1.

Executive Summary

As a part of the partial fulfilment of the M.B.A course at JSPM’S Rajashri Shahu College of Business Narhe,
Summer Training was undertaken with the Sinhasane Hrishikesh & Co. Delhi.

This project is specially designed to understand the subject matter of Financial Statement Analysis through
various ratios in the Company. This project gives us information and report about company’s Financial
position. Throughout the project the focus has been on presenting information and comments in easy and
intelligible manner.

The purpose of the training was to have practical experience of working in an organisation and to have
exposure to the various management practices in the field of Finance. This training has also given me an on
the job experience of Financial Management.

This project is very useful for those who want to know about company and financial position of the company.

1
 2. OBJECTIVES OF STUDY

The major objectives of the recent are to know about the strengths and Weakness through
RATIO ANALYSIS.

The main objective of recent study aimed as:

 To evaluate the performance of the company by using ratios as a yardstick to measure

the efficiency of the company.

 To understand the liquidity, profitability and efficiency positions of the company

during the study period.

 To evaluate and analyse various facts of the financial performance of the company.

 To make comparison between the ratios during different periods.

2
 3.NEED FOR THE STUDY

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

 It is beneficial to management of the company by providing crystal clear picture

regarding important aspects like liquidity, leverage, activity and profitability.

 The study is also beneficial to employees and offers motivation by showing how
actively they are contributing for company’s growth.

 The Investors who are interested in investing in the company’s shares will also get
benefited by going through the study and can easily take a decision whether to invest
or not to invest in the company’s shares.

3
 4. Company Profile

 Name of the Company -: Sinhasane Hrishikesh & Co.

Charted Accounts

 Address of the Company -: 14/68 , II Floor , Subhash Nagar,

New Delhi-27.

 About the Company -:

Sinhasane Hrishikesh & Co. is sole Proprietor Firm working sincerely for their Clients.
Firm’s Aim is to satisfy their Clients by maintaining their financial Activities up-to-date and
makes calculations correctly, which will give them true and fair information about their
Financial Activities.

Sinhasane Hrishikesh & Co. is Established on 2nd February,2001. The firms objectives are
to provide correct information, to give Clients details correctly as per their wants, to show
them true Accounting and financial information. Firm is always trying to do their work
efficiently and effectively for their clients. They are always try to do their work or provide
the information needed by their clients correctly on time and up-to -date.

Firm is working effectively & Efficiently for their Clients to Give Proper Accounting &
Financial information. The firm is working towards their objectives from the time of it’s
establishment. Right from its establishment they working sincerely for their Clients &
providing Clear & True Information about their clients Financial & Accounting Activities.

4
 Client List of Firm -:

 Perception World Technologies

 Chilltech Systems
 Vudtique Creations
 Nilli International
 Daksh International Business Ltd.
 House of Trims
 Tekventura Pvt. Ltd
 Nilofer Singh Rental Business
 Coco Dryfruits Ltd.
 Dynamic Switchgears Associations
 Wedko
 PB Melters
 PM Consultancy
 Dispel Co.

5
 5. Theoretical Background

Financial Analysis -:

Financial Analysis is the process of identifying the financial strengths and weaknesses of the
firm and establishing relationship between the items of the Balance Sheet and Profit & Loss
Account.

Financial ratio Analysis is the calculation and comparison of ratios, which are
derived from the information in a company’s financial statements. The level and historical
trends of these ratios can used to make inferences about a company’s financial condition, its
operations and attractiveness as an investment. The information in statements used by

 Trade creditors :
To identify the firm’s ability to meet their claims i.e. liquidity
position of the company.

 Investors :
To know about the present and future profitability of the
company and its financial structure.

 Management :
In every aspect of the financial analysis. It is the responsibility
of the management to maintain sound financial condition in the company.

Ratio Analysis -:

The term “Ratio” refers to the numerical and quantitative relationship

between two items or variables. This relationship can exposed as

6
  Percentages

 Fraction

 Proportion of number
Ratio analysis is defined as the systematic use of the ratio to interpret the f i n a n c i a l
statements. So that the strengths and weaknesses of a firm, as
w e l l a s i t s historical performance and current financial condition can be
determined. Ratio reflects a quantitative relationship helps to form a quantitative
judgment.

Ratios are useful for Several Parties such as:

1) Investors, both present as well as potential investors.

