INTRODUCTION

1.1 INTRODUCTION OF THE STUDY

The project is on WORKING CAPITAL MANAGEMENT ON MICROMEN
SOFTWARE.
It described about how the company manages its working capital and the various steps
that are required in the management of working capital.
Cash is the life line of a company. If this lifeline deteriorates, so does the companys
ability to fund operations, reinvest and meet capital requirement and payments.
nderstanding a companys cash flow health is essentials to making investment
decisions. ! good way to judge a companys cash flow prospects is to look at its working capital
management "#C$%.
#orking capital refers to the cash business requires for day&to&day operations or, more
specifically, for financing the conversion of raw material into finished goods, which the company
sells for payment. !mong the most important items of working capital are levels of inventory,
accounts receivables, and accounts payable. !nalysts look at these items for signs of a
companys efficiency and financial strength.
The working capital is an important yardstick to measure the companys operational and
financial efficiency. !ny company should have a right amount of cash and lines of credit for its
business need at all times.
This project describes how the management of working capital takes place at
$IC'($)* +(,T#!').
1
INTRODUCTION TO WORKING CAPITAL
#orking capital refers to the part of capital which is available and used for
carrying on the regular business operations. +imply it refers to capital which is required for the
day to day running of the business. The important components of the working capital are current
assets and current liabilities. Current assets are those which can be converted into cash with in an
accounting year. It includes cash, bank, debtors, bills receivables, short term loans and advances,
prepaid e-penses and money receivable within twelve months. Current liabilities are those
liabilities. they can be trade of within one year. It include creditors, bills receivable, bank
overdraft, short term borrowings, dividend payable, provident fund due, outstanding e-penses
and other payments which is due within one year. The working capital is needs for the purchase
of raw materials, for the payments of wages and salaries, to meet the day to day e-penses, to
provide credit facilities to the customers, etc. +o the working capital plays an important role in
the functioning of an enterprise. There are two concepts of working capital i.e.
/ross #orking Capital Concept
*et #orking capital Concept
/ross #orking Capital represents the total amount of investment in the current assets.
*et #orking Capital is the difference between current assets and current liabilities.
The firm should maintain a sound working capital position. 0oth )-cessive as
well as inadequate working capital are dangerous to the organi1ation. )-cessive working capital
means idle funds, which earns no profits for the organi1ation. Inadequate working capital not
only impairs firms profitability but also it interrupts the production function and the overall
working of the organi1ation.
2
WORKING CAPITAL MANAGEMENT

The decisions relating to working capital and short term financing are referred to as
#orking Capital $anagement. This involves managing the relationship between a firms short
term assets and short term liabilities. The goal of the working capital management is to ensure
that the firm is able to continue its operation and that it has sufficient cash flows to satisfy both
maturing short term debts and upcoming operational e-penses. #orking capital management
entails short term decisions 2 generally relating to ne-t one year period& which is reversible. The
management of working capital involves managing inventories, account receivable and account
payable and cash.
! firms net working capital position is not only important as an inde- of
liquidity but it used as a measure of the firms risk. 'isk in this regards means chance of the firm
being unable to meet its obligation on due date. 3enders consider a positive net working capital
as a measure of safety. 3enders such as commercial banks insist that the firm should maintain a
minimum net working capital position.
4resent study is undertaken with a view to analy1ing financial statement and
discussions with financial e-perts of the company with a hope that this study provides
information to the $IC'($)* +(,T#!') 3T5 and other institutions especially for
government undertakings.

3
1.2 NEED FOR THE STUDY
#orking capital constitutes part of the crowns investment in a department. !ssociated
with this is an opportunity cost to crown. "$oney invested in one area may 6cost7
opportunity or investment in other area.% If a department is operating with more working
capital than is necessary, this over&investment represents an unnecessary cost to the
crown.
,rom a departments point of view, e-cess working capital means operating
inefficiencies. In addition, unnecessary working capital increases the amount of the
capital change which departments are required to meet from 8 9uly :;;;.

4
1.3 SCOPE OF THE STUDY
8. The scope of the study is to enable the management to reali1e the asset locked&up in
current assets and current liabilities.
:. It enables the management for further decision in #orking Capital.
<. The study could help to understand the estimation of #orking Capital $anagement.
5
1.4 OBJECTIVE OF THE STUDY
P!"#$ %&'()*!+(
8. To study the working capital management.
S()%,-#$ %&'()*!+(
8. To analy1e liquidity position of the firm.
:. To analy1e and evaluate profitability position of the firm.
<. To study the cash management practices.
=. To analy1e the credit sales
>. To analy1e the trend and schedule of changes in working capital.
6
1.. LIMITATIONS OF THE STUDY
The company has been at growth situation during the study period. It could not be
considered as a predictor for growth phase
The study had used few critical ratios for analysis to measure the financial efficiency
of the firm
The annual report of the company was used as the basis of analysis and the research
could not attempt to gather any other reliable information from the companys
auditors
The analysis method used in the study was very shallow to recommend it as an input
for major financial decision
The e-penses composition was not charted against total cost
The study is mainly based on secondary data.
'atio has its own limitation
7

