SUMMER TRAINING REPORT

On

Importance of Financial statement analysis in Equity Research India Info line (India) Securities Private Ltd.

Submitted in partial fulfillment of the requirements of Post Graduate Programme By

Ridhima Khanna

Batch: PGP2010 - 12 Roll No.: PG20102292 IILM Institute for Higher Education

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New Delhi ACKNOWLEDGEMENT No longer forward nor behind I took in hope or fear; But, grateful, take the good I find, The best of now and here. John Greenleaf Whittier

It is my pleasure to acknowledge sincere gratitude towards who gave me a great opportunity to do my project in INDIA INFOLINE; it gives me a great experience to present my project in Importance of financial statement analysis in equity research. First of all I am grateful to highly knowledgeable and most respected industry mentor Mr. Mohammad Khalid who is a team manager head for giving me the opportunity to undergo Summer Training project at India Infoline and for his kind and consistent guidance that help me during the project report and due to his kind co-operation and encouragement which lead to the completion of the project. It is impossible to all the people who have helped during the course of project work. I take this opportunity to express whole heart thanks to MIS.ISHA MADAAN (sales manager) and MS. YOGITA SINGH also for providing me with the intellectual advice from time to time, and most importantly enthusing in me, which is known as Perfect Attitude. They are the one who guided me at every step in the execution of the project and their experience and valuable guidance were very helpful. I would like to express my deep since of gratitude towards all staff and workers who directly or indirectly helped me in successful completions of project. This project would definitely not have materialized without their most needed vision and I profusely thank all my mentors who devoted their valuable time towards me. I would also like to thank all those people at India Infoline Pvt Ltd. Who though being total strangers to me lifted my sprit with their cheerful smiles and gave courage and inspiration to work zealously on the project assigned and do justice to it. Here, I must also extend my thanks to my co-workers in the office for their friendship and encouragement. Ridhima Khanna

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INDEX

S.NO

CONTENTS

PAGE NO

EXECUTIVE SUMMARY 1.

4-5

OBJECTIVE 2.

COMPANY PROFILE 3.

7-16

WORKING METHODOLOGY 4.

17-18

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ANALYSIS 5.

19-38

6.

RECOMMENDATIONS

39-40

7.

LIMITATIONS

40

8.

LEARNING

41-42

9.

REFRENCES

43

EXECUTIVE SUMMARY The two main objective of any equity research company

To analyze the financial statements for equity research. To improve relationship profile

It is important to maintain relationship profile because it is the main source of revenue for any equity research company is its customer profit portfolio, which can be attain only after profitable investment and doing more market coverage, that is attaining more and more customers. So this project is also an attempt to understand the basics of stock market. The project on Importance of Financial statement analysis in equity research was carried out in India Infoline Limited, New Delhi, a very well-known company in the field of stock broking and financial services. The duration of the project was two months
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i.e. from 1st May 2011 to 30th June 2011. These two months were not only limited to learning and devoting time towards the project but it also provided an insight on what various services such broking houses provided and what efforts are required to manage such organizations. Equity is a stock or any other security representing an ownership interest .It is a security that represent ownership in a corporations asset and earning is called the common stock .The equity research include

Equity valuation Macroeconomic and industry analysis Financial analysis of the company Technical analysis Out of the above, I had chosen financial analysis which involve financial statement analysis that include, balance sheet, profit and loss a/c statement and cash flow statement with the help of above three, I have done ratio analysis, this is the powerful tool to analyze the company. Financial analysis refers to an assessment of the viability, stability and profitability of a business, sub-business or project. It is performed by professionals who prepare reports using ratios that make use of information taken from financial statements and other reports. Thus financial statements include: Cash flow statement Income statements that is profit and loss a/c Balance sheet statements In order to continuation of the project, during the training I have calculated the ratio analysis of the company Hero Honda (two wheeler industry) and made an attempt to describe about the company. It is a joint venture company promoted by Hero cycles of India and Honda Motors Company of Japan. During the training, apart from the analysis I have also adopted the questioner method in order to understand about the awareness of the people towards the stock market, it is an qualitative method where I interacted various number of people and try to evaluate their thoughts and idea towards the stock market, this qualitative research was done with an aim to gather an in-depth understanding of human behavior and the reasons that govern such behavior. The qualitative method investigates the why and how decision making is being done. Hence, smaller but focused samples are more often needed.

