A

Financial Analysis Report on

ELECON ENGINEERING COMPANY LIMITED.

2009-10

SUBMITED TO :-
B.W.T.INSTITUTE OF BUSINESS
ADMINISTRATION.
ASHRAM ROAD;
AHMEDABAD.

SUBMITED BY :- JOSHI ARJUN U.

Sy.BBA(a)

ROLL NO :- 2045 ( TWO ZERO FOUR FIVE )

Page 1 of 47
PREFACE,

According to me, management education may be

divided into two broad categories, theory and
practical. The more emphasis should be on practical
portion of management theory is same everywhere
least nor practice what makes organizations different
from each other.

Management education seeks to accomplish several

objectives simultaneously. One is to set of concept
so that student can understand the framework in
which business decisions are made. The second is to
operational those concept with specific tools of
analyze. Industrial training is also one of the tools.

I and other students were got very well and greatest

chance to make a finance report in my Second year
of B.B.A. I got guidance with my friend s which is
very helpful to me.

This was a good chance to acquaint myself with

various corporation functions. I have tried my level

Page 2 of 47
best to comprehend all these aspects of in this
project.

Joshi Arjun .u
S.Y.BBA <A>
2045

AKNOLEDGEMENT,

I become so much happy to prepare the report of

finance during S.Y.B.B.A. session. In preparing report
my professors have helped me and give their
guidance to me.

I specially thanks to all of them who have helped me

and give me guidance to preparing the finance
report on elecon ltd.

I and all the students thankful to Mrs. Pallvi oza for

their guidence and give us confidence to prepare a
very well report .

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I really want to tell them who help me lot and give
me confidence to done this wonderful act of MY Life.

Special thanks to you.

JOSHI
ARJUN .U
S.Y.BBA <A>
2045

INDEX
SR.NO PARTICULARS PAGE
. NO.
PART-1 INTRODUCTION
1 COMPANY INFORMATION:-
1.1 Name of the company
1.2 Registered office of the company
1.3 Brief introduction of the activity of the
business
1.4 Achievements
1.5 Gear division
1.6 Growth drivers
1.7 Board of the directors
PART-2 THEORY
1 THEORY ON RATIO ANALYSIS:-
1.1 Meaning of ratio analysis
1.2 Advantages of ratio analysis
1.3 Disadvantages of ratio analysis
1.4 Types of ratio analysis

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2 COMMON SIZE STATEMENT:-
2.1 Meaning of common size statement
2.2 Usefulness of common size statement

3 CASH FLOW ANALYSIS:-

3.1 Meaning of cash flow analysis
3.2 Usefulness of cash flow analysis

PART-3 PRACTICAL
1 SPREAD SHEET
2 PROFIT & LOSS A/C
3 COMMON SIZE STATEMENT
4 CASH FLOW STATEMENT
5 CALCULATION OF RATIOS
2.1 Current ratio
2.2 Current ratio
2.3 Debtors turnover ratio
2.4 creditors ratio
2.5 Interest courage ratio
2.6 Gross profit ratio
2.7 Net profit ratio
2.8 Return on total assets ratio
2.9 Debt equity ratio
2.10 Return on capital employed ratio
2.11 Administrative expenses ratio
2.12 Selling expenses ratio
2.13 Return on share holder’s equity
2.14 Price earnings ratio
2.15 Dividend payout ratio
2.16 Stock turnover ratio
2.17 Proprietary ratio
2.18 Liquid ratio
2.19 Fixed assets turnover ratio

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 2.20 Debtors ratio
2.21 Creditors turnover ratio
2.22 Dividend per share ratio
6 CONCLUSION
7 BIBLIOGRAPHY

Part -1
Introduction of company:-

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1.1 Name of the company: ELECON ENGINEERING COMPANY
LIMITED
1.2 Registered address of the company:ANAND-SOJITRA ROAD,
VALLABH VIDHYANAGAR – 388 120
GUJARAT, INDIA.

1.3 Brief introduction of the activities of the business:

Elecon Engineering is one of the India’s leading manufacturers of

power transmission and material Handling Equipment with technology
based products and solution deployed across a wide range of industrial
application ranging from defense, mining power generation, plastic,
sugar and cement amongst others applications across the world.

Elecon strategy for long term growth is based on customer driven

focus and global mindsets.

INDUSTRY FIRSTS IN INDIA

First company in India to design, build and erect a Stacker Recamier at

Santaldih PowerStation.

First company in India to design, build and erect a Barrel Reclaimer at

Bukaro Steel. From elevators and conveyors to full blown bulk material
handling solution, Elecon has moved up the value chain. Over the

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years Elecon has supplied hi-tech. Material handling equipment to core
industry sectors in steels, fertilizers, cement , power, coal, lignite and
iron ore Mines and Port Mechanization across the globe.

BIRD’S EYE VIEW ON ELECON GEAR DIVISION

They are creating opportunities to expand their potential. They foster

learning and skill development at every level and encourage exchange
of ideas within the enterprise. They are developing and aptitude for
excellence and an attitude that drives continuous improvement.

MANUFACTURING STRENGTH

The division has manufacturing facility spread over 1, 17,000sq. mts.,

housing CNC machine tools for manufacturing and state of the arc test
equipment for quality control.
Have the technology and experience to design, build and
erect robust reliable Material Handling solution for driver’s industrials
segments.

ACHIEVEMENTS

Order worth Rs. 2370 mn from NTPC LTD. for their NCTPP, Dadri stage-
II, and thermal power plant.

Order worth Rs. 3790 mn from Damodar valley corporation, Kolkata for
their Mejia Plant.

Order worth of about Rs. 1541 mn from steel authority of India Ltd.,
Buranpur, W.B. for supply and erection of equipment for expansion of
IISCO Steel plant –RMHS- Yard machines.

Order worth Rs. 524 mn from GIPCL from design, engineering supply,
civil structure, and erection and commissioning of mechanical
equipment for lignite stone handling system.

