies.

1. DEBT TO NET WORTH RATIO - The net debt to net worth ratio
has significance to lenders, analysts and business managers. If affects the ability of
a company to borrow money and to finance its growth. A business owner needs to
know the optimal debt to net worth ratio for the benefit of its company. The net
debt should never be higher than the net worth; it is a bad sign for the company.

FORMULA = LONG TERM DEBT

NET WORTH

LONG TERM DEBT = SECURED LOANS + UNSECURED LOANS CASH

& BANK CURRENT INVESTMENTS

120
 NET WORTH= EQUITY SHARE CAPITAL + PREFERENCE SHARE
CAPITAL+ RESERVES & SURPLUS MISCELLANOUS EXPENSES TO
THE EXTENT NOT WRITTEN OFF.

FINANCIAL YEAR 2010-2011

COMPANY LONG NET DEBT- NET

TERM WORTH WORTH
DEBT RATIO
IZON (1728.55) 13893.62 (0.125)
TECHNOLOGY
INDUSTRY
SOFTWARE (5454.57) 17184 (0.32)
SOFTWARE 3642.29 5399.18 0.67
FINANCIAL YEAR 2011-2012

COMPANY LONG NET DEBT- NET

TERM WORTH WORTH
DEBT RATIO
IZON 16519.85 27145.62 0.61
TECHNOLOGY
INDUSTRY
SOFTWARE (10737.77) 23004.09 (0.47)
SOFTWARE 6283.78 7677.25 0.82

FINANCIAL YEAR 2012-2013

COMPANY LONG NET DEBT- NET

TERM WORTH WORTH
DEBT RATIO

121
 IZON 22086.25 30071.19 0.73
TECHNOLOGY
INDUSTRY
SOFTWARE (10714.20) 27984.10 (0.38)
SOFTWARE 9602.56 7959.25 1.21

FINANCIAL YEAR 2013-2014

COMPANY LONG NET DEBT- NET

TERM WORTH WORTH
DEBT RATIO
IZON 20285.83 36961.80 0.55
TECHNOLOGY
INDUSTRY
SOFTWARE (5925.12) 33316.70 (0.18)
SOFTWARE 9529.64 9706.34 0.98
FINANCIAL YEAR 2014-2015

COMPANY LONG NET DEBT- NET

TERM WORTH WORTH
DEBT RATIO
IZON 21159.81 46944.63 0.45
TECHNOLOGY
INDUSTRY
SOFTWARE 2638.56 37069.47 0.07
SOFTWARE 5965.65 16695.89 0.36

122
 1.4
1.21
1.2
0.98
1
0.82
0.8 0.73
0.67
0.61
0.6 0.55
0.45 SIDHICK PLATE INDUSTRY
0.36
0.4 PAPER
PLATES
0.2
0.07

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-0.2 -0.125
-0.18
-0.4 -0.32
-0.38
-0.47
-0.6

INTERPRETATION:

This ratio is used in the analysis of financial statements to show the amount of
protection available to creditors. A high ratio usually indicates that the business
has a lot of risk because it must meet principal and interest on its obligations.
IZON TECHNOLOGY INDUSTRY has a fluctuating ratio
throughout the five years. But anyhow it has tried to maintain its position by
reducing the debts and increasing the net worth of the company.
SOFTWARE has a negative ratio but in the year 2014-2015 it has
finally achieved a positive ratio.
SOFTWARE has a fluctuating graph throughout the five years but in
the year 2014-2015, it has been able to lower the ratio and thus reduce the risk
involved in the business.

123
 2. FIXED ASSETS TO LONG TERM RATIO - This ratio indicates
the proportion of long-term funds deployed in fixed assets. The higher the ratio,
the safer will be the funds available in case of liquidation. It also indicates the
proportion of funds that is invested in working capital.
It indicates the level of fixed assets owned by a company in relation to the
long-term debts of the company. The higher the ratio the better it is for a
company and the assets which are debt free and fully owned by the company.

FORMULA = FIXED ASSETS

LONG TERM LOANS

FIXED ASSETS = GROSS FIXED ASSETS DEPRICIATION

LONG TERM LOANS = SHARE CAPITAL+ RESERVES+ LONG TERM LOANS

FINANCIAL YEAR 2010-2011

COMPANY FIXED ASSETS LONG FIXED ASSTES

TERM TO LONG
FUNDS TERM RATIO
IZON 11040.56 23594.42 0.47
TECHNOLOGY
INDUSTRY
SOFTWARE 11597.71 21493.67 0.54
SOFTWARE 8189.10 9767.08 0.84

124
FINANCIAL YEAR 2011-2012

COMPANY FIXED LONG TERM FIXED

ASSETS FUNDS ASSTES TO
LONG TERM
RATIO
IZON 12623.56 45322.42 0.28
TECHNOLOGY
INDUSTRY
SOFTWARE 11571.31 26108.81 0.44
SOFTWARE 10955.49 15223.78 0.72

FINANCIAL YEAR 2012-2013

COMPANY FIXED LONG TERM FIXED

ASSETS FUNDS ASSTES TO
LONG TERM
RATIO
IZON 14482.22 57122.44 0.25
TECHNOLOGY
INDUSTRY
SOFTWARE 12268.83 35522.89 0.35
SOFTWARE 13086.44 19231.88 0.68

125
FINANCIAL YEAR 2013-2014

COMPANY FIXED LONG TERM FIXED

ASSETS FUNDS ASSTES TO
LONG TERM
RATIO
IZON 16006.03 62201 0.26
TECHNOLOGY
INDUSTRY
SOFTWARE 13615.28 49827.95 0.27
SOFTWARE 16866.14 21291.44 0.79

FINANCIAL YEAR 2014-2015

COMPANY FIXED LONG TERM FIXED

ASSETS FUNDS ASSTES TO
LONG TERM
RATIO
IZON 18774.48 75067.57 0.25
TECHNOLOGY
INDUSTRY
SOFTWARE 15082.66 57234.96 0.26
SOFTWARE 21102.15 28647.23 0.74

126
 CHART
0.9 0.84
0.79
0.8 0.74
0.72
0.68
0.7

0.6 0.54

0.5 0.47 SIDHICK PLATE INDUSTRY

0.44

0.4
PAPER
0.35
0.28 0.27
PLATES
0.3 0.25 0.26 0.25 0.26

0.2

0.1

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

This is a difficult set of ratios to interpret as asset values are based on the
historical cost. An increase in the fixed asset figure may result from the
replacement of an asset at an increased price or the purchase of an additional asset
intended to increase the production capacity.
A latter transaction might be expected to result in increased sales.
3. PROPERITARY RATIO - This ratio indicates the proportion of long-term funds
deployed in fixed assets. The higher the ratio, the safer will be the funds available in

127
 case of liquidation. It also indicates the proportion of funds that is invested in working
capital.