2) Financial analyst.

3) Mutual funds.

4) Stock broker and stock exchange authorities.

5) Government.

6) Tax department.

7) Competitors.

8) Research analysts and students

9) Company’s Management.

10) Creditors and Suppliers

11) Lending Institutions – Banks and Financial Institutions

12) Financial Manager

13) Other Interested parties like credit rating agencies etc.

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Nature of Ratio Analysis -:

Ratio analysis is a technique of analysis and Interpretation of financial statements.

It is the process of establishing and interpreting various ratios for helping in making certain
decisions. It is only a means of understanding of financial strengths and
weaknesses of a firm.

There are a number of ratios, which can calculated from the information given in the
financial statements, but the analyst has to select the appropriate data and calculate only a few
appropriate ratios. The following are the four steps involved in the ratio analysis.

Selection of relevant data from the financial statements depending

u p o n t h e objective of the analysis.

 Calculation of appropriate ratios from the above data.

 Comparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from projected financial statements or the ratios of some
other firms or the comparison with
r a t i o s o f t h e i n d u s t r y t o w h i c h t h e f i r m belongs.

 Classification of Ratio -:

A] Liquidity Ratio –

It is also known as liquidity ratios. it includes the following

1) Measures ability of a company to meet its current obligations.
2) Indicates short-term financial stability of a company.

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3) Indicates present cash solvency and ability to remain
S o l v e n t i n t i m e s o f adversities.
To measure the liquidity of a firm the following ratios can be calculated

 Current ratio

 Quick (or) Acid-test (or) Liquid ratio

(a) Current Ratio :

Current ratio is useful to find out solvency of the company. High current ratio indicates
that company will be able to pay its debt maturity within a year. Low current ratio
indicates that company will not be able to meet its short-term debts.
Minimum standard current ratio is 2:1.Current Assets

Current Ratio = Current Asset / Current Liabilities

(b) Quick Ratio -

Quick ratio is also known as acid test ratio. It indicates immediate ability of a company to
pay off its current obligations. In addition, shows the solvency and financial
soundness of the business. Greater the ratio stronger the financial position of the company.
The standard quick ratio should be 1:1

Quick Ratio = Quick assets / Quick Liabilities

B) Profitability Ratios:

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The primary objectives of business undertaking are toearnprofits.
Because profit is the engine that drives the business enterprise. It measures the overall
efficiency of the business. It indicates whether utilization of business assets and funds
are done efficiently and Best way or not, so as to generate adequate profits or returns.
Profitability ratios fall in two categories:

a) Related To Sales:

1) Gross Profit Ratio:

It shows the operating efficiency of the business. It measures the efficiency of

production as well as pricing. Decrease in the ratio indicates reduction in selling
price or increase in the cost of production or decline in the business activity.
Increase in the ratio indicates increase in the selling price or reduction in the
cost of production.

Gross Profit Ratio = Gross Profit / Sales X 100

2) Operating Profit Ratio:

It indicates profitability of entire business after meeting all operating cost including
direct and indirect cost of administrative and distribution expenses.

Operating Profit Ratio = Operating Profit / Sales X 100

3) Net Profit Ratio:

It shows the overall efficiency of the business. Higher the ratio

indicatesh i g h e r e f f i c i e n c y o f b u s i n e s s a n d b e t t e r u t i l i z a t i o n o f t o t a l r e s o

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urces. In addition, it indicates efficiency of financing operations as well as
tax management.

Net Profit Ratio = Net profit after tax / Sales X 100

b) Related To Investment Of Capital Employed:

1) Return On Investment:

It measures the overall performance of the company that is utilization of total

resources and funds available with the company. Higher the ratio better utilization
of funds. It indicates earning capacity of the business. It measures the management
performance.

Return on Investment = EBT But AT / Total Asset or Liabilities X 100

2) Return On Net Worth Or Proprietors Funds :

It measures the productivity of shareholders funds. Higher the ratio

I n d i c a t e s b e t t e r utilization of shareholders funds or higher productivity of
owner’s funds. It helps to investor to compare the earning capacity of company with that
of other companies.

Return on Net Worth = Net Profit after Tax / Equity Shareholder X 100

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C) Turnover Ratio-

I t m e a s u r e s h o w e f f i c i e n t l y t h e a s s e t s a r e e m p l o ye d . T h e s e
r a t i o s a r e expressed in number of times the assets is used during the period.