Order worth Rs. 371 mn from Sican Iron Ore Terminals Ltd., Chennai
for wagon tippler ship Loader and stacker Reclaimer.

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Investment in mining and power generation are expected to pick-up in
tandem with implementation of Mega power projects in the country,
thus creating a strong demand for bulk material handling solution.

The mushrooming scenario in the Indian infrastructure sector and fast

paced development initiated by the government in Power, Steel, Coal,
Ports and other industries has helped increased revenue for the MHE
division.

GEAR DIVISION

Elecon is Asia’s largest manufacturer of industrial gears and was the

first company in India to introduce modular design concept case
hardened and ground gear technology. Elecon is the gear supplier of
choice to core sector like Sugar, Cement, Steel, Fertilizer, Plastic
Extrusion and rubber. Elecon was the first industrial gear manufacturer
in India to achieve ISO – 9001 in 1994 and again the first to achieve
ISO- 9001:2000 in 2001.

GROWTH DRIVERS

Capacity augmentation and modernization projects by heavy

engineering industry.

Growth in exports and introduction of import situation products.

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Page 10 of 47
Page 11 of 47
SALE’S OF COMPANY INDUSTRY WISE

ORDER BOOK OF COMPANY INDUSTRY WISE

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Page 13 of 47
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Page 15 of 47
CHAPTER-2
Theory on ratio
analysis:-

THEORY ON RATIO ANALYSIS

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MEANING:-
“Ratio analysis is a process of comparison of one figure against
another and the interpretation of the ratios to know the strength and
weakness of the firm’s operations of its financial position.”

IMPORTANCE (ADVANTAGES) OF RATIO ANALYSIS:-

The use of ratio was started by banks for ascertaining the liquidity and
profitability of companies’ business for the purpose of advancing loans
to them profitably. Now even the investors calculate ratios from the
published accounts of the company in order to have an idea about the
solvency and profitability of the company before investing their
savings. The ratio analysis provides useful data to the management,
which would help them in taking important policy decisions. Diverse
groups of people make use of ratio, to determine a particular aspect of
the financial position of the company, in which they are interested.
(1) Profitability: -
Useful information about the trend of profitability is available from
profitability ratio giving a good idea of the business. On the basis
these ratio management gets an idea about the efficiency of
managers and bank as well as other creditors draw useful conclusion
about repaying capacity of the borrowers.
(2) Liquidity:-
The use of ratio was made initially to ascertain the liquidity of
business. The current ratio, liquid ratio and acid test ratio will not
whether the business will be able to meet its current liabilities when
they mature. Banks and other lenders will be able to conclude from
the ratios whether the firm will be able to pay regularly the interested
and loan installment.
(3) Efficiency:-
The turnover ratios are excellent guides to measure the efficiency of
managers e.g. the stock turnover ratio will indicate how efficiency the
sales is being made, the debtors turnover ratio will indicate the
efficiency of collection department and assets turnover shows the
efficiency with which assets are used in business. All such ratios
resulted to sales presents a good picture of the success or otherwise
of the business.
(4)Inter Firm comparison:-
The absolute ratios of a firm are not of much use unless they are
compared with similar ratio of other firms belonging to the same
industry. This is inter firm comparison, which the strengths and
weakness of the firm as compared to other firms and will indicate
corrective measures.

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(5) Indicates Trend:-
The ratio of the last three to five years will indicate the trend in the
respective fields. For example, the current ratio of a firm is lower than
the industry average, but if the ratios of the last five years show an
improving trend, it is an encouraging trend. Reverse may also be true.
A particular ratio of a company for one year may compare favorably
with industry average, but its trend may show a deteriorating position,
which is not desirable. Only ratio analysis provides this information.
(6) Useful for Budgetary control:-
Regulatory budgetary reports are prepared in a business were the
system of budgetary control is use. If various ratios are presented in
these reports, it will give fairly good idea about various aspect of
financial position.
(7)Useful for decision making:-
Ratios guide the management in making some of the important
decision. Suppose the liquidity ratio shows unsatisfactory position, the
management may Deeside to get additional liquidity. Even for capital
expenditure decision, the ratio of return on investment will guide the
management. The efficiency of various departments can be judge on
the basis of their profitability ratio and efficiency of each department
can thus be determined.
DISADVANTAGES OF RATIO ANALYSIS:-

(1) Single year’s ratios have limited utility:-

The utility of ratios computed from the financial statement of one year
only is obviously limited. They must be compared with the past result
of the company as also with the result of other business firm in the
same industry.

(2) Other factor must be considered:-

While comparing ratio of deferent firms, it must be remember that

deferent firm follow deferent accountancy plans and policies. Hence
great care has to be exercised before any conclusions are drawn from
such comparison.
(3)Limited utility of historical ratios:-

While comparing ratios of past several years, it should be remembered

that changes in price level may render such comparison useless.
TYPES OF RATIO:-

➢ TRADITIONAL CLASSIFICATION:

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The ratio is grouped into three categories on the basis of the
statements from which the figures are taken for computing the ratios.
It is well known traditional classification and has been so grouped
since the advent of ratio analysis. The ratio according to this
classification is:
1) : REVENUE STATEMENT RATIOS:-

These are the ratios computed on the basis of the items taken from
revenue statement i.e. Profit & loss account e.g. Net profit ratio is
computed by dividing Net Profit by sales.
Here both net profit and sales are items appearing on Profit & loss
account.

2) BALANCE SHEET RATIO:

When two items are or groups of items appearing in the balance sheet
are compared in the ratio, is a balance sheet ratio. E.g. A ratio
establishing a relationship between current asset and current liabilities
is a balance sheet ratio.
3) COMPOSITE RATIO:

A ratio showing the relationship between one item taken from balance
sheet and another from profit and loss a/c is a composite ratio or
combined ratio known as balance sheet and revenue statement ratio.
A return on capital employed shoes the proportion of net profit to
capital employed and it is a composite ratio.

