Roll. No- --------------A PROJECT REPORT ON RATIO ANALYSIS With reference to SAHYADRY CO-OPERATIVE SUGAR FACTORY Submitted to IMED in Partial fulfillment of MASTERS IN BUSINESS ADMINISTRATION (G) SUBMITTED BY: BHOSALE V.A. (BATCH- 2007--2009) Under the guidance of Prof. Dr. Kirti Gupta Institute of Management And Entrepreneurship Development PUNE- 48 ACKNOWLEDGEMENT I sincerely wish to acknowledge a deep gratitude for valuable guidance, suggesti ons and generous help extended to me by Shri. G.S. CHAVAN, Managing Director . Shri. NARAYANRAO YADAV. I thank them for being the source both of helpful critic ism and of encouragement. I take this opportunity to thank all the members of SSS who directly and indirec tly helped me in completing my report. Their encouragement during the difficult stages of this project, constructive discussions and useful interaction has prov ed to be core moral support behind this achievement. I would like to thank and express my deep sense of gratitude to Prof. Dr. Kirti Gupta, project guide and faculty of BHARATI VIDYAPEETH IMED COLLEGE, Pune.

TITLE INDEX SL. No Topic Page. No 1. Introduction 05-07 2. Profile of the company 08-11 3. Objectives of the project 4. Research methodology 14-18 5. Ratio Analysis in SSS 19-44 6. Suggestions 45-46 7. Limitations 47-48 8. Conclusion 49-50 9. Bibliography 51

12-13

INTRODUCTION INTRODUCTION: Financial management is the life of every business enterprise. A busines s under taking at a given point time can be viewed as a pool of funds raised fro m various sources like inventory and the source of internal financing. The funds raised from these sources are utilized for. 1. Acquiring fixed Assets needs for the production of goods and services. 2. Inventories that facilitate production and sales accountants receivables owned by customers. 3. Cash and marketable securities used for liquidity purpose and business transa ctions. MEANING: The pool of funds at a given point of time is static. But over a period it changes. The change in the funds positions of a company is known as funds flo w. In an ongoing business enterprise, the funds flow through out the enterprise, continually. The object of the subject financial management is to direct the fl ow of these funds as per a given plan. Thus the financial management concerns it self with the management of funds of an enterprise. NATURE OF FINANCIAL MANAGEMENT: The term financial management can be defined as the management of flow o f funds in a firm and it deals with the financial decision making of the firm. . I.e. it is concerned with overall managerial decision making in general and wit h the management of economic resources in particular. Finance has emerged as a distinct area of study during second half of th e twentieth century. Initially it was a part of economics .the evolution of fina nce function and the changes in its scope appeared due to two factors namely 1. The continuous growth and diversity in business and 2. The gradual appearance of new financial analytical tools. The subject of financial management is of immense interest to both acade micians and practicing managers. It is of great interest to academicians because the subject is still developing and there are still certain areas where controv ersies exist for which no unanimous solutions have been reaching as yet. Practic ing managers are interested in this subject because among the most crucial decis ions of the firms are those which relate to finance and an understanding of the theory of financial management provides them with conceptual and analytical insi ghts to make those decisions skillfully. SCOPE OF FINANCIAL MANAGEMENT: Initially the finance manager function was limited to raising funds as a nd when the need arise. Once the funds are procured his function was over. Howev er, over a period of time the scope of his function has tremendously widened. Hi s presence is required at every moment whenever any decision having involvement of funds is to be taken. Now a days, the financial manager, is required to look in to the financial implications of any decision in the firm. Since every activi ty in a business organizations, be it purchase, production, marketing or capital expenditures has a financial implications, the financial function is inter link ed with all other areas. In particular the finance manager has to focus his atte

ntion on 1. Procuring the required quantum of funds as and when necessary, at the lowest cost, 2. Investing these funds in various assets in the most profitable way, and 3. Distributing returns to shareholders in order to satisfy their expectations f rom the firm. These three functions of the finance manager encompasses most the finan cial events in any firm, thus, the functions of finance manager may be summarize d to include the following. 1. Overall financial planning and control 2. Raising funds from different sources 3. Selection of fixed assets 4. Management of working capital, and 5. Any other individual financial event.

PROFILE OF THE COMPANY PROFILE OF SAHYADRI SAHAKARI SUGAR LIMITED

History of Sahyadri Sugar Factory:Pursuant to the policy of Maharashtra Govt. In regard to establishment & develop ment of Agro-based industrial units in the State Then chief Minister Late Honora ble Yashavantravji Chavan had appealed to the social workers and leaders in the state to take initiatives and the make vigorous efforts in that direction in thi s matter. In response to the said appeal the social workers of Karad Taluka, as back in 1964, gathered together held detailed discussion with farmers particular ly sugar growers, and reached the discussion to submit to the Govt. of India a p roposal for permission to establish a Cooperative Sugar Factory. At the same tim e they observed that the northern part of Karad Taluka, the former Assembly Cons tituency of Late Yashavantraoji Chavan, is quite suitable place for establishmen t of a corporate sugar factory as there was adequate quantity of sugarcane cop. Accordingly a corporative society by name Sahyadri Sahakari Sakhar Karkhana Ltd. ; came to be registered under the Maharashtra Cooperative Societies Act, 1960 at Sr. No. SAT/PRG (A) 2 dates 26-8-1969. As per provision in the Act the first General Meeting of society was held in Oct ober 1969 and in that meeting the first provisional Board by show of hands, was elected under the Chairmanship of Shri. P.D.Patil who continues to be the chairm an of Sahyadri Sahakari Sakhar Karkhana Ltd. The duration of the provisional Boa rd was for three years. Thereafter the site selection Committee appointed by the Govt. of India visited various sites in the northern part of Karad Taluka and selected Shahapur Mal as proper site in all respects for establishment of a cooperative sugar factory the re. The work of acquisition of adequate land for the purpose was started and we are proud to state that as many as 350 acres of land could be acquired only through