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OBJECTIVE The main objective of the project is to find out the important of financial statement, ratio analysis in equity research thus all these statement help the investors to take sound decision at time of investing money in the share market. For earning returns investors have to almost invariably bear risk. In general, equity research companies like INDIA INFOLINE prepares valuables reports and give important tips from time to time on market so that portfolio maintained by the customers show profitability. So, the objective of the project is to prepare the financial statement analysis report for equity research. The tools I had chosen is ratio analysis as it help the investors to evaluate the position of the company and help to take the decision ,then during the project qualitative technique is being applied in order to understand the position of the customer awareness . In addition, during
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the whole study I have done the financial analysis of Hero Honda as an example .The objective of financial analysis is to find the creditworthiness of the companies and other performances and do the future forecasting. During the whole training I have studied the company in which I am doing my summer internship training that is India Infoline, it is one of the top broking house there I tried to understand about the stock trading briefly and try to understand that how the work is being carried down in this big corporate houses.

COMPANY PROFILE

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IIFL THE ONE STOP FINANCIAL SERVICES SHOP

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 The IIFL group is a leading player in the INDIAN financial services space .

IIFL offers advice and execution platforms across the entire range of financial services-equities, derivatives, commodities, wealth and asset management, life insurance mobilization, investment banking and credit. Therefore IIFL has evolved into a one- stop financial services solution provider. IIFL enjoys pan-INDIA presence through over 2300 business locations in 450 cities and towns IIFL is registered with the BSE and NSE for security trading (cash and derivative segment), with MCX for currency, with MCX AND NCDEX for commodity trading and CDSL and NSDL as depository participants. It is also registered as CATEGORY 1 merchant banker and as a portfolio manager with SEBI. Its equity shares are listed on Bombay stock exchange and National Stock exchange. IIFL Securities ltd is securities are registered with monetary authority of Singapore (MAS).It has also received as principal approval and CDP clearing member from Singapore Exchange. IIFL, s subsidiary in Sri Lanka, IIFL securities Ceylon (pvt) ltd has received as in principal membership of the Colombo stock exchange. India Info line securities pvt ltd is a 100% subsidiary of India Info line ltd, which is being engaged in equity services and portfolio management services. In order to provide online services it provided 5 paisa .com. It is being launched in mid 2000, it is one of the leading space of e-broking in INDIA.. Beside high quality investment advice from an experienced research team, the site has real time stock quotes, market news and multiple tools for technical analysis.5 paisa .com has world class security system to avoid any type of misuse fraud or data pilferage.

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SLOGAN MONEY DOESNT MAKE MONEY

VISION To become the most respected company in the financial service space.

OBJECTIVE IIFL aims to enrich client knowledge, leading to an informed investment decision. In order to full fill the objective, the company is consistently involved in presenting independent research reports based on comprehensive interactions with corporate and industry executives.

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MILESTONE

1995: Commenced operation as an equity research 1997: Launched research products of leading Indian companies, key sectors and the economy client included leading FIIS, banks and companies. 1999: Launched www.indiainfoline.com 2000: Launched online trading through 5.paisa.com started distribution of insurance and mutual funds. 2003: Launched proprietary trading platform trading terminal for retail customers. 2004: Acquired commodities broking license, Launched portfolio management service. 2005: Maiden IPO and listed on NSE and BSE. 2006: Acquired membership DGCX, commenced the lending business. 2007: Commenced institutional business under IIFL. Formed Singapore subsidiary, IIFL (Asia) pvt Ltd. 2008: Launched IIFL wealth Transitioned to insurance broking model 2009: Acquired registration for Housing Finance SEB in-principal approval for Mutual funds obtained Venture Capital License. 2010: Received principal approval for membership of Singapore and Colombo stock exchange 2011: Get approval, starting its Mutual fund operation (Approval for AMC) started in second half of 2011. (Best Equity Award) from Bloomberg UTV financial leadership Awards, 2011.

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MANAGEMENT Mr. Nirmal Jain Nirmal Jain is the founder and Chairman of India Infoline Ltd. He holds an MBA degree from IIM Ahmadabad, and is a Chartered Accountant (All India Rank 2) and a Cost Accountant. In 1995, he Founded his own independent financial research company, known as India Infoline Ltd. Mr. R. Venkataram R Venkataram is the co-promoter and Executive Director of India Infoline Ltd. He holds a B. Tech degree in Electronics and Electrical Communications Engineering from IIT Kharagpur and an MBA degree from IIM Bangalore. He has varied experience of more than 14 years in the financial services sector. The Board of Directors Apart from Nirmal Jain and R. Venkataram, the other Board of Directors of India Infoline are: Mr. Sat Pal Khattar Mr. Nilesh Vikamsey Mr. Kranti Sinha Mr. A.K. Purwar