➢ FUNCTIONAL CLASSIFICATION:

Ratios are also grouped in accordance with certain test. On the

basis there are four categories of ratios.

i) LIQUIDITY RATIOS:
These ratios indicate the position of liquidity. They are computed to
ascertain whether the company is capable of meeting its short term
obligations from its short term resources. For example, current ratio
shows the capacity of a firm to meet its current liability as and
when they mature. For example, (I) Current Ratio (ii) Liquid Ratio
(iii)Acid-test Ratio.

ii) PROFITABILITY RATIOS:

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 A number of ratios are designed to indicate the profitability of the
business and are grouped into a category of profitability ratios. For
example, Return on capital employed is an example of profitability
ratio. E.g. (I) Expenses ratio (ii) Operating ratio (iii) Gross profit
ratio(iv) Net profit ratio (v) Return on capital employed (VI) Return
on Shareholder’s Funds, (vii) Debt Coverage Ratio.

iii) LEVERAGE RATIOS:

The composition of capital of business and the proportion of
owner’s capital and capital provided by outsiders are reflected by
leverage ratio. For E.g., gearing ratio, showing the relationship
between the preference capital and ordinary capital is a leverage
ratio. For
e.g., (i) Proprietary ratio (ii) Debt equity ratio (iii) Gearing ratio
(iv)Fixed capital to fixed assets ratio.

IV) ACTIVITY OR EFFICIENCY RATIOS:

These are the ratios showing the effectiveness with which the
resources of the business are employed. It signifies the efficiency of
the management. For e.g. stock turnover is an activity ratio, showing
the no of times the average stock is turned over during the year. E.g.
Debtors ratio or debtor’s turnover ratio, creditor’s ratio or creditor’s
turnover ratio, total assets turnover and fixed assets turnover ratio
etc.

THEORY OF COMMON SIZE STATEMENT:-

INTRODUCTION:-
Financial statements when read with absolute figures are not easily
understandable sometimes they are even miss-leading. It is therefore,
necessary that figures reported in these statements should be
converted into percentage to some common base. In profit and loss
account sales figures are expressed as percentage of sales. Similarly,
in balance sheet the total of assets or liabilities is taken as 100 and all
figures re-expressed as percentage of the total. This type of analysis is

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called vertical analysis. This is a static relationship because it is a
study of relationship existing at a particular date. The statements so
prepared are called common size statement.
MEANING:-
There is not any financial statement which would provide any common
base with which all items in each statement can be compared. For this
purpose common size statements are prepared in which all items are
compared with one common item, which is significant. The significant
item would be considered here as 100% & all other related items are
rated on the bases of this significant item. Therefore the common size
statements are sometimes known as “100 per cent statements”.
There are two types of common size statements prepared:-
(1) Balance sheet as common-size statement,
(2) common-size profit & loss a/c.

UTILITIES OF COMMON-SIZE STATEMENTS:-

The common size statement gives useful proportions of each
component to the total. But they are not of each use, as they do not
give information about the trends of individual items from year to
year. They must be used along with trend percentages & individual
items from year to year. They must be used along with trend.
However, common-size statement are found to be very useful for
comparison of two business enterprises at a certain data e.g. the
common-size balance sheet of a company reveals that its owned funds
are 65% & outside liabilities are 35%. The common- size balance sheet
of other company shows that its owned funds are 48%, while its
outside liabilities are 52%. The comparison makes it clear that the first
company is financially sounder that the other one, as it mainly
depends upon its own funds for carrying on the business, while the
other company carries on its activities chiefly with the help of outside
funds.

THEORY OF CASH FLOW ANALYSIS:-

MEANINGS:-
“Cash flow statement is a historical statement which shows that what
the cash inflow was and cash outflow during the last year what was
the actual cash balance on hand at the end of last year.”

UTILITIES OF CASH FLOW STATEMENT:-

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(1)EFFICIENT CASH MANAGEMENT:-
If the finance manager has clear idea if cash receipts and payments,
cash resources can be efficiently managed. If the cash payments are
planned at a time, when enough cash inflow is likely, it is possible to
manage business with minimum of working capital.

(2)USEFUL FOR INTERNAL FINANCIAL MANAGEMENT:-

The management can plan out payment of dividend, repayment of
long term loans, and purchase of machine or equipments.

(3)INFORMATION ABOUT CASH RECEIPTS AND PAYMENTS:-

Such a statement will give information about the trend of cash receipts
and payments. Such information is useful to the management in
meeting any future contingencies and also I seizing any profitable
opportunity.

(4)USEFUL FOR CONTROL:-

The historical cash flow statement prepared for last year is useful for
comparing the figures of cash budgets and points of differences may
be located. This facilities managerial control on the use of cash.

(5) EASE IN OBTAINS FUNDS:-

By comparing the figures of cash flow statement and cash budgets,
the cash planning and control becomes more effective. Liabilities are
easily paid as when they mature and this improves the prestige of the
firm in the market.

PART – 3
PRACTICAL

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SPREAD SHEET,

(RS. IN LACKS)
PARTICULARS 2006- 2007- 2008-
2007 2008 2009
[1] Equity share capital 6818.47 1857.23 1857.23
+ Reserve & Surplus 18171.90 21815.39 25862.77

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Net worth 18790.37 23672.62 27540.00
Long term loan

(A) Working capital 21876.05 23334.78 32295.72

demand loan
(B) Term loan 4098.04 8624.60 19962.87
(A) HDFC Bank loan(fully 224.00 - -
report)
(B) Bharat overseas bank 403.00 - -
Hypothecation from other 126.60 131.68 102.33
bank
26727.69 32091.06 -
=>Short term loan
[1] HDFC bank (fully paid) 432.84 -
HDFC bank - 1203.00 -
(repayable)
ING vysya bank - 1000.00 -
Centurion bank of - 1017.51 -
Punjab
Standard chartered - 1180.00 1180.00
bank
AXIS bank - 3000.00 -
Inducing bank - 507.59 4234.65
Loan and advances from 1043.71 926.93 1430.87
others
Interest accrued and due on 28.49 - 1.76
above
1505.04 8835.03 6847.28
Assets
Fixed assets 12673.75 19306.74 31101.93
Current assets 61675.18 81990.25 101932.7
Net assets 74348.93 101296.9 133034.63
9
- Liability 25558.94 35003.64 43177.28
48789.99 66212.35 89857.35