private negotiations without resorting to any legal proceedings. The vendor of t he land never expressed his grudge for the price of land he was paid. The transa ction of sale and purchase of land was held voluntarily. After acquisition of adequate land and after having completed all other formalit ies a foundation stone was laid on Shahapur Mal on 8-4-1970 at the auspicious ha nds of Late Vasantraoji Naik the Chief Minister of Maharashtra State and in the presence of Late Yashvantraoji Chavan Finance Minister of India. The architects and civil contractors were also simultaneously appointed. However while finalizing the plan of main factory building, one remarkable change was b rought about which requires to be taken a notice of Instead of following the con ventional method of constructing main factory with a view to accommodate machine ry projecting a parallel mirror image, a building plan was so rearranged as to a ccommodate a machinery up to capacity of 5000 T.C.D. without any further additio ns to existing building. This rearrangement of building plan is popularly kwon a s "Sahyadri Pattern", which is worth appreciating and following. A number of new sugar factories are coming up with this Pattern. In this respect our Honorable Chairman Shri P.D.Patil does deserve to be congratulated for his foresight ness in rearranging the building plan as above

About Us:Sahyadri Sahakari Sakhar Karkhana Ltd, is a Co-operative Sugar Factory, it has b een registered under section 9 (1) of the Maharashtra Co-operative Societies Act , 1960. It s Registration No.is SAT/PRG(A)/ 2 dated 26th August, 1969. The facto ry is located adjacent to Shirawade Railway Station on South Central Railway , National Highway No.4 is within a distance of 2 Kms. From the site of Factory. T he factory is near Karad Town a progressive Taluka Place in Satara District of M aharashtra. Factory s Area of Operation The area of ane growing rivers viz. breadth of operation of this factory comprises of following of which the main c villages are within a radius of 15 Kms. from the factory. The major Krishna, Koyana within their tributaries flow through the length and victory s area of operation.

District Tahsil No. Of Villages Satara Karad 64 Satara Satara 16 Satara Koregaon 16 Satara Khatav 36 Sangli Khanapur 32 Total 164 The Plant The Govt. of India issued to this sugar factory, Industrial License No. L/25/N-2 43/70-LC dated 6th August 1970, to erect a plant of 1250 TCD (extendable up to 2 000 TCD) for the manufacture of cane sugar. The plant was erected and was commis sioned in the year 1974. Due to irrigation facilities and activities led o considerably enhance the area under sugarcane cultivation in our area of operation. At the 1st crushing season i.e. 1974-75 under sugarcane cultivation in our area of operation was 4534.26 h ectors whereas it has increased about 18500 hectors as at present. This situation of surplus sugarcane complelled us to undertake immediate expansi on of initial project of 1250 TCD. Hence application for permission of first exp ansion from 1250 TCD to 2200 TCD was submitted to Govt. of India on 6th Septembe r 1976. This first expansion was completed and project started with expanded cap acity of 2200 TCD in 1982. The machinery achieved good results. Still we faced t he problem of excess sugarcane and disposal. Hence we had to undertake further e

xpansion from 2200 TCD to 5000 TCD and complete the same. The plant with expansi on capacity of 5000 TCD is functioning well from 1994-1995 crushing season. While finalizing the plant and machinery for 2200 to 5000 TCD expansion the Mana gement of the factory took maximum care because of which the efforts were made t o add modern Technology i.e. Walker s Mill, Continuous Pan, Bin Systems Etc; and ; scope for the further expansion of the plant. After the completion of 5000 TCD expansion after 1995 onwards we required to cru sh for every season more than 10.50 lakhs tones of cane. We even required contin uing up to June. This adversely affect the recovery of cane. In order to crush a vailable cane within the area of operation in time (before 30th April) and in or der to get the benefit of sugar recovery; The management decided to expand sugar plant from 5000 TCD to 7500 TCD. As started earlier, there was a additional scope of cane crushing in milling, po wer and boiler section, hence during the expansion from 5000 TCD to 7500 TCD, ad ditions and alterations in the plant and machinery were completed during last of f season in Boiling House. The expanded Plant for 7500 TCD were commissioned on the 15th November, 2000. Th e plant is running very smoothly.

Management:Board Of Directors 1. Mr. Pandurang Dadasaheb Patil : Founder 2. Mr. Balasaheb Pandurang Patil (M L A ): Chairman 3. Mr. Babanrao Baburao Yadav : Vice-Chairman 4. Mr. Balavantrao Krishna Chavan : Director 5. Mr. Sureshrao Nanasaheb Mane : Director 6. Mr. Dattatray Dhondi Patil: Director 7. Mr. Vilasrao Bapu Patil : Director 8. Mr. Sambhaji Vithhal Gaikwad : Director 9. Mr. Dadoba Ynanu Jadhav : Director 10. Mr. Datatray Baburao Jadhav : Director 11. Mr. Annasaheb Antu Nikam : Director 12. Mr. Baburao Govindrao Jagdale :Director 13. Mr. Namdeo Bandu Chavan : Director 14. Mr. Balasaheb Shankar Dalvi :Director 15. Mr. Vithhalrao Srjerao Gorpade : Director 16. Mr. Sanjay Shamrao Jagdale :Director 17. Mr.Jaysing Sarjerao Jadhav : Director 18. Mr. Navaji Gunda Bhosale : Director 19. Mr. Dinkarrao Tatyasaheb Jamale : Representative of Durbal Ghatak 20. Mr. Yashvant Umaji Kambale : Representative of Backword classes 21. Mrs. Hirabai Govindarao Thorat : Representative of woman 22. Mr. Dadasaheb Jyotiram Godase : Representative of District Bank 23. Mr. G. S. Chavan : Managing Director Pradeshik Sahsanchalak Pune : Govt. Representative

Administration Mr. Mr. Mr. Mr. G.S. S.P. J.G. G.M. Chavan : Managing Director Patil : Secretary Patil : Factory Manager Bhagwan : Chief Engg.