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CORPORATE STRUCTURE

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CORPORATE SOCIAL RESPONSIBILITY

Company also setup the IIFL foundation, which will work for the support and upliftment of the under privaliged sections of society. The IIFL foundation sponsored an eye and dental camp in February, 2010 with the support of expert doctors and surgeons from the Bhaktivedanta foundation in Barsana near Mathura. While over 2600 people underwent eye test and over 800 were selected for eye surgery. A total of 1800 dental procedures were carried on like scaling and filling, extraction, etc. Team IIFL whole heartedly supported to this noble cause and will continue to do it in future. Blood donation camp at six locations across ASIA, at the head quarters of IIFL were organized. Over 500 employees participated in the same. The IIFL foundation sponsored an eye and dental camp in February, 2010 with the support of expert doctors and surgeons from the Bhaktivedanta foundation in Barsana near Mathura. CORPORATE GOVERENCE The group aims at achieving not only the highest possible standards of legal and regulatory compliances, but also of effective management and maximizes the value of stake holders by forming profitable portfolio for them.

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ECONOMIC RESPONSIBILITY The Company shall: Disseminate the price sensitive information to the stock exchanges on a continuous and immediate basis Endeavour to increase investor access to its public announcements by using various media for the said purpose. The Compliance Officer shall be responsible for ensuring that the company complies with continuous disclosure requirements, overseeing and co-coordinating disclosure of price sensitive information to stock exchanges, analysts, shareholder and media, and educating staff on disclosure policies and procedures. COMPETITORS India Bulls Religare Motilal oswal F

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4 PS
1. Product:

Equity IIFL is a member of BSE and NSE registered with NSDL and CDSL as a depository participant and provides broking services. IIFL is a dominant player in the retail as well as institutional segments of the market. IIFLs Trader Terminal, its proprietary trading platform, is widely acknowledged as one of the best available for retail investors. Commodities IIFL offers commodities trading to its customers vide its membership of the MCX and the NCDEX. Our domain knowledge and data based on in depth research of complex paradigm Credit and finance The Company has deployed proprietary loan-processing software to enable stringent credit checks while ensuring fast application processing. Recently the company has also launched Loans against Gold. 2. Price: For intraday trading it charges 0.10 % For delivery charges are 0.50% For mps(minimum per share) it is 5 paisa that is 0.05% Trade to trade it charges 0.75 paisa.

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3. Place: It spread over 2500 to business locations across over 500 cities in India.

4.Promotion: As this company is an trading firm so its one of important of promotion is internet as its different websites like www.indianinfoline.com ,.For retil broking info@5pmail.com etc.And also newspaper adds and advertisement also play the promotional role.

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WORKING METHODOLOGY An active, diligent and systematic process of inquiry aimed at discovering, interpreting, and revising facts is known as research. In fact, research is an art of scientific investigation and is also used to describe a collection of information about a particular subject, and is usually associated with science and scientific method. It is a step-by-step logical process, which involves: Defining a problem Laying the objectives of the research Sources of data Methods of data collection Data analysis & processing Conclusions and recommendations Defining a problem: To seek is financial analysis is an important tool for equity research. Laying the objectives of the research The objective of the project is to first analyze what is equity research, what is an importance of different financial ratios while taking the decision, and also to know the the importance different financial statements and to work in trading terminal.
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Sources & methods of data collection The data was from companies and its first hand information. The other necessary information is collected from various other sources outside the company i.e. from newspapers, websites etc. In order to ratio analysis I searched Hero Honda annual report from its website www.herohonda.com , from the website, I got all the relevant Information about the company and then I prepare ratio analysis of past three years. My first task before starting the process was to understand the concept how to conduct the analysis. I was suggested by my coordinator Mr. Khalid Mohammed (Team Leader) head to conduct the analysis through questionnaire method so that I should come to know about awareness about the online share trading. In this method questionnaire was prepared which consist of seven questions, and then it was being asked by us to go for a survey in which we were required to ask different question:

This questionnaire ,help me to evaluate what are the main reason due to which people are interested to invest in financial market. What is the time frame ,for which investors can keep patience What are the different sources by which your desired earned money can be attain. Importance of demit a/c In this sip process, we are also assigned the trade terminal to learn the practical training

ANALYSIS: During the training, I have chosen Hero Honda Company which is registered in Nifty Index so that I can examine the financial analysis by calculating ratios. Initially, I have analyzed the financial statement of the company because understanding the past is prerequisite for anticipating the future. Hence, with the help of balance sheet, profit and loss account and cash flow statement, I have measured the key financial ratios using the formula referred from the Investment analysis and portfolio management by PRASANNA CHANDRA Applying the ratios formula, the results I have founded has been plotted in the graph to easily understand the companys position and performance. The different ratios that are being calculated are: current ratio, debt equity ratio, stock turnover, debtor turnover etc.

