Ratio Analysis of Amararaja Batteries

A study on Ratio Analysis

RATIO ANALYSIS

INTRODUCTION:

Financial analysis is the process of identifying the financial strengths and

weaknesses of the firm by properly establishing relationship between the items of the

balance sheet and profit & loss account. Management should be particularly interested in

knowing financial strengths and weaknesses of the firm to make their best use and to be

able to spot out financial weaknesses of the firm to take their suitable corrective actions.

Financial analysis is the starting point for making plans, before using any

sophisticated forecasting and planning procedures.

NATURE OF RATIO ANALYSIS:

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the

indicated quotient of mathematical expression” and as “the relationship between two or

more things”. A ratio is used as benchmark for evaluating the financial position and

performance of the firm. The relationship between two accounting figures, expressed

mathematically, is known as a financial ratio. Ratios help to summaries large quantities

of financial data and to make qualitative judgment about the firm’s financial

performance.

The persons interested in the analysis of financial statements can be grouped

under three heads owners (or) investors who are desire primarily a basis for estimating

earning capacity. Creditors who are concerned primarily with liquidity and ability to pay

interest and redeem loan within a specified period. Management is interested in evolving

analytical tools that will measure costs, efficiency, liquidity and profitability with a view

to make intelligent decisions.


STANDARDS OF COMPARISION:

The ratio analysis involves comparison for a useful interpretation of the financial

statements. A single ration in itself does not indicate favorable or unfavorable condition.

It should be compared with some standard. Standards of comparison may consist

of:

PAST RATIOS: Ratios calculated from the past financial statements of the same firm.

COMPETITORS RATIOS: Ratios of some selected firms, especially the most

progressive and successful competitor, at the same point of time.

INDUSTRY RATIOS: Ratios of the industry to which the firm belongs.

PROJECTED RATIOS: Ratios developed using the projected, or pro forma, financial

statements of the same firm.

TIME SERIES ANALYSIS:

The easiest way to evaluate the performance of a firm is to compare its present

ratios with past ratios. When financial ratios over a period of time are compared, it is

known as the time series analysis or trend analysis.

CROSS SECTIONAL ANALYSIS:

Another way to comparison is to compare ratios of one firm with some selected

firms in the industry at the same point in time. This kind of comparison is known as the

cross-sectional analysis.


INDUSTRY ANALYSIS:

To determine the financial condition and performance of a firm, its ratios may be

compared with average ratios of the industry of which the firm is a member. This type of

analysis is known as industry analysis.

PROFORMA ANALYSIS:

Sometimes future ratios are used as the standard of comparison. Future ratios can

be developed from the projected, or pro forma, financial statement. The comparison of

current or past ratios with future ratios shows the firm’s relative strengths and

weaknesses in the past and the future. If the future ratios indicate weak financial

position, corrective actions should be initiated.

USERS OF FINANCIAL ANALYSIS:

Financial analysis is the process of identifying the financial strengths and

weaknesses of the firm by properly establishing relationship between the items of the

balance sheet and the profit & loss account. Financial analysis can be undertaken by

management of the firm, or by parties outside the firm, viz. owners, creditors, investors

and others. The nature of analysis will differ depending on the purpose of the analyst.

TRADE CREDITORS are interested in firm’s ability to meet claims over a very

short period of time. Their analysis will, therefore, confine to the evaluation of

the firm’s liquidity position.

SUPPLIERS OF LONG-TERM DEBT are concerned with the firm’s long term

solvency and survival. Long term creditors do analyze the historical financial

statements, but they place more emphasis on the firm’s projected or pro forma,

financial statements to make analysis about its future solvency and profitability.


INVESTORS, who have invested their money in the firm’s shares, are most

concerned about the firm’s earnings. They restore more confidence in those firms

that show steady growth in earnings. As such, they concentrate on the analysis of

the firm’s present and future profitability. They also interested in the firm’s

financial structure to the extent it influence the firm’s earnings ability and risk.

MANAGEMENT of the firm would be interested in every aspect of the financial

analysis. It is their overall responsibility to see that the resources of the firm are

used most effectively, and that the firm’s financial condition is sound.

CLASSIFICATION OF RATIOS:

So many ratios, calculated from the accounting data can be grouped into various

according to financial activity or function to be evaluated. The parties interested in

financial analysis are short and long creditors, owners and management. Short-term

creditor’s main interest is in the liquidity position or the short-term solvency of the firm.

Long term creditors are interested in long-term solvency and profitability of the firm.

Owners concentrate on the firm’s profitability and financial condition. Management is

interested in evaluating every aspect of the firm’s performance. In view of the

requirement of the various users of ratios, we may classify them into the following four

important categories.

LIQUIDITY RATIOS

LEVERAGE RATIOS

ACTIVITY RATIOS

PROFITABILITY RATIOS


LIQUIDITY RATIOS:

Liquidity ratios measure the ability of the firm to meet its obligations. Liquidity

ratios help in establishing a relationship between cash and other current assets to current

to current obligations to provide a quick measure of liquidity. A firm should ensure that

it does not suffer from lack of liquidity and also that it does not have excess liquidity. A

very high degree of liquidity is also bad, idle assets earn nothing. The firm’s funds will

be unnecessarily tied up in current assets. Therefore it is necessary to strike a proper

balance between high liquidity.

CURRENT RATIO

QUICK RATIO

CASH OR SUPER QUICK RATIO

NET WORKING CAPITAL RATIO

LEVERAGE RATIOS:

The short-term creditors, like bankers and suppliers of raw material, are more

concerned with the firm’s current debt-paying ability. On the other hand, long-term

creditors, like debenture holders, financial institutions are more concerned with the firm’s

long-term financial strength. To judge the long-term financial position of the firm,

financial leverage, or capital structure, ratios are calculated. These ratios indicate mix of

funds provided by owners and lenders. There should be an appropriate mix of debt and

owner’s equity in financing the firm’s assets.

The process of magnifying the share holders return through the use of debt is

called “financial leverage” or “financial gearing” or “trading on equity”.