Mr. B.N. Taware : Chief Chemist Mr. H.T. Desai : Chief Accountant Mr. V.D. Chakote : Distilory Incharge Mr. A.P. Patil : Agricultural Officer Mr. M.A. Patil : Cane Developement Officer Mr. B.L. Desai : Chief Irrigation Engg. Mr. Y.J. Khandagale : Civil Engg. Mr. N.R. Jadhav : Labour and welfare Officer Mr. D.B. Mohite : Internal Auditor Mr. B.Y. More : Deputy Civil Engg. Mr. J.D. Gharge : Purchase Officer Mr. P.S. Sonawane : EDP Manager Mr. S.V. Jadhav : Safety Officer Bankers Maharshtra State Co-operative Bank : Mumbai Satara District Co-operative Bank : Satara National Co-operative Finance Co-oprative New Delhi

Awards

By National Federation of Co-operative Sugar Factories Ltd., New Delhi By Product Utilization Award (Efficiency Award) 1st Declared 1st time in India & 1st prize for Year 1994-95 Received on 26th September 1995

Sahyadri Sahakari Sakhar Karkhana Ltd. (Shirwade Railway Station), Yashvantnagar, Taluka. Karad, District.Satara

Daily Crushing Report Season : 2007- 2008 Season Day: 181 /-

Date: 15.05.2008

Details Today Till Today Sugarcane (M.T.) 740 Sugar (100 K.G. Bags) 3815

1150050 1430390

Ratio Analysis is useful in the following ways: Short term and long term Planning. Measurement and evaluation of financial performance. Study of financial trends. Decisions making for investments and operations. Diagnosis of financial skills. Thus a detailed study regarding the Ratio Analysis in Sri Sarvaraya Suga rs Limited is to be done to well understand the performance of various operations, id entify the Shortcoming in management and to suggest for improvement in those areas .

OBJECTIVE OF THE STUDY OBJECTIVE OF THE STUDY The objective of the study is to evaluate operational efficiency of a su gar unit M/s sahyadry sugar factory Limited. which established 40 years ago in District of SATARA the other objective of this study. 1. To know the profitability of the funds. 2. To find out the financial stability of the firm. 3. To measure the overall effectiveness in terms of returns generated, with profits being related to sales and adequacy of such profits as to sales or inve stment. 4. To manage the extent to which the company has been financed through borr owing.

5. To know how effective the company is using its resources. LIMITATION OF THE STUDY The study has been conducted is a systematic and comprehensive way so as to make the project work and enviable one. However the topic under my study may not be free form limitations due to the factors The major limitation of the project under study was time. Since it was t o be completed with in a short period of time. This is not sufficient to underta king comprehensive study. Non-availability of completed information. Limitation in information abo ut cash sales and credit sales out of total sales is not available. One more lim itation is depreciation on assets individually is not available. In the height of the above, it is not possible for an analysis to calculate the exact working capital ratios. The study covers a period of five years form 1998-2003 The information is mostly depends upon the secondary data As it is not possible to cover all the supervisors, so the student trainee selec ted the supervisors of working capital analysis.

THEORETICAL FRAMEWORK RATIO ANALYSIS INTRODUCTION As observed, a basic limitation of the traditional financial statement compr ising the Balance Sheet and the Profit and Loss Account is that they do not give all the information related to the financial operation of the firm. Ne vertheless, they provide some extremely useful information to the extent that th e Balance Sheet mirrors the financial position on a particulars date in terms of the structure of assets, liabilities and owners equity and so on. The Profit and Loss Account shows the results of operations during a certain per iod of time in terms of the revenues obtained and the cost incurred during the y ear therefore, they are much invaluable documents / performance reports RATIOS MAY BE EXPRESSED IN THE FOLLOWING WAYS 1. in a pure ratio. 2. as a rate. 3. as a percentage. NATURE OF RATIO ANALYSIS Ratio is a powerful tool of financial analysis. A ratio is defined as the indica ted quotient of two mathematical quotients and as the relation between two or mo re things. In financial analysis a ratio is used as a benchmark for evaluating t he financial position and performance of the firm. The absolute accounting figu res reported in the financial statement do not provide a meaningful understandin g of the performance and financial position of the firm. An accounting figure c onveys meaning when it is related to some other relevant to some other relevant information. SIGNIFICANCE OF RATIO ANALYSIS

Ratios are significant in both the vertical and horizontal analysis. In vertica l analysis ratios help the analyst to form a judgment whether the performance of the firm at a given point of time is in good position or not. Use of ratios in horizontal analysis indicates whether the financial condition of the firm is imp roving or deteriorating and whether it indicates profitability or downward trend . IMPORTANCE OF RATIO ANALYSIS The importance of ratio analysis lies in the fact that it presents facts on a co mparative basis and enables the drawing of inferences regarding the performance of the firm. Ratio analysis is relevant in assessing the performance of a firm i n respect of the following points: 1. Liquidity positions With the help of ratio analysis conclusions can be drawn regarding the liquidity position of the firms. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. The liquidit y ratios are particularly useful in credit analysis by banks and other supplier of short term loans. 2. Long term solvency Ratio analysis is equally useful for assessing the long term financial viability of the firm. The long term solvency is measured by the leverage / capital struc ture and profitability ratios Which focus on earning power and operating efficiency Ratio analysis reveals the strength and weakness of a firm in this respect 3. Operating efficiency It is relevant from the view point of management and it throws light on the degr ee of efficiency in the management and utilization of its assets. The ultimate analysis depends upon the sales revenue generated by the use of its assets as we ll as its components. 4. Overall profitability In this the management is constantly concerned about the overall profitability of the enterprises. They are concerned about the ability of the firm to meet it s short term as well as long term obligations to its creditors to ensure a reaso nable return of its owners and secure optimum utilization of the assets of the f irm. 5. Inter firm comparison Ratio analysis is also a stepping stone for remedial measures. This is made pos sible due to inter-firm comparison and comparison with industry average. An int er-firm comparison would demonstrate the relative position to its competitors. 6. Trend Analysis Ratio analysis enables a firm to take the time dimension in to account. In other words whether the financial position of a firm is improving or deteriorating ov er the years. This is made possible by the use of trend analysis. The significa nce of trend analysis of ratios lies in the fact that the analyst can know the d irection of movement as the present level may be satisfactory but the trend may be a declining one. Thus the trend analysis is of great significance. MANAGERIAL USES 1. Helps in Decision-Making 2. Helping in financial forecasting and planning 3. Helps in communications 4. Helps in co-ordination 5. Other uses a) Utility to shareholders/Investors b) Utility to Creditors c) Utility to Employees d) Utility to Government