INDUSTRY PROFILE
The India software industry has brought has about a tremendous success for the emerging
economy. The software industry is the main component of the information technology in India.
Indias pool of young aged manpower is the key behind this success story. 4resently there are
more than >;; software firms in the country which shows the monumental advancement that
India software industry has e-perienced.
The Indian software industry has grown from a mere +?8>; million in 8@@8&@: to a
staggering +?>.Abillion in 8@@@&:;;;. *oother Indian industry has performed so well against
the global competition. !ccording to statistics, Indias software e-ports reached total revenues of
's.=B8;; cores. The total share of Indias e-ports in the global market rose form =.@ percent in
8@@Ato :;.= percent in :;;:&;<.
It is e-pected that the India software industry will generate a total employment of around
four million people, which accounts for A percent of Indias/54, in the year :;;C. Today, the
software industry in India e-ports software and services to nearly @>countries around the world.
The share of north !merica ".+.D Canada% in Indias software e-ports is about B8 percent. In
8@@@&:;;;, more than one third of fortune >;; companies outsourced their software requirement
to India.
The government has also played a vital role in the development of the India software
industry. In 8@CB, the Indian government announced a new software policy which was designed
to serve as a catalyst for the software industry. This was followed in 8@CC with world market
policy and the establishment of software technology parks of India"+T4%scheme. In addition, to
attract foreign direct investment, the Indian government permitted foreign equity of up 8;;
percent and duty free import on all inputs and products.
8
SOME FAMOUS SOFTWARE COMPANIES
1/ MICROSOFT
$icrosoft Corporation is a software company based in 'edmond, #ashington.
$icrosofts flagship product, the windows operating system, is the single most popular operating
system for home desktop use. Its other desktop products, namely $icrosoft office, internet
e-plorer, and windows media player, are either bundled directly with the windows operating
system , or are often sold together with windows as preinstalled software on new computer
system. !dditionally, the company manufactures and sells computer hardware such as keyboards
and mice, and owns or possesses interest in several content&distribution channels such as
$+*0C, the $+* internet portal, and the $icrosoft )ncarta electronic encyclopedia.
2/ HP
HP is a technology company that operates in more than 170 countries
around the world. e e!plore how technology and ser"ices can help people
and companies address their pro#lem and challenges$ and reali%e their
possi#ilities$ aspirations and dreams. e apply new thin&ing and ideas to
create more simple$ "alua#le and trusted e!periences with technology$
continuously impro"ing the way our customers li"e and wor&.
3/ ORACLE
(racle )&0usiness suite ")0+% version 8: is an internet ena#led product that can #e
managed 'rom a single site. ( company can operate a single data center
with a single data#ase$ similar to other )*P products. +his release was
launched in ,e#ruary 2007 and contains a num#er o' product lines which
users can implement 'or their #usiness. -racle )./ includes the company0s
1
enterprise resource planning 2)*P3 product as well as supply chain
management 2/453 and relationship management 24*53 applications. )ach
application is licensed separately so companies can select the com#ination
that is suita#le 'or their #usiness processes.
3/ TCS
In 9une :;;< Tata consultancy services "TC+% 2the leading information technology "IT% company
in India, reported revenues of 's.=@.@A> billion"+?8.;= billion% for the financial year ending
march <8,:;;<"'efer e-hibit I and e-hibit II for financials of TC+%. This made TC+ the first IT
Company in India to cross the ? 8 billion revenue mark.
#ithin a span of three and a half decades, TC+ emerged as one of the largest
software companies in !sia, employing :C,;;; IT professionals from <; nationalities working in
<: countries. TC+ has also been the largest software e-porter from India for past <; years. TC+
played a major role in developing the IT industry in India
./ INFOSYS
Infosys was founded on : 9uly 8@C8 in pune by *.'.*arayanamurthy and si- other. Eris
gopalakrishnan,*andannilekani , *.+.'aghavan, +.5.+hidulal, !shok !rora and E.5inesh, with
*.+.'aghavan officially being the first employee of the company. ,ounders started the company
with an initial investment of I*' 8;,;;;. The company was incorporated as 6Infosys consultants
4vt 3td.7 In model colony, pune as the registered office
In 8@C:, Infosys opened an office in 0angalore which soon became its headquarters.
Infosys headquarters in 0angalore, India
!ccording to ,orbes maga1ine, since listing on the 0ombay stock e-change till the year
:;;;, Infosys sales and earnings compounded at more A;F a year. In the year :;;;, president of
the united states 0ill Clinton complimented India on its achievements in high technology areas
citing the e-ample of Infosys.
10
In :;;8, it was rated best employer in by business today.. Infosys was rated best
employer to work for in :;;;, :;;8 and :;;: by Gewitt associates. In :;;A, Infosys received
over :.< million applications and hired fewer than <F of applicants.
COMPANY PROFILE
+tarted in 8@CB with its founder $r.!rul+elvam./sH vision of providing comprehensive
IT solution, $icromen was one of the earliest players in the customi1ed application software
service in Chennai.
Initially the company was catering to the requirements of clients from various industries.
/radually $icromen found itself acquiring core competency in a niche area & Construction
industry. +o the company went back to the drawing board and after many man years of research,
launched one of the earliest branded software products in the Indian market for a specific
industry & 0uild +uper fast.
This popular software went on to win awards at various forums. $eanwhile, the product
was also being constantly upgraded based on the market feedback received from the clientele.
$icromenHs 5elivery +ystems and +upport +ystems are in place with a network of
channel partners and a team of software engineers.
COMPANY PRODUCTS0
E1*!"#*!%, 2 T(,-(!,3
Cost Control
,inancial !ccounting
,lat +ales
0illing
AWARDS
11
0est software award at C(*+T'( & !n International e-hibition for construction related
4roducts held once in every five years and organi1ed by the 4une Chapter of the 0uilders
!ssociation of India.
!djudged as the best Civil )ngineering +oftware in India by the !ll India !ssociation of
Consulting Civil )ngineers, at 0angalore.
!wards came in thick and fast but the pride of $icromen has been the wide acceptance of
0uild +uper fast, resulting in installed base, which keeps growing day by day. $icromen have
now spread its wings catering to the demands of the global market.
The software has been constantly upgraded employing state&of&the&art technology
improvising the software performance keeping in mind the future requirements of the segment.
MISSION
$icromen will aim to be the best software solution provider. This we will achieve by high
quality service, better value addition and quick response to our customers. #e will sustain our
efforts by teamwork, innovation and continuous improvement.
VISION
$icromen have the vision of providing comprehensive Information Technology +olution.
It was one of the earliest players in customi1ed application software service in chennai
OBJECTIVES
The main objectives that $icromen has set out is to develop, sell and service quality
software making use of international standards and latest development tools to cater to
individuals, +$)s, large corporate as well as government organi1ations and quasi&government
organi1ations.
COMPANY PHILOSOPHY
#e believe that a company is an integration of resources for the purpose of producing
marketable products and services that improve and enhance the quality of life through efficient
12
and better management of resources within each organi1ation. !ll our activities down to the
nitty&gritty details must converge towards that objective.
4roduction and marketing of products and services of the highest possible quality are our prime
concern.
#e believe that a company should be an environment where employees pursue and
discover their fullest potential within the conte-t of the companyHs objectives. The reward to the
individual is a direct result of high productivity and revenue to the company. )mployees should
not feel restricted or repressed in any way whatsoever.
#e believe that the activities of a company should be performed in an environment that is
conducive to enhancement of life and personal happiness.
#e believe that any activity of the company should be conducted in total honesty and in
concert with facts and reality and the legal confines of the country that it operates in. *o
actionIdecision should ever be based on personal feelings or emotions, false persuasion,
coercion, force or greed. #e do not tolerate nepotism, favoritism, unreasonableness, frictions and
questionable dealings with questionable entities. !ll business dealings must be undertaken in
total transparency.
MICROMEN SYSTEMS 2 SOFTWARE PVT.LTD.
*ew *o. C, ,irst ,loor, 'adhakrishnan +treet,
+hankaran !venue, Jelachery 0ypass 'oad,
Jelachery, CG)**!I & B;; ;=:. I*5I!
4hone K L@8 == =<B: A8;8,;:,;<,;=,;>
,a- K L@8 == =<B:A8;B
,or +ales 2 salesMmicromen.com
,or +upport & supportMmicromen.com
13
2.1 REVIEW OF LITERATURE
1. T4( 5%)61 %5 7%8!,3 )#9!*#: "#,#3("(,* !, UK 1"#:: 5!"1
C#%:( H%7%*4
;
#,- P#6: W(1*4(#- N%**!,34#" U,!+(1!*$ B61!,(11 S)4%%:; J6&!:((
C#"961; W%::#*%, R%#-; N%**!,34#" NG< 1BB; UK
A&1*#)*
#orking capital management routines of a large random sample of small companies in
the E are e-amined. Considerable variability in the take&up of 88 working capital management
routines was detected. 4rincipal components analysis and cluster analysis confirm the
identification of four distinct Ntypes of companies with regard to patterns of working capital
management $ultinomial logistic regression.
2. D()!1!%, 1699%* 5% !,*(3#*(- )#14 "#,#3("(,*
V(,8#* S!,!+#1#, #,- Y%,3 H. K!" N%*4(#1*(, U,!+(1!*$; B%1*%,; MA =211.; USA
U,!+(1!*$ %5 C!,)!,,#*!; C!,)!,,#*!; OH 4.221; USA
A&1*#)*
Cash management has attracted the increasing attention of both academicians and
practitioners in recent time. The e-panding role and responsibilities of cash managers and
corporate treasurers is likely to increase the focus on cash management as a vital organi1ational
function. !cademic research, however, has primarily focused on providing analytical tools to
solve well structured problems that are relatively isolated in nature. Conspicuously, no attempt
14
has been made to integrate the various sub&problems of cash management e-plicitly recogni1ing
interrelationships among the sub&problems as well as between the sub&problems and other
financial decisions. $ore importantly, there is an even greater need to provide a framework that
in addition to recogni1ing the above interrelationships will enable the cash manager to recogni1e
a more inclusive set of dependencies that e-ist in practice.
3. A, %9(#*!%,#: #99%#)4 *% !,*(3#*(- 7%8!,3 )#9!*#: 9:#,,!,3
R%$ L. C6"; D#7!, D. K:!,3"#, #,- L(( A. T#+!1
;
A&1*#)*
#orking capital management involves the balancing of activities from three functional
areas that are generally considered to be somewhat separableOmarketing, production, and
finance. 4roper integration of the various parts of the working capital process requires
simultaneous consideration of both cross&sectional interrelationships among the functional
activities and intertemporal dynamics of the linkages between elements of the problem that are
either out of phase with each other or have differing short&and long&run ramifications. This
suggests that a formal modeling approach can be advantageously employed.
4. I,1!-( 1#:(1 #,- (#,!,31 "#,#3("(,*
M$6,3 S(%8 P#8
;
#,- T#(7%% P#8 S)4%%: %5 B61!,(11; V!3!,!# C%""%,7(#:*4
U,!+(1!*$; R!)4"%,-; VA 232<4>4===; U,!*(- S*#*(1
R%&(* H. S"!*4 S)4%%: %5 B61!,(11; U,!+(1!*$ %5 M#$:#,-; C%::(3( P#8; MD 2=?42>
1<1.; U,!*(- S*#*(1
A&1*#)*
This study e-amines the relationship between managers insider transactions and their
strategic behavior on earnings management. 4rior literature provides a theoretical basis to
empirical studies of insider trading and earnings management. #e predict that managers adjust
discretionary accruals "5!s% to increase current&period earnings before they sell their own firms
shares in the subsequent period. (ur empirical results support that current discretionary accruals
15
are higher for firms whose managers sell their ownership in the subsequent period than for other
firms, indicating that managers of insider sales firms would have deliberately increased current&
period earnings through 5!s.
.. V(,*6( )#9!*#: #,- "#,#3("(,*>:(-; :(+(#3(- &6$>%6*10 A E6%9(#, 9(19()*!+(
M!8( W!34*
A&1*#)*
$anagement and leveraged buy&outs became phenomena of the 8@C;s. ,rom beginnings
in the .+., they quickly traversed the !tlantic, spreading first to the .E. and then throughout
)urope. The venture capital industry has played a crucial role in the development of buy&outs in
)urope, particularly in smaller deals in the .E., the *etherlands, and ,rance. This paper
e-amines three aspects of the market for venture and development capital funded management
led buy&outs in )urope. It provides a framework for analysis of the different levels of
development of each countryHs market, it e-amines performance of .E. buy&outs and addresses
the e-tent and nature of e-its. Throughout the paper use is made of the e-tensive database of
)uropean buy&outs developed by the authors.
@. I,-!)#*%1 %5 S6))(1156: C%"9#,!(1
R%&(* J%4,1%, #,- L6) S%(,(, U,!+(1!*$ %5 S#, D!(3%; USA
A&1*#)*
sing monthly Compustat data for =AC companies covering the period 8@C:28@@C, we
investigate which factors discriminate between financially successful and less successful
companies. ,inancial success is measured using three different methods, i.e., the +harpe ratio,
9ensens alpha, and )J!. #e consider a total of 8; different company specific characteristics as
16
potential indicators of superior performance. ! binary logit model is applied to quantify the
relationship between the individual firm characteristics and the probability that a particular
measure of success will be greater or lower than the average for all firms considered
?. T4( &%#- #,- 1*#*(3$0 V(,*6( )#9!*#: #,- 4!34 *()4,%:%3$
J%1(94 R%1(,1*(!,; T4( U,!+(1!*$ %5 T(A#1 #* A:!,3*%, USA
A&1*#)*
In the area of strategy formulation, the part played by the board of directors in high
technology firms operating with funds provided by venture capital organi1ations has not been
investigated before. This e-ploratory study, although based on a limited sample, looks at some of
the fundamental issues and contrasts the involvement of the board in firms of this kind with very
limited involvement of the board in small conventional firms and in large publicly&held
corporations. The relative power of management and the board of directors is of great
importance. In contrast with the small conventional firm and the large corporation, in both of
which the Chief )-ecutive (fficer is usually in firm control of the board and generally does not
look to the board for active involvement in strategy formulation, the high&technology firms
funded by venture capital organi1ations are characteri1ed by a board of directors that has high
power relative to management
<. EA9(* "#,#3(1 %5 6,)(*#!,*$0 !,*("(-!#!(1 %5 )#9!*#: !, H%,3 K%,3
DR M($(
A&1*#)*
Intermediaries of capital include firms and individuals in commercial and investment
banking, commodity e-port and import, money management, and multinational corporate
management. Those who operate in Gong Eong control and coordinate the e-change of capital
17
within !sia and between !sia and the rest of the world, but they face a new regime after China
regains control. This momentous transformation elicits widespread speculation about the future
of Gong Eong as the global metropolis for !sia. ncertainty unleashed by this change,
nevertheless, follows a long history of uncertainty that these intermediaries have e-perienced in
!sian trade and finance.
B. F!,#,)!#: 5%()#1*!,3 5% )%9%#*( 9:#,,!,3
A&1*#)*
4lanning to meet cash requirements is an essential management function in any business.
It is not enough for the undertaking to make a profit. Cash resources must be planned to finance
a negative cash flow in a period when necessary additions to fi-ed assets or temporary increases
in working capital requirements are in e-cess of funds being generated by profits and by
depreciation charges. In a period of surplus funds, the need for a forecast of future cash levels is
no less important. ! forecast of available funds is a prerequisite for any investment plan.
1=. F!,#,)!#: )%,*%:; "#,#3(!#: )%,*%: #,- #))%6,*#&!:!*$0 (+!-(,)( 5%" *4( B!*!14
C%**%, I,-61*$; 1?==C2===
S*(+(, T%"1 D(9#*"(,* %5 M#,#3("(,* S*6-!(1; U,!+(1!*$ %5 Y%8; S#::$ B#:-7!,
B6!:-!,31; B:%)8 A; H(1:!,3*%,; Y%8 YO1= .DD UK
A&1*#)*
The paper seeks to identify the underlying and long run historical determinants of
accounting practices. These practices include the nature and relative importance of management
and financial accounting techniques, together with the mediating roles of corporate finance and
especially financial markets. To e-plain historical variation in the application of these techniques
the paper introduces an analytical model.
18
2.2 RESEARCH METHODOLOGY
'esearch means search for knowledge. It aims at discovering the truth. It is undertaken to
discover the questions by applying scientific method of finding solutions to the problems.
Therefore research is the process of systematic and depth study or search of any particular topic,
subject or any area of investigation backed by collections, computation, presentation and
interpretations of relevant data. The role of research in several fields of applied economics,
whether related to business or to the economy as a whole, has greatly increased in modern times.
'esearch has its special significance in solving various operational and planning problems of
business and industry. 'esearch is equally important for social scientist in studying social
relationship and in seeking answers to various social problems. The purpose of research is to
discover the answer to question through the application of scientific procedure. ,or conducting a
research there has to follow some steps i.e.
,ormulating the research problem
)-tensive literature survey
5evelopment of working hypothesis
4reparing the research design
5etermining the sample design
Collection of data
)-ecution of the project
!nalysis of the data
11
Gypothesis testing
/enerali1ations and interpretations
4reparation of the report
'esearch methodology is a way to systematically solve the research
problems. It may be understood as a science of studying how research is done scientifically. The
main purpose of this study is to evaluate the present position of the net working capital of the
company and how they are managing the available working capital. ,or the analysis of working
capital, it requires financial data of the company which is obtained from the !nnual 'eport of the
company. The !nnual 'eport from the year :;;A&:;;C to :;88&:;8: is chosen for this.
TOOLS USED FOR ANALYSIS
The analysis of the working capital is done with the help of the tool 2 'atio !nalysis.
RATIO ANALYSIS
'atio analysis is one of the most powerful tools of financial analysis. It
aims at making use of quantitative information for decision making. 'atio analysis is an
important and useful technique to check upon the efficiency with which the working capital is
being used in the organi1ation. +ome ratios indicate the progress or downfall trend of the firm. It
helps the financial management in evaluating the financial position and performance of the firm.
This is not only used as a measure of efficiency but also very useful in cost control.
SOURCE OF DATA
There are two types of sources of data collection. They are 4rimary 5ata and
+econdary 5ata. In this study secondary data is used more for the analysis.
SECONDARY DATA
20
The study is based upon the secondary data that is audited financial data of accounts,
schedules and other disclosed matters of the company. The audited statements of the accounts for
the period :;;A&:;;C to :;88&:;8: were available from the company. ! primary enquiry was
made with finance department, production department, and purchase and stores departments.
+tatistical techniques were used for analy1ing and interpreting the various results
obtained from secondary data. /raphical presentation is also used for the interpretation of
financial statements and schedules.
PERIOD OF STUDY
The present study is based on a period of five years from :;;A&:;;C to
:;88&:;8:. ,or this we get a period of B $(*TG+
TOOLS USED FOR DATA ANALYSIS.
o 4ercentage !nalysis
o +chedule of changes in working capital
o 'atio analysis
21
2.3 DATA ANALYSIS AND INTERPRETATION
DETERMINATION OF THE NET WORKING CAPITAL OF
MICROMEN SOFTWARE
TABLE C 2.3.1
STRUCTURE OF CURRENT ASSETS
"'s. in 3akhs%
Y(# I,+(,*%
!(1
D(&*%
1
C#14 2
B#,8
&#:#,)(
O*4(
C6(,
* A11(*1
L%#,1 2
A-+#,)(
1
T%*#:
C6(,*
A11(*1
2==?>=< ?13..= 2<12.=@ B1.3@ 4..4 11<@.2@ 4<=?.?2
2==<>=B 122..1. 2@4<.BB 13=.=B 4.@< 1=1=.<B .=1B.<=
2==B>1= 13?..1. 23@B.=3 13B.33 4.<2 <@2..2 4?.=.<.
2=1=>11 ?@3..= 2???.14 1B<.<2 ..1@ @22.43 43@..=.
2=11>12 B<..@1 2B22.<. 23=.@B 4.BB 42?.42 4.?1..@
+ourceK +econdary 5ata
I,*(9(*#*!%,0
In :;88&8: the total amount of current assets is =>A8.>B lakhs. !fter the accounting year
:;8;&88 the total current assets shows an increasing trend. The inventories, cash and bank
balance form a major segment of current assets. Thus, an increasing trend in the current assets
shows that the firm is able to meet it day to day e-penses and other outside liabilities that occurs
in its functioning. Gowever the increasing trend is better to the firm.
22
TABLE C 2.3.2
STRUCTURE OF CURRENT LIABILITIES
Y(# C6(,*
L!#&!:!*!(1
P%+!1!%,1 T%*#:
:;;A&;C :8CB.=; <:.<C 221<.?<
:;;C&;@ 8A@A.=: <8.8C 1<2<.@=
:;;@&8; 8A<@.>@ :C.=@ 1?@<.=<
:;8;&88 8=:>.BC :A.>; 14.3.1<
:;88&8: 8B<>.@A 88@.:= 1?...21
+ourceK +econdary 5ata
I,*(9(*#*!%,0
The current liabilities in :;88&8: are 's 8A>>.:8. #hen the amount is compared with
:;;A&;C to :;;@&8; year, the current liabilities trends to decline. Gowever this trend is better for
the firm.
23
TABLE C 2.3.3
STRUCTURE OF NET WORKING CAPITAL
Y(# C6(,* A11(*1 C6(,* L!#&!:!*!(1 N(* W%8!,3
C#9!*#:
:;;A&;C =C;A.A: ::8C.AC 2.<<.B4
:;;C&;@ >;[email protected]; 8C:C.B; 31B1.2=
:;;@&8; =A>;.C> 8ABC.;C 2B<2.??
:;8;&88 =<B>.;> 8=><.8C 2B11.<?
:;88&8: =>A8.>B 8A>>.:8 2<[email protected].
+ourceK +econdary 5ata
CHART 2.3.1
I,*(9(*#*!%,0
,rom the year :;;A&;C and :;;C&;@ the working capital shows a increasing trend. 0ut
after that, i.e. in :;;@&8; onward, working capital shows an decreasing trend. ,rom this table it
shows that the company has enough current assets to meet its current liabilities. The companys
working capital is favorable for all these five years. Gere we can see that the company has
adequate working capital to meet its day to day e-penses and the short term liabilities that occur
in its functioning. Gere the position of the working capital is healthier for the smooth functioning
of the business
APPLICATION OF RATIOS
24
1. LIDUIDITY RATIO
CURRENT RATIO