1) Inventory Turnover Ratio:

It indicates number of times the replacement of inventory during the given period
usually a year. Higher the ratio more efficient is the management of inventory. But higher
inventory turnover ratio is not always good if it is lower, level of inventory because it invites
problem of frequency stock outs and loss of sales and customer or goodwill.

Inventory Turnover Ratio = Cost of Goods Sold / Average Stock in Hand

2) Average Collection Period:

It indicates credit and collection policy and indicates efficiency in
management of debtors. Smaller no. of dates, higher will be the
e f f i c i e n c y o f t h e collection department.

Avg. collection period should not exceed 1.5 times the credit period allowed.

Avg. Collection Period = Receivable(Debtors) / Average Sales Per Day

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3) Receivable Turnover Ratio:

The ratio indicates average credit period enjoyed by debtors

Receivable
Turnover Ratio = Debtors + Bills Receivable / Total Credit Sales X 100

4)Fixed Asset Turnover Ratio:

It indicates efficiency in the utilization of fixed assets like plant and

m a c h i n e r y b y management.

Fixed Assets Turnover Ratio = Net Sales / Fixed Asset

5) Total Asset Turnover Ratio :

It indicates how efficiently the assets are employed overall. It indicates

relationships between the amount invested in the assets and the result accrues in terms
of sales.

Total Asset Turnover Ratio = Net Sales /Total Assets

4) Creditors Turnover Ratio:

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It indicates the how the credit period enjoyed by the creditors.

Creditors Turnover Ratio = Net Credit Purchases / Average Creditors

D) Financial Ratio –

1) Capital Gearing Ratio:

This ratio indicates the relationship between preferential capital, debenture. Term loan
and capital, which does not carry fixed rate of interest or dividend.

When the ratio is more than one then the capital is said to be highly geared that
means low equity share capital and greater amount of preference share capital,
debenture, long-term loan.
When the ratio is less than one then the capital is said to be very lowly geared that
means low earning per share. Equity shareholder will control the company. It results in over
capitalization.

Capital Gearing Preferential Capital + Debenture + Term Loan

Ratio = Equity Share Capital + Reserve & Surplus

2) Proprietary Ratio:

It measures the relationship between funds invested in business by the

owners with the total funds invested in business. It indicates long run solvency
of the business. High ratio means company is less dependent on outside funds
and company is quite solvent.

Low ratio indicates company is more dependent on outside funds solvency and solvency may
be danger.

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 Proprietary Ratio = Proprietary Fund / Total Assets

3) Stock Working Capital Ratio:

It indicates weightage of stock in the current assets or in the

w o r k i n g funds. It indicates strength and weaknesses of working capital; high ratio indicates
slow movement in stock and also reflects better management of inventory as well as working
capital.

Stock Working Capital Ratio = Stock / Working Capital

E) Financial Leverage Ratio:

It indicates financial structure of the organization that is proportion of debts as

compare to owner’s fund.

1) Debt Equity Ratio:

Higher the ratio less secured is the creditors, lower the ratio creditors
enjoy higher degree of safety.

Debt Equity Ratio = Debt / Equity

2) Debt Asset Ratio:

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 It indicates the percentage of the total asset created by
T h e c o m p a n y through short term and long-term debt. Higher the ratio less safe is the
creditors and vice versa.

Debt Asset Ratio = Debt / Total Assets

3) Long Term Debt to Total Capitalization:

It explains the relationship between long-term debts borrowed from

Outsiders with owner’s contribution. Lower the ratio better is the solvency of the business
and safer is the creditor so far as his repayment.

Long Term Debt to Long Term Debt

Total Capitalization = Total Capital Employed

4) Interest Coverage Ratio:

This indicates earning capacity of the business to pay its interest burden. Higher
the ratio business can easily pay the interest.

Interest Coverage Ratio = Earnings before Interest and Tax /Interest

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F) Dividend Ratio:

These ratios for a particular company are relevant for an investor for m a k i n g a n
investment decision as to whether he should invest in the share
o f t h e company.

1) Earnings per Share:

This ratio indicates weather over a given period there have been change in the wealth
per shareholder. Other the ratio increases the possibility for the higher dividends
and increase in the market price of the shares.