LIMITATIONS OF RATIO ANALYSIS The Ratio analysis is one of the most powerful tools of financial management. Th ough ratios are simple to calculate and easy to understand they suffer from some serious limitations. They are: 1. Limited use of single ratio 2. Lack of Adequate Standards 3. Inherent Limitations of Accounting 4. Change of accounting procedure 5. Window Dressing

RATIO ANALYSIS IN SAHYADRI SAHAKARI SUGAR LIMITED LIQUIDITY RATIOS 1. CURRENT RATIO Current Ratio = Current Assets Current Liabilities This ratio relates Current Assets to Current Liabilities. It is found out by di viding Current Assets by Current Liabilities. It is the most commonly used meas ure of Short - Term solvencies. S. No a. b. c. d. e. A(a-e) a. b. c. B(a-c) A/B (Rs. in Lacs) Particulars 2003-04 2004-05 Inventories 1111.38 857.55 Sundry debtors 212.49 217.58 Cash & Bank 161.12 541.57 Other Assets 5.40 5.26 Loans & Advances 223.39 Total Current assets 1713.79 Liabilities & Provisions Interest due 0.60 0.05 Provisions for gratuity 49.34 Total Current liabilities Current Ratio 1.46 1.59 2005-06 706.34 85.62 1359.71 24.31 241.64 1863.60 1220.99 -----56.77 1172.25 2.36 2006-07 1257.30 49.30 3932.60 100.17 550.70 2726.68 1229.74 ----79.20 1173.02 4.53 2007-08 1216.45 165.65 5621.70 184.36 710.12 6047.52 1235.35 -----88.60 1156.15 5.6

1063.84 8252.00 1424.15 1587.86 120.25 1335.55 1467.61

INTERPRETATION The Current Ratio for the year 2007-08 was 5.60, that is, for every one rupee of Current Liabilities, the firm is holding 5.60 Rupees of Current Assets. It sho ws that the firm is able to meet its obligations. OBSERVATION 1. The Companys Current Assets have been increasing every year. 2. There is an increase in the Current Liabilities until 2008, due to Provisions for Income tax. 3. The Company is maintaining more Cash balances when compared to previous years

, This could be due to increase in Turnover. The Current Ratio for the year 2003-04 was 1.46, which gradually increased to 1. 59 in 2004-05 and then to 2.36 in 2005-06 and then to 4.53 in 2006-07 and then t o 5.60 in 2007-08. It means that the Company is improving its Short-term solven cy position despite of an increase in competition from all around.

2. QUICK RATIO/ LIQUID RATIO: Quick Ratio = Liquid Assets Current Liabilities Liquid assets = Current Assets Inventory. This is a narrow measure of liquidity. This ratio concentrates on cash, Marketab le Receivables in relation to current obligation. So, it provides a more penetr ating measure of liquidity than Current Ratio. S.No a. b. c. d. A(a-d) a. b. c. B(a-c) A/B Particulars 2003-04 2004-05 Sundry debtors 212.49 217.58 Cash & Bank 161.12 541.57 Other Assets 5.40 5.26 Loans & Advances 223.39 Liquid Assets 602.41 1006.05 Cur liabilities & Provisions Interest due 0.60 0.05 Provisions for gratuity 49.34 Total Current liabilities Quick Ratio 0.51 0.86 (Rs in 2005-06 85.62 1359.71 24.31 241.64 2020.34 1220.99 -----56.77 1172.25 1.07 Lacs) 2006-07 49.30 3932.60 100.17 550.70 4792.22 1229.74 ----79.20 1173.02 3.58 2007-08 165.65 5621.70 184.36 710.12 7035.55 1235.35 -----88.60 1156.15 4.79

1063.84 1424.15 1587.86 120.25 1335.55 1467.61

INTERPRETATION The Quick Ratio for the year 2007-08 was 4.79:1. That is for every one rupee of Quick Liabilities, the firm holds 4.79 Rs. of Quick Assets. OBSERVATION 1. There is an increase in the Total Liquid Assets. 2. There is a decrease in the Current Liabilities until 2005 and an increase in 2006. 3. The company was maintaining more cash balances when compared to previous year s, which could be the result due to increase in Turnover. The Quick Ratio for t he year 2003-04 was 0.51 which has gradually increased every year i.e. from 0.51 to 0.86 in 2005, to 1.07 in 2006, and then to 3.58 in 2007 and then to 4.79 in 2008. It means that the Company was improving its short-term solvency position d espite all around increased competition.