DEBT RATIO

DEBT EQUITY RATIO

TOTAL LIABILITIES RATIO

ACTIVITY RATIOS:

Activity ratios are employed to evaluate the efficiency with which the firm

manages and utilities its assets. These ratios are also called turnover ratios because they

indicate the speed with which assets are being converted or turned over into sales.

Activity ratios thus involve a relationship between sales and assets. A proper balance

between sales and assets generally reflects that assets are managed well. Activity ratios

help to judge the effectiveness of asset utilization.

o INVENTORY TURNOVER RATIO

o DEBTORS TURNOVER RATIO

o FIXED ASSETS TURNOVER RATIO

o WORKING CAPITAL TURNOVER RATIO

PROFITABILITY RATIOS:

A company should earn profits to survive and grow over along period of time.

Profits are essential but it would be wrong to assume that every action initiated by

management of a company should be aimed at maximizing profits. Profit is the

difference between revenues and expenses over a period of time.

Profitability ratios are calculated to measure the operating efficiency of the

company. Besides management of the company, creditors and owners are also interested

in the profitability of the firm. Creditors want to get interest and repayment of principal

regularly.

Generally, two major types of profitability ratios are calculated:

Profitability in relation to sales

Profitability in relation to investment.


GROSS PROFIT MARGIN

NET PROFIT MARGIN

RETURN ON EQUITY

OPERATING EXPENSES RATIO

EARNINGS PER SHARE

LIQUIDITY RATIOS:

1.CURRENT RATIO:

The current ratio is an acceptable measure of the firm’s short term solvency.

Current assets include cash within a year, such as marketable securities, debtors and

inventories. Prepaid expenses are also included in current assets as they represent the

payments that will not be made by the firm in the future. All the obligations maturing

with in a year are included in current liabilities. Current liabilities include creditors, bills

payable, accrued expenses, short-term bank loan, income-tax liability and long-term debt

maturing in the current year.

The current ratio is a measure of the firm’s short-term solvency. It indicates the

availability of current assets in rupees for every one rupee of current liability. A current

ratio of 2:1 is considered satisfactory. The higher the current ratio, the greater the margin

of safety; the larger the amount of current assets in relation to current liabilities, the more

the firm’s ability to meet its obligations. It is a crude-and-quick measure of the firm’s

liquidity.


2. QUICK RATIO:

Quick ratio establishes a relationship between quick, or liquid, assets and current

liabilities. An asset is liquid if it can be converted into cash immediately or reasonably

soon without a loss of value. Cash is the most liquid asset, other assets which are

considered to be relatively liquid asset, other assets which are considered to be relatively

liquid and included in quick assets are debtors and bills receivables and marketable

securities (temporary quoted investments).

Generally a quick ratio of 1:1 is considered to penetrating test of liquidity than the

current ratio, yet it should be used cautiously. A company with a high value of quick

ratio can suffer from the shortage of funds if it has slow-paying, doubtful and long

duration outstanding debtors. A low quick ratio may really be prospering and paying its

current obligation in time.

3. CASH RATIO:

Since cash is the most liquid asset, a financial analyst may examine cash ratio and

its equivalent current liabilities. Trade investment or marketable securities are equivalent

of cash; therefore, they may be included in the computation of cash ratio.

If the company carries a small amount of cash there is nothing to be worried about

the lack of cash if the company has reserves borrowing power. In India, firms have credit

limits sanctioned from banks, and easily draw cash. Cash ratio is calculated as cash

marketable securities divided by current liabilities.


4. NETWORKING CAPITAL RATIO:

The difference between the current assets and current liabilities excluding short-

term bank borrowings is called networking capital or net current assets. Sometimes it is

used to measure firm’s liquidity. If the firm is having NWC has the greater ability to

meet its current obligations.

LEVERAGE RATIOS:

1. DEBT RATIO:

Several debt ratios may be used to analyze the long-term solvency of a firm. The

firm may be interested in knowing the proportion of the interest-bearing debt (also called

funded debt) in the capital structure. It may, therefore, computer debt ratio by dividing

total debt by capital employed or net assets. Total debt will include short and long-term

borrowings from financial institutions, debentures/bonds, deferred payment arrangements

for buying capital equipments, bank borrowings, public deposits and any other interest

bearing loan. Capital employed will include total debt and net worth.

A high ratio means that claims of creditors are greater than those of owner. A

high level of debt introduces inflexibility in the firm’s operations due to the increasing

interference and pressure from creditors.

2. DEBT EQUITIY RATIO:

Debt equity ratio indicates the relationship describing the lenders contribution for

each rupee of the owner’s contribution is called debt-equity ratio. Debt equity ratio is

directly computed by dividing total debt by net worth. Lower the debt-equity ratio higher

the degree of protection. A debt-equity ratio of 2:1is considered ideal.


3. TOTAL LIABILITIES RATIO:

Total liabilities ratio indicated the relationship between total assets and total

liabilities. In this we know the wealth of the organization and satisfying the shareholders.

ACTIVITY RATIOS:

Activity ratios are employed to evaluate the efficiency with which the firm

manages and utilizes its assets. These ratios are also called turnover ratios because they

indicate the speed with which assets are being converted or turned over into sales.

Activity ratios thus involve a relationship between sales and assets. A proper balance

between sales and assets generally reflects that assets are managed well. Activity ratios

help to judge the effectiveness of asset utilization.

1) INVENTORY TURNOVER RATIO:

Inventory turnover ratio indicates the efficiency of the firm in producing and

selling its product. It is calculated by dividing the cost of goods sold by the average

inventory.

2) DEBTORS OR ACCOUNTS RECEIVABLE TURNOVER RATIO:

A firm sells goods for cash and credit. Credit is used as marketing tool by a

number of companies. When the firm extends credits to its customers, debtors are

created in the firm’s account. Debtors turnover indicates the number of times debtors

turnover each year. The higher the value of debtor’s turnover, the more efficient is the

management of credit. Debtor’s turnover is found out by dividing credit sales by average

debtors.


3) FIXED ASSETS TURNOVER RATIO:

The firm may wish to know its efficiency of utilizing fixed assets and current

assets separately. The use of depreciated value of fixed assets in computing the fixed

assets turnover may render comparison of firm’s performance over period or with other

firms.