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PROFIT & LOSS A/C
(RS. IN
LACKS)
PARTICULARS 2006- 2007- 2008-
2007 2008 2009
Income
Sales 75995.82 83209.29 86538.48
-Excise duty 9349.28 10141.71 7577.16
Net sales 66646.54 73067.58 78961.32
Income From Operation
Net sales 66646.54 73067.58 78961.32
+Erection & Other charges 5417.98 9575.93 16545.16
72064.72 82643.51 85506.48
Other Income 823.65 978.66 957.72
139534.71 156689.7 86464.2
5
Expenditure
Cost of goods sold
Building 319.14 317.85 200.85
Materials 433.86 536.78 646.98
Salaries & Wages 2241.33 2756.75 3735.40
Contribution to provident 116.21 129.26 154.25
fund
Employees Welfare expenses 199.71 303.74 162.72
Employees retirement 151.36 238.00 330.85
benefits
3461.61 4282.38 5231.05
Interest
On fixed period loan 338.87 631.57 1064.82
On working capital 1304.17 1532.23 3110.96
On Others 293.31 578.86 611.02
1936.35 2742.66 4836.80
Selling Expenses
Traveling Expenses 193.96 340.62 343.56

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Packing ,forwarding & 713.13 866.08 600.27
distribution expenses
Commission & brokerage 3246.49 3607.93 4219.48
Bad debts written off 976.07 779.31 588.26
Liquidated damages 335.97 890.46 395.32
Advertisement & Sales 213.29 471.46 411.14
Promotion Expenses
Donation 71.43 47.93 443.64
5750.34 6993.94 7001.67
Administrative Expenses
Other Expenses 63.88 50.27 62.34
Insurance 109.67 104.57 134.91
Bank charges 520.58 605.55 912.59
Directors fees 7.85 9.00 7.20
Rectification Expenses 72.63 56.08 51.30
Payment to Auditors 13.33 15.43 21.21
Lease Rentals 9.28 37.58 443.64
Royalty paid - 31.11 13.73
Technical Inspection Fees 14.72 18.77 1.81
Other professional fees 342.14 489.84 900.85
General Administrative 568.24 502.99 769.58
Charges
1722.33 1921.29 3319.16
General Expenses
Rent 8.60 28.01 8.03
Computer software charges 94.53 140.27 165.69
Rates & taxes 219.87 229.33 141.28
Excises duty 285.86 122.92 149.56
658.86 520.53 464.56
Profit before tax 9867.91 8810.03
Profit after Tax 6720.42 5745.12
Dividend per share 17.00 17.00 71.77
Earnings per share 2.00 2.00 6.19

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PROFIT AND LOSS A/C to find out EPS:

(RS. IN
LACKS)
N Particular 2007 2008 2009
O
1 INCOME:
Sale & Service 75995. 83209.2 86538.
+ Other income 82 9 48
(-) Excise duty 823.65 978.66 957.72
(9349.2 (10141.7 (7577.1
NET INCOME 8) 1) 6)

67470. 74046.2 79919.

19 4 04

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 2 Calculation of COGS
Sales 66646. 73067.5 78961.
(-)gross profit 54 8 32
5490.3 6720.42 5745.1
0 2

TOTAL AMOUNT
66347.1
MONTH HIGH LOW VOLUM HIGH LOW VOLUM
61156. 6 73216.
E E
24 20
April-2008 200.00 166.4 172185 200.9 166.1 200759
0 0 5 5 3
May-2008
INTEREST 171.95 122.0 303541
1936.3178.4 121.9 4836.8
352688
3 2742.66
0 4 5 0 9867.91
0
4 Profit before Tax 0 0
Jun-2008 127.00 90.10 315968
8440.7125.7 91.15 8810.0
284068
5 Profit After Tax 5 5 0 6720.42 3 3
July-2008 105.00 80.15 167418 104.8 78.50 179434
EPS 3 5490.30 7.24 9
5745.1
August-2008 128.30 88.50 675072
0 128.5 88.95 2 753197
8 0 3
September- 124.30 84.25 136819
6.36 124.3 85.00 6.19149169
2008 7 0 4
October-2008 93.00 36.25 203363 94.90 36.00 244620
3 6
November- 51.45 34.15 176965 94.90 34.10 459262
2008 5 8
December-2008 40.90 29.50 322976 39.90 29.50 292281
1 8
January-2009 46.10 34.00 185754 46.40 34.15 165797
1 4
February-2009 37.60 28.75 110901 46.40 28.70 266062
5 1
March-2009 32.45 23.85 262245 32.35 23.75 314317
7 1

STOCK MARKET DATA:-

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COMMENTS:-
Given above is the upper lower situation of the share market and stock
market of the Elecon co. ltd. In given situation data is given last 1
year. And the price on given y axis and the month is given x axis. The
NSE sensex April 2008 is 200 and it is also March 2009 is 32.45 in high
level. In low level situation the stock market data is April 2008 is
166.40 and March 2009 is 23.85.
The NSE sensex of high level is in April 2008 is 200.95 and March 2009
is 32.35 and low level situation market data is in April 208 is 166.15
and March 2009 is 23.75. So the stock situation is as also good.
(4) COMMON SIZE STATEMENT OF BALANCE SHEET:-

COMENTS:
The balance sheet shows the percentage of each liability to the total
liability and capital. Such percentages give only the change in
proportion of one item to one main item like sales or total assets. But
it fails to indicate whether the financial position or performance over a
period of some years is improving or deteriorative.
Here, in this case, the proportion of fixed assets to total assets in
2006-07, 2007-08, and 2008-09 is 29.12%, 25.95% and 34.55%
PARTICULARS 2006-2007(%) 2007-2008(%) 2008-2009(%)
share capital 1.27 2.8 2.06
res & surplus 37.21 32.9 28.54
secured loan 54.73 48.4 58.16
unsecured loan 3.35 13.32 7.06
deferred tax 3.59 2.81 3.64
liability
Total 100 100 100
APPLICATION OF
FUND:-
fixed assets 29.12 25.95 34.55
Investment 1.43 1.65 1.21
current assets 122.1 124.65 112.02
differed exp. 0.14 0.09 0.19
152.79 152.34 147.97
(-)current liability 52.79 52.34 47.97
100 100 100