3. CASH RATIO Cash Ratio = Cash & Marketable Securities Current Liabilities This ratio is also known as super quick ratio. It reflects only the absolute li quidity available with the firm. (Rs. in Lacs) Particulars 2003-04 2004-05 2005-06 Cash & Bank 161.12 541.57 1359.71 Current Liabilities 1172.25 1173.05 Cash Ratio 0.14 0.46 1.18 2006-07 3932.60 1156.25 2.94 2007-08 5621.70 1335.55 1467.61 3.83

INTERPRETATION The cash Ratio for the year 2007-08 was 3.83:1, that is for every one rupee of C urrent Liabilities, the firm is holding Rs.3.83 cash in its Current Assets. Tha t is the Firm is able to maintain 100% cash reserve in its Current Assets. This could be obtained due to increase in its Turnover. The ratio was almost satisfyi ng. The ideal Cash Ratio is 1:2 this indicates that the firms cash position is sa tisfactory. OBSERVATIONS 1. There is an increase in the Total Current Assets. 2. There is an increase in the Current Liabilities until 2008. 3. The Company is maintaining more cash balances when compared to previous years , which could be due to increase in Turnover. The Cash Ratio for the year 2003-0 4 was 0.14, which has increased very little every year. LEVERAGE RATIO 1. DEBT-EQUITY RATIO = Debt Equity Debt-Equity ratio is the ratio of the total debt in the firm (both long term and short term) to Equity; Where Equity is the sum of Ordinary share capital and pr eferential share capital. Particulars 2003-04 Secured Loans 1373.49 Unsecured Loans 615.89 Differed Loans 1.22 Debt 1990.60 1187.25 Equity 7827.32 7827.32 Debt-Equity Ratio (Rs. in Lacs) 2004-05 2005-06 2006-07 711.08 37.17 88.94 474.84 ----1.33 ----37.17 88.94 457.59 7827.32 7827.32 7827.32 0.25 0.15 0.04 2007-08 88.15 364.44 --0.011 0.058 Debt-Equity Ratio

INTERPRETATION The Debt-Equity ratio for the year 2007-08 was 0.058. It is clear from Debt-Equ ity ratio that lenders have contributed fewer funds than what the owners have. Lenders contribution is 0.058 times of the Owners contribution for 2007-08. This relationship describes the lenders contribution for each rupee of the Owners cont

ribution. Public sector companies are expected to maintain 1:1 ratio, under unfavorable co nditions. Firms desire to use less debt to equity. This less debt indicates less risk to shareholders. OBSERVATIONS There is a constant decrease in the debt level. But the debt increased in the ye ar 2008. The equity level is constant in all the years. The Debt-Equity ratio for the yea r 200304 was 0.25. But it decreased from 0.25 to 0.15 in the year 2004-05, to 0.0 4 in 2006, to 0.011 in 2007 and then to 0.058 in the year 2008. This decrease i n the ratio is due to decrease in the debt level. This shows that the firm is ab le to decrease its interest burden clearing its debt.

2. PROPRIETARY RATIO Proprietary Ratio =

Equity Share Capital Total Tangible Assets This ratio states the relationship between Share capital and total assets. Propr ietary equity represents Equity share capital, Preference share capital and Rese rves and surplus. The latter ratio is also called Capital Employed to Total Ass ets. (Rs. in Lacs) Particulars 2003-04 2004-05 2005-06 2006-07 2007-08 Share Holders Fund 7827.32 7827.32 7827.32 7827.32 7827.32 Total Tangible Assets 4235.04 3827.58 3372.13 2441.30 2078.26 Proprietary Ratio 1.848 2.04 2.32 3. 20 3.76 Total Net Assets = Net Block + Working Capital Net Block = Gross Block - Cumulative Depreciation Working Capital = Current Assets - Current Liabilities

INTERPRETATION The Proprietary ratio for the year 2007-08 was 3.76: 1. This relation describes the Shareholders contribution in the total net assets. This ratio reflects the Sh areholders contribution which was 3.76 of the total net assets. This shows that the firm has increased its contribution to the assets. OBSERVATION There is an increase in the total net assets until 2008. Earlier the Proprietary ratio was in a declining trend i.e. in 2003-04, the fund which was at 1.84% lat er improved in the year 2004-05 to 2.04% and to 2.32% in 2005-06. After that the ratio increased to 3.20% in the year 2007 and then to 3.76% in the year of 2008 . There is an increase in Proprietary ratio 3. INTEREST COVERAGE RATIO Interest Coverage Ratio = EBIT Interest charges Where, EBIT = (+/-) Net profit / Loss + Interest. Interest = Interest and finance charges. Interest coverage ratio indicates the extent to which earnings can decline witho ut resultant financial hardship to the company because of its inability to meet annual interest cost.

Particulars 2003-04 EBIT -75.15 520.69 Interest Charges Interest Coverage Ratio

(Rs. in Lacs) 2004-05 2005-06 2006-07 2007-08 1547.19 2008.09 1252.37 290.48 123.19 49.04 11.11 31.24 -0.25 4.22 31.50 180.74 40.08

INTERPRETATION The Interest Coverage ratio for the year 2007-08 was 40.08. It shows that the p rofit of the firm is nearly 40 times of its interest liability. The higher the ratio, better it is both for the firm and for the lenders. It shows the firms abi lity to handle fixed charge liabilities. This is obtained due to two reasons i.e . increase in the earning of the firm and also due to decrease in the interest c harges, which is due to decrease is debt level. OBSERVATION There is a tremendous many fold increase in the Earning Before Interest and Taxe s (EBIT). But a decrease in the year of 2007-08 is also noticed. There is signif icant improvement in the decline of the interest charges. The ratio was -0.25 in 2003-04 which then increased to 4.22 in 2004-05, to 31.5 in 2005-06 and then to 180.74 in 2006-07. It then fell to 40.08 in the year of 2 008, hence decreased the Interest coverage ratio. 4. FIXED ASSETS TO NET WORTH Fixed Assets to Net Worth = Fixed Assets Net Worth