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ANALYSIS Questionnaire Analysis

From the analysis we come to know that at today point of time many people are aware of the online trading concept and yes many of them hold their A/C in broking firms but many also hold their a/c in banks in which they are holding their others A/C Then we come to know that an regular trader can do more than 150 times too but mostly due to lack of knowledge or time maximum of the people do it between 25 to 50 times a year It depend on the amount invested in the market this was the common answer given by the people Lower risk, moderate return with moderate losses Yes, the loss of money affects everybody but it depends how you take it, some says that they take the loss as a part of experience others decided to quite from the share trading. Maximum of the say that they would like to invest from 25%to 50%, but we even talk to some freshers in the field they said that less than 25%.

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Working of the trading terminal It involve technical task like, downloading of the software that is also known as TT download this is done to learn how the actual trading is being done in the terminal and also this help us to clear any doubts regarding trading to our customer.

NSE has main computer which is being connected through very small Aperture Terminal installed at the office. The main computer runs on fall tolerant apparatus Stratus mainframe computer at the exchange .Brokers have terminal installed at their premises, which are connected to the VASTS/lead lines/modems. Investors inform brokers to place the order on behalf of them. The broker enters the order through his PC, which runs under Windows NT and send the signals to the satellite via VASTS/lead lines/modems. The signal directed to mainframe
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computers at NSE. The system also provides complete market information online. The market screens at any point of time provide information on total order debt in an security, the five best buys and sells available in the market, the quantity traded in the day security, the high and the low, the last traded price, etc. The investors can also know the fate of the order almost as soon as they placed with the trading members.

FINANCIAL ANALYSIS: A financial analysis involve the analysis of the company financial A/C, in order to understand the reliability and security of money after making investment and also how financial data can be used to analyze a firms past performance and assess its present financial strengths.Financial statements includes:

Cash Flow Statement: cash flow statement shows the inflows and outflows of the company ,that is what is the source of income ,and what is the source of expense Cash flows statement represent the in financing activities of the firms that involve borrowing, and payments during the specific period . Profit And Loss a/c: The income statement provides an account of the total revenue generated by a company during a period (usually a financial year or a quarter), the expenses involved and the money earned. In its simplest form, revenue generation from selling the products manufactured, or services rendered by the company. It is published yearly for the stockholders, but in some quartly and monthly issues can be there. Balance sheet statement: It is an equalize statement of company assets to the liabilities. The balance sheet shows the total assets equal the sum of the creditors claim against them (liabilities)and the stockholders claims against them (owners equity) .

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Ratio analysis: Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things.

Ratio Analysis Performance ratios are the best tools in examining the financial health of a company and to determine the worth subsequently. The first and the foremost measure is the earning of the company. The present as well as the projected earning graph makes a company reliable for investments. Other ratios used to measure the ability of the company are: Gross profit ratio Net profit ratio Operating ratio Return on capital employed Inventory material Earnings ratio Price earnings ratio