It indicates the level of fixed assets owned by a company in relation to the long-term
debts of the company. The higher the ratio the better it is for a company and the assets
which are debt free and fully owned by the company.

FORMULA = NET WORTH

TOTAL ASSETS

NET WORTH = EQUITY SHARE CAPITAL + PREFERENCE SHARE CAPITAL+

RESERVES & SURPLUS MISCELLANOUS EXPENSES TO THE EXTENT NOT
WRITTEN OFF.

TOTAL ASSETS = FIXED ASSETS + CURRENT ASSETS

FINANCIAL YEAR 2010-2011

COMPANY NET WORTH TOTAL PROPERITARY

ASSETS RATIO
IZON 13893.62 25597.50 0.54
TECHNOLOGY
INDUSTRY
SOFTWARE 17184 22906.33 0.75
SOFTWARE 5399.18 10779.74 0.50
FINANCIAL YEAR 2011-2012

COMPANY NET WORTH TOTAL PROPERITARY

ASSETS RATIO
IZON 27145.62 47075.52 0.57
TECHNOLOGY
INDUSTRY
SOFTWARE 23004.09 27677.41 0.83
SOFTWARE 7677.25 16475.62 0.47
FINANCIAL YEAR 2012-2013
128
 COMPANY NET TOTAL PROPERITARY
WORTH ASSETS RATIO
IZON 30071.19 58741.77 0.52
TECHNOLOGY
INDUSTRY
SOFTWARE 27984.10 36855.04 0.76
SOFTWARE 7959.25 20653.04 0.39

FINANCIAL YEAR 2013-2014

COMPANY NET TOTAL PROPERITARY

WORTH ASSETS RATIO
IZON 36961.80 64232.78 0.58
TECHNOLOGY
INDUSTRY
SOFTWARE 33316.70 51242.87 0.65
SOFTWARE 9706.34 23256.39 0.42

FIANANCIAL YEAR 2014-2015

COMPANY NET TOTAL PROPERITARY

WORTH ASSETS RATIO
IZON 46944.63 78555.91 0.60
TECHNOLOGY
INDUSTRY
SOFTWARE 37069.47 58726.03 0.63
SOFTWARE 17225.27 31493.65 0.55

129
 CHART

0.9
0.83
0.8 0.75 0.76

0.7 0.65
0.63
0.6
0.57 0.58
0.6 0.54 0.55
0.52
0.5
0.5 0.47 SIDHICK PLATE INDUSTRY
0.42
0.39 PAPER
0.4
PLATES
0.3

0.2

0.1

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

Proprietary ratio indicates the proportion of total assets funded by owners or

shareholders. A higher proprietary ratio is an indicator of sound financial position
from the long term point of view because it means a large proportion of total assets
are provided by equity and hence the firm is thus less dependent on the external
sources of finance. A lower proprietary ratio is a danger signal for l.ong term
lenders as it indicates a lower margin of safety available to them.

130
IZON TECHNOLOGY INDUSTRY has maintained an overall consistent ratio
throughout as in the five year time.
The proprietary ratio of PAPER has been declining since the year 2011-2012.
The proprietary ratio of PLATES has been increasing since 2012-2013.
IZON TECHNOLOGY INDUSTRY has been improving over the years and
though PAPER has a declining ratio throughout but anyhow it is in a better position
than the other companies.

4. INTEREST COVER - This ratio is also known as time interest -

earned ratio. It measures the firms ability to make contractual interest payments.
This ratio measures the debt servicing capacity of a firm insofar as fixed interest
on long term loan is concerned. It indicates the extent to which a fall in EBIT is
tolerable in that the ability of the firm to service its interest payments would not be
adversely affected. For instance, coverage of five times would indicate that a fall
in operating earnings only to up to one-fifth level can be tolerated.

The higher the ratio the greater is the ability of the firm to handle fixed
charge liabilities and the more assured is the payment of interest to them. However,
too high a ratio would imply unused debt capacity. A low ratio is danger signal that
the firm is using excessive debt and does not have the ability to offer assured
payment of interest to the lenders.