Fixed assets = Gross Block Depreciation. Net Worth = Share Holders fund (+/-) Paid up capital (+/-) Net Profit / Loss. (+/-) Reserves & Surplus / Miscellaneous Expenditure. ( Rs. in Lacs) Particulars Fixed Assets Net Worth Fixed Assets to 2003-04 2004-05 4235.04 3827.58 2744.49 3286.02 Net Worth 2005-06 3372.13 4851.78 1.54 2006-07 2441.31 6878.31 1.16 2007-08 2078.26 6167.09 0.69 0.35

0.33

INTERPRETATION The Fixed Assets to Net worth Ratio for the year 2007-08 was 0.33: 1. It shows that the ratio is less than one, which means that fixed assets are partly financ ed from outside funds. The lower this ratio, the higher will be the protection t o the Creditors. So, the current years ratio could be identified as an improveme nt in its position. OBSERVATION There is a decrease in the fixed assets. The Net Worth has improved when compare d to the previous years, but it decreased in the year 2008. The ratio was 1.54 i n 2003-04, to 1.16 in 2004-05. Later it decreased in the year 2005-06 to 0.69 a nd to 0.35 in 2006-07. In the year 2007-08 it was 0.33 and later increased in th e year of 2008. But in the current year ratio, there is a decrease in the ratio . It is due to the increase in the Net worth which could not be depicted as an i mprovement in the ratio.

ACTIVITY RATIOS 1. Inventory Turnover Ratio Inventory Turnover Ratio = Net Sales Average Inventories. This ratio indicates how efficiently the firm is managing its inventory. This r atio roughly indicates how many times per year the inventory is replaced. (Rupees in Lacs) Particulars 2003-04 2004-05 Net Sales 4080.94 5058.25 Average Inventories 1159.42 Inventory Turnover Ratio 2005-06 5462.90 984.47 3.51 2006-07 7359.85 781.95 5.13 2007-08 7305.71 980.83 1236.99 6.98 7.50 5.90

INTERPRETATION The Inventory turnover ratio for the year 2007-08 was 5.90 times; that is the fi rm is able to convert its inventory for nearly 6 times within a year. Normally, higher ratio indicates the better inventory management. OBSERVATION There are fluctuations in the inventory. The inventory has decreased during the last couple of years. This indicates that more sales are generated with low inv estment in inventory. This is a good sign. This is also evident from improvemen t in the ratio year after year; that is from 3.51 times to 5.13 times in 2005 an d from 5.13 times to 6.98 times in 2004 and then to 7.50 in 2005 and then 5.90 i n the year of 2007-08. The Inventory ratio has decreased in the year of 2008. Th is reflects the efficient management of inventories. 2. DEBTOR TURNOVER RATIO Debtors constitute an important constituent of current assets. Quality of Debtor s determines to a great extent a firms liquidity. Debtors Turnover Ratios is very important as it depicts the efficiency of the staff who are entrusted with the task of collection from debtors. Debtor Turnover Ratio = Sales Average Debtors. Average Debtors in lacs) Particulars = Opening Debtors + Closing Debtors 2 (Rs. 2003-04 2004-05 2005-06 2006-07 2007-08

Sales 4080.85 5058.25 5462.90 7359.85 7305.71 Average Debtors 193.17 215.04 151.60 167.46 107.47 Debtors Turnover Ratio 21.13 23.52 36.03 43.94 67.90

INTERPRETATION The Debtors Turnover Ratio for the year 2007-08 was 67.97 times which shows that the firm is able to convert credit sales into cash about 68 times in a year. T his shows that the Debtors are collected fast. OBSERVATION There is an increase in the Sales in all years. There is increase in the Debtors until 2007 which decreased in the year 2008. The Debtor Turnover Ratio was fluc tuating in all the years i.e. it was 23.52 in 2005, was 36.03 in 2006, and was 4 3.94 in 2007. In the year 2007-08 it was 67.97. 3. DEBTORS COLLECTION PERIOD RATIO This ratio indicates the extent to which the debts have been collected in time. The debt collection period indicates the average debt collection period. This ra tio is a good indicator to the lenders of the firm, because it explains them, wh ether their borrower is collecting from its debtors in time. An increase in thi s period indicates blockage of funds in Debtors. Debtors Collection Period Ratio = . Debtors Turnover Ratio Particulars 2003-04 2004-05 Days 365 365 366 Debtors Turnover ratio 21.13 Debtors Collection Period ratio (Rs. in lacs) 2005-06 2006-07 2007-08 365 365 23.52 36.03 43.94 67.97 17 16 10 8 365

5

INTERPRETATION The firm is able to turn around its Debtors for 67.97 times a year. In other wor ds its Debtors remain outstanding for 67.97 = 5 days. That is the credit period given to its Debtors is very less OBSERVATION There is an increase in the Sales in all the years. There is increase in debtor with 2008. The debtors collection period was varying for every year but it was le ss in all the years. That is from 17 days it has varied to 16 days in 2005 to 9 days in 2006 and then to 7 days in 2007 and then in the year of 2008 is 5 days. But the credit period maintained was low and it has improved its performance by decreasing the credit period from the last couple of years. 4. FIXED ASSETS TURNOVER RATIO Fixed Assets Turnover Ratio = Assets (Rs. Particulars 2003-04 2004-05 Net sales 4080.95 5058.25 Net Fixed Assets 4235.04 Fixed Assets Turnover Ratio in lacs) 2005-06 2006-07 5462.90 7359.85 3827.58 3372.13 0.96 1.32 2007-08 7305.71 2441.31 2078.26 1.62 3.01 3.51 Net Sales Net Fixed