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THE MAIN RATIO ARE AS FOLLOWS AUTOMOBILE SECTOR Automobile Industry Starting its journey from the day when the first car rolled on the streets of Mumbai in 1898, the Indian automobile industry has demonstrated a phenomenal growth to this day. Today, the Indian automobile industry presents a galaxy of varieties and models meeting all possible expectations and globally established industry standards. Some of the leading names echoing in the Indian automobile industry include Hero Honda, TVS, Mahindra and Mahindra and Hindustan Motors in addition to a number of others. During the early stages of its development Indian automobile industry heavily depended on foreign technologies. However, over the year the manufacturers in India have started using their own technology evolved in the native soil. The thriving market place in the country has attracted a number of automobile manufacturers including some of the reputed global leaders to set their foot in the soil looking forward to enhance their profile and prospects to new heights.
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Company Snap Shot Hero Honda Motors Ltd,(HHML),a Joint venture company promoted by Hero Cycles of India and Honda motors co of Japan. HHml is the world largest two wheeler manufacturing company. Hero Honda, Japan the technical and financial collaborator holds 26% stake in the company. HHML started its project on APRIL 1984 and towards end of November, 1984 the public issue was oversubscribed by ten times. In February 1985, itself there were seven and half lakh bookings for 100cc, 4 stroke motor cycles in India .Commencement of commercial production took place in May 1985.HHml is the market leader in the 100 cc motorcycles segment with a market share of 64-69%.The company is also the largest producer of motorcycles among all Honda companies in the world. Hero Honda main characteristic are its four stroke engine technology, fuel efficiency and low exhaust pollution levels. It exports to around 31 countries including Srilanka, Africa, west Asia, Bermuda, Zaire and Paraguay. The company also Introduced street,4-stroke step through motorcycle in the year 1998.It commenced production of engine components in January 87 to reduce manufacturing cost.IN 1990-91 ,Hero Honda promoted a company Hero Honda Fin lease to provide lease finance to the customers .In 1993-94 ,the company launched a new model splendor. During 1999-2000, it launched its most powerful and fast bike Cbz (ee), powered by 156 cc engine. The company is also investing Rs 300 crs to roll out a new motorcycles model .The company said that the new two-wheeler will incorporate enhanced functionally combined with strengths of riding comfort and fuel efficiency. During 2003-04, HHML launched 5 new models namely cd-dawn, for entry segment, Karizma for power +sport segment, Passion Plus, Spender Plus and ambition 135 for premium segment. Hero group belongs to Munjal family and came into existence in1965.Earlier manufactured bicycles and become world largest bicycle manufacturer. But today Hero Honda becomes the first company to introduce four-stroke motorcycles and set the standards for fuel efficiency, pollution control and quality.

Ratios Gross Profit Ratio: Year 2010 2009 2008 Gross Profit Ratio (in %age) 16.11 12.57 11.67

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Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. This Ratio shows the margin left after meeting manufacturing cost, it measures the efficiency of the production as well as pricing Inference: From 2008-2010 the gross profit ratio saw a jump of 4.44% because even in the phase of rising commodity prizes, Hero Honda is able to maintain economies of scale, due to which Gross profit increases.

Net profit ratio Year 2010 2009 2008 Net Profit Ratio (in %age) 14 10.30 9.27

Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage. This measures the overall efficiency of production, administration, selling, financing, pricing and tax management. Inference: There is a continues increase in net profit every year .Sales growth for2008-2009 growth, it added due to low bas effect of the previous year. Going forward effect, and have strong distribution effect. And others factors such as inflation and interest rate have to be controlled.

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Operating Ratio Year 2010 2009 2008 Operating Ratio (in %age) 17.32 14.22 13.22

Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. Operating ratio measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales Inference: During the FY 2008-2009 only consumption of stores and spares witnessed an increase of 4.1%. In the FY 2009-2010 an overall increase in the operating expenses because their input cost which include inflationary costs in raw materials - steel, aluminum and rubber etc. and brand building expense increased, in order to control input cost company decided to close the fourth plant but brand building expense will provide them overall profit in long run.

Return On Capital Employed Year 2010 2009 2008

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Return On Capital Employed (in %age) 75.07 43.33 41.57

Return on capital employed is the post tax version of earning power. It considers the effect of taxation, but not the capital structure, it is internally consistent. Return on capital employed establishes the relationship between the profit and the capital employed. It indicates the percentage of return on capital employed in the business and it can be used to show the overall profitability and efficiency of the business. Inference: There was a rose to return on capital, which shows better performance of the capita.

Inventory\Stock Turnover Ratio Year 2010 2009 2008 Stock turnover Ratio (in times) 42.80 47.53 42.82

Stock turnover ratio and inventory turnover ratio are the same. This ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times. Stock turnover ratio/Inventory turnover ratio indicates the number of time the stock has been turned over during
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the period and evaluates the efficiency with which a firm is able to manage its inventory. This ratio indicates whether investment in stock is within proper limit or not. Inference: in the FY 2010 the stock turnover ratio decreased because there was some technical problem in batteries due to which many bikes were laid down ideal in ware houses but it is being solved in two months.