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respectively. The proportion of current assets to the total assets for
the same three years is 122.1%, 124.65% and 112.02%. There is a
continually rise in fixed assets this is showing good position of the
company. The proportion of current liabilities to total is 52.79%,
52.34& and 47.97% respectively. The proportion of share capital to
total for the three consecutive years is 1.27%, 2.6% and 2.06%
respectively.
COMMON SIZE STATEMENT OF PROFIT & LOSS A/C:-

PARTICULARS 2006-07(%) 2007-08(%) 2008-09(%)

Income:-
Net sales 91.44 87.38 81.66
Erection and 7.43 11.45 17.15
other charges
Other income 1.13 1.17 0.99
100 100 100
Expenditure:-
Consumption of 77.65 81.22 84.13
material
Power 0.97 0.92 0.81
Employees 4.22 4.65 5.00
Administrative 13.76 13.95 14.05
Interest 3.02 3.72 5.52
Depreciation 1.90 1.93 2.53
101.52 106.39 112.04
(-)decreasing 1.52 6.39 12.04
stock
100 100 100

COMMENTS:-
The balance sheet shows the percentage of each liability to the total
liability and capital. Such percentages give only the change in
proportion of one item to one main item like sales or total assets. But
it fails to indicate whether the financial position or performance over a
period of some years is improving or deteriorative.
Here, in this case, the proportion of net sales to total sales in 2006-07,
2007-08, and 2008-09 is 91.44%, 87.38% and 81.86% respectively.
The proportion of other income to the total income for the same three
years is 1.13%, 1.17% and 0.99%. There is a continually rise in total

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 income this is showing good position of the company. The proportion
of c0nsumption of the material to total is 77.65%, 81.22& and 84.13%
respectively.

CASH FLOW STATEMENT

(4) CASHFLOW STATEMENTS:-
(RS. IN LACKS)
2007 2008 2009
particulars amount amount amount amount amount Amount

1)Net profit before interest 10391.86 12628.50 13675.37

and tax, extra ordinary
items & profit on loss of
assets and investments
2)Adjustment for :
-depreciation 1419.80 1222.30 2214.71
-interest income (79.87) (190.94) (534.64)
-dividend income (87.76) (60.20) (71.77)
-gratuity - - 201.38
971.16 1252.37 1809.68
Operating profit before 11363.02 13880.87 15485.05
working capital changes
3)adjustment for working
capital changes
-trade & other receivables (17380.99) (10433.01) 2058.03
*trade receivables (901.26) (1559.37) (930.12)
*loan & advances
-trade & other payables
*trade payable 5114.42 7130.70 641.58
*advances (1330.94) 641.15 7384.34
-inventories (505.14) (8364.62) (14814.
29)
(15003.91 (12585.15 (5660.4
) ) 6)
CASH GENERATED FROM
OPERATIONS

(3640.79) 1295.72 9824.59

4)LESS: direct taxes paid
(2519.40) (3242.13) (2587.9
2)
(2519.40) (3242.13) (2587.92
)

Page 31 of 47
ADD: prior period
adjustment (0.74) - -
NET CASH BEFORE (6161.03) (1946.41) 7236.67
EXTRA ORDINARY ITEMS
5) Deferred exp. (51.92) (75.11) (111.62)
- technical knowhow fees

NET CASH FLOW FROM

OPERATING (6212.95) (2021.52) 7125.05
ACTIVITIES(A)
(B)CASH FLOW FROM
INVESTING ACTIVITIES
-Purchase of fixed assets (4431.39) (8193.85) (14017.
-sales of fixed assets 272.05 144.38 74)
-purchase of investment 18.17
-sales of investment (175.30) (141.58)
-return of share application - 91.45 (141.25)
of money 1 0.99
-interest income 1.11 -
-dividend income 190.94 79.67 -
60.20 87.76 534.64
71.77
NET CASH FLOW FROM (4082.39) (7932.16) (13533.4
INVESTING ACTIVITIES(B) 2)
(C) CASH FLOW FROM
FINANCING ACTIVITIES
-issued of equity capital 3577.10 45.28 -
-proceeds from long term
borrowings 4986.09 8229.08 16300.2
-repayment against long 6
term borrowings (6667.77) (2635.03)
-proceeds from other (4487.3
borrowings 10176.12 23219.02 9)
-repayment against other
borrowings (695.01) (16221.18) 39731.4
-interest paid (1934.44) (2665.49) 5
-dividend paid (341.54) (541.67)
(33263.
97)
(4900.7
3)
(1617.6
2)
NET CASH FLOW FROM 9100.55 9430.01 11762.0
FINANCING 0
ACTIVITIES(C)
(D)EQUIVALENT (1194.79) (523.66) 5353.63
CASH(A+B+C)
(E)CASH EQUIVALENT 2470.69 1275.90 752.24
(F)CASH 1275.90 752.24 6105.87
EQUIVALENT(D+E)

TYPES OF RATIOS
[1] CURRENT RATIO :- ( WITH LOAN AND ADVANCE)

Page 32 of 47
 ⇒ DEFINITION :-
⇒ This ratio shows the proportion of current assets and current
liability. It is a measure of working capital available at a
particular time. This ratio obtained by dividing current assets by
current liabilities. The ideal standard for this ratio is 2:1
⇒ FORMULA :-
CURRENT RATIO = CURRENT ASSETS
CURRENT LIABILITIE
⇒ PARTICULARS
(Rs. In Lacks)
YEARS 2006- 2007-2008 2008-2009
2007
CURRENT ASSETS 60871.21 80963.70 100845.90
CURRENT 25558.94 35003.64 43177.28
LIABILITY
RATIO 2.38 2.31 2.34

CHART

⇒ COMMENTS :-
⇒ This implies that the company is having enough working capital
to meet the short term liabilities which can be considered well
enough for the company. It is generally believed that 2:1 current
ratio shows a comfortable working capital position. Here, in
2006-07 it is 2.38 and in 2007-2008it is slightly decrease and
reach 2.31 and in 2008-09 it is increases 2.34 this ratio is quite
satisfactory in three years.