INTERPRETATION The ratio for the year 2007-08 was 3.51 times. Interpreting the reciprocal of th is ratio, one may say that for generating a sale of three rupees the company nee ds 3.51 of investment in fixed assets. OBSERVATION There is an increase in Sales in all the years. There is a decrease in the fixed assets year after year. There is an increase in the ratio in all the years i.e. the ratio has increased from 0.96 to 1.32 in 2005, to 1.62 in 2006, to 3.01 in 2007 and then to 3.51 in 2008. This indicates that the Company had improved its performance in managing its fixed assets. 5. WORKING CAPITAL TURNOVER RATIO The Working Capital Turnover ratio studies the velocity or utilization of the wo rking capital of the firm during the year. Working Capital Turnover Ratio = Net Sales . Net Working Capita l Where, Net Working Capital = Current Assets Current Liabilities. (Rs. in lacs) Particulars 2003-04 2004-05 Net Sales 4080.95 5058.25 Net Working Capital 541.54 Working Capital Turnover Ratio 7.53 7.32 3.47 2005-06 2006-07 2007-08 5462.90 7359.85 7305.71 690.58 1570.54 4711.97 7380.51 1.56 0.98

INTERPRETATION The ratio for the year 2007-08 was 0.98. Interpreting this we can come to know t hat the increase in the Net Working Capital is in accordance to the Sales. OBSERVATION There is an increase in the sales in all the years. There is a constant increase in the Net Working Capital. The ratio has decreased from 7.53 to 7.32 in 2005, to 3.47 in 2006 and then to 1.56 in 2007. It then decreased to 0.98 in the year 2008. From the table we can say that there is an increase in the capital invest ed in working capital but this increase is in correspondence to the increase in sales, which has increased about 20 %.

PROFITABILITY RATIO Profits are the ultimate test of the Managements effectiveness. These ratios comm unicate the profitability of events that have already taken place. a. Based on Sales: 1. GROSS PROFIT RATIO Gross Profit x 100 Net Sales Gross Profit is considered to be a reliable guide as it regards the adequacy of selling prices. Further it acts as an indicator of the efficiency of Inventory control. (Rs. in lacs) Particulars 2003-04 2004-05 2005-06 2006-07 2007-08 Gross Profit 690.3 1161.91 2072.71 2811.20 1882.69 Net Sales 4080.95 5058.25 5462.90 7359.85 7305.71 Gross Profit Ratio 16.92 22.97 37.94 38.19 25.77 Gross Profit Ratio =

INTERPRETATION The Gross Profit Margin reflects the efficiency with which management produces e ach unit of product. The gross profit margin for the year 2007-08 was 25.77%. I t shows that for every one rupee of sales the gross profit obtained is 0.26. OBSERVATION There is an increase in the Sales year after year. There is a consistent growth in the Gross Profit. It has increased from 16.92 to 22.97 in 2004-05 and then it increased to 37.94 in 2005-06 and then to 38.36 in 2007. It then decreased to 2 5.77 in the year of 2008. This decrease in the ratio is due to decrease in the g ross profit as well as decrease in sales. It shows that the firm has not improv ed its efficiency in managing and utilizing the Plant and Machinery. 2. NET PROFIT RATIO The Net Profit Ratio reveals the overall profitability of the concern. It revea ls the efficiency of the Management in manufacturing, selling, administration an d other activities of the firm. Net Profit Ratio = Net Profit x 100 Sales (Rs. in lacs) Particulars 2003-04 2004-05 Net Profit -75.15 520.69 Sales 4080.95 5058.25 5462.90 Net Profit Ratio -1.84 2005-06 1547.19 7359.85 10.29 2006-07 2007-08 2008.09 1252.37 7305.71 28.32 27.28 17.14

INTERPRETATION The Net Profit is the final profit of the company after deducting all the expend itures. The profit percentage for the year 2007-08 was 17.14%, though there was a heavy amount of limit on depreciation and deferred revenue expenditures. Thi s profit ratio could be improved by decreasing the expenditure or increasing the sales. OBSERVATION There is a positive Net Profit in the current year. There is a decrease in the i nterest charges but an increase in the year of 2008. The firm was running with n egative results during the previous years, but it turned into maximized level in the current year. This is due to an increase in sales and a decrease in the int erest burden. So, it could be said that the firm has improved its overall perfo rmance level by increasing its efficiency levels. 3. OPERATING MARGIN RATIO The Operating Margin establishes a relationship between the Total Cost incurred (excluding interest) and Sales. This is used to find out the overall operational efficiency of the business concern. Operating Margin ratio = (Rs. in lacs) Particulars 2003-04 2004-05 2005-06 Operating Profit -75.15 520.69 Net Sales 4080.95 5058.25 5462.90 Operating Margin Ratio 1.84 10.29 Operating Profit x 100 Net Sales 2007-08 2008.09 1252.37 7305.71 27.28 17.14

2006-07 1547.19 7359.85 28.32

INTERPRETATION The Operating Margin is the Profit before Interest and Tax. This ratio shows t he operating efficiency of the company. The ratio for the year 2007-08 was 17.1 4%. OBSERVATION There is an increase in the sales year after year. There is a consistent growth in the Operating Profit. But in the year of 2008 the profit has decreased. The Operation Profit ratio increased from 1.84 to 10.29 in 2004-05, then to 28.32 in 2005-06 and then to 27.28% in 2007. It then decreased to 17.14 is decreased. T his shows the inefficient management of the business affairs. b. Based on Investment: 1. Return on Investment The Return on Investment states the efficiency or otherwise with which the firm operates. Return on Investment = Profit before Tax x 100 Capital Employed Where, Capital Employed = Net Working Capital + Net Assets. (Rs. in lacs) Particulars 2003-04 2004-05 2005-06 Profit Before Tax -75.15 520.69 Capital Employed 4776.58 4518.16 Return on Investment -1.57 11.52 2006-07 1547.19 4942.67 31.30 2007-08 2253.77 1889.51 7158.27 9458.77 31.52 19.98