FORMULA = PBIT
INTEREST
FINANCIAL YEAR 2010-2011

COMPANY PBIT INTEREST INTEREST

COVER

131
IZON 6435.55 173.90 37.01
TECHNOLOGY
INDUSTRY
SOFTWARE 9754.75 332.13 29.37
SOFTWARE 2314.72 399.54 5.79

FINANCIAL YEAR 2011-2012

COMPANY PBIT INTEREST INTEREST

COVER
IZON 7945.06 878.70 9.04
TECHNOLOGY
INDUSTRY
SOFTWARE 11719.67 250.94 46.70
SOFTWARE 2924.56 440.44 6.64

FINANCIAL YEAR 2012-2013

COMPANY PBIT INTEREST INTEREST

COVER
IZON 8468.30 1152.69 7.35
TECHNOLOGY
INDUSTRY
SOFTWARE 9656.69 253.24 38.13

132
 SOFTWARE 1474.88 797.25 1.85
FINANCIAL YEAR 2013-2014

COMPANY PBIT INTEREST INTEREST

COVER
IZON 8722.70 1508.40 5.78
TECHNOLOGY
INDUSTRY
SOFTWARE 10534.04 402.01 26.20
SOFTWARE 3678.57 858.92 4.28

FINANCIAL YEAR 2014-2015

COMPANY PBIT INTEREST INTEREST

COVER
IZON 11077.34 1300.49 8.52
TECHNOLOGY
INDUSTRY
SOFTWARE 7669.26 474.95 16.15
SOFTWARE 3477.46 695.18 5.00

CHART

133
 50 46.7

45

37.01 38.13
40

35
29.37
30 26.2 SIDHICK PLATE INDUSTRY
25 PAPER

20 16.15 PLATES

15
9.04 8.52
10 5.79 6.64 7.35 5.78 5
4.28
5 1.85

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

The interest cover ratio is used to determine how easily a company can be
relieved of its burden to pay interest expenses on outstanding debt. The lower the
ratio, the more the company is burdened by debt expense. When a company's
interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses may
be questionable.

IZON TECHNOLOGY INDUSTRY has had a steep fall in the ratio from
the year 2010-2011(37.01) to the year 2011-2012(9.04) and this was mainly
because the interest expenses had risen by leaps and bounds. And thereafter the
interest expenses continued to rise.

SOFTWARE has a fluctuating ratio. The rise in the ratio was because of
the reduction in the interest expenses and a sudden fall was when the interest
expenses were high.

SOFTWARE has witnessed a ratio of 1.85 for the year 2012-2013

because this year the profit before interest and tax was 1474.88 which was quite
less as compared to the previous year and the interest expenses were 797.25 which
had risen by 1.8 times as compared to the previous year.

5. DIVIDEND COVER RATIO - It measures the ability of a firm to pay dividend on

preference shares which carry a stated rate of return. This ratio is the ratio of net profits
134
 after taxes (EAT) and the amount of preference dividend. The higher the coverage the
better it is and vice versa

FORMULA = NET PROFIT AFTER TAX

DIVIDEND

FINANCIAL YEAR 2010-2011

COMPANY PROFIT DIVIDEND DIVIDEND

AFTER TAX COVER
IZON 4222.15 1104.33 3.82
TECHNOLOGY
INDUSTRY
SOFTWARE 6202.29 1478.40 4.20
SOFTWARE 1292 199.39 6.48

FINANCIAL YEAR 2011-2012

COMPANY PROFIT DIVIDEND DIVIDEND

AFTER TAX COVER
IZON 4687.03 1393.55 3.36
TECHNOLOGY
INDUSTRY
SOFTWARE 7536.78 1787.16 4.22
SOFTWARE 1728.19 241.49 7.16

FINANCIAL YEAR 2012-2013

135
COMPANY PROFIT DIVIDEND DIVIDEND
AFTER TAX COVER
IZON 5201.74 1492.5 3.49
TECHNOLOGY
INDUSTRY
SOFTWARE 6174.81 1255.16 4.92
SOFTWARE 958.50 55.41 17.30

FINANCIAL YEAR 2013-2014

COMPANY PROFIT DIVIDEND DIVIDEND

AFTER TAX COVER
IZON 5046.80 878.45 5.75
TECHNOLOGY
INDUSTRY
SOFTWARE 6754.37 1590.55 4.25
SOFTWARE 2022.74 240.93 8.40

FINANCIAL YEAR 2014-2015

COMPANY PROFIT DIVIDEND DIVIDEND

AFTER TAX COVER
IZON 6865.69 1307.77 5.25
TECHNOLOGY
INDUSTRY
SOFTWARE 4904.74 1152.45 4.26
SOFTWARE 2014.67 350.09 5.74

CHART

136
 20

18 17.3

16

14

12
SIDHICKPLATE INDUSTRY
10
8.4 PAPER
8 7.16 PLATES
6.48
5.75 5.74
6 4.92 5.25
4.22 4.25 4.26
3.824.2 3.49
4 3.36

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

The dividend cover ratio means that how easily the company can be relieved of
its burden of paying the dividends to the company.

IZON TECHNOLOGY INDUSTRY has been paying off its dividends at a

consistent rate. And it seems that it has been following a conservative approach.

SOFTWARE had paid a very high dividend for the year 2011-2012, which
means that the company had declared ala large part of its profit as dividend and
thus following a liberal approach for paying the dividends.

6. EBIDTA TO TURNOVER RATIO - This ratio is used to assess a

companys profitability by comparing its turnover and earnings. Since EBITDA is
derived from revenue this would indicate the percentage of a company remaining
after operating expenses.

Generally a higher ratio would indicate that the company is able to keep
its earnings at a good level through efficient processes that have kept certain
expenses low.

FORMULA = EARNING BEFORE INTEREST, TAX AND DEPRICIATION

TURNOVER
137
 FINANCIAL YEAR 2010-2011

COMPANY EBIDTA TURNOVER EBIDTA TO

TURNOVER
RATIO
IZON 7254.84 17984.76 0.40
TECHNOLOGY
INDUSTRY
SOFTWARE 10966.23 35924.07 0.31
SOFTWARE 2812.95 8699.59 0.32

FINANCIAL YEAR 2011-2012

COMPANY EBIDTA TURNOVER EBIDTA TO

TURNOVER
RATIO
IZON 8779.67 20028.28 0.44
TECHNOLOGY
INDUSTRY
SOFTWARE 12955.15 41890.91 0.31
SOFTWARE 3611.74 11677.14 0.31

FINANCIAL YEAR 2012-2013

COMPANY EBIDTA TURNOVER EBIDTA TO

TURNOVER
RATIO
IZON 9441.70 24624.04 0.38
TECHNOLOGY
INDUSTRY
SOFTWARE 10941.81 46248.61 0.24

138
SOFTWARE 2302.54 14260.81 0.16

FINANCIAL YEAR 2013-2014

COMPANY EBIDTA TURNOVER EBIDTA TO

TURNOVER
RATIO
IZON 9805.88 25875.77 0.38
TECHNOLOGY
INDUSTRY
SOFTWARE 11871.28 43319.61 0.27
SOFTWARE 4801.98 18735.32 0.26