TABLE C 2.3.4
COMPUTATION OF CURRENT RATIO
Y(# C6(,* A11(*1 C6(,* L!#&!:!*!(1
"In laks%
C6(,* R#*!%
:;;A&;C =C;A.A: ::8C.AC 2.1?
:;;C&;@ >;[email protected]; 8C:C.B; 2.?4
:;;@&8; =A>;.C> 8ABC.;C 2.@B
:;8;&88 =<B>.;> 8=><.8C 3.==
:;88&8: =>A8.>B 8A>>.:8 2.@=
+ourceK +econdary 5ata
CHART 2.3.2
I,*(9(*#*!%,0
Gere the current ratio is sufficient to the firm. The current ratio of all years
onward, its more than the satisfactory level i.e. :K8. It shows the good liquidity position of the
firm. In :;;@&8; the current ratio is in a satisfactory level. Gere the firm has sufficient cash
balance to meet its day to day e-penses and the short term obligations that occur in its
functioning.
P D6!)8 R#*!%
25
TABLE C 2.3..
COMPUTATION OF DUICK RATIO
Y(# D6!)8 A11(*1 C6(,* L!#&!:!*!(1 D6!)8 R#*!%
:;;A&;C =;@=.:: ::8C.AC 1.<4
:;;C&;@ <A@=.B> 8C:C.B; 2.=?
:;;@&8; <<A>.A; 8ABC.;C 1.B=
:;8;&88 <B;8.>> 8=><.8C 2.4<
:;88&8: <>C>.@> 8A>>.:8 2.=4
+ourceK +econdary 5ata
CHART 2.3.3
I,*(9(*#*!%,0
! Quick 'atio of 8K8 is considered satisfactory as a firm can easily meet all its current
liabilities. If the ratio is less than 8K8, then the financial position of the firm shall be deemed to be
unsound. (n the other hand, if the ratio is more than 8K8, then the financial position of the
concern is good and sound one. ! higher ratio indicates sound financial position and vice versa.
Quick 'atio is the true test of business solvency. Gere the entire ratio is greater than one. It
shows that the solvency position of the firm is good. ,or the current year, the quick ratio is
decreasing trend . i.e. it is the satisfactory level. In the year:;;@&8;the company is in a sound
financial position
E A&1%:6*( L!F6!-!*$ R#*!%
26
TABLE C 2.3.@
COMPUTATION OF ABSOLUTE LIDUIDITY RATIO
Y(# C#14 C6(,* L!#&!:!*!(1 A&1%:6*( L!F. R#*!%
:;;A&;C @8.<B ::8C.AC =.=41
:;;C&;@ 8<;.;@ 8C:C.B; =.=?1
:;;@&8; 8<@.<< 8ABC.;C =.=?<
:;8;&88 [email protected]: 8=><.8C =.13@
:;88&8: :<;.B@ 8A>>.:8 =.131
+ourceK +econdary 5ata
CHART 2.3.4
I,*(9(*#*!%,0
! ratio of ;.A>K8 is recommended to ensure liquidity position. This test is more vigorous
measure of a firms liquidity position. Gere all the ratios are lesser than the recommended level
i.e. ;.A>K8. it shows an increasing trend. This shows that the firm has aunsound liquidity position.
P D(&* EF6!*$ R#*!%
27
TABLE C 2.3.?
COMPUTATION OF DEBT EDUITY RATIO
Y(# O6*1!-(G1 F6,- S4#(4%:-(G1
F6,-
D(&* EF6!*$ R#*!%
:;;A&;C =@::.;A 8B@=.C> 2.B=
:;;C&;@ >:>B.>> 8B@=.C> 3.1=
:;;@&8; >A:<.== 8B@=.C> 3.3<
:;8;&88 >888.=> 8B@=.C> 3.=1
:;88&8: :>=;.CC 8B@@.C> 1.4B
+ourceK +econdary 5ata
CHART 2.3.@
I,*(9(*#*!%,0
!n acceptable norm for this ratio is considered to be :K8. ! high ratio shows that the
claims of the creditors are greater than those of owners. ! high debt company is able to borrow
funds on very restrictive terms and conditions. ! high debt equity ratio implies a greater claim
ofcreditors. than owners. ,rom the point of view of creditors, it represents a dissatisfactory
capital structure of the business. Gere the company has a very high debt equity ratio. +o it
implies a greater claim ofcreditors.than owners
PP%9!(*#$ R#*!%
28
TABLE C 2.3.<
COMPUTATION OF PROPRIETARY RATIO
Y(# S4#(4%:-(G1
F6,-
T%*#: A11(*1 P%9!(*#$ R#*!%
:;;A&;C 8B@=.C> CC<>.A; =.1B
:;;C&;@ 8B@=.C> CAC;.;; =.1B
:;;@&8; 8B@=.C> @8CB.<A =.1<
:;8;&88 8B@=.C> C:>@.=C =.2=
:;88&8: 8B@@.C> >@@>.@= =.2<
+ourceK +econdary 5ata
CHART 2.3.?
I,*(9(*#*!%,0
The proprietary ratio shows the financial strength of the company. The acceptable norm
of the ratio is 8K< "i.e. ;.<<%. It helps the creditors to find out the proportion of shareholders fund
in the total assets. Gigher ratio indicates a secured position to creditors and a lower ratio
indicates a greater risk to creditors. It indicates the long term solvency of the firm. 0ut here the
proprietary ratio shows an decreasing trend as they are compared with its previous year. 0ut the
rate of increasing is not at a higher rate. Gere the ratios are in adis satisfactory level and it gives a
unsecured position to the creditors.
P F!A(- A11(* *% N(* W%*4
21
TABLE C 2.3.B
COMPUTATION OF FIHED ASSETS TO NET WORTH RATIO
Y(# F!A(- A11(* S4#(4%:-(G1
F6,-
F!A(- A11(* R#*!%
:;;A&;C :<;;.<< 8B@=.C> 1.3@
:;;C&;@ <<8:.;> 8B@=.C> 1.B.
:;;@&8; :@C;.;@ 8B@=.C> 1.?@
:;8;&88 :>B@.>; 8B@=.C> 1..2
:;88&8: 8;8B.;: 8B@@.C> =.@=
+ourceK +econdary 5ata
CHART 2.3.<
I,*(9(*#*!%,0
It shows the relationship between fi-ed assets and shareholders fund. If the ratio is
greater than one, it means that creditors fund have been used to acquire a part of the fi-ed assets.
Gere the companys fi-ed assets ratio from the year :;;A&;C to :;8;&88 onward is greater than
one. 0utcurrent year ratio is less than one. Gence it denotes that the creditors funds have not
been used to acquire a part of the fi-ed assets.
3. ACTIVITY RATIO
30
PI,+(,*%$ T6,%+( R#*!%
TABLE >2.3.1=
COMPUTATION OF INVENTORY TURNOVER RATIO
Y(# C%1* %5 G%%-1 S%:- A+(#3(
I,+(,*%$
I,+(,*%$
T6,%+( R#*!%
:;;A&;C BC>>.>C B=<.A; 1=.@.
:;;C&;@ BA=C.:> =:B.C8 1..<1
:;;@&8; B;>@.8; A<=.<> <.2.
:;8;&88 B<@=.@@ >=;.=@ 11.<3
:;88&8: A:B<.C< <<B.8> 21.@=
+ourceK +econdary 5ata
CHART 2.3.B
I,*(9(*#*!%,0
The inventory turnover ratio signifies the liquidity of the inventory. ! high inventory
turnover ratio indicates brisk sales. The ratio is a measure to discover the possible trouble in the
form of over stocking. ! low inventory turnover ratio results in blocking of funds in inventories.
There is no standard ratio for the inventory turnover. Gere the companys inventory turnover
ratio from the year :;;@&8; onward is increasing. It indicates an increase in the liquidity of the
inventories of the firm. The inventory turnover ratio for the year :;88&8:is:8.B;times.
ED(&*%1 T6,%+( R#*!% 2 A+(#3( D(&* C%::()*!%, P(!%-
31
TABLE C 2.3.11
COMPUTATION OF DEBTORS TURNOVER RATIO 2 AVERAGE
DEBT COLLECTOIN PERIOD
Rear *et +ales !vg. !ccounts
'ec.
D(&*%1
T6,%+(
R#*!%
A+3. D(&*
C%::()*!%,
P(!%-
:;;A&;C BA=8.AC :C8:.;B 2.3B 1.2.?1
:;;C&;@ BC;;.B; :B=C.@@ 2..@ 142..<
:;;@&8; >;>:.<A :<B@.;< 2.13 1?1.3@
:;8;&88 B>>8.:A :AA>.8= 2.3@ 1.4.<=
:;88&8: C:[email protected]: :@::.C> 2.<2 12B.3=
CHART 2.3.1=
I,*(9(*#*!%,0
5ebtors turnover ratio measures the quality of debtors. ! shorter collection period
implied prompt payment by debtors. It reduces the chance of bad debt. ! longer collection period
implies inefficient credit collection performance. Gere at the beginning i.e. in :;;A&;C, the
company has given a time of 8>: days for the collection of debt and :;;A&;C onward the
debtcollection period has been increased by the company. 0ut in the financial year :;;88&8: it
has been reduced to 8:@ days.
E F!A(- A11(*1 T6,%+( R#*!% I,*(9(*#*!%,0
32
TABLE C 2.3.12
COMPUTATION OF FIHED ASSETS TURNOVER RATIO
Rear *et +ale ,i-ed !sset F!A(- A11(*1
T6,%+( R#*!%
:;;A&;C BA=8.AC :<;;.<< 2.B3
:;;C&;@ BC;;.B; <<8:.;> 2.=.
:;;@&8; >;>:.<A :@C;.;@ 1.?=
:;8;&88 B>>8.:A :>B@.>; 2...
:;88&8: C:[email protected]: 8;8B.;: <.12
+ourceK +econdary 5ata
CHART 2.3.11
I,*(9(*#*!%,0
The ,i-ed !ssets Turnover 'atio indicates the e-tent to which the investment in fi-ed
assets contributes towards sales. If compared with a previous year, it indicates whether the
investment in fi-ed assets has been judicious or not. Gere we can see that :;;@&8; from onward
the fi-ed asset turnover ratio is increasing. 0ut after a fall in :;;@&8; the fi-ed asset turnover
ratio in the year :;88&8: is C.8: times. +o we can say that the additional investment in fi-ed
assets by the company resulted in an increased sales.
E W%8!,3 C#9!*#: T6,%+( R#*!%
33
TABLE C 2.3.13
COMPUTATION OF WORKING CAPITAL TURNOVER RATIO
Rear *et +ales *et #orking Capital W%8!,3 C#9!*#:
T6,%+( R#*!%
:;;A&;C BA=8.AC :>CC.@= 2.@=
:;;C&;@ BC;;.B; <8@8.:; 2.13
:;;@&8; >;>:.<A :@C:.AA 1.@B
:;8;&88 B>>8.:A :@88.CA 2.2.
:;88&8: C:[email protected]: :C8B.<> 2.B3
+ourceK +econdary 5ata
CHART 2.3.12
I,*(9(*#*!%,0
This ratio reflects the turnover of the firms net working capital in the course of the year.
It is a good measure of over&trading and under&trading. The higher ratio indicates the efficiency
utili1ation of working capital. Gere the working capital turnover ratio shows an increasing trend
e-cept last three years. :;;@&8; onward the working capital turnover ratio is :.@< times. ,or the
last three years the funds are unnecessarily blocked and the company is not utili1ing its funds in
the proper way.
4. PROFITABILITY RATIO
PG%11 P%5!* R#*!%
34
TABLE C 2.3.14
COMPUTATION OF GROSS PROFIT RATIO
Y(# G%11 P%5!* N(* S#:(1 G%11 P%5!* R#*!%
:;;A&;C &8::.C; BA=8.AC >1.<2
:;;C&;@ =;.<> BC;;.B; =.?@
:;;@&8; &8;;A.C< >;>:.<A >1B.B2
:;8;&88 8<;.>8 B>>8.:A 2.3<
:;88&8: @8B.>A C:[email protected]: 11.B.
CHART 2.3.13
I,*(9(*#*!%,0
This ratio helps in ascertaining whether the average percentage of mark up on the goods
is maintained or not. !n increase in the gross profit ratio may be due to an increase in the selling
price without a corresponding increase in the cost of goods sold or due to a decrease in the cost
of goods sold without a corresponding decrease in the selling price. +imilarly, a decrease in the
gross profit ratio may be due to a decrease in the selling price without a corresponding decrease
in the cost of goods sold or due to an increase in the cost of goods sold without a corresponding
increase in the selling price of goods sold. Gere the companys gross profit ratio is in a increasing
trend. Gere the gross profit ratio for the year :;;@&8; is 88.@>F
E N(* P%5!* R#*!%
35
TABLE C 2.3.1.
COMPUTATION OF NET PROFIT RATIO
Y(# N(* P%5!* N(* S#:(1 N(* P%5!* R#*!%
:;;A&;C &88<.C; BA=8.AC >1.@<
:;;C&;@ =;.<> BC;;.B; =..B
:;;@&8; &8;;A.C< >;>:.<A >1B.B4
:;8;&88 8<;.>8 B>>8.:A 1.BB
:;88&8: @8B.>A C:[email protected]: 11.11
CHART 2.3.14
I,*(9(*#*!%,0
This ratio is used to measure the overall profitability and hence it is very
useful to proprietors. It is an inde- of efficiency and profitability of the business. Gigher the
ratio, better is the operational efficiency of the concern. Gere in the year :;;>&;@ and :;;A&;C
there shows a huge decrease in the net profit ratio. In this year the operational efficiency of the
firm is good. 0ut during the year :;;@&8; the net profit decline and the ratio is 88.88F.
E O9(#*!,3 R#*!%
36