INTERPRETATION The Return on Investment for the year 2007-08 was 19.98%. This shows the earnin g capacity of the capital employed by the firm. That is the firm is able to gen erate 19.98% profit from the capital employed. OBSERVATION There is an increase in Sales every year. There is an improvement in the Profita bility (EBIT). But in the year 2008, Profit before Tax decreased. There is a dec rease in the Capital Employed. The ratio which was initially negative has improv ed year after year i.e. from 1.57 to 11.52 in 2003-04, then to 31.30 in 20 05-06, then to 31.51 in 2007. But in the year of 2008 it decreased to 19.98. Thi s shows that there is an improvement in the ratio. 2. RETURN ON NET WORTH Return on Net Worth = Profit before Tax x 100

Net worth The Return on Net Worth means the Return on the Proprietary Net Capital Employed . The return should be calculated with reference to Profits belonging to shareh olders and therefore profits shall be Net Profit after Interest and Tax. (Rs. Particulars 2003-04 Earning After Tax Net Worth 2744.47 Return on Net Worth in lacs) 2004-05 2005-06 -75.15 520.69 3286.02 4851.78 -2.74 15.84 2006-07 1547.19 6878.31 31.88 2007-08 2008.09 1252.37 7784.31 29.19 16.09

INTERPRETATION The Return on Net worth Ratio for the year 2007-08 was 16.09%. This shows that t he firm is able to generate a return of 16.09% on the funds of Shareholders. Thi s indicates that the firm has well utilized the resources of the Owners to gener ate a return on their funds in the year 2007. But in the current year it decrea sed. OBSERVATION There is an increase in the Sales every year. There is an improvement in the Pro fitability. There is an increase in Net Worth. The ratio, which was -2.74 in 200 3-04, improved to 15.84% in 2004-05, to 31.88% in 2005-06, to 29.19% in 2007 and

then decreased to 16.09 in the year 2008. This shows that there is a less impr ovement in the ratio. 3. RETURN ON CAPITAL The Return on Capital ratio indicates what kind of Rate of Return was earned on Book Value of Owners Equity. Return on Capital = Net Profit After Interest & Before Tax x 100 Share Capital (Rs. in lacs) Particulars 2003-04 2004-05 2005-06 Profit Before Tax -75.15 520.69 Share Capital 7827.32 7827.32 7827.32 Return on Capital Employed -0.96 2006-07 1547.19 7827.32 6.65 2007-08 2253.77 1889.51 7827.32 19.77 28.79 24.13

INTERPRETATION The Return on Capital in the year 2007-08 was 24.13. This ratio indicates that t he firm is able to generate 24.13% of return on the Book value of the Share Capi tal. OBSERVATION There is a decreased in the firms Profitability (PBT) when compared to the pervio us year. The Share Capital was constant in all the years. The performance of the firm was low in the previous years. But it turned out to Profitable position in the subs equent years. The improvement in the ratio is due to Profitability of the firm. This shows that the firm is able to increase the Return of its Share holders. 4. RETURN ON GROSS BLOCK The Return on Gross Block establishes a relationship between Net Profit and Gros s Fixed Assets. Return on Gross Block = Net Profit before Tax x 100 Gros s Block (Rs. in lacs) Particulars 2003-04 2004-05 2005-06 Profit Before Tax -75.15 520.69 Gross Block 8702.79 8730.76 8709.72 Return on Gross Block -0.86 5.96 2006-07 1547.19 8763.49 17.76 2007-08 2253.77 1889.51 8832.13 25.72 21.3

INTERPRETATION The Return on Gross Block for the year 2007-08 was 21.39 %. This ratio shows tha t a Return of 21% was earned from the Investment of Capital in Fixed Assets. OBSERVATION There is a decrease in the Return on Gross Block in the year of 2008. There is a n improvement in the Profitability. The Return on Gross Block was negative in pr evious years, but there was a constant betterment in the ratio every year. In t he year 2007 is was able to generate a return of 25.72%. This shows that the fir m has improved its efficiency. But this year, the return decreased to 21.39%. This shows that the firm has not improved its efficiency.

SUGGESTIONS SUGGESTIONS Some of the suggestions drawn from the finding of the Ratio Analysis for the bet ter performance of SSS are as follows: The Companys liquidity position in terms of Current ratio, Quick ratio and Cash r atio increased from one year to another year which indicates their better solven cy position though there is a moderate fall in Profitability. So they will main tain the desirable ratio 2:1 in order to increase their Profitability. The Companys Leverage ratio shows their lenders contribution, which is less than t he Owners capital. It is advisable to the Company to increase the lenders capital . Debtors Collection Period is gradually improving from one year to another year wh ich shows that they are converting their debts into cash very fastly which is a positive sign for their growth. But their Debtors Turnover ratio is increasing from one year to another year which shows that they allow more credit period to

their Debtors.

LIMITATIONS LIMITATIONS 1. The company is having enough funds but not invested them properly. 2. The fixed assets of the company are decreasing year by year. It will bec ome problem to the company. 3. current liabilities are fluctuating year by year so proper planning is r equired. 4. The firm has not improved its efficiency in managing and utilizing the P lant and Machinery.

CONCLUSION CONCLUSION From the past 5 years the current ratio of the company is improving and reached standard ratio. During in this current year it is more than standard ratio. Quic k ratio of the past five years of the company is more than standard ratio. And a lso company fixed assets ratio is satisfactory for getting long term funds. Due to average collection period of the company indicates that it is trying to impro ve past performance. Working capital turn over of the companys is desirable gross profit and net profit ratios are satisfactory. BIBLIOGRAPHY 01. FINANCIAL MANAGEMENT.................................. I.M.PANDEY 02. COST & MANAGEMENT ACCOUNTING.C.D.VASHIST &

V.K. SAXENA 03. FINANCIAL MANAGEMENT..R.K.SHARMA & S.K.GUPTA 04. FINANCIAL MANAGEMENT..M.Y.KHAN