4) WORKING CAPITAL TURNOVER RATIO:

A firm may also like to relate net current assets or net working capital to sales.

Working capital turnover ratio indicates for one rupee of sales the company needs how

many net current assets. This ratio indicates whether or not working capital has been

effectively utilized in market sales.


A company should earn profits to survive and grow over a long period of time.

Profits are essential but it would be wrong to assume that every action initiated by

management of a company should be aimed at maximizing profits. Profit is the

difference between revenues and expenses over a period of time.

Profitability ratios are calculated to measure the operating efficiency of the

company. Besides management of the company, creditors and owners are also interested

in the profitability of the firm. Creditors want to get interest and repayment of principal

regularly.


Profitability in relation to sales.



1. GROSS PROFIT MARGIN:

The first profitability ratio in relation to sales is the gross profit margin the gross

profit margin reflects the efficiency with which management produces each unit of

product. This ratio indicates the average spread between the cost of goods sold and the

sales revenue. When we subtract the gross profit margin from 100 percent, we obtain the

ratio of cost of goods sold to sales. A high gross profit margin ratio is a sign of good

management. A gross margin ratio may increase due to any of the following factors:

higher sales prices cost of goods sold remaining constant, lower cost of goods sold, sales

prices remaining constant.

2. NET PROFT MARGIN:

Net Profit is obtained when operating expenses, interest and taxes are subtracted

from the gross profit. Net profit margin ratio establishes a relationship between net profit

and sales and indicates management’s efficiency in manufacturing, administering and

selling the products. This ratio is the overall measure of the firm’s ability to turn each

rupee sales into net profit.

3. OPERATING EXPENSES RATIO:

The operating expenses ratio explains the changes in the profit margin ratio It is

affected by a number of factors, such as external uncontrollable factors, internal factors.

This ratio is computed by dividing operating expenses by sales. Operating expenses

= cost of goods sold plus selling expenses and general administrative expenses by sales.


4. RETURN ON EQUITY (ROE):

A return on shareholder’s equity is calculated to see the profitability of owner’s

investment. ROE indicates how well the firm has used the resources of owners. This

ratio is one of the most important relationships in financial analysis. The earning of

satisfactory return is the most desirable objective of a business.


INDUSTRY PROFILE

A battery is an electrochemical device in which the free energy of a chemical

reaction is converted into the electrical energy. The chemical energy contained in the

active materials is converted into electrical energy by means of electrochemical

oxidation-reduction reactions.

How a Battery Works?

When you place the key in your car’s ignition and turn the ignition switch to

“ON” a signal is sent to the car’s battery. Upon receiving this signal the car battery takes

energy that it has been strong in chemical form and releases it as electricity. This electric

power is used to crank the engine. The battery also releases energy to power the car’s

lights and others accessories.

It is the only device, which can store electrical energy in the form of chemical

energy, and hence it is called as a storage battery.

Sealed Maintenance Free (SMF) Batteries:

Sealed Maintenance Free (SMF) batteries technologies are leading the battery

industry in the recent year in automobile and industrial sector around the globe.

SMF batteries come under the rechargeable battery category so it can be use a

number of times in the life of a battery. SMF batteries are more economical than nickel

cadmium batteries.


Value Regulated Lead Acid (VRLA) Batteries:

VRLA batteries are leak proof, spill-proof and explosion-restraint and having life

duration of 15-20 years. These batteries withstand the environmental conditions due to

high technology, in built in the batteries. Each cell is housed in a power coated steel tray

making them convenient to transport and installation, so transit damages are minimized

in case of these batteries.

Sealed Maintenance Free (SMF) batteries and Value Regulated Lead Acid

(VRLA) batteries technology are leading the battery industry in the recent years in

automobile and industrial battery sector around the globe VRLA batteries have become

the preferred choice in various applications such as uninterrupted power supply,

emergency lights, security systems and weighing scales.

Classification of Batteries:

Batteries are broadly classified into two segments like,

Automotive Batteries

Industrial Batteries

Automotive Batteries:

Apart from mopeds all other automobiles including scooters need storage battery.

So automotive batteries are playing pre-dominant role in automobile sector by

influencing customers in the automobile market. Automobile batteries can be further

distinguished as the original equipment (OE) markets as low as 5-6%. OE segment has

the advantage of securing continuous orders and inquiries. This enables manufacturers to

streamline production facilities, plan production schedules and attain certain level of

operational efficiency.


INDUSTRIAL BATTERIES:

The Industrial Battery segment comprises of two main categories. One comprises

of the “Stationery Segment” and the second relating to “Motive Power and Electric

Vehicles”. The Motive Power and the Electric Vehicle segment comprising of “Telecom,

Railways and Power Industries have registered a growth in excess of 20% and this trend

is likely to continue in the next 5 years.

The Industrial Segment is highly technological intensive and access to high

quality world-class technology is an important factor and is vital for brand reference. The

total demand for the industrial battery segment is met by indigenous production with a

small saves of about 10% by imports. The demand for industrial batteries has grown

slowly and steadily.

RECYCLING BATTERIES:

Battery acid is recycled by neutralizing it into water of converting it to sodium

sulphate for laundry detergent, glass and textile manufacturing.

Cleaning the battery cases, meeting the plastic and reforming it into uniform

pellets recycle plastic. Lead, which makes up 50% of every battery, is method, poured

into slabs and purified.

The following are the major manufacturers in battery industry in India,

Exide Industries

Standard Batteries

Amco Batteries

Tudor India

Amara Raja Batteries Ltd.

Hyderabad Batteries Ltd.


Sealed Maintenance Free (SMF) batteries and Value Regulated Lead Acid

(VRLA) technologies are leading the battery industry in the recent years in the preferred

choice in various applications such as uninterrupted power supply, emergency lights,

Security systems and Weighing scales.

TELECOM:

The Government’s policy to increase the capacity from 10 million to 21 million

lines by 2000 increased the demand for storage batteries considerably the value added

services like radio paging and cellular will increase the demand for storage batteries in

future considerably.