[2] CURRENT RATIO :- ( WITHOUT LOAN AND ADVANCE )

⇒ DEFINITION:- As Given above.

⇒ FORMULA:-

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITi
⇒ PARTICULARS:
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
CURRENT ASSETS 75244.22 93354.11 56970.24
CURRENT LIABILITIES 30785.94 38556.82 24473.56
RATIO (IN:1) 2.44 2.42 2.33

Page 33 of 47
⇒ CHART :-

⇒ COMMENTS :-
From the above data we can say that there is not any big change in
the ratio. This implies that the company is having enough working
capital to meet the short term liabilities which can be considered well
enough for the company. It is generally believed that 2:1 current ratio
shows a comfortable working capital position. Here, in 2006-07 it is
2.44 and in 2007-2008it is slightly decrease and reach 2.42 and in
2008-09 decreases 2.33 this ratio is quite satisfactory in three years.

[3] DEBTORS TURN OVER RATIO:

⇒ DEFINITION:-
⇒ The debtor’s turnover suggests the number of times the amount of
credit sale is collected during the year. This ratio is computed by
dividing the credit sale by average debtors. Average debtors can
be obtained by adding opening debtors and closing debtors and
dividing them by two.

⇒ FORMULA :-

DEBTORS TURNOVER = CREDIT SALES

DEBTORS

⇒ PARTICULARS:
(Rs. In Lacks)
YEA RS 2006-2007 2007-2008 2008-2009
CREDIT SALES 75995.82 83209.29 86538.48
DEBTORS 38798.60 49231.61 41173.58
RATIO(IN TIMES) 1.96 1.69 2.10

⇒ CHART:

⇒ COMMENTS:-
⇒ The higher the debtor turnover or shorter is the collection period
the better is the credit management of the firm. It implies better
liquidity as debtors make prompt payment. Longer collection
period reflects poor credit policy and very short period shows not
desirable. it reduce sales in 2006-2007 it is 1.96 and decreasing in

Page 34 of 47
 2007-2008 reach at 1.69 and finally it increase in 2008-2009 and
reach at 2.10 it is quite satisfactory.

[4] CREDITORS TURN OVER RATIO:

⇒ DEFINITION:-

⇒ The creditor’s turnovers suggest the number of times the amount

of credit purchase is collected during the years. This ratio is
computed by dividing the credit purchase by average creditors.
Average creditors can be obtaining by adding opening creditors
and closing creditors and dividing them by two.
⇒ FORMULA:

CREDITORS TURNOVER = CREDIT PURCHASE

CREDITORS
⇒ PURTICULARS:
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
CREDIT PURCHASE 49862.03 59903.12 73747.08
CREDITORS 20395.53 27526.23 28167.81
RATIO(IN TIMES) 2.44 2.18 2.62

⇒ CHART:

⇒ COMMENT:-
⇒ The ratio suggests number of day with in which we make payment
to hour creditor for credit purchase. In 2006-2007 it is 2.44 and it
is increasing 2007-2008 at 2.18 and last in 2008-2009 it is 2.62 it
is desirable for our side.

[5] INTEREST COVERTAGE RATIO

⇒ DEFINATION:-
⇒ The ratio indicates as how many times the profit covers the
payment of interest on debenture & other long term loans. Hence
it is known as “Time –interest earned ratio”. It measures the debt
service capacity of the firm with respect to fixed assets on long
term debts.

⇒ FORMULA:

INTEREST COVERAGE RATIO = PROFIT BEFORE INTEREST & TAX

Page 35 of 47
 INTEREST

⇒ PURTICULARS:
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
PROFIT BEFORE INTEREST 8440.75 9867.91 8810.03
& TAX
INTEREST 1936.35 2742.66 4836.80
RATIO (IN TIMES) 4.36 3.60 1.82

⇒ CHART:

⇒ COMMENT :-

⇒ The ratio indicates as to how many times the profit covers the
payment of interest on debentures and other long term loan. In
2006-2007 it was 4.36 and it is decreasing 2007-2008 and 2008-
2009 respectively 3.60 and 1.82 in all three year it is decreasing
trend it is not desirable to meet financial strength of the company.
[6] GROSS PROFIT RATIO :
⇒ DEFINITION :-
⇒ It is ratio expressing relationship between gross profits earned to
net sales. It is useful indication of the business. This ratio usually
expressed as a percentage. If this ratio is high it indicates that
cost of sales is low and if this ratio is low that the cost of sales is
high.
⇒ FORMULA :-

⇒ GROSS PROFIT RATIO = GROSS PROFIT X 100

SALES
⇒ PARTICULARS :-
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
GROSS PROFIT 75995.82 83209.29 86538.48
SALES 72534.21 78926.91 81307.43
RATIO (IN %) 95.44 94.85 93.96

⇒ CHART:

⇒ COMMENT :-

⇒ Here there is high ratio in 2006-2007 is 95.44 so it is good mark of

the management of the company. It means there is low production

Page 36 of 47
 cost. But from 2007-2009 it seems to be decreasing which can be
debatable issue.
[7] NET PROFIT RATIO :
⇒ DEFINITION :-
⇒ This ratio is valuable for the purpose of ascertaining the overall
profitability of business and shows the efficiency of operating the
business. It is the reverse of operating ratio. This ratio indicates
what portion of sales revenue is left to the proprietors after
operating expenses are met.
⇒ FORMULA :
NET PROFIT RATIO = NET PROFIT AFTER INTEREST & TAX
X 100
SALES
⇒ PARTICULARS :
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
NET PROFIT 5490.30 6720.42 5745.12
SALES 75995.82 83209.29 86538.48
RATIO (IN %) 7.22 8.08 6.64

⇒ CHART :

⇒ COMMENTS :-
⇒ The above picture implies that the efficiency of profit earning of
the company is decreasing at an increasing rate as the net profit
ratio is decreasing from 12.50 % to 10.84 % for the last three
years. Here the profitability of the company seems to be
diminishing.
[8] RETURN ON TOTAL ASSETS RATIO :-
⇒ DEFINATION :-
⇒ The return on total assets implies how the funds supplied by both
owners and creditors are utilized in business. Thus it measures the
overall profitability of business.