Debtor\Receivable Turnover Ratio Year 2010 2009 2008 Debtor turnover Ratio (in times) 122.63 55.10 32.70

Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year. Inference: The Ratio has increased by 6.57, this shows that the company has greater efficiency in credit management as during FY 2008-2009 major portion of debtors were converted into cash and in the FY 2009-2010 the sales increased, and the average debtors decreased by 14.7%

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Creditor\Payable Turnover Ratio Year 2010 2009 2008 Creditor turnover Ratio (in times) 6.15 5.36 5.93

Creditor turnover ratio or accounts payable turnover ratio indicates the velocity of credit payment of a firm. In simple words it indicates the number of times average creditors (payable) are turned over during a year. Inference: During FY 2008-2009 the company paid off its creditors worth 872646 as a result this Ratio decreased from 5.93 to 5.36. In fy 2009-2010 there was certain vendors amounting 119 who have confirmed that they will be covered under micro and small enterprises there was . 76 increase in the creditors turnover ratio because of the increase in creditors from 2532455 to 3513982.

LIQUIDITY RATIO

1. CURRENT RATIO: Year 2010 Current Ratio (in %age) 0.58

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2009 2008

0.46 0.48

Current ratio is the ratio of current assets to current liabilities. It is widely used an indicator of a company's ability to pay its debt in the short term. It shows the amount of current assets a company has per rupee of current liabilities. Inference: The current ratio during FY2008-2010 has increased from .048 to .058 which means that in 2010 the company had more current assets to meet its current liabilities. This is good news for the companys short term creditors.

Quick ratio: Year 2010 2009 2008 Quick Ratio (in %age) 0.4 0.31 0.32

Quick ratio is computed as a supplement to the current ratio. This ratio relates relatively more liquid current assets, usually current assets less inventories, to current liabilities. This ratio is also known as acid test ratio. Inference: Clearly, the companys inventories drove the improvement in the current ratio. Once we remove them, there is no change in the liquidity measure from 2008-2010. As a rule of thumb, the current ratio is expected to be at least 2:1 and the quick ratio 1:1. The latter means that a firm must have at least as much liquid assets as its current obligations so that it will have
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no difficulty in paying that obligation. It is a good indicator for the creditor as it shows that company has increased sales to pays its a/c receivable.

SOLVENCY RATIO Debt to equity ratio:

Year 2010 2009 2008

Debt to Equity Ratio (in %age) 0.02 0.02 0.04

Debt to equity ratio measures the relationship of the capital provided by the creditors to the amount provided by the shareholders. A wise mix of debt and equity can increase the return on equity for two reasons:

Debt is generally cheaper than equity. Interest payments are tax deductible expenses , whereas dividends are paid from taxed profits

Inference: This ratio indicates the extent of use of financial leverage. Debt to equity ratio has decreased from 0.04 to 0.02.. During the FY 2008-2009 the debt has decreased which is good for the company As we can easily see the company is trying to reduces it liability and one of the interesting finding in hero Honda balance sheet all the debt are unsecured no secured debt it

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shows that company has a good credit rating it enjoys good reputation amongst its debtor here company has no legal obligation to pay first to the debtors during time of liquidation.

Debt ratio: Year 2010 2009 2008 Debt Ratio (in %age) 0.02 0.02 0.04

Debt ratio measures the extent to which borrowed funds support the firms assets. The numerator of this ratio includes all debt, short term as well as long term, and the denominator of this ratio is the total of all assets ( the balance sheet total). Inference: During the FY 2008-2009, the ratio has decreased which is good for the company. Here we can see reduce their debt thus trying to make it debt free. The reason for the same is increase in net profit as sales of hero Honda has grown in

Interest coverage ratio:

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Year 2010 2009 2008

Interest Coverage Ratio (in %age) 1262.36 664.40 648.15

Interest coverage ratio is the measure of protection available to creditors for payment of the interest charges by the company. The ratio shows whether the company has sufficient income to cover its interest requirements by a wide margin. Inference: The interest coverage ratio of the company has increased from 648.15 to 1262.36 from 2008-2010. This increase in the ratio implies adequate safety for payment of interest. The debt interest of the company has declined as a result of which the company can safely pay its interest. Also the depreciation has been charged after transferring the amount to revaluation reserves.

Debt service coverage ratio:

Year 2010 2009 2008

Debt Service Coverage Ratio (in %age) 255.15 142.76 108.14

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Debt service coverage ratio is the ratio of cash available for debt servicing to interest, principal and lease payments. It is a popular benchmark used in the measurement of an entities ability to produce enough cash to cover its debt (including lease payments). The higher the ratio, the easier is to obtain the loan. INTERPRETATION: Its a good indicator for the company indicators.