FINANCIAL YEAR 2014-2015

COMPANY EBIDTA TURNOVER EBIDTA TO

TURNOVER
RATIO
IZON 12223.53 30187.02 0.40
TECHNOLOGY
INDUSTRY
SOFTWARE 9155.06 44918.67 0.20
SOFTWARE 4856.17 23445.88 0.21

CHART

139
 0.5
0.44
0.45
0.4 0.4
0.4 0.38 0.38

0.35
0.31 0.32 0.31 0.31
0.3 0.27
0.26 SIDHICK PLATE INDUSTRY
0.24
0.25
PAPER
0.2 0.21
0.2 PLATES
0.16
0.15

0.1

0.05

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

EBIDTA to turnover ratio signifies that higher the ratio the better it is. Since it
means that earnings before interest, depreciation and taxation.
IZON TECHNOLOGY INDUSTRY has maintained a positive rising
graph throughout. And it has a ratio better than the other two companies.
7. EARNING PER SHARE - This ratio measures the profitability on a
per share basis i.e. the amount that they can get on every share held. The higher the
ratio the more amount the equity shareholders receive.

FORMULA = PROFIT ATTRIBUTABLE TO SHAREHOLDERS

WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR BASIC EPS

140
 FINANCIAL YEAR 2010-2011

COMPANY PROFIT O WEIGHTED EARNING

ATTRIBUTABLE AVERAGE PER SHARE
SHAREHOLDERS NO. OF
ORDINARY
SHARES
IZON 4222.15 646823122 73.76
TECHNOLOGY
INDUSTRY
SOFTWARE 6202.29 4130400545 15.02
SOFTWARE 1259.35 157208820 80.11

FINANCIAL YEAR 2011-2012

COMPANY PROFIT WEIGHTED EARNING

ATTRIBUTABLE AVEARGE PER SHARE
TO NO. OF
SHAREHOLDERS ORDINARY
SHARES
IZON 4687.03 697748601 67.17
TECHNOLOGY
INDUSTRY
SOFTWARE 7536.78 4130400545 18.25
SOFTWARE 1694.19 177855318 95.26

FINANCIAL YEAR 2012-2013

COMPANY PROFIT WEIGHTED EARNING

ATTRIBUTABLE AVEARGE PER SHARE
TO NO. OF
SHAREHOLDERS

141
 ORDINARY
SHARES
IZON 5073.69 730584834 69.45
TECHNOLOGY
INDUSTRY
SOFTWARE 6174.81 4130400545 14.95
SOFTWARE 424.58 187048666 22.70

FINANCIAL YEAR 2013-2014

COMPANY PROFIT WEIGHTED EARNING

ATTRIBUTABLE AVEARGE PER SHARE
TO NO. OF
SHAREHOLDERS ORDINARY
SHARES
IZON 4993.12 828550811 60.26
TECHNOLOGY
INDUSTRY
SOFTWARE 6754.37 4130400545 16.35
SOFTWARE 1989.01 187048682 106.34

FINANCIAL YEAR 2014-2015

COMPANY PROFIT WEIGHTED EARNING

ATTRIBUTABLE AVEARGE PER SHARE
TO NO. OF
SHAREHOLDERS ORDINARY
SHARES
IZON 6861.15 907252572 75.63
TECHNOLOGY
INDUSTRY

142
SOFTWARE 4904.74 4130400545 11.87
SOFTWARE 1978.24 203595864 97.17

CHART

97.17
2014-2015 11.87
75.63

106.34
2013-2014 16.35
60.26

22.7 PLATES
2012-2013 14.95
69.45 PAPER
SIDHICK PLATE INDUSTRY
95.26
2011-2012 18.25
67.17

80.11
2010-2011 15.02
73.76

0 20 40 60 80 100 120

INTERPRETATION:

The ratio is helpful in the determination of the market price of the equity share
of the company. The ratio is also helpful in estimating the capacity of company to
declare dividends on equity shares.

Higher the EPS the better is the capital productivity. It is an important

measure of the economic performance of a corporate entity.

the highest EPS as compared to the other two firms. And IZON
TECHNOLOGY INDUSTRY has been quite consistent in maintaining its ratio
throughout.

8. GROSS PROFIT MARGIN - The ratio measures the margin of profit

available on sales. The higher the ratio the better it is for the company. It reflects
the efficiency with which a firm produces its products.

FORMULA = GROSS PROFIT * 100

SALES
143
 FINANCIAL YEAR 2010-2011

COMPANY GROSS SALES GROSS

PROFIT PROFIT
MARGIN
IZON 6153.98 17551.09 35.06
TECHNOLOGY
INDUSTRY
SOFTWARE 8656.19 34223.92 25.29
SOFTWARE 2169.49 8554.36 25.36

FINANCIAL YEAR 2011-2012

COMPANY GROSS SALES GROSS

PROFIT PROFIT
MARGIN
IZON 7388.93 19693.28 37.52
TECHNOLOGY
INDUSTRY
SOFTWARE 10057.87 39508.45 25.46
SOFTWARE 2667.42 11420.00 23.35

FINANCIAL YEAR 2012-2013

COMPANY GROSS SALES GROSS

PROFIT PROFIT
MARGIN
IZON 8160.03 24315.77 33.55
TECHNOLOGY
INDUSTRY
SOFTWARE 8040.59 43150.08 18.63
SOFTWARE 2005.45 14001.25 14.32
144
 FINANCIAL YEAR 2013-2014

COMPANY GROSS SALES GROSS

PROFIT PROFIT
MARGIN
IZON 7868.91 25021.98 31.44
TECHNOLOGY
INDUSTRY
SOFTWARE 8190.83 40551.38 20.20
SOFTWARE 3149.49 18202.48 17.30
FINANCIAL YEAR 2014-2015

COMPANY GROSS SALES GROSS

PROFIT PROFIT
MARGIN
IZON 10286.67 29396.35 34.99
TECHNOLOGY
INDUSTRY
SOFTWARE 5304.80 42718.71 12.42
SOFTWARE 3194.82 23163.24 13.79

145
 CHART

40 37.52
35.06 34.99
35 33.55
31.44
30
25.36
25.29 25.46
25 23.35
20.2 SIDHICK PLATE INDUSTRY
20 18.63
17.3 PAPER
14.32 13.79 PLATES
15 12.42

10

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTEPRETATION:

The ratio measures the margin of profit available on sales. The higher the
ratio the better it is. The ratio of IZON TECHNOLOGY INDUSTRY has been
fluctuating but it has been on a constant platform. The sales figures have been
rising so the fluctuations in the ratio can be attributed to the difference in the prices
of the raw materials, freights and wages.