⇒ FORMULA :

RETURN ON TOTAL ASSETS = PROFIT AFTER TAX + INTEREST

X 100
TOTAL ASSETS
⇒ PURTICULARS :
(Rs. In Lacks)
YEARS 2006-2007 2007- 2008-

Page 37 of 47
 2008 2009
PROFIT AFTER TAX + 7426.65 9463.08 10581.92
INTEREST
TOTAL ASSETS 48833.26 66309.47 90026.23
RATIO (IN % ) 15.21 14.27 11.75

⇒ CHART :-

⇒ COMMENT :-
⇒ The return on total assets measure overall profit ability of
company in all three year it is decreasing in 2006-2007 it was
15.21 % and in 2007-2008 or 2008-2009 it is decreasing
respectively 14.27 % & 11.75 %.
[9] DEBT EQUITY RATIO :
⇒ DEFINITION:-
⇒ This ratio is only another form of opportunity ratio and establishes
relationship between the outside long term liabilities and fund.

⇒ FORMULA :-

DEBT EQUITY RATIO = LONG TERM LIABILITIES x 100

OWNERS FUND

⇒ PURTICULARS :-
(Rs. In
Lacks)
YEARS 2006-2007 2007- 2008-2009
2008
LONG TERM LIABILITIES 28365.94 40926.09 59208.20
OWNERS FUND 18790.37 23672.62 27540.00
RATIO (IN :1) 150.96 172.88 214.99

⇒ CHART :

⇒ COMMENTS:-

⇒ The higher ratio suggests that outside creditors have larger claim
than the owner of the company in 2006-2007 the ratio is 150.96
% and it is increasing respectively in 2007-2008 and 2008-2009
by 172.88 % and 214.99 % it shows vary pour condition of the
company.
[10] RETURN ON CAPITAL EMPLOYED:
⇒ DEFINITION:-

Page 38 of 47
 ⇒ It is an index of profitability of business .It is obtained by
comparing net profit with capital employed. This ratio is normally
expressed in the percentage. Here profit after interest and tax is
considered.
⇒ FORMULA:-
R.O.C.E = NET PROFIT BEFOR INT & TAX X 100
CAPITAL EMPLOYED
⇒ PARTICULARS:-
(Rs. In
Lacks)
YEARS 2006-2007 2007-2008 2008-2009
N.P.B.I.&.TAX 8440.75 9867.91 8810.03
CAPITAL EMPLOYED 47156.31 64598.71 86748.20
RATIO(IN : 1) 17.90 15.28 10.16

⇒ CHART :-

⇒ COMMENTS:-
⇒ The ratio is useful in measuring the must efficiency of the
operating the business in the year 2006-2007 ratio is 17.90. In
year 2007-2008 it goes down by 15.22 & by 10.16 % in 2008-09.
This concludes that the profitability is decreasing slowly.
[11] ADMINISTRATIVE EXPENCES RATIO :-
⇒ DEFINATION:-
⇒ This ratio over a number of year will reveal the extent to which
the expenses either increase or decrease in relation to sales.
⇒ FORMULA:

AD.EX.RATIO=ADMINISTRATIVE EXPENSES X 100

NET SALES
⇒ PARTICULARS:
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
AD.EXPENSES 2331.18 2441.72 4836.47
NET SALES 66646.54 73067.58 78961.32
RATIO (IN %) 3.50 3.34 6.13

⇒ CHART:

⇒ COMMENTS:-

Page 39 of 47
 ⇒ A high expense ratio is not desirable as it means that only a small
part of sales revenue is available for meeting financial liabilities
like interest taxes dividends etc.

[12] SELLING EXPENSES RATIO:

⇒ DEFINATION:-
⇒ This ratio shows that the high expenses ratio is desirable as it
means only a small part of sales revenue is available for meeting
financial abilities.
⇒ FORMULA:
SELLING EXP. RATIO = SELLING EXP. X 100
NET SALES

⇒ PARTICULARS:
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
SELLING EXPENSES 5750.34 6993.94 7001.67
NET SALES 66646.54 76067.58 78961.32
RATIO (IN %) 8.63 9.57 8.87

⇒ CHART:

⇒ COMMENTS:-

⇒ The table & chart determine that the ratio so decreasing. So here
capital structure is desirable.

[13] RETURN ON SHAREHOLDERS EQUITY:-

⇒ DEFINITION:-
⇒ This ratio indicates how profitability. The funds provided by the
owners have been used in business. It tells the inventors whether
he could get higher return or not.
⇒ FORMULA :-

RETURN ON SHAREHOLDERS FUND=NET PROFIT AFTER

TAX X 100
SHARE HOLDIERS
FUND

⇒ PARTICULARS :-
(Rs. In Lacks)

Page 40 of 47
 YEARS 2006- 2007- 2008-
2007 2008 2009
NET PROFIT AFTER TAX 5490.30 6720.42 5745.12
SHARE HOLDERS FUND 18790.37 23672.62 27540.00
RATIO (IN %) 29.22 28.39 20.86

⇒ CHART :