TABLE C 2.3.1@
COMPUTATION OF OPERATING RATIO
Y(# O9(#*!,3 C%1* N(* S#:(1 O9(#*!,3 R#*!%
:;;A&;C A<:C.;> BA=8.AC 1=<.@B
:;;C&;@ C8@=.C@ BC;;.B; 12=..=
:;;@&8; C8B@.;: >;>:.<A 1@1.@<
:;8;&88 A88=.C8 B>>8.:A 1=<.@=
:;88&8: C;A:.<A C:[email protected]: B?.<.
+ourceK +econdary 5ata
CHART 2.3.1.
I,*(9(*#*!%,0
(perating ratio is an indicative of the proportion that the cost of sales bears
in sales. Cost of sales includes direct cost of goods sold as well as other operating e-penses. It is
an important ratio that is used to discuss the general profitability of the concern. 3ower the ratio,
the more profitability are the operations indicating an efficient control over cost and an
appropriate selling price. 'everse is the position when the ratio is higher. Gere the company is in
a sound position during the year :;88&8: i.e. the (perating 'atio is @A.C>F
E R(*6, O, T%*#: A11(*1
37
TABLE C 2.3.1?
COMPUTATION OF RETURN ON ASSETS
Y(# N(* P%5!* T%*#: A11(*1 R(*6, O, A11(*1
:;;A&;C &88<.C; CC<>.A; >1.2<
:;;C&;@ =;.<> CAC;.;; =.4.
:;;@&8; &8;;A.C< @8CB.<A >1=.B?
:;8;&88 8<;.>8 C:>@.=C 1..<
:;88&8: @8B.>A >@@>.@= 1..31
+ourceK +econdary 5ata
CHART 2.3.1@
I,*(9(*#*!%,0
4rofitability can be measured in terms of relationship between net profit and total assets.
This ratio is also known as return on /ross Capital )mployed. It measures the profitability of
investment. In the accounting year :;;@&8;the return on assets has been increased to 8>.<8F.
ER(*6, %, C#9!*#: E"9:%$(-
38
TABLE C 2.3.1<
COMPUTATION OF RETURN ON CAPITAL EMPLOYED
Y(# N(* P%5!* C#9!*#: E"9:%$(- R(*6, O, C#9!*#:
:;;A&;C &88<.C; =@:8.B> >2.31
:;;C&;@ =;.<> B><=.=< =.@1
:;;@&8; &8;;A.C< >@B<.<B >[email protected]
:;8;&88 8<;.>8 >=C8.C> 2.3<
:;88&8: @8B.>A <C<:.C> 23.B1
+ourceK +econdary 5ata
CHART 2.3.1?
I,*(9(*#*!%,0
This ratio is also known as return on investment "'(I%. The primary objective of making
investment in any business is to obtain satisfactory return on the capital invested. It indicates the
return on capital employed in the business and it can be used to show the efficiency of the
business as whole. Gigher the ratio, the more efficient use of capital employed. Gere the
company has high return during the year :;;@&8; ,it has been increased to :<.@8F.
E E#,!,31 9( S4#(
31
TABLE C 2.3.1B
COMPUTATION OF EARNINGS PER SHARE
Y(# N(* P%5!* N%. %5 EF6!*$ S4#(1 E#,!,31 9( S4#(
:;;A&;C &88<.C; 8<;.8CC >=.<?4
:;;C&;@ =;.<> 8<;.8CC =.31=
:;;@&8; &8;;A.C< 8<;.8CC >?.?41
:;8;&88 8<;.>8 8<;.8CC 1.==2
:;88&8: @8B.>A 8<;.8CC ?.=4=
+ourceK +econdary 5ata
CHART 2.3.1<
I,*(9(*#*!%,0
This ratio helps in the assessment of the profitability of a firm from the stand point of
equity shareholders. This measures the profit available to the equity share holders per share. The
)arnings per +hare helps in determining the market price of the equity share of the company. !
comparison of ).4.+ of the company with another will also help in deciding whether the equity
share capital is being effectively used or not. It also helps in estimating the companys capacity
to pay dividend on its equity share holders. Gere the company is in a good financial position to
meet its equity share holders
T#&:( 2.3.2=
SCHEDULES OF CHANGES IN WORKING CAPITAL FOR FIVE YEAR
40
P#*!)6:#1 2==?>2==< 2==<>2==B 2==B>2=1= 2=1=>2=11 2=11>2=12
Inventories A8>.>; 8::>.8> 8<A>.8> AB<.>; @C>.B8
+undry debtors :C8:.;B :B=C.@@ :<B@.;@ :AAA.8= :@::.C>
Cash D bank balance @8.<B 8<;.;@ 8<@.<< [email protected]: :<;.B=
3oans and advances 88CB.:B 8;8;.C@ CB:.>: B::.=< =:A.=:
(ther current assets =.>= =.BC =.C: >.8B =.@@
T%*#: IA/ =C;A.A: >;[email protected]; =A>;.C> =<B>.;> =>A8.>B
Current liabilities :8CB.=; 8A@A.=: 8A<@.>@ 8=:>.BC 8B<>.@A
4rovision <:.<C <8.8C :C.=@ :A.>; 88@.:=
T%*#:IB/ ::8C.AC 8C:C.B; 8ABC.;C 8=><.8C 8A>>.:8
I,)(#1(J-()(#1( !, 7%8!,3 )#9!*#: IA>B/ 2.<<.B4