The gross profit ratio of SOFTWARE has been falling and which is again
because of the rise in the prices of the raw materials, wages and freight which have
ultimately reduced the margin of the gross profit.

The gross profit margin of SOFTWARE has also decreased since the
selling prices have not risen in the same proportion to the increase in the cost of
the raw materials and other expenses.

IZON TECHNOLOGY INDUSTRY has a much favourable ratio as

compared to the other two companies. PAPER can take some measures such as
procure raw materials at a cheaper price or to increase the selling price in order to
improve its gross profit margin.

146
 9. NET PROFIT MARGIN - This ratio measures the relationship
between EBIT to sales. It indicates the efficiency of the management in
manufacturing, selling, administration and other activities of the firm. It is the
overall measure of a firms profitability. It is represented as a percentage.

A high net profit margin would ensure adequate returns to the owners as well
as enable a firm to withstand adverse economic conditions when selling price is
declining, cost of production is rising and demand for product id falling. A low net
profit margin has the opposite implication.

FORMULA = NET PROFIT BEFORE INTEREST AND TAX * 100

SALES

FINANCIAL YEAR 2010-2011

COMPANY NPBIT SALES NET

PROFIT
MARGIN
IZON 6435.55 17551.09 36.67
TECHNOLOGY
INDUSTRY
SOFTWARE 9754.75 34223.92 28.50
SOFTWARE 2314.72 8554.36 27.06
FINANCIAL YEAR 2011-2012

COMPANY NPBIT SALES NET

PROFIT
MARGIN
IZON 7945.06 19693.28 40.34
TECHNOLOGY
INDUSTRY
SOFTWARE 11719.67 39508.45 29.66
SOFTWARE 2924.56 11420.00 25.60

147
 FINANCIAL YEAR 2012-2013

COMPANY NPBIT SALES NET

PROFIT
MARGIN
IZON 8468.30 24315.77 34.82
TECHNOLOGY
INDUSTRY
SOFTWARE 9656.69 43150.08 22.38
SOFTWARE 1474.88 14001.25 10.53

FINANCIAL YEAR 2013-2014

COMPANY NPBIT SALES NET

PROFIT
MARGIN
IZON 8722.70 25021.98 34.86
TECHNOLOGY
INDUSTRY
SOFTWARE 10534.04 40551.38 25.98
SOFTWARE 3678.57 18202.48 20.21

FINANCIAL YEAR 2014-2015

COMPANY NPBIT SALES NET

PROFIT
MARGIN
IZON 11077.34 29396.35 37.68
TECHNOLOGY
INDUSTRY
SOFTWARE 7669.26 42718.71 17.95
SOFTWARE 3477.46 23163.248 15.01
148
 CHART

45
40.34
40 37.82
36.67
34.82 34.86
35
29.66
28.5
30 25.98
27.06 25.6
SIDHICK PALTE INDUSTRY
25 22.38
20.21 PAPER
20 17.95
15.01 PLATES
15
10.53
10

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

Net profit ratio reflects the net profit margin on the total sales after deducting
all the expenses but before deducting the interest and taxation. This ratio measures
the efficiency of the operation of the company.

The trend of the graph of the net profit ratio is quite similar to that of the gross
profit margin ratio. Higher the ratio the better it is. IZON TECHNOLOGY
INDUSTRY has been quite efficient in managing the operating expenses of the
firm.

10. CASH PROFIT RATIO - The Cash Ratio is the most conservative of
all these measures of cash resources, as only actual cash and securities easily
convertible to cash are used to measure cash resources. The short-term liquidity of
a company may be measured through cash ratio.

FORMULA = CASH PROFIT

SALES

CASH PROFIT= NET PROFIT+ DEPRICIATION

149
 FINANCIAL YEAR 2010-2011

COMPANY CASH SALES CASH

PROFIT PROFIT
RATIO
IZON 5041.44 17551.09 28.72
TECHNOLOGY
INDUSTRY
SOFTWARE 7413.77 34223.92 21.85
SOFTWARE 1790.23 8554.36 20.93

FINANCIAL YEAR 2011-2012

COMPANY CASH SALES CASH

PROFIT PROFIT
RATIO
IZON 5521.64 19693.28 28.38
TECHNOLOGY
INDUSTRY
SOFTWARE 8772.26 39508.45 22.20
SOFTWARE 2415.37 11420.00 21.15
FINANCIAL YEAR 2012-2013

COMPANY CASH SALES CASH

PROFIT PROFIT
RATIO
IZON 6175.14 24315.77 25.40
TECHNOLOGY
INDUSTRY
SOFTWARE 7459.93 43150.08 17.29
SOFTWARE 1313.16 14001.25 9.38
150
 FINANCIAL YEAR 2013-2014

COMPANY CASH SALES CASH

PROFIT PROFIT
RATIO
IZON 6129.98 25021.98 24.50
TECHNOLOGY
INDUSTRY
SOFTWARE 8091.61 40551.38 19.95
SOFTWARE 3146.15 18202.48 17.28

FINANCIAL YEAR 2014-2015

COMPANY CASH SALES CASH

PROFIT PROFIT
RATIO
IZON 8011.88 29396.35 27.25
TECHNOLOGY
INDUSTRY
SOFTWARE 6890.54 42718.71 14.95
SOFTWARE 3389.38 23163.25 14.63