RAILWAYS:

In Railways, the demand estimate is based on the annual coach production this

comes to 2500 numbers by Railways itself and 1000 numbers more by various other

segments, replacement demand and annual requirement for railways electrification.

POWER SECTOR:

In this sector, the estimated 90 private power projects which are expected to

produce 40,000MV with an approximate capital outlay of Rs.1,40,000 crores would keep

the industry’s future brighter in the coming years.


COMPANY PROFILE

The introduction of company can be described in two parts

Company Details

Company Overview

COMPANY DETAILS

Company Name: Mangal Precision Products Private Limited (MPPL)

(Mangal Precision Products Private Limited is having two units)

MPPL - 1

Address: karakambadi

Tirupathi – 517501

Andhra Pradesh, India

Ph.No. 0877-2285561 to 65

Fax No. 0877-2285600

MPPL – 2

Address: Petamitta (village)

Puthalapattu (Mandal)

Chittoor District

Andhra Pradesh, India

Ph.No. 0877-2271161 to 65

Fax No. 0877-2271167

Mangal Precession Products Private Limited – 1


MPPL – 1 is a fabrication division. It commenced its business in the year 1992.

Manufactures

Metal sheets

Battery trays

Racks

Charger cabinets

Accessories

Customers

ARBL

ARPSL

AREL

Others

The product range includes trays and racks for batteries. Cabinets for chargers

ranging size from 125-100-235 mm to 2400-1400-1600 mm as per customers’

requirements. Products are manufactured as per specifications given by customers.

The company also provides after sales services to meet the customers need MPPL

– 1 factory around 400 personnel. The factory is spread over 0.75 acres with a current

built-up area of 5000 square meters.

Mangal Precession Products Private Limited – 2


MPPL – 2 is a fastener’s division. It commenced its business in the year 1996. but

actual production started in 1997.

Manufactures:

Mild steel fasteners

Stainless steel fasteners

Stainless steel fasteners

High tensile fasteners

Copper and brass fasteners

Ms Bolts

Ms Sheets

Customers:

ARBL

ARPSL

AREL

TATA MOTORS

Ashok Leyland

Others

MPPL- 2 factory around 300 personnel and trained them. The factory is spread

over an area of 5000 squares meters with a current built up area of 3600 square meters

factory spread over 2.35 areas. Even MPPL-2 manufactures its products as per customer

specifications.


COMPANY OVERVIEW

Mangal Precision Products Limited

Located at Tirupati, MPPL is the group’s subsidiary for the precision engineering

products business and it has three divisions within its fold

Auto Components

Enclosures

Storage Solutions

MPPL plays a strong emphasis on top- of –the-line business and operational

practices such as 5S, Six Sigma and Poka Yoke with rewarding results in efficiency,

productivity and cost effectiveness.

AUTO COMPONENTS


MANGAL develops and manufactures Auto Components like High tensile

fasteners, Cold forged parts and Engineering Plastic parts. We have been serving ALL,

TATA Johnson Controls, Rane Group, Godrej, Bosch, SAME Deutz and Royal Enfield

for their requirements in Fasteners and Plastic parts. The manufacturing facility is based

at Tirupati and the plant facility is ISO 9001:2000, ISO/TS 16949:2002 and ISO

14001:2004 certified by TUV.

As a reliable development partner in the automotive industry, we are capable of

covering a range of applications including critical applications for engines, drive trains,

fasteners for chassis, car seating system and battery parts in plastics.

The products solutions include,

High Tensile Fasteners

Cold Forged Parts

Engineering Plastics

HIGH TENSILE FASTENERS

MANGAL develops and produces Standard and Special Screws and Bolts,

precision Cold Forged parts and assemblies, in which cold forged parts are combined

with other components. We endeavor to be a full service supplier and manufacturer in the

diameter range from M5 to M20 with a maximum part length of 300mm. We have

experience in various grades of steel right from 8.8 to 12.9 and also special material like

Stainless steel and Boron Steel.

As a reliable development partner in the automotive industry, we are capable of

covering a range of applications including critical applications for engines, drive trains

and chassis.


Typical Range of Fasteners includes

Standard Fasteners

Hexagon Screws/Bolts, Cross Recessed Screws, Flange Screws, Socket Head Cap

Screws/Bolts

Special Fasteners

Connecting Rod Bolts, Main bearing Cap Bolts, Cylinder Head Screws/Studs,

Flywheel Bolts, Adjusting Screws, Balance Weight Bolts, Banjo Bolts, Hub/Wheel Bolts,

Wheel Studs, Suspension Bolts, Propeller Shaft Bolts, Center Bolts, Track Shoe Bolt.

Aside addressing cold forged fasteners we provide value added service by

converting the bar machined parts into cold forged parts by converting the wire rods into

near net shape of the final product by cold forging and machine the near net shape part to

final precision turned parts. Some of the parts include Double end studs, Max cut screws,

Banjo bolts and Threaded inserts, resulting in a cost effective solution especially for long

production runs.

MANGAL can also address any special fasteners/ net shape parts by playing

actively as a technical liaison or assume responsibility as “C” parts aggregator on a need

basis enabled by its alliance with key associates like NEDSCHROEF.


The manufacturing facility is a completely integrated one spanning Wire

Preparation including Phosphating and Wiredrawing, Annealing, Cold Forging,

continuous mesh belt Heat Treatment furnace, Secondary Machining, Finishing and

Packing all under one roof.

COLD FORGED PARTS

Cold forging is performed on reliable and precision machinery such as

NEDSCHROEF and JERN YAO.

The plant facility is ISO 9001:2000, ISO/TS 16949:2002 and ISO 14001:2004

certified by TUV.

PRODUCTS

A wide range of standard cold forged high tensile fasteners over 6,000 varieties

covering the diameter range of 3 mm to 16 mm and the length range of 6 mm to 150 mm.

We manufacture a wide range of fasteners based on the following standards:

Indian Standards-IS

German Standards-DIN

Japanese Standards-JIS

American Standards-ASTM

British Standards-BS

MPPL's product range encompasses a wide variety of standard, chassis, engine

and special fasteners. These Fasteners covers a very wide range of industries viz

Automobile sectors, standard / special m/c building sectors, printing machineries, etc.