31B1.2= 2B<2.?? 2B11.<? 2<[email protected].
IR1.I, :#841/
C4#* 2.3.1< A,#:$1!1 %, )4#,3(1 !, 7%8!,3 )#9!*#:
I,*(9(*#*!%,
41
In the year :;;A&:;;C the schedule of changes shows an increase in the working capital. The
increase in working capital is mainly due to increase in inventory, debtors and decrease in current
liabilities. It could be inferred that there was efficient management of working capital. Gere the
current assets are e-cess over current liabilities
In the year :;;C&:;;@ the schedule of changes shows an increase in the working
capital. The increase in working capital is mainly due to increase in inventory, debtors and
decrease in current liabilities. It could be inferred that there was efficient management of
working capital. Gere the current assets are e-cess over current liabilities.
In the year :;;@&:;8; the schedule of changes shows decrease in the working
capital. The decrease in working capital is mainly due to increase in inventory, debtors and
decrease in current liabilities. It could be inferred that there was efficient management of
working capital. Gere the current assets are e-cess over current liabilities.
In the year :;8;&:;88 the schedule of changes shows decrease in the working
capital. The decrease in working capital is mainly due to increase in inventory, debtors and
decrease in current liabilities. It could be inferred that there was efficient management of
working capital. Gere the current assets are e-cess over current liabilities.
In the year :;88&:;8: the schedule of changes shows an decrease in the working
capital. The decrease in working capital is mainly due to increase in inventory and debtors. It
could be inferred that there was efficient management of working capital. Gere the current assets
are e-cess over current liabilities
T#&:( 2.3.21 SCHEDULES OF CHANGES IN WORKING CAPITAL IN 2==?>2==<
42
IR1. I, :#841/
4!'TIC3!'+ :;;A :;;C I*C')!+) 5)C')!+)
CURRENT ASSETS
I*J)*T('I)+
5)0T('+
C!+G D 0!*E
(TG)' C'')*T !++)T+
3(!*+ D!5J!*C)+
B<;.8=
:A8>.88
C=.<=
=.B>
8<>>.:;
A8<.>;
:C8:.;B
@8.<B
=.>=
88CB.:B
C<.<B
@B.@>
A.;:




8>C.=8

.88
8BC.@=

8B@.@>
B.A=
T(T!3"!% =AC=.B> =C;<.A:
CURRENT LIABILITIES2
PROVISIONS
C'')*T 3I!0I3ITI)+
4'(JI+I(*+
:;8B.=>
:>.B=
:8CB.=;
<:.<C
T(T!3"0% :;=:.;@ ::8C.AC
#('EI*/ C!4IT!3 "!&0%
5)C')!+) I* #('EI*/ C!4IT!3
:A=A.<> :>C=.@=
8>C.=8
T(T!3 :A=A.<> :A=A.<> <=>.A= <=>.A=
I,*(9(*#*!%,
The working capital was decreased"8>C.=8% during the year :;;A&;C
T#&:( 2.3.22 SCHEDULES OF CHANGES IN WORKING CAPITAL IN 2==<>2==B
43
IR1. I, :#841/
4!'TIC3!'+ :;;C :;;@ I*C')!+) 5)C')!+)
CURRENT ASSETS
I*J)*T('I)+
5)0T('+
C!+G D 0!*E
(TG)' C'')*T !++)T+
3(!*+ D!5J!*C)+
A8<.>;
:C8:.;B
@8.<B
=.>=
88CB.:B
8::>.8>
:B=C.@@
8<;.;@
=.BC
8;8;.C@
>88.B>
<C.A<
.8=

<CC.@C

8.:
8B<.;A
8A>.<A
B;:.:B
T(T!3"!% =C;A.A: >;[email protected];
CURRENT LIABILITIES2
PROVISIONS
C'')*T 3I!0I3ITI)+
4'(JI+I(*+
:8CB.=;
<:.<C
8A@A
<8.8C
T(T!3"0% ::8C.AC 8C:C.B
#('EI*/ C!4IT!3 "!&0%
I*C')!+) I* #('EI*/ C!4IT!3
:>CC.@=
B;:.:B
<8@8.:
T(T!3 <8@8.: <8@8.: @=;.A @=;.A
I,*(9(*#*!%,
The working capital was increased "B;:.:B% during the year :;;C&;@
T#&:( 2.3.23 SCHEDULES OF CHANGES IN WORKING CAPITAL IN 2==B>2=1=
44
IR1. I, :#841/
4!'TIC3!'+ :;;@ :;8; I*C')!+) 5)C')!+)
CURRENT ASSETS
I*J)*T('I)+
5)0T('+
C!+G D 0!*E
(TG)' C'')*T !++)T+
3(!*+ D!5J!*C)+
8::>.8>
:B=C.@@
8<;.;@
=.BC
8;8;.C@
8<A>.8>
:<B@.;<
8<@.<<
=.C:
CB:.>:
8>;
@.:=
;.8=
>A.C<
:.B@
:;C.=<
:A@.@B
8=C.<A
T(T!3"!% >;[email protected]; =A>;.C>
CURRENT LIABILITIES2
PROVISIONS
C'')*T 3I!0I3ITI)+
4'(JI+I(*+