151
 CHART

30 28.72 28.38
27.25
25.4
24.5
25
21.85 22.2
20.93 21.15 19.95
20
17.29
17.28 SIDHICK PALTE INDUSTRY
14.95
14.63
15 PAPER
PLATES
10 9.38

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

The ratio measures the cash generation in the business as a result of the
operation expressed in terms of sales. The cash profit ratio is more reliable
indicator of performance where there are sharp fluctuations in profit before tax and
the net profit from year to year owing to the difference in depreciation.
It facilitates the inter firm comparison of performance since different
methods of depreciation may be adopted by different companies.
IZON TECHNOLOGY INDUSTRY is ahead of the other two companies
and has a better graph as compared to PAPER and PLATES.
11. RETURN ON ASSETS - Here the profitability is measured in terms
of the relationship between net profits and assets. The ROA may be also called as
profit-to-asset ratio. It can be interpreted in two ways. First, it measures
managements ability and efficiency in using the firms assets to generate
(operating) profits. Second, it reports the total return accruing to all providers of
capital (debt and equity), independent of the source of capital.

FORMULA = EBIT
AVERAGE TOTAL ASSETS

152
 FINANCIAL YEAR 2010-2011

COMPANY EBIT AVERAGE RETURN ON

TOTAL ASSETS
ASSETS
IZON 6435.55 20147.33 0.32
TECHNOLOGY
INDUSTRY
SOFTWARE 9754.75 20644.91 0.47
SOFTWARE 2314.72
FINANCILA YEAR 2015-2012

COMPANY EBIT AVERAGE RETURN ON

TOTAL ASSETS
ASSETS
IZON 7945.06 36336.51 0.22
TECHNOLOGY
INDUSTRY
SOFTWARE 11719.67 25291.87 0.46
SOFTWARE 2924.56 13627.68 0.21
FINANCIAL YEAR 2012-2013

COMPANY EBIT AVERAGE RETURN ON

TOTAL ASSETS
ASSETS
IZON 8468.30 52908.65 0.16
TECHNOLOGY
INDUSTRY
SOFTWARE 9656.69 32266.23 0.30
SOFTWARE 1474.88 18564.33 0.08

153
 FINANCIAL YEAR 2013-2014

COMPANY EBIT AVERAG RETUR

E TOTAL N ON
ASSETS ASSETS
IZON 8722.70 61487.28 0.14
TECHNOLOG
Y INDUSTRY
SOFTWARE 10534.0 44143.57 0.24
4
SOFTWARE 3678.57 21954.72 0.17
FINANCIAL YEAR 2014-2015

COMPANY EBIT AVERAGE RETURN ON

TOTAL ASSETS
ASSETS
IZON 11077.34 71394.35 0.11
TECHNOLOGY
INDUSTRY
SOFTWARE 7669.26 54984.45 0.14
SOFTWARE 3477.46 27375.02 0.13

154
 CHART

0.5 0.47 0.46

0.45

0.4

0.35 0.32
0.3
0.3
SIDHICK PALTE INDUSTRY
0.24
0.25
0.21 0.21 PAPER
0.2 0.17 PLATES
0.16 0.150.14
0.14 0.13
0.15

0.1 0.08

0.05

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

The ratio indicates how profitable a company is relative to its total assets. The
ratio illustrates how well management is employing companys total assets to make
a profit. The higher the return, the more efficient management is in utilizing the
assets base.

Here we can conclude that SOFTWARE has not been utilizing its asset base
efficiently and so the graph has taken a downward trend.

IZON TECHNOLOGY INDUSTRY has also not been very efficient in

utilizing the asset base of the company.

12. RETURN ON AVERAGE NET WORTH - This ratio measures the

return on the total equity funds of ordinary shares. From this ratio it can be judged
whether the firm has earned a satisfactory return for its shareholders or not. The
higher the ratio, the better it is for the shareholders.

FORMULA= PROFIT AFTER TAX

AVERAGE NET WORTH

155
 FINANCIAL YEAR 2010-2011

COMPANY PROFIT AVERAGE RETURN ON

AFTER TAX NET WORTH AVEARGE
NET WORTH
IZON 4222.15 11697.83 0.36
TECHNOLOGY
INDUSTRY
SOFTWARE 6202.29 14784.80 0.42
SOFTWARE 1292

FINANCIAL YEAR 2011-2012

COMPANY PROFIT AVERAGE RETURN ON

AFTER TAX NET WORTH AVEARGE
NET WORTH
IZON 4687.03 20519.62 0.23
TECHNOLOGY
INDUSTRY
SOFTWARE 7536.78 20134.05 0.38
SOFTWARE 1728.19 6538.22 0.26

FINANCIAL YEAR 2012-2013

COMPANY PROFIT AVERAGE RETURN ON

AFTER TAX NET WORTH AVEARGE
NET WORTH
IZON 5201.74 28608.41 0.18
TECHNOLOGY
INDUSTRY

156
SOFTWARE 6174.81 25494.10 0.24
SOFTWARE 958.50 7827.25 0.12

FINANCIAL YEAR 2013-2014

COMPANY PROFIT AVERAGE RETURN ON

AFTER TAX NET WORTH AVEARGE
NET WORTH
IZON 5046.80 33516.50 0.15
TECHNOLOGY
INDUSTRY
SOFTWARE 6754.37 30650.40 0.22
SOFTWARE 2022.74 8832.80 0.23

FIANANCIAL YEAR 2014-2015

COMPANY PROFIT AVERAGE RETURN ON

AFTER TAX NET WORTH AVEARGE
NET WORTH
IZON 6865.69 41953.22 0.16
TECHNOLOGY
INDUSTRY
SOFTWARE 4904.74 35193.09 0.14
SOFTWARE 2014.67 13465.81 0.15

157
 CHART

0.45 0.42

0.4 0.38
0.36
0.35

0.3
0.26
0.23 0.24 SIDHICK PALTE INDUSTRY
0.25 0.220.23
PAPER
0.2 0.18
0.15 0.16 PLATES
0.14 0.15
0.15 0.12

0.1

0.05

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

It expresses the net profit in terms of equity shareholders fund. It is an important

yardstick of performance for equity shareholders since it indicates the return on
funds employed by them. However this measure is based on the historical net worth
and will be high for old plants and low for new plants.