⇒ COMMENTS :-
⇒ The ratio indicates how profitably the funds provided by the
owners have been used in business it tells the investors whether
he would get higher returns. In the year 2006-2007 ratio is 29.22.
In year 2007-2008 it goes down by 28.39 & by 20.86% in 2008-09.
This concludes that the profitability is decreasing slowly.
[14] PRICE EARNING RATIO :
⇒ DEFINITION:-
⇒ It signifies the price that currently rulings in the market in the
market for each rupee of earning being made by company per
share. As a general rule the higher this ratio the better it is for the
owners.
⇒ FORMULA :-
PRICE EARNING RATIO= MARKET PRICE OF
SHARE
EARNING PER
SHARE
⇒ PARTICULARS :-

(Rs. In Lacks)
YEARS 2006- 2007- 2008-2009
2007 2008
MARKET PRICE PER SHARE 2 2 2
EARNING PER SHARE 6.36 7.24 6.19
RATIO(IN TIMES) 0.31 0.28 0.32

⇒ CHART:

⇒ COMMENTS :-

⇒ The data clarifies that the earning per share of equity share
holders is continuously decreasing rate swiftly which indicates the
profitability is decreasing.
[15] DIVIDEND PAYOUT RATIO:

Page 41 of 47
 ⇒ DEFINATION:-
⇒ It shows that out of the earning made by the company for equity
share holders. This ratio is also use full to the company to make
progress.
⇒ FORMULA:-

DIVIDEND PAYOUT RATIO = DIVIDEND PER SHARE

EARNING PER SHAR
➢ PURTICULARS:
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
DIVIDEND PER SHARE 60.20 87.76 71.77
EARNING PER SHARE 6.36 7.24 6.19
RATIO (IN TIMES) 9.47 12.12 11.59

⇒ CHART:-

⇒ COMMENTS:-
⇒ The table and chart indicates that the share holders are not paid
any dividend for the company so it becomes loss for the
company.

[16] STOCK TURNOVER:

⇒ DEFINITION :-
⇒ The number of times the average stock is turned is known as
stock turnover. It is computed by dividing the cost of goods sold
by the average stock. Average stock is obtained by adding
closing stock and operating stock and dividing them by two.
⇒ FORMULA :-

STOCK TURNOVER = COST OF GOODS

SOLD
AVERAGE STOCK
⇒ PARTICULARS :
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
COST OF GOODS
SOLD 3461.61 4282.38 5231.05
AVERAGE STOCK 8392.1 11232.32 18862.14
RATIO (IN TIMES ) 0.41 0.38 0.28

⇒ CHART :

Page 42 of 47
 ⇒ COMENTS :-
⇒ This ratio shows the number of times the average stock is turned
over during the year. Here in this case the company can be
considered in a good position. In the year 2006-2007 ratio is 0.41
in year 2007-2008 it goes down by 0.38 & by 0.28 in 2008-09.
This concludes that the profitability is decreasing slowly.

[17] PROPRITARY RATIO CHART:

⇒ DEFINITION :-
⇒ The ratio shows the proportion of proprietors fund to the total
assets employed in the business. The proprietor’s fund of share
holder’s equity consists of share capital and reserve. The higher
the ratio the stronger the financial position of the enterprise.
⇒ FORMULA :-

PROPRIETORY RATIO = PROPRITORS FUND X

100
TOTAL ASSETS

⇒ PARTICULARS :
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
PROPRITORS FUND 18790.37 23672.62 27540.00
TOTAL ASSETS 48833.26 66309.47 90026.23
RATIO (IN:1) 38.48 35.70 30.59

⇒ CHART :

⇒ COMMENTS :-
⇒ The higher ratio suggests the stronger the financial position of
company in the year 2006-2007 ratio is 38.48 %. In year 2007-
2008 it goes down by 35.70 % & by 30.59 % in 2008-09. This
concludes that it is quite unsatisfactory.
[18] LIQUID RATIO :-
⇒ DEFINITION :-

Page 43 of 47
⇒ The ratio shows the proportion of liquid assets and liquid liability it
is obtained dividing liquid assets by liquid liability the ideal ratio
is 1 : 1
⇒ FORMULA :-
LIQUID RATIO = LIQUID ASSETS
LIQUID LIABILITY

⇒ PARTICULARS :-
(Rs. In Lacks)
YEARS 2006-2007 2007-2008 2008-2009
LIQUID ASSETS 43975.47 55703.33 60771.24
LIQUID LIABILITY 25558.94 35003.64 43177.28
RATIO (IN :1) 1.72 1.59 1.41

⇒ CHART :

○ COMMENTS :-

○ The idea ratio should be 1:1 the ratio for the company during
2006 was 1.72. It is respectively satisfaction like 1.59 and 1.41.
the positive of company is good

Page 44 of 47
Conclusion:-

I have prepared this report on the bases of the information

available in the balance sheet of ELECON ENIGINEERING (INDIA)
LTD.

From the above discussion conclude that of ELECON

ENIGINEERING (INDIA) LTD. has a good future. The company has
good technology for its product.

Total profit of company is increasing in last year and also a total

sale of the company is increasing continuously from last three
years. The amount of dividend declared by the company is
increasing year by year.

The company is also engaged in a project of overseas which

helps the company in its growth.

According to me, ELECON ENIGINEERING (INDIA) LTD. is doing an

excellent business and so it becomes profitable company and very
popular company.

Page 45 of 47
 (7) BIBILIOGRAPHY:-
INTRODUCTION:-

1. WWW.ELECON.COM

BRIEF OF THE HISTORY:-

• Annual report of the company year:-2007-‘08 and 2008-’09.

•
FINANCE FUNCTION OF THE COMPANY:-

• Two year’s annual reports.

• Financial management khan & Jain.

TYPES OF RATIO & COMMON SIZE STATEMENT:-

• Annual report of the company 2007-08 & 2008-09.

• Company accounts B.S.Shah.

ALSO VERY HELPFUL WAPSITES:-

1. WWW.DOCSTOCK.COM
2. WWW.SCRIBD.COM
3. WWW.GOOGLE.COM

Page 46 of 47
4. WWW.EDELWISE.COM
5. WWW.BSEINDIA.COM
6. WWW.MONEYCONTROL.COM

Page 47 of 47