8A@A.=:
<.8C
8A<@.>@
:C.=@
T(T!3"0% 8C:C.B 8ABC.;C
#('EI*/ C!4IT!3 "!&0%
5)C')!+)5 I* #('EI*/ C!4IT!3
<8@8.:
:@C:.AA
:;C.=<
T(T!3 <8@8.: <8@8.: =:C.=@ =:C.=@
I,*(9(*#*!%,
The working capital was decreased ":;C.=<% during the year :;;@&8;
T#&:( 2.3.24 SCHEDULES OF CHANGES IN WORKING CAPITAL IN 2=1=>2=11
IR1. I, :#841/
4!'TIC3!'+ :;8; :;88 I*C')!+) 5)C')!+)
45
CURRENT ASSETS
I*J)*T('I)+
5)0T('+
C!+G D 0!*E
(TG)' C'')*T !++)T+
3(!*+ D!5J!*C)+
<8A>.8>
:<B@.;<
8<@.<<
=.C:
CB:.>:
AB<.>;
:AAA.8=
[email protected]:
>.8B
B::.=<
=;C.88
>@.=@
.<=
<8<.
8
.@@
A;.@
B88.B>
:=;.;@
T(T!3"!% =A>;.C> =<B>.;>
CURRENT LIABILITIES2
PROVISIONS

C'')*T 3I!0I3ITI)+
4'(JI+I(*+
8A<@.>@
:C.=@
8=:>.BC
:A.>;
T(T!3"0% 8ABC.;C 8=><.8C
#('EI*/ C!4IT!3 "!&0%
5)C')+)5 I* #('EI*/ C!4IT!3
:@C:.AA
:@88.CA

A;.@
T(T!3 :@C:.AA :@C:.AA C><.<= C><.<=
I,*(9(*#*!%,
The working capital was decreased "A;.@% during the year :;8;&88
T#&:( 2.3.2. SCHEDULES OF CHANGES IN WORKING CAPITAL IN 2=11>2=12
IR1. I, :#841/
4!'TIC3!'+ :;88 :;8: I*C')!+) 5)C')!+)
46
CURRENT ASSETS
I*J)*T('I)+
5)0T('+
C!+G D 0!*E
(TG)' C'')*T !++)T+
3(!*+ D!5J!*C)+
AB<.>;
:AAA.8=
8@C.::
>.8B
B::.=<
@C>.B8
:@<<.C>
:<;.B@
=.@@
=:A.=:
:::.88
8=>.A8
<8.CA
@B.>:
.8A
8@>.;8
:8;.:
@
@8.A=
T(T!3"!% =<B>.;> =>A8.>B
CURRENT LIABILITIES2
PROVISIONS

C'')*T 3I!0I3ITI)+
4'(JI+I(*+
8=:>.BC
:A.>;
8B<>.@A
88@.:=
T(T!3"0% 8=>:.8C 8A>>.:8
#('EI*/ C!4IT!3 "!&0%
5)C')+)5 I* #('EI*/ C!4IT!3
:@8:.CA
:C8B.<>