Earnings Earnings after Tax – Preference Dividend

Per Share = No. of Shares Paid Up

2) Price Earnings Ratio:

It indicates relationship between market price of the share and the current earnings per share.
It helps to determine the future price of the share.

Price Earnings Ratio = Market Price per Share / Earning Per Equity Share

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3) Payout Ratio:

It indicates how much proportion of the earning per share is retaining for plaguing back
and portion distributed as dividend to the shareholder.

Payout Ratio = Dividend per Equity Shares /Earnings per Share

4) Dividend Yield Ratio:

It indicates the ultimate current return which investor will get as a

percentage of is investment. It indicates the feature like the profitability and
dividend policy of the company. When dividend yield is lower than the expected
return, market price for the share may fall in future or vice versa.

Dividend per Share = Equity Dividend /No. Of Equity Shares

Dividend Yield = Dividend per Share / Market Price per Share

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Interpretation of the Ratios:

The Interpretation of ratios is an important factor. The inherent

l i m i t a t i o n s o f r a t i o analysis should keep in mind while interpreting them. The
impact of factors such as price level changes, change in accounting policies, window
dressing etc.

Guidelines or Precautions for Use of Ratios:

The calculation of ratios may not be a difficult task but their use is not
easy. Following guidelines or factors may be kept in mind while interpreting
various ratios is

 Accuracy of financial statements

 Objective or purpose of analysis

 Selection of ratios

 Use of standards should also be kept in mind when attempting to interpret ratios.

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 6. RESEARCH METHODOLOGY

Research Methodology is a way to systematically solve the research problem. It may be

understood as a science of studying how research is done scientifically. So, the research
methodology not only talks about the research methods but also considers the logic behind
the method used in the context of the research study.

1. Research Design -

Descriptive research is used in this study because it will ensure the minimization of bias
and maximization of reliability of data collected. The researcher had to fact and
information already available through financial statements of earlier years and analyse
these to make critical evaluation of the available material. Hence, by making the type of
the research conducted to be both Descriptive and Analytical in nature.

From the study, the type of data to be collected and the procedure to be used for this
purpose were decided.

2. Data Collection -

Basically , data are of Two types :

1. Primary Data
2. Secondary Data

The required data for the study are basically secondary in nature and the data are
collected from the audited reports of the company.

 Primary Data –

20
Primary Data are those data which are collected afresh.

In project Questionnarie Method and Interview Method are used for gathering
required information.
 Sources of Data –

The sources of data from the annual reports of the firm from the year

 Methods of Data Analysis-

The data collected were edited, classified and tabulated for analysis. The Analysis
tools were used in this study.

 Analytical Tools Applied –

The study employ’s the following Analytical Tools:

 Comparative Statement.

 Common Size Statement.

 Trend Percentage.

 Ratio Analysis.

 Limitations :

The main limitations of the project undertaken are as under:-

•Time:

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 The time of around two months was too short to study as wide subject like Financial
Analysis.

•Confidential information:

T h e e x e c u t i v e s w e r e h e s i t a n t t o r e v e a l c o m p l e t e information since it
was confidential.

•Busy Schedule of Concerned Executives:

The concerned executives were not having very busy schedule because of
which they were reluctant to give appointment.

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 7. Data Analysis And Interpretation

1] Financial Stability Ratio :

To measure the liquidity of a firm the following ratios can be calculate the following
ratios,

A) Current Ratio -

Current Ratio = Current Asset / Current Liabilities

 Table 1

(Rupees are in Lakh)

Year Current Asset Current Liabilities Ratio

31-03-2013 568.26 568.26 1:01

31-03-2014 502.07 502.07 1:01

31-03-2015 351.75 351.75 1:01

23
  Chart :

Current Ratio

1.2

0.8

0.6

0.4

0.2

0
2013 2014 2015

Current Ratio

Interpretation :

The Ratio is mainly used to give an idea of the company’s ability to pay back its short-
term liabilities (debts & payables) with its short-term assets (Cash, Receivables, and
inventory). The higher the Current Ratio, the more capable the company is of paying its
obligations. The current Ratio in each year suggests that the company would be able to pay
off its obligations if they came due at point. Since, low current ratio does not necessarily
mean that the firm will go bankrupt, but it is definitely is not good sign.
Here The Ratio in three Corresponding Years is one. It means that Current Assets are
Equal to the Current Liabilities of the Company.