The factor which motivates the shareholders to invest in

a company is the expectations of an adequate rate of return on their funds, they will
want to assess the rate of return in order to decide whether to continue their
investments or not.

13. RETURN ON AVERAGE CAPITAL EMPLOYED - Return on

average capital employed is a profitability ratio. The term capital employed refers
to long-term funds supplied by the lenders and owners of the firm. Capital
employed basis provides a test of profitability related to the sources of long-term
funds. It is an insight into how efficiently the long-term funds of owners and

158
lenders are being used. The higher the ratio, the more efficient is the use of capital
employed.

CAPITAL EMPLOYED = TOTAL FUNDS EMPLOYED

MISCELLANOUS EXPENSES TO THE EXTENT NOT WRITTEN OFF

FIANANCIAL YEAR 2010-2011

COMPANY EBIT AVERAGE RETURN ON

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
IZON 6435.55 19879.43 0.32
TECHNOLOGYI
NDUSTRY
SOFTWARE 9754.75 20601.58 0.47
SOFTWARE 2314.72

FIANANCIAL YEAR 2011-2012

COMPANY EBIT AVERAGE RETURN ON

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
IZON 7945.06 36157.69 0.22
TECHNOLOGY
INDUSTRY
SOFTWARE 11719.67 25326.71 0.46
SOFTWARE 2924.56 13530.25 0.22

159
 FIANANCIAL YEAR 2012-2013

COMPANY EBIT AVERAGE RETURN ON

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
IZON 8468.30 52778.56 0.16
TECHNOLOGY
INDUSTRY
SOFTWARE 9656.69 32236.49 0.30
SOFTWARE 1474.88 18564.33 0.08
FIANANCIAL YEAR 2013-2014

COMPANY EBIT AVERAGE RETURN ON

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
IZON 8722.70 61434.74 0.14
TECHNOLOGY
INDUSTRY
SOFTWARE 10534.04 44048.96 0.24
SOFTWARE 3678.57 21954.72 0.17

160
 FIANANCIAL YEAR 2014-2015

COMPANY EBIT AVERAGE RETURN ON

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
IZON 11077.34 71394.35 0.16
TECHNOLOGY
INDUSTRY
SOFTWARE 7669.26 54984.45 0.14
SOFTWARE 3477.46 27375.02 0.13

CHART

0.5 0.47
0.46
0.45

0.4

0.35 0.32
0.3
0.3
SIDHICK PLATE INDUSTRY
0.24
0.25 0.22 0.22 PAPER
0.2 0.17 PLATES
0.16 0.16
0.14 0.14
0.15 0.13

0.1 0.08

0.05

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

Return on average capital employed ratio narrows the focus to gain a better
understanding of a company's ability to generate returns from its available capital
161
base.
By comparing net income to the sum of a company's debt and equity capital,
investors can get a clear picture of how the use of leverage impacts a company's
profitability. Financial analysts consider the ROCE measurement to be a more
comprehensive profitability indicator because it gauges management's ability to
generate earnings from a company's total pool of capital.

14. DIVIDEND PAYOUT RATIO - This ratio indicates the percentage

PAT distributed as dividends to equity shareholders. It is also known as pay-out
ratio. For instance PAT are Rs. 500000 and the dividend is Rs. 300000 then the
dividend pay -out ratio would be 60%. This implies that 40% of the profits of the
firm are retained (retention ratio) and 60% distributed as dividends. Therefore,
the higher the ratio the more dividends can be received.
FORMULA= DIVIDEND (EQUITY)/ PROFIT AFTER TAX

FINANCIAL YEAR 2010-2011

COMPANY DIVIDEND(EQUITY) PROFIT DIVIDEND

AFTER PAYOUT
TAX RATIO
IZON 1104.33 4222.15 26.16
TECHNOLOGY
INDUSTRY
SOFTWARE 1478.40 6202.29 23.89
SOFTWARE 199.39 1292 15.43
FINANCIAL YEAR 2011-2012

COMPANY DIVIDEND(EQUITY) PROFIT DIVIDEND

AFTER PAYOUT
TAX RATIO

162
IZON 1393.55 4687.03 29.73
TECHNOLOGY
INDUSTRY
SOFTWARE 1787.16 7536.78 23.71
SOFTWARE 241.49 1728.19 13.97

FINANCIAL YEAR 2012-2013

COMPANY DIVIDEND(EQUITY) PROFIT DIVIDEND

AFTER PAYOUT
TAX RATIO
IZON 1492.5 5201.74 28.69
TECHNOLOGY
INDUSTRY
SOFTWARE 1255.16 6174.81 20.33
SOFTWARE 55.41 958.50 5.78

FINANCIAL YEAR 2013-2014

COMPANY DIVIDEND(EQUITY PROFIT DIVIDEND

) AFTER PAYOUT
TAX RATIO
IZON 878.45 5046.80 17.41
TECHNOLO
GY
INDUSTRY
SOFTWARE 1590.55 6754.37 23.55
SOFTWARE 240.93 2022.74 11.91

163
 FINANCIAL YEAR 2014-2015

COMPANY DIVIDEND(EQUITY) PROFIT DIVIDEND

AFTER PAYOUT
TAX RATIO
IZON 1307.77 6865.69 19.05
TECHNOLOGY
INDUSTRY
SOFTWARE 1152.45 4904.74 23.50
SOFTWARE 350.09 2014.67 17.41
CHART
35

29.73
30 28.69
26.16
25 23.89 23.71 23.55 23.5

20.3
20 19.05
17.41 17.41 SRI MEENAKSHI GARMENTS
15.43 CLOTHS
15 13.97
11.97 TEXTILES

10
5.78
5

0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015

INTERPRETATION:

This ratio identifies the percentage of earnings (net income) per common share
allocated to paying cash dividends to shareholders. The dividend payout ratio is an
indicator of how well earnings support the dividend payment.