IT Server Racks

Mangal produces a range of enclosures for IT & ITES applications for Server

rooms and Networking hubs. The most widely used 19” racks come in a variety of

heights up to 42U size. It is available in depths of 600mm, 800mm, 1000mm or 1200mm.

Accessories like Shelves, Keyboard trays, Cable, Thermal and Power

management, Fan trays, cooling fans etc add to the complete solution.

Floor standing cabinets of 30U, 36U and 42U with 600mm and 800mm

width.

Wall mounted enclosures of 6U, 9U and 12U for LAN/WAN application.

Conforms to DIN 41494 standards.

Telecom Racks

Mangal cabinets for Telecom applications conform to ETSI standards. These

cabinets come in a standard height of 2200mm and depth of 600mm. Mangal also makes

Outdoor cabinets with IP-65 protection for custom telecom applications.


ETSI Cabinets.

Custom made Outdoor enclosures.

Ingress Protection up to IP-55/65 standards

Industrial Cabinets

Mangal has wide experience in executing complex work in Automation & Control

panel applications. From small interface panels to large process automation in industries,

Mangal has always lived-up to the precision requirement expected by the industry.

Industrial Control & Automation Panels

Power Control Cabinets

Interface Panels

Cabinets with Ingress protection up to IP553/56 standards

Custom Products


With a most Modern Fabrication Shop, In-house Design Center and Skillful

Engineering Manpower, Mangal can offer solutions for any complex sheet metal product

applications.

Some of the recent applications we catered include,

Thermal Insulation Panels.

Mezzanine floor panels for extra heavy duty application.

MCC Panels

Consoles

STORAGE SOLUTIONS & AUTOMATION DIVISION

Pallet Racking Systems

Shelving System

Automation System

AR-DX Pallet Racking Systems


AR-DX Racking systems are designed to increase the Warehouse Operational

efficiency, Productivity and Goods Turnaround.

These systems come with a host of accessories like Guided Pallet Supports, Rear

Stoppers for Pallets, Aisle labels, Upright Guards, Fill in Mesh, etc. Very versatile and

flexible, these can be easily reconfigured to accommodate changing storage needs of your

warehouse.

Our Racking range includes,

Conventional Pallet Racking

Drive-In Racking

Gravity Flow Racking

Push Back Racking

Mobile Pallet Racking

Benefits of our Racking

Suitable for Medium to Heavy load

Easy to assemble

50mm level adjustment for beams

Wide range of accessories

Powder coated finish offers good resistance to abrasion

Rack Clad structures eliminate the need of separate warehouse building

Conventional Pallet Racking


Conventional Pallet Racking is the simplest of all Pallet Racking systems and

provides individual access to every pallet in the system. The flip side is low storage

density with only 35-40% of floor space being utilized. This is because aisles have to be

provided for the handling equipments like forklifts to maneuver.

Features

Most versatile pallet storage system with easy adaptability

The beam levels can be easily adjusted in increments of 50mm according

to the pallet height requirement.

Host of accessories for individual storage needs

Compatible with a variety of handling equipments like Pedestrian Lift

Trucks, Forklifts, Reach trucks, VNA Trucks and Automated Stacker

Cranes

Double Deep Racking


This is a modified layout of our Conventional Pallet Racking where two bays of

racks are installed one behind another and accessed using Modified Reach Trucks in a

front and rear pallet combination.

This reduces aisle to rack ratio and gives better floor space utilization (around

55%) and higher storage density. The flip side is that it reduces selectivity and only 50%

pallets are directly accessible.

Gravity Flow Racking

Gravity Flow Racking is a specialized form of Pallet Racking where inclined

tracks of rollers are used as storage surface and Pallets are put-away from one end and

retrieved from the other end of the racks. It is typically 4-5 pallets high and the depth

depends on size and weight of the pallet. It is necessary that the loads on pallets are stable

and quality of pallets is good

Push Back Racking


Push Back Racking is a modified Pallet Racking system where pallets are loaded

on inclined tracks or roller skids where the inclination is towards the forklift. The system

offers storage upto 4 pallet deep and 5 pallets high with put-away and retrieval from the

same side.

Mobile Pallet Racking

Our Mobile Pallet Racking is a modified Pallet racking system where the racks

are mounted on powered movable bases running on rails flush with the floor. The rack

bases are moved to create the aisle for the forklift to access the pallets.

AR-DX Shelving System


AR-DX Shelving systems are designed to suite accurate manual picking of

products following “man-to-goods” principal.

These systems comes with a host of accessories like Shelf Dividers, Partition

panels, Doors with lock, Drawers & Cabinets, etc. enabling endless possibilities for

customization to suit individual storage needs. They can also be made multiple floors

high connected by staircases.

Mobile Shelving

In Mobile shelving, shelves are mounted on mobile bases which slide on rails on

floors. The system is good for highly dense storage and ensures order and security of

goods stored

AMARA RAJA GROUP OF COMPANIES:


AMARA RAJA POWER SYSTEMS PRIVATE Ltd. (ARPSL), Karakambadi,

Tirupati.

AMARA RAJA BATTERIES PRIVATE Ltd. (ARBL), Karakambadi, Tirupati.

MANGAL PRECISION PRODUCTS PRIVATE Ltd1. (MPPL1), Karakambadi,

Tirupati.

MANGAL PRECISION PRODUCTS PRIVATE Ltd2. (MPPL2), Petamitta,

Chittoor.

AMARA RAJA ELECTRONICS PRIVATE LIMITED (AREPL),

Dighavamgham, Chittoor.

GALLA FOODS PRIVATE LIMITED (GFPL), Puthalapattu Mandal, Chittoor.

NEED FOR THE STUDY

QA – ARBL Manager P.Murali


Financial forecasting is an integral part of financial planning. Forecasting uses

past data to estimate the future financial requirements. Ratio analysis is a powerful tool

of financial analysis. A ratio is used as a benchmark for evaluating the financial position

and performance of the firm. Ratios help to summarizes large quantities of financial data

and to make qualitative judgment about the firm’s financial performance. With the help

of ratios, one can determine.

The ability of the firm to meet its current obligations.