@B.>:
T(T!3 :@8:.CA :@8:.CA =@A.;= =@A.;=
I,*(9(*#*!%,
The working capital was decreased "@B.>:% during the year :;88&8:
3.1 FINDINGS
The present study is devoted to depth analysis of financial statement and it is used for
decision making by various financial authorities. The major findings are as followsK&
47
ET4( C6(,* R#*!%must not only be equal to current liabilities but should leave a
comfortable margin working capital after paying of the current liabilities. ! high ratio indicates
sound solvency position and a low ratio indicates inadequate working capital. Gere the current
ratio is sufficient to the firm. The current ratio from the year :;8;&88 onward, its more than the
satisfactory level i.e. :K8. It shows the good liquidity position of the firm. In :;88&8: the current
ratio is in a satisfactory level. Gere the firm has sufficient cash balance to meet its day to day
e-penses and the short term obligations that occur in its functioning. 0y verifying its current
ratio we can came to the conclusion that the firm has sufficient cash balance to pay its short term
obligation. Therefore current ratio is the most common ratio for measuring the liquidity position
of the organi1ation.
E ! D6!)8 R#*!% is the true test of business solvency. Gere the entire ratio is
greater than one. It shows that the solvency position of the firm is good. ,or the last two years,
i.e. in :;8;&88 and :;88&8:, the quick ratio is in a good position i.e. it is highly more than the
satisfactory level. In the year :;88&8: the company is in a sound financial position.
EA&1%:6*( L!F6!-!*$ R#*!%is themore vigorous measure of a firms liquidity
position. Gere all the ratios are lesser than the recommended level i.e. ;.A>K8. 0ut the year :;;A&
;C onward, it shows an increasing trend. This shows that the firm has a unsound liquidity
position.
E In D(&* EF6!*$ R#*!%, an acceptable norm for this ratio is considered to be
:K8. ! high ratio shows that the claims of the creditors are greater than those of owners. ! very
high ratio is unfavorable from the point of view of the firm. ! high debt company is able to
borrow funds on very restrictive terms and conditions. ! low debt equity ratio implies a greater
claim of owners than creditors. ,rom the point of view of creditors, it represents a satisfactory
capital structure of the business. Gere last years the company has a high debt equity ratio. +o it
implies a greater claim of creditors than owners
ET4( P%9!(*#$ R#*!% shows the financial strength of the company. It helps
the creditors to find out the proportion of shareholders fund in the total assets. Gigher ratio
indicates a secured position to creditors and a lower ratio indicates a greater risk to creditors. It
indicates the long term solvency of the firm. 0ut here the proprietary ratio shows an increasing
trend as they are compared with its previous year. 0ut the rate of increasing is not at a higher
48
rate. Gere the ratios are in a dissatisfactory level and it gives a unsecured position to the
creditors.
E The F!A(- A11(*1 *% N(* W%*4 R#*!% shows the relationship between fi-ed
assets and shareholders fund. If the ratio is greater than one, it means that creditors fund have
been used to acquire a part of the fi-ed assets. Gere the companys fi-ed assets ratio of the year
:;88&8: is less than one. Gence it denotes that the creditors funds have not been used to acquire
a part of the fi-ed assets.
E T4( I,+(,*%$ T6,%+( R#*!% signifies the liquidity of the inventory. ! high
inventory turnover ratio indicates brisk sales. The ratio is a measure to discover the possible
trouble in the form of over stocking. ! low inventory turnover ratio results in blocking of funds
in inventories. There is no standard ratio for the inventory turnover. Gere the companys
inventory turnover ratio from the year :;;@&8; onward is increasing. It indicates an increase in
the liquidity of the inventories of the firm. The inventory turnover ratio for the year :;8;&88 is
:8.B; times.
P D(&*%1 T6,%+( R#*!% measures the quality of debtors. ! shorter collection
period implied prompt payment by debtors. It reduces the chance of bad debt. ! longer collection
period implies inefficient credit collection performance. Gere at the b i.e. in :;;A&;C, the
company has given a time of 8>: days for the collection of debt and :;;A&;C onward the debt
collection period has been increased by the company. 0ut in the financial year :;8;&88 it has
been reduced to 8:@ days.
P T4( F!A(- A11(*1 T6,%+( R#*!% indicates the e-tent to which the
investment in fi-ed assets contributes towards sales. If compared with a previous year, it
indicates whether the investment in fi-ed assets has been judicious or not. Gere we can see that
from :;;A&;C onward the fi-ed asset turnover ratio is increasing. 0ut after a fall in :;;@&8; the
fi-ed asset turnover ratio in the year :;88&8: is C.8: times. +o we can say that the additional
investment in fi-ed assets by the company resulted in an increased sales.
P T4( W%8!,3 C#9!*#: T6,%+( R#*!% reflects the turnover of the firms net
working capital in the course of the year. It is a good measure of over&trading and under&trading.
The higher ratio indicates the efficiency utili1ation of working capital. Gere the last three
working capital turnover ratio shows an increasing trend. ,rom :;;@&8; onward the working
41
capital turnover ratio is :.@< times. ,or the last three years the funds are necessarily allowed and
the company is utili1ing its funds in the proper way.
P T4( G%11 P%5!* R#*!% helps in ascertaining whether the average
percentage of mark up on the goods is maintained or not. It also indicates the degree to which
selling price per unit may decline without resulting in losses from the operations of the firm. !n
increase in the gross profit ratio may be due to an increase in the selling price without a
corresponding increase in the cost of goods sold or due to a decrease in the cost of goods sold
without a corresponding decrease in the selling price. +imilarly, a decrease in the gross profit
ratio may be due to a decrease in the selling price without a corresponding decrease in the cost of
goods sold or due to an increase in the cost of goods sold without a corresponding increase in the
selling price of goods sold. Gere last three years the companys gross profit ratio is in a
increasing trend. Gere the gross profit ratio for the year :;88&8: is 88.@>F.
P T4( N(* P%5!* R#*!% is used to measure the overall profitability and hence
it is very useful to proprietors. It is an inde- of efficiency and profitability of the business.
Gigher the ratio, better is the operational efficiency of the concern. Gere in the year :;88&8:
there shows a huge increase in the net profit ratio. In this year the operational efficiency of the
firm is good. 0ut during the year :;88&8: the net profit decline and the ratio is 88.88F.
P O9(#*!,3 R#*!% is an indicative of the proportion that the cost of sales
bears in sales. Cost of sales includes direct cost of goods sold as well as other operating
e-penses. It is an important ratio that is used to discuss the general profitability of the concern.
3ower the ratio, the more profitability are the operations indicating an efficient control over cost
and an appropriate selling price. 'everse is the position when the ratio is higher. Gere last two
years the company operating ratio is in decreasing trend. +ound position of company during the
year :;8;&88 is satisfy i.e. the (perating 'atio is @A.C>F.
P In R(*6, O, T%*#: A11(*1, profitability can be measured in terms of
relationship between net profit and total assets. This ratio is also known as return on /ross
Capital )mployed. It measures the profitability of investment. Gere last two year the company
has increasing trend in return on the assets. In the accounting year :;88&8: the return on assets
has been increased to 8>.<8F.
P T4( R(*6, O, C#9!*#: E"9:%$(- is also known as return on
investment "'(I%. The primary objective of making investment in any business is to obtain
50
satisfactory return on the capital invested. It indicates the return on capital employed in the
business and it can be used to show the efficiency of the business as whole. Gigher the ratio, the
more efficient use of capital employed. Gere the company has high return during the year :;8;&
88 and :;88&8:. 0ut during the year :;88&8: it has been increased to :<.@8F.
P T4( E#,!,31 P( S4#( helps in the assessment of the profitability of a
firm from the stand point of equity shareholders. This measures the profit available to the equity
share holders per share. The )arnings per +hare helps in determining the market price of the
equity share of the company. ! comparison of ).4.+ of the company with another will also help
in deciding whether the equity share capital is being effectively used or not. It also helps in
estimating the companys capacity to pay dividend on its equity share holders. Gere last year the
company is in a good financial position to meet its equity share holder
3.2 SUGGESTION AND RECOMMENDATION
51
P The Company has to improve its liquidity position, this can be done by
reducing current liabilities.
P The Company may issue debenture or long term borrowed funds to meet the
long term obligation. The issue of debenture capital helps the organi1ation to achieve the
advantage of high leverage. This enables the company to yield ma-imi1e earnings to the owners
of the firm because the fi-ed rate of interest is lower than the general rate of earnings of the
company.
PThe net profit margin can be ma-imi1ed by investing the e-cess funds in profit
making securities which will yield high volume of non operating income of the company.
PThe Company can improve its earnings power by increasing net profit margin.
It can be done by increasing the sales volume because the average of the operating ratio of the
company can also improve the sales volume by reducing the inventory.
PThe increase in the volume of sale will also increase the operating profit as
such the company may have sufficient source of funds.
P 4oor turnover of inventory can be improved by reducing heavy investment in
the inventories and speeding up movement of finished goods by increasing sales through
promotional activities.
P !ll inventory decision should be based on sound information system as it
involves investment of large amount of companys funds.
P !s the company started facing competition from the private parties, it should
adopt an effective debt policy so as to retain the e-isting demand.
Ptili1e the availableresourses of the company on the best possible
manner
3.3 CONCLUSION
52
The project undertaken by me in $IC'($)* +(,T#!') very useful as I and
successful learned a lot of practical e-perience apart from the theoretical knowledge. The study
reveals that the profitability position of the company is remarkable. 0ut in some areas efforts are
required to develop more.
Company must also try to develop liquidity position and sound procedure must be used
to maintain the level of inventories. Thus the overall performance on the basis of study is good in
all areas of the company. I thank all the faculties of $0! department and the staff of
$IC'($)* +(,T#!') 3T5, who made this project possible
53
BIBLIOGRAPHY
1. I.$.4andey, ,inancial $anagement, Jikas 4ublications Gouse 4vt 3td, *ew 5elhi.
2. +.4 9ain and E.3 *arang, !dvanced !ccountancy & volume II, Ealyani 4ublications,
3udhiana.
3. 4. $ohan 'ao and !lok. E. 4ramanik& #orking Capital $anagement, 5eepD 5eep
4ublications 4vt 3td, *ew 5elhi.
4. 9ames.C.Jan Gorne 2 ,inancial $anagement.
.. !nnual 'eports of $IC'($!* +(,T#!') 3td,Chennai
@. www.wikipedia.com
BALANCE SHEET
54
COMPARITIVE BALANCESHEET OF FIVE YEARS A"%6,* !, L#841
I*("1 S)4.
N%.
A"%6,*
!,
2==<
A"%6,*
!,
2==B
A"%6,*
!,
2=1=
A"%6,*
!,
2=11
A"%6,*
!,
2=12
I.S%6)( %5
56,-1
8.+hareholders
,und
a. Capital 8 8<;8.C8 8<;8.C8 8<;8.C8 8<;8.C8 8<;8.C8
b. 'eserve D
+urplus
: <@<.;= <@<.;= <@<.;= <@<.;= <@C.;=
:.3oans ,unds
+ecured 3oans < &&&&&&&& :>.@@ 8A.BC @.<8 &&&&&
nsecured
3oans
= AA=A.B> BB=;.C= >><=.;< ==:A.:< <<:;.=:
AA=A.B> BBBB.C< >>>8.A8 ==<B.>= <<:;.=:
TOTAL 311?=..B 3313?.B@ 3@424.?1 4<[email protected]. .=.<@.1.
II. A99:!)#*!%,
%5 F6,-1
8. ,i-ed !ssets
a. /ross 0lock >. <[email protected] <:CB>.BA <A:<>.;; =<;B:.AC =<@>>.C;
b. 3ess
5epreciation
:<<>A.=: 8@8BA.=> :;A8@.>= ::C;8.A= :==@>.@<
c. *et 0lock 8<<<@.A= 8<B@C.:: 8B>8>.=B :;:B8.;= 8@=>@.CA
d. Capital #ork
In 4rogress
B. :8:.BC :>;<.C; =C@A.;< BA:.:8 A;@.::
e. Capital
e-penditure
*ot represented
by assets
owned by
Co.#rite off
<A.:; :=.C; 8:.=; &&&&&&&& &&&&&&&&&
f. !ssets
4ending
5isposal
>.<> >;.@; 8B.8> 8>.A= ;.=@
8<>@=.@A 8B:AA.A: :8==8.;= :;@=C.@@ :;8B@.>C
:. Investment A. 8.=: 8.=: >=>.<: 8:>C.>8 8.=:
<. 5eferred Ta-
!sset "*et%
:A<<.;A <=CA.<@ =:<A.<= >:<.<= 8B;<.@C
=.Current
!ssets, 3oans
D !dvances
55
Current !ssets C
a. Inventories B@;C.BA AB8=.AA =C:@.8< >>;;.;C B;:;.C8
b. +undry
5ebtors
8>>;.B@ :8=;.;@ <[email protected] :B=8.B8 C<<.=C
c. Cash D 0ank
balance
8A<8<.@B 8CB=>.;8 :;:;8.:= :<<C8.A8 :A:C8.<;
d.(ther current
!ssets
&&&&&&&& &&&&&&&& &&&&&&&&&& B;;.BB 8=C>.::
e. 3oans D
!dvances
8;:<<.C; B;B:.8< B:<@.@B A8;<.8@ A>AA.AB
<B;;A.8: <==B:.;; <==<@.>; <@::A.:> =<8@C.>A
3ess current
3iability D
4rovisions
@
a. Current
3iability
<C>@.C< <@A=.B@ =;@A.;> B8<=.>C >B<8.=<
b. 4rovisions 8A=<8.>: 8A:<:.BA :;:>C.:< AC@<.@> C@;C.<>
:8:@8.<> :8:;A.<B :=<>>.:C 8=;:C.>< 8=><@.AC
*et Current
!ssets
8=A8>.AA 8<:>=.B= 8;;C=.:: :>[email protected]: :CB>C.A@
>.
$iscellaneous
e-penditure "to
the e-tent not
written off or
adjusted %
4re project
e-penditure
8:>.<B 88B.A@ 88B.A@ 88B.A@ 8>:.<C
TOTAL 311?=..B 3313?.B@ 3@424.?1 4<[email protected]. .=.<@.1.
56