It indicates the extent to the net profit distributed to the

shareholders as dividend. A high payout signifies a liberal distribution policy and
a low payout reflects conservative distribution policy,

164
 CHAPTER- V

RECOMMENDATION:

IZON TECHNOLOGY INDUSTRY should try to improve its

solvency so that at the time of crisis they dont have to sell of their inventory to
pay off debts.
They should maintain quick ratio above or equal to 1.0.
Fluctuations in operating cycle should be reduced.
IZON TECHNOLOGY INDUSTRY must keep eye on its WIP
conversion period.
IZON TECHNOLOGY INDUSTRY should try to minimize its
inventory conversion period and also try to minimize the average age of stock to
reduce the cost of inventories.
As sale price per unit is lesser than the competitors it must keep trend
increasing mode of sales to reduce the blockage of its price in its inventory.
Try to generate more revenue from other country.
IZON TECHNOLOGY INDUSTRY should try for acquisition of
more mines in India to reduce the raw material outsourcing or import cost.
There should be a proper balance between the current assets and the
currents liabilities. The working capital became negative due to an improper
balance.

It should not allow its net debt to become negative. A negative net
debt indicates more cash and less debt which means that the company is not
investing enough in its growth.

165
 New and advanced concept must be introduced in inventory control
management.

Adequate planning is required for procurement of store items.

Advance payments should be avoided. If at all advance payments are

required, it should be against securities like bank guarantees etc.

The essence of effective working capital management is proper cash

flow forecasting. This should take into account the unforeseen events, market
cycles, sudden fall in demand, fall in selling price, loss in prime customers etc.
This is a very important factor that has to be taken into account.

166
 CONCLUSION

IZON TECHNOLOGY INDUSTRY has been analyzed in terms of financial

aspects especially working capital and financial ratios. A comparison has been
made with SOFTWARE and SOFTWARE to see the position of IZON
TECHNOLOGY INDUSTRY Ltd. in the industry.

Working capital management is a very crucial part of any organization. It needs

to maintain its working capital efficiently for its day to day operations to take place.
An organization needs proper liquidity to meet its obligations on time.

Ratio analysis is also a very important part of a business. It is a platform to

judge a company based on liquidity, profitability etc. It is very crucial for banks,
investors, creditors etc. It also makes comparisons easier.

IZON TECHNOLOGY INDUSTRY has been able to maintain a good liquidity

position throughout. It has been able to pay back its liabilities on time and also has
been able to give dividends on time to its shareholders. It has also maintained a
good level of EPS. The inventory turnover has been maintained efficiently which
we can see from the high inventory turnover ratio.

167
 BIBLIOGRAPHY

Gerald I. White, Ashwinpaul C. Sondhi & Dov Fried (2015). The Analysis
And Use Of Financial Statements- Third edition.
M Y Khan & P K Jain (2014). Management Accounting- Fifth Edition.
http://www.software .com/about-us/company-profile.asp
http://www.ey.com/Publication/vwLUAssets/Global__Report_2014-
2015/$FILE/Global%20PAPER PLATE %20Report%202014-
2015%20FULL%20REPORT.pdf
zenithresearch.org.in/images/stories/pdf/2012/Jan/ZIJMR/13 SURESH
VADDE software.pdf
http://www.zacks.com/stock/news/49743/IZON -industry-outlook-%96-
march-2015
Research and Markets: Analyzing the Indian Industry 2012 Edition is
Completed with An Analysis of the Major Players in the Indian Sector | Japan
Metal Bulletin
Top Indian Companies Performance | News From Business, Finance, Share
Market Real Estate

168
Balance sheet

IZON TECHNOLOGY INUSTRY

Balance sheet Izon technology

2012 2013 2014 2015 2016

Sources of funds

Owner's fund

Equity share
capital 971.41 971.41 971.41 971.41 959.41

Share
application
money - - - 178.20

Preference
share capital - - - - -

Reserves &
surplus 65,692.48 60,176.58 54,238.27 51,649.95 45,807.02

Loan funds

Secured loans 4,507.64 4,400.55 4,311.02 4,190.47 3,509.18

169
 2012 2013 2014 2015 2016

Unsecured
loans 21,702.61 21,726.23 21,600.49 19,503.35 22,639.00

To
tal 92,874.14 87,274.77 81,121.19 76,315.18 73,092.81

Uses of funds

Fixed assets

Gross block 41,791.52 39,019.72 38,056.28 23,081.58 22,497.83

Less :
revaluation
reserve - - - - -

Less :
accumulated
depreciation 16,543.00 14,753.97 13,181.23 11,715.32 10,692.73

Net block 25,248.52 24,265.75 24,875.05 11,366.26 11,805.10

Capital work-
in-progress 23,036.67 18,509.40 8,722.29 16,058.49 5,612.28

Investments 53,164.32 54,661.80 50,418.80 50,282.52 46,564.94

Net current assets

Current
assets, loans
& advances 14,227.61 13,603.46 17,860.79 18,483.79 25,569.40

170
 2012 2013 2014 2015 2016

Less : current
liabilities &
provisions 22,802.98 23,765.64 20,755.74 19,875.88 16,458.91

Total net
current assets -8,575.37 10,162.18 -2,894.95 -1,392.09 9,110.49

Miscellaneou
s expenses
not written - - - - -

To
tal 92,874.14 87,274.77 81,121.19 76,315.18 73,092.81

Notes:

Book value
of unquoted
investments 52,088.86 53,615.18 49,434.56 49,617.55 45,899.97

Market value
of quoted
investments 11,528.97 8,390.72 4,904.96 4,911.43 4,914.95

Contingent
liabilities 14,610.35 17,398.71 18,999.02 18,039.57 14,288.41

Number of
equity shares
outstanding 9712.15 9712.15 9712.15 9712.14 9592.14

171