The extent to which the firms has used its long – term solvency by borrowing

funds.

The efficiency with which the firm is utilizing its assets in generating sales

revenue.

The overall operating efficiency and performance of the firm.

Analysis and interpretation of various accounting ratios gives a skilled and

Experienced analyst, a better understanding of the financial condition and performance of

the firm.

Thus ratio analysis can assist management in its basic function of forecasting,

planning, coordination, control and communication


OBJECTIVES OF THE STUDY

To analyze the financial performance of. Man gal precision products private ltd.

For drawing conclusions regarding the liquidity position of a firm.

To determine the long-term financial solvency of a firm through ratio analysis.

To analyze the effectiveness in the utilization of assets.

RESEARCH METHODOLOGY


Research

Any effort which is directed to study the strategy needed to identify the problem

and selecting of best solution for better results is known as research.

Research methodology

A system of models, procedures and techniques used to find the results of a research

problem is called research methodology.

Research design

A research design is an arrangement of conditions for collection and analysis of data in a

manner that aims to combine relevance to the research purpose with economy in

procedure.

A research design is purely and simply the framework and plan for the study that

guides the collection and analysis of data. It is a blue print that is followed in completing

a study

Data Collection Methods

Primary Data Collection Method

Secondary Data Collection Method

In this study the primary data collection method have been used to collect data.

SOURCES OF DATA:


Primary data-

The primary data is collected from personnel interviews and discussions with

execution.

Secondary data-

The secondary data is collected from the

Annual financial reports of the company

Internet reports

Brochures and books.

These are sources containing data, which have been collected and compiled for

another purpose. The secondary sources consists of readily available compendia

and already compiled statistical statements and reports whose data may be used by

researches for their studies, e.g., census reports, annual reports and financial

statements of companies

FINANCIAL TOOLS:


The data relating to the performance of Man gal precision products private ltd

drawn from the different sources have been carefully and meaning fully analyzed by

using well established and financial tools.

CLASSIFICATION OF RATIOS:

So many ratios, calculated from the accounting data can be grouped into various

according to financial activity or function to be evaluated. The parties interested in

financial analysis are short and long creditors, owners and management. we may classify

them into the following four important categories.

LIQUIDITY RATIOS

LEVERAGE RATIOS

ACTIVITY RATIOS


LIQUIDITY RATIOS:

Liquidity ratios measure the ability of the firm to meet its obligations. Liquidity

ratios help in establishing a relationship between cash and other current assets to current

to current obligations to provide a quick measure of liquidity.

1. CURRENT RATIO:

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

2. QUICK RATIO:


QUICK RATIO = CURRENT ASSETS-INVENTORIES

CURRENT LIABILITIES

3. CASH RATIO:

CASH RATIO = CASH+MARKETABLE SECURITES

CURRENT LIABILITIES

4. NETWORKING CAPITAL RATIO:

NETWORKING CAPITAL RATIO = NETWORKING CAPITAL

NET ASSETS

LEVERAGE RATIOS:

The short-term creditors, like bankers and suppliers of raw material, are more

concerned with the firm’s current debt-paying ability.

1. DEBT RATIO:

DEBT RATIO = TOTAL DEBT

TOTAL DEBT + NETWORTH

2. DEBT EQUITIY RATIO:

DEBT-EQUITY RATIO = TOTAL DEBT

NET WORTH

3 .TOTAL LIABILITIES RATIO:

TOTAL LIABILITIES RATIO =

ACTIVITY RATIOS:

TOTAL LIABILITIES TOTAL ASSETS


Activity ratios are employed to evaluate the efficiency with which the firm manages

and utilizes its assets.

1. INVENTORY TURNOVER RATIO:

INVENTORY TURNOVER RATIO SALES

AVERAGE INVENTORY

AVERAGE INVENTORY = OPENING + CLOSING INVENTORY

2

2. DEBTORS OR ACCOUNTS RECEIVABLE TURNOVER RATIO:

DEBTORS TURNOVER = CREDIT SALES

AVERAGE DEBTORS

3. FIXED ASSETS TURNOVER RATIO:

FIXED ASSETS TURNOVER RATIO = SALES

FIXED ASSETS

4. WORKING CAPITAL TURNOVER RATIO:

WORKING CAPITAL TURNOVER RATIO = SALES

NET CURRENT ASSETS



A company should earn profits to survive and grow over a long period of time.

Profit is the difference between revenues and expenses over a period of time.


Profitability in relation to sales.


1. GROSS PROFIT MARGIN:

GROSS PROFIT MARGIN = SALES – COST OF GOODS SOLD

SALES

2. NET PROFT MARGIN:

NET PROFIT MARGIN = PROFIT AFTER TAX

SALES

3. OPERATING EXPENSES RATIO:

OPERATING EXPENSES RATIO = OPERTING EXPENSES

SALES

4. RETURN ON EQUITY (ROE):

RETURN ON EQUITY = PROFIT AFTER TAXES

NETWORTH


SCOPE OF THE STUDY

This ratio analysis study is on Mangal Precision Products Ltd only.

The information what I need for the study is collected from the company’s

finance manager and from annual reports of the company.

My study is constrained to the information which is provided by the company.

The secondary data i.e., Balance sheets and profit & loss accounts are the base for

this study.

If the values of the balance sheets causes the wrong analysis.


LIMITATIONS OF THE STUDY

The study is based on the information provided by the organization in the form of

various annual reports only.

The study is based on only the balance sheets and profit & loss accounts of the

company.

Ratio analysis only provides a glimpse of the past performance and forecasts for

future may not be correct since several other factors like market conditions.

Management policies etc may affect the future operations.

The ratio facilitates wholly quantitative analysis only. The qualitative factors

which are so important for the successful functioning of the organization are

completely ignored.

Ratio analysis suffers from the serious limitations of the statistical concepts such

as determinations of proper standard for comparison.

Ratio analysis helps in providing only a part of the information needed in the

process of decision – making.


LIQUIDITY RATIOS

1. CURRENT RATIO: -

The ratio between all current assets and all current liabilities; another way of

expressing liquidity. It is a measure of the firm’s short-term solvency. It indicates the

availability of current assets in rupees for every one rupee of current liability. A ratio of

greater than one means that the firm has more current assets than current claims against

them.