Market Test Ratio Earnings per share Year 2010 2009 2008 Earnings Per Share(in %age) 111.71 64.19 48.47

Earnings per share are useful in comparing the performance over time. It abstracts away the effect of capital structure and tax factor and focus on operating performance. Hence it is eminently used for inter- firm comparison. Inference: During the FY 2008- 2009, the company witnessed huge rise in the earning per share. But then in 2010, the company shows the improved performance per share to 0.47.It shows

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Price Earnings ratio: Year 2010 2009 2008 Price Earnings Ratio(in %age) 20.6 15.6 8.9

Price Earnings Ratio This is a popular measure of extensively used in investment analysis. It is a screen to detect mispriced stock. The price earnings ratio is a summary measure which primarily reflects the following factors: growth prospects, risk characteristics, shareholder orientation, corporate image and the degree of liquidity. Inference: Price earnings ratio from 2008 -2010 has decreased from 50 to 21.2 .The increase in the price earnings ratio indicates that the company is having market potential for growth potential

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ACHIEVMENTS

I am glad to work ,and analysis the environment of Best trading house of the country Stock market observation has been done during the summer internship project Companies trading software has been downloaded Come to the contact to many people who are interested towards the market and can become the customers of the company. RECOMMENDATION/SUGGESTIONS

Before investing in stock market one should be very cautious as there are lot of negative news that can be pending Regular contact should be maintained with the broker Investors were advised to select portfolios and not individual securities. It is important to have right information about the stock one is going to invest in. Stocks may be known to return more than any other investment, but they also tend to be very volatile. "Hero Honda continues on its planned growth path" in order to attain top most position in the market it is necessary that Hero Honda should concentrate on its research and development and specially after Honda came up with its own subsidiary HSMI ,it is important to be more independent. Hero Honda should keep strict check of the commodity prices due to which their input cost has been increased; control can be done by improved efficiencies and cost management. After evaluating the ratio analysis of the company I can personally recommend to purchase this share as it is expected to show good return to its investors and mostly all ratios are showing positive results like gross profit ratio, net profit ratio, debt coverage ,interest coverage ratio etc, so this show that company can have bright near future. All those people who do not have potential to face losses, it is advisable to them to invest in blue chip companies. There should be efficient use of shareholder fund to increase return on investment and return on equity in order to maintain company goodwill in investors mind. As the financial position of company is sound so I recommend the investors that they can take a chance of investing in Hero Honda. Stringent actions must be taken by SEBI and other regulatory authorities in order to prevent inside trading so that investors should bear any loss due to these actions and overall authenticity and credibility of Indian Stock Market is being maintained. Equity well planned investment strategy ,so one need to spend necessary time to learn about the market and in selecting a good financial advisor to understand his or her recommendations .

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Last not the least after doing my SIP in top most broking house I want to recommend that all those people who are interested to invest in share market should consult these houses ,as experts advice out there can save your hard earned money and give you profitable margins . LIMITATION

It was hard to acquire knowledge about this field in such a short span of time as there are n, number of things to be learn in order to be expert in this field Share market is very vast and fast sector, at times it seems to be complicated and become very difficult to cope up with the environment in such a short span of time. Talking to new clients was the tough task to perform, as in market you will come to meet different types of people who are not interested to coordinate with you at all, so when it happens with somebody, it makes one to feel quite demotivated. While doing ratio analysis I have to go to seek various formulas, have to check about the importance of different ratios. Understanding the trading terminal is not an easy task to do. It is quite complicated and involves high risk because your one small mistake can really make you as well as other person at risk. Lack of awareness about online trading among the people, as this is quite new concept for few they believe in physical delivery of stock in form of papers so it become difficult to convince them in order to get fill questioner ,this problem come while convincing to elder generation. Most of the people have the negative perception that, this market is a gambling market that why they are not participating

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MY EXPERIENCE LEARNING EXPERIENCE: Summer internship, is overall an new thing for me as it was the first time when I enter the corporate world, but as every new person is exited to learn more similarly the case is with me, I tried to learn as much as I can and in this learning process my company mentors as well as my college mentors and faculty, really helped me out, they share their experiences ,thoughts ideas from which I try to absorb as much knowledge as I can and they are the one due to which I am able to deliver my project, their guidance really help In this whole process first of all I come to know about the stock market and its nitty-gritty. Working in IIFL, was complete an new beginning in my carrier path,it in build within me new level of confidence, attitude of accepting new challenges with more zeal, learn to grab more opportunities, learn to interact with new people with more confidence as earlier I felt quite hesitate to talk to new ones ,but after doing my questioner part this hesitation is being reduce to some level. Then doing work in corporate office I learned and experience one thing that is like discipline ,patience, forecasting power and keen to do something attitude is required if one want to achieve something in life ,and fore and foremost thing I want to say that earlier I had only studied theoretically that in order to run an organization communication, coordination, superior subordinate relation is important but now after working in IIFL ,I realized actually how important are these terms in practical life ,In IIFL office really I observe healthy working environment where all are interested to help each other ,now I come to know that really what is an organized structured framework and why IIFL is able to attain Number One broking house and able to win many awards likes Best Equity Broker of the Year by Bloomberg by UTV and also Best Broker, by Asia Money polls., then Forbes as Best of the Web, then I learned one very important thing about IIFL that mostly all the offices are connected with corporate office in Mumbai with cutting edge networking technology. The group caters to a customer base about a million customers, over a medium that is online, over the phone. Continuing further in my learning I also want to include that somehow I tried my level best in order to learn about the stock market and I evaluate:

Whenever Market is high ,there are chances that it might fall soon Whenever market is low, if there is no external factor then it will rise I understand how systematic is this stock market Various thing are being interrelated in this market All news effect the market in one way or the other

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Whenever any new IPO is published ,it is very important to read all terms and condition related ,what is market potential, scope of industry as all these are the key factors in determine the future scope of business I learned many new terms like what is bull, bear market and now I am quite confident about equity knowledge. Although nobody can claim complete expertise but there is a sea change at least from my point of view .Now atleast, I am quite able to evaluate but still chance of learning always exist. I learned that as INDIA is one of the emerging markets that ranked as tenth largest in the world and expected to maintain 9% GDP in coming years ,so there is big scope that if investment in market with logic can help anyone to attain good profits .So I learned in my SIP process that equity market is an good option to invest but if done with logic so after working in IIFL I realizes that broking houses are really useful for all the people ,whatever background he is from and specially for the once who have surplus money but do not have right guidance that where they should invest .Yes, it is true that equity market involve high risk but broking houses like IIFL try to reduce it and help their customers to provide high returns.

MARKET EXPERIENCE: Apart from this our specific task also involve in filling the questioner forms in order to get the view points of the market related to the marketing. During this venture I came across many people who came from different walks of life. I learned how to deal with them, how to persuade them and guide them in trading. Filling an questioner require special focus on targeting the customers. Each and every person do not trade/invest in the stock market. Actually what I had to do was to identify the prospect and then convince them. Many a times it happen that at first people do not respond properly, they ask me about the identification many questions were put forward like on behalf of which institution I am doing this survey, what is the purpose of this questioner and many more so by maintaining my confidence level I tried to answer all the queries in the best possible manner I could. So as I meet more and more number of people ,I come to know more about how to talk to them, how much time to be given to the person we meet.. But still after putting so much effort on my part I even faced some bad experience while doing this task, sometime we are not allowed to do the survey in an specific premises like malls and sometime it happen people do not respond positively even after giving full details they do not corporate but at the end all this things again was an learning experience to increase my tolerance and be more careful. At the end I want to conclude by saying that It was really an new experience of my life, where I ought to learn many new things but still there is large part still left to explore which I will do with experience of time and job.

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BIBLIOGRAPHY

Financial Management by Prasanna Chandra www.indiainfoline.com www.moneycontrol.com www.nseindia.com www.bseindia.com www.wikipedia.org www.buzzingstock.com www.managementparadise.com www.stockmarkethelp.org www.stockmarketforum.org www.ubsecure.com www.controlmoney.com www.business-standard.com www.herohonda.com

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ANNEXURE THE QUESTIONAIRES FOR THE RESEARCH Q1.Do you have DEMAT A/C YES NO Q2.Where do you hold an a/c? IIFL India bulls Religare Share khan Others. Q3.On an average how many transactions does you mitigate each year?

More than 150 times Between 50 to 150 times Between 25 to 50 times Between 5 to 25 times Less than 5 times None

Q4.How often would you like to review your investment portfolio in the future ?

Rarely or Never At least once in a year At least once in an quarter At least once in a month Several times a week

Q5..What are the schemes more important?

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Higher risk with bigger chance of achieving higher returns Higher returns with higher loss Lower risk, lower returns , lower losses

Low risk, moderate return, moderate losses

Q6.How a sharp drop in your investment would effect you ?

It would personally effect me very much It would be disappointed It would be disappointed ,but do recognize that it would be possible It would not affect you

Q7. What proportion of assets would you wish to invest in other investments other risk free deposits?

Less than 25% Between 25% to 50% Between 50% to 75% More than 75% Depends upon the market fluctions.

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