B) Quick Ratio -

Quick Ratio = Quick Asset

24 / Quick Liabilities
 Table 2

Year Current Asset Current Liabilities Ratio

31-03-2013 230.25 185.06 1.24:1

31-03-2014 222.3 205.33 1.08:1

31-03-2015 185.6 210.22 0.88:1

 Chart :

Quick Ratio
1.4

1.2

0.8

0.6

0.4

0.2

0
2013 2014 2015

Quick Ratio

25
  Interpretation:-

The Above chart indicates the Decline trend from the F.Y.2013 to F.Y.2015. The
company’s Ratio is Declining but is above Standard level which means company’s Current
Assets is not stuck but also not fast moving. But overall trend shows declining which is not
good sign.

2] Profitability Ratio-

A) Related to Sales-

a) Operating Profit Ratio-:

Operating Profit Earnings Before Interest & Taxes X 100

Ratio = Sales

Sales

 Table a) :
(Rupees in Lakhs)

Earnings Before
Year Interest & Taxes Sales Ratio
31-03-2013 30.69 478.5 1.24:1
31-03-2014 57.68 656.64 1.08:1
31-03-2015 63.62 724.78 0.88:1

26
  Chart :

Operating Profit Ratio

0.1
8.74% 8.77%
0.08

0.06 6.41%

0.04

0.02

0 0
2013 2014 2015

Operating Profit Ratio

 Interpretation :

The Above Chart Shows that there was a continuous increase in the Ratio. That Means
the Ratio was Increased from 6.41% in FY 2013-14 to 8.77% in FY 2015-16. This is Due to
Increase in Sales and Also it shows that Company succeeded in controlling expenses.

b) Net Profit Ratio -:

Net Profit Net Profit X100

Ratio = Sales

27
  Table b) :

Year Net Profit Sales Ratio

31-03-2013 21.21 478.50 4.43%
31-03-2014 44.40 656.64 6.76%
31-03-2015 40.96 724.78 5.65%

 Chart :

Net Profit Ratio

0.08
0.07
0.06
0.05
0.04
0.03
0.02
0.01
0
2013 2014 2015

Net Profit Ratio

Interpretation :

The above chart indicates the Net Profit Ratio in 2012-13 was 4.33% which further
increases to 6.76% in FY 2013-14. Further it had fallen to 5.65% in FY 2013-14. That
means company suffers the losses after the FY 2014-15. In FY 2013-14 the net profit was
high to increase in the sales of the company.

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B] Related to Capital Employed -:

a) Return on Investment :

Return on Earnings Before Interest but AfterTax X 100

Investment = Total asset / Liability

 Table -:

(Amount in Lakhs)

EarningsBefore
Year InterestBut Total Asset/ Liability Ratio
After Taxes

31-03-2013 43.96 502.07 8.57%

31-03-2014 39.86 568.26 7.01%

31-03-2015 79.04 851.75 9.27

 Chart –

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 Return on Investment
Return on Investment

0.1

0.08

0.06

0.04

0.02

0
Year 2013 2014 2015

 Interpretation -:

It can be found that the return on Investment Ratio of Firm was increasing in 2013,
then slightly decreasing in FY 2014 and again it Increases in FY 2015.It Shows that in
FY 2014 Some ineffective decisions taken by Managers which Results in Decreasing
Ratio in FY 2014.

 TURNOVER RATIO -:

a) Inventory Turnover Ratio –

Inventory Turnover Net Sales

Ratio = Closing Stock

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  Table a) :

Year Net Sales Closing Stock Ratio

31-03-2013 478.5 98.4 4.86 times
31-03-2014 490.84 98.7 4.97 times
31-03-2015 555.3 150.13 7.91 times

 Chart -:

Inventory Turnover Ratio

9
8
7
6
5
4
3
2
1
0
Year 2013 2014 2015
Inventory Turnover Ratio

 Interpretation :

The above chart shows that the stock gets converted into cash was 4.86times, 4.97
times and 7.91 times in the FY 2013 to 2015 respectively. If we compared the figures of
sales and inventory of first two years, the level of inventory is almost same, but in the FY

31
2013and14 the sales was increased with low cost of inventory which implies the
management is successful to reduce the cost involved for management of inventory.

b) Receivable Turnover ratio -:

Receivable Turnover Credit Sales

Ratio = Average Debtors

 Table -:

Year Credit Sales Average Debtors Ratio

31-03-2013 249.34 50.12 4.97 times
31-03-2014 279.48 78.2 3.57 times
31-03-2015 358.82 55.54 6.46 times

 Chart -:

Receivable Turnover Ratio

7
6
5
4
3
2
1
0
Year 2013 2014 2015

Receivable Turnover Ratio

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 INTERPRETATION :

T h i s r a t i o i n d i c a t e s t h e a v e r a g e c r e d i t p e r i o d e n j o ye d b y
d e b t o r s . T h e above chart shows that the customers to whom the credit sales are
made pay 4.97times, 3.57times & 6.46 times in the FY 2013 to respectively.
In the FY 2014-15 THE DEBTORS TURNOVER RATIO was low which
indicates the absence of a strict credit policy and also point out that there
were delayed to recover the revenue from sales. This point out into the huge
block up of working capital in book debt.

It was high in FY 2015-16 i.e. 6.46 times which indicate prompt

payment on the part of debtors. Overall debtor’s turnover ratio was good.

c) Fixed Asset Turnover Ratio -:

Fixed Asset Net Sales

Turnover Ratio = Fixed Assets

33
  Table –

Year Net Sales Fixed Asset Ratio

31-03-2013 478.5 109.51 4.36 times
31-03-2014 656.84 139.46 4.70 times
31-03-2015 724.78 129.07 5.61 times

 Chart -:

Fixed Asset Turnover Ratio

6

0
Year 2013 2014 2015

Fixed Asset Turnover Ratio

 Interpretation -:

It indicates efficiency in the utilization of fix ed assets

like Plant and Machinery by Management.

From the above chart the fixed asset turnover ratio slowly
increases over period of time. From this we can say that a company
has been successful to manage and utilized its assets. Also a company
has been more effective in using the investment in fixed assets to
generate revenue.

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 d) Total Asset Turnover Ratio -:

Total Asset Net Sales

Turnover Ratio = Total Asset

Table :

Year Net Sales Fixed Asset Ratio

31-03-2013 656.84 502.07 1.30 times
31-03-2014 478.5 560.26 1.01 times
31-03-2015 624.78 351.75 1.54 times

 Chart -:

Total Asset Turnover Ratio

1.8
1.6
1.4
1.2
1
0.8
0.6
0.4
0.2
0
Year 2013 2014 2015

Total Asset Turnover Ratio

35
 INTERPRETATION -:

The total asset turnover ratio indicates the firm’s ability to generate sales from
all financial resources. From the above chart the total asset turnover ratio was
decreased from 1.3 times in FY2013-14 to 1.8 in FY 2014-15. The total asset turnover
of the company was 1.01 times implies that Firm generate a sell of Rs. 1.5 for one
rupee investment in fixed and current asset together.

 FINANACIAL RATIO :-

a) Stock Working Capital Ratio -:

Stock Working Stock

Capital Ratio = Working Capital

 Table -

Year Net Sales Fixed Asset Ratio

31-03-2013 188.1 256.23 73.38%
31-03-2014 180.45 220.56 81.81%
31-03-2015 178.3 205.23 87.86%

 Chart-:

36
 Stock Working Capital Ratio
1
0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
Year 2013 2014 2015

Stock Working Capital Ratio

 Interpretation -:

The above chart shows the continuous increase in the trend of the
ratio. T h e w e i g h t a g e o f s t o c k i n t h e c u r r e n t a s s e t s i s h i g h i n t h e
F Y 2 0 1 5 - 2 0 1 6 a s compare to other FY. That means there was a slow movement
of stock.