Formula: Current Assets Current Liabilities

Table no: 1 current ratio Standard ratio is 2:1

YEARCURRENT

ASSETSCURRENT

LIABILITIESCURRENT RATIO

2004-05 33,894, 349 27,138,593 1.24:1

2005-06 49, 397,942 24,404,997 2.02:1

2006-07 125,658,719 69,630,463 1.80:1

2007-08 304,999,890 177861294 1.71:1

2008-09 455,742,126 260,088,191 1.75:1

INTERPRETATION:

The standard norm for current ratio is 2:1. During the year 2005 the ratio is 1.24

and it has increased to 2.02 during the year 2006 and decreased to 1.80 in 2007 and it is

decreased to 1.71 in the year 2008 and it has decreased to 1.75 in the year 2009. So the

ratio was not satisfactory.

2. QUICK RATIO: -


The ratio between all assets quickly convertible into cash and all current

liabilities. Specifically excludes inventory.

Formula: Current Assets – Inventories Current Liabilities

Table no: 2 quick ratios

Standard ratio is 1: 1

YEAR QUICK ASSETSCURRENT

LIABILITIESQUICK RATIO

2004-05 27,913,828 27,138,593 1.02:1

2005-06 40,869,967 24,404,997 1.67:1

2006-07 83,916,683 69,630,463 1.20:1

2007-08 208,208,252 177,861,294 1.17:1

2008-09 330,199,379 260,088,191 1.27:1

INTERPRETATION:

The standard norm for the quick ratio is 1:1. Quick ratio is 1.02 in the year 2005

And it is increased to 1.67and1.20 in the year 2006 and 2007.And it is decreased to 1.17

in the year 2008and increased to1.27 in the year 2009. However the ratio was above the

standard norm so the ratio was satisfactory.

3. CASH RATIO: -


The ratio between cash plus marketable securities and current liabilities.

Formula: Cash & Bank balances Current liabilities

Table no:3 cash ratio

standard ratio is 0.5:1

YEARCASH&BANK

BALANCES

CURRENT

LIABILITIESCASH RATIO

2004-05 18,003,083 27,138,593 0.66:1

2005-06 15,664,761 24,404,997 0.64:1

2006-07 19,989,626 69,630,463 0.28:1

2007-08 24,175,629 177,861,294 0.13:1

2008-09 61,157,640 260,088,191 0.23:1

INTERPRETATION:

In all the above years the absolute quick ratio is very low. The standard norm for

absolute quick ratio is 0.5:1 the company is failed in keeping sufficient Cash & Bank

Balances and Marketable Securities.


4. NET WORKING CAPITAL RATIO: -

The difference between current assets and current liabilities excluding short-term

bank borrowing is called net working capital or net current assets.

Formula: Net Working Capital Net Assets

Table no:4 net working capital ratio

YEARNET WORKING

CAPITALNET ASSETS

NET WORKING

CAPITAL

RATIO

2004-05 6,869,969 221.355.246 0.03:1

2005-06 11,367,220 264,504,761 0.04:1

2006-07 42,402,531 337,735,853 0.12:1

2007-08 113,512,871 492,258,996 2.30:1

2008-09 192,653,935 733,924,377 0.26:1

INTERPRETATION:

Net Working Capital ratio is 0.03 in 2005and it is increased to 0.04 in the next

year i.e., 2006. From that year the ratio increased to 0.04 in 2006 and followed in 2007

also increased 0.12 and also 2.30 in 2008 but condition of business working capital is

shortage except 2008 and again it decrease to 0.26 in 2009.


LEVERAGE RATIOS

5. DEBT RATIO: -

If the firm may be Interested in knowing the proportion of the interest bearing

debt in the capital structure.

Formula: Total debt Total debt + Net worth

Total debt = Secured & UN Secured loans

Net Worth= Share holders funds – misc expenses

Table no: 5 debt ratio

YEAR TOTAL DEBTTOTAL DEBT + NET

WORTHDEBT RATIO

2004-05 114,925,660 203,592,315 0.56:1

2005-06 111,545,855 242,170,949 0.46:1

2006-07 130,554,086 309,647,248 0.42:1

2007-08 202,412,086 455,186,403 0.44:1

2008-09 310,713,028 682,490,489 0.45:1

INTERPRETATION:

This ratio gives results relating to the capital structure of a firm. From the above

in fluctuating trend we can conclude that the company’s dependence on debt is

increasing. It is not better position in collection of debt.

6. DEBT EQUITY RATIO: -


Shows the ratio between capital invested by the owners and the funds provided by the lenders.

Formula: Total Debt Net Worth

Table no:6 debt equity ratio

YEAR TOTAL DEBT NET WORTH D.E.RATIO

2004-05 114,925,660 88,666,655 1.29:1

2005-06 111,545,855 130,625,094 0.85:1

2006-07 130,554,086 179,093,162 0.72:1

2007-08 202,412,086 252,774,317 0.80:1

2008-09 310,713,028 371,777,461 0.83:1

INTERPRETATION:

The ratio gives results relating to the capital structure of a firm. Debt equity ratio is

1.29 in the year 2005 and decreased to 0.85 in the year 2006. In the year 2007 the ratio

has decreased to 0.72 and it increased to 0.80&0.83in the gradual years. We can conclude

that the company depends on the debt fund is increasing.

7. TOTAL LIABILITIES RATIO: -


Formula: Total Liabilities Total Assets

Total liabilities: Current liabilities + Secured & Unsecured Loans.

Total Assets : Fixed assets + Investments + Current assets

Table no: 7 total liabilities ratio

YEARTOTAL

LIABILITIESTOTAL ASSETS T.L. RATIO

2004-05 142,064,253 216,489,607 0.6

2005-06 135,950,852 286,523,151 0.4

2006-07 200,184,549 403,717,278 0.4

2007-08 380,273,380 670,120,290 0.5

2008-09 570,801,218 724,830,857 0.7

INTERPRETATION:

In the years, 2005 & 2006 the total liabilities is 0.6&0.4 but in the year 2007 the

total liabilities decreased to 0.4 and the ratio increased to 0.5 & 0.7 in the corresponding

years of 2008 &2009.