 FINANACIAL LEVERAGE RATIO :-

It indicates financial structure of the organisation that is proportion of debts

as compare to owner’s fund.
a) Debt Asset Ratio -:

 Table –

Year Debt Total Asset Ratio

31-03-2013 130.2 502.07 25.93%
31-03-2014 125.12 560.26 22.33%
31-03-2015 110.2 565.12 19.50%

37
  Chart-:

Debt Asset Ratio

0.3
0.25
0.2
0.15
0.1
0.05
0
Year 2013 2014 2015

Debt Asset Ratio

 Interpretation –

From the above chart the debt asset ratio was consistently decreased from 25.93%
in FY 2013-14 to 19.50% in FY 2015-16. That means at beginning creditors of
Firm bear the high risk than the other years.

b) Interest Coverage Ratio -:

Interest Coverage Earnings before interest and tax

Ratio = Interest

38
  Table -:

Earnings Before
Year Interest And Tax Interest Ratio
31-03-2013 280.3 85.1 3.29 times
31-03-2014 305.12 128.12 2.38 times
31-03-2015 275.2 112.5 2.44 times

 Chart -:

Interest Coverage Ratio

3.5
3
2.5
2
1.5
1
0.5
0
Year 2013 2014 2015

Interest Coverage Ratio

 Interpretation -:

From the above chart the trend of the ratio was decreased from
3 . 2 9 times in FY 2013-14 to 2.44 times in FY 2015-16. From this, it indicates that Firm is
trying to reduce its interest burden, which is good sign for both i.e. there,
creditors and Shareholders.

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 FINDINGS

1. The ideal current ratio is 2:1 which the firm obtains only in the FY 2013-14 it
shows the positive impact.

2. The ideal liquid ratio is 1:1 which does firm not obtain in any year, which is
not good sign.

3. The net profit ratio shows fluctuating trend, it shows that more or less the company is
successful to maintained efficiency in sales value and operating expenses.

4. The operating profit ratio is in fluctuating manner as 6.41%, 8.74%, and 8.77%
from FY 2013to FY 2015.

5. The return on investment ratio is increased in FY 2014 to FY2015 because both

the EBIT and total asset increased.

6. The company is maintaining the proper record of inventory. Management is successful to

manage the cost involved in inventory, because of increasing ratio of inventory.

7. The fixed asset turnover ratio of the firm is in increasing trend from the F.Y. 2013 to 2015,
means that the company is efficiently utilizing the fixed assets.

8. The proprietary ratio of the firm shows increasing trend, means that the long
term solvency of the firm is increased.

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9.The Firm borrowed loans in such a way that the cost of this debt
financing do not outweigh the return that the company generates on the
d e b t t h r o u g h i n v e s t m e n t a n d business activities And become too much for the
company to handle.

11. The Firm is far better in covering its fixed cost with the interest coverage ratio

12. The sales, profit before tax, profit after tax shows the increasing trend during
the period under review. It depicts that the company is working with more efficiency.

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 CONCLUSION

Finance is the lifeblood of every business. Without effective financial management

a company cannot in this competitive world. A Prudent financial Manager has to measure the
working capital policy followed by the company.

The Firm’s overall position is at a good position. Through the losses

were there in the FY 2013-14, they were able to come out of it successfully and regain into
profitable scenario. Particularly the last three year’s position is well due to
raise in the profit level from the FY 2013 to FY 2015. It is better for the firm to
diversify the funds to different sectors in the present market scenario.

On a whole Firm has once again demonstrated its potential to ride through the
difficult times. Also tried to improve their financial positions by taking corrective and
effective steps.

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 SUGGESSIONS

1. The Current Ratio of Firm was less than the standard in all Financial
Y e a r s . A low current ratio indicates that co will not be able to meet its short term debts.

2. Firm should look into its credit policies in order to ensure the timely
collection of imparted credit that is not earning interest for the firm.

3. There is decreasing trend in interest coverage ratio which is due to heavy investment
which further effect on the return on investment ratio. So Firm should
k e e p u p i t ’ s investment unto sufficient level.

4. The Firm should formulate the strategy to use the fixed assets more
effectively to generate more revenues.

5. Operating expenses should be especially considered to be reduced.

6. Inventory is the biggest item of balance sheet that must have

d e m a n d e d a l a r g e amount of maintaining cost. So there is need for efficient Inventory
Management.

7. There should be efficient utilization of shareholder fund to increase

r e t u r n o n investment and return on equity to maintain its goodwill in investors mind.

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 BIBLIOGRAPHY

 Financial Management: M Y KHAN AND P K JAIN Fifth Edition

 FINANCIAL MANAGEMENT - I. M. PANDEY

 Financial Management (BMS): MR. Kale.

 Quantitative Methods For Banking & Finance : A S Ramsastri

 Public Finance : S N Chand

 Fundamental of Financial Management : Khan

 Annual Reports of the Sinhassane Hrishikesh & Co.

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