ACTIVITY RATIOS


8. INVENTORY TURNOVER RATIO: -

It indicates the firm efficiency of the firm in producing and selling its product.

It is calculated by dividing the cost of goods sold by the average inventory.

Formula: sales Average inventory

Table no: 8 inventory turnover ratio

YEAR salesAVG

INVENTORYI.T.RATIO

2004-05 9,438,244 6,070,863 1.5

2005-06 18,160,031 7,254,248 2.5

2006-07 58,389,926 25,135,004 2.3

2007-08 736,541,123 69,266,837 10.6

2008-09 1,276,752,957 124,642,747 10.24

INTERPRETATION:

Inventory turnover ratio is 1.5 times in the year 2005. But, it is increased to 2.5

in the year 2006. Then, it is decreased to 2.3 in the year 2007 and increased to 10.6 in the

year 2008. But, it is decreased to 10.24 in the year 2009. Inventory turn over ratio

increased for year by year that is company production is also increased. Subsequently

sales are also increased.

9. DEBTORS TURNOVER RATIO: -


It is found out by dividing the credit sales by average debtors. Debtor’s turnover

indicates the number of times debtor’s turnover each year.

Formula: Sales Average debtors

Sales = Gross Sales

Table no: 9 debtors turnover ratio

YEAR SALESAVERAGE

DEBTORSD.T.RATIO

2004-

059,438,244 2,207,265 4.2

2005-

0618,160,031 8,056,599 2.2

2006-

0758,389,926 17,996,034 3.2

2007-

08736,541,123 60,833,804 12.1

2008-

091,276,752,957 181,063,357 7.05

INTERPRETATION:

Debtor’s turnover ratio is 4.2 times in the year 2005 and it is decreased to 2.2

times in the year 2006 and increased to 3.2 times in the year 2007 and it increased to 12.1

times in the year 2008 and decreased to7.05 times in 2009.


10. FIXED ASSETS TURNOVER RATIO: -

The firm may whish to know its efficiency of utilizing fixed assets and

current assets separately. The use of depreciated value of fixed assets in computing the

fixed assets turnover may render comparison of firm’s performance over period or with

other firms.

Formula: Sales Net fixed assets

Sales = Gross Sales

Net fixed assets: Net block

Table no: 10 fixed assets turnover ratio

YEAR SALES NET FIXED ASSETS F.A.T.RATIO

2004-05 9,438,244 182,595,258 0.05

2005-06 18,160,031 237,125,209 0.07

2006-07 58,389,926 278,058,559 0.20

2007-08 736,541,123 365,120,400 2.01

2008-09 1,276,752,597 515,551,197 2.47

INTERPRETATION:


Fixed assets turnover ratio is 0.05 in the year 2005 and it is increased to 0.07 in

the year 2006. In the year 2007 the ratio is 0.20 and it continued up to 2.01 and to 2.47 in

the years 2008&2009.

11. WORKING CAPITAL TURNOVER RATIO: -

A firm may also like to relate net current assets or net working capital to sales.

Working capital turnover indicates for one rupee of sales the company needs how many

net current assets. This ratio indicates whether or not working capital has been effectively

utilized market sales.

Formula: Sales Net Current Assets

Table no: 11 working capital turnover ratio

YEAR SALESNET CURRENT

ASSETSW.C.T. RATIO

2004-05 9,438,244 6,869,969 1.37

2005-06 18,160,031 11,367,220 1.59

2006-07 58,389,926 42,402,531 1.37

2007-08 736,541,123 113,512,871 6.48

2008-09 1,276,752,597 195,653,935 6.52

INTERPRETATION:


Working capital turnover ratio is 1.37 in the year 2005 and it is increased to 1.59

in the year 2006. In the year 2006 decreased to 1.37 and it increased to 6.48 &6.52 in the

next two years 2008&2009. The higher the working capital turnover the more favorable

for the company.


12. GROSS PROFIT MARGIN: -

Indicator of how much profit is earned on your products without consideration

of selling and administration costs.

Formula: Gross profit X 100 Sales

Gross Profit: Sales – Cost of goods sold

Table no: 12 gross profit margin

YEAR GROSS PROFIT SALES G.P. RATIO (%)

2004-05 7,464,375 70,021,938 10.6

2005-06 54,577,760 129,761,262 42.06

2006-07 85,572,165 217,610,149 39.32

2007-08 123,829,045 736,541,123 16.81

2008-09 197,533,409 1,276,752,957 15.47

INTERPRETATION:


From the above we can say that gross profit ratio is 10.6% in the year 2005 but it

increased to 42.06 %&39.32% in 2006& 2007 and it decreased to 16.81 % in the year

2008 and it is decreased to 15.47 % in the year 2009. The company is maintaining proper

control on trade activities.

13. NET PROFIT MARGIN: -

Shows how much profit comes from every dollar of sales.

Formula: Profit after tax X 100 Sales

Table no: 13 net profit margin

YEARPROFIT AFTER

TAXSALES

NET PROFIT

MARGIN (%)

2004-05 988,237 70,021,938 1.41

2005-06 38,958,439 129,761,262 30.02

2006-07 48,471,758 217,610,149 22.27

2007-08 74,513,415 736,541,123 10.11

2008-09 119,003,145 1,276,752,957 9.32

INTERPRETATION:


During the year 2005 the net profit margin 1.41% and increased to 30.02in the year

2006. In the next year, it gradually decreased to 22.27 in the year 2007and to 10.11 in

2008 and to 9.32 in the year 2009.

14. OPERATING EXPENSES RATIO: -

The operating expenses ratio explains the changes in the profit margin ratio. A

higher operating expenses ratio is unfavorable since it will leave a small amount of

operating income to meet interest, dividends.

Formula: Operating expenses X 100 Sales

Operating expenses =Admin expenses+ Selling expenses

Table no: 14 operating expenses ratio

YEAROPERATING

EXPENSESSALES O.E. RATIO

2004-05 4,434,725 70,021,938 6.3

2005-06 5,322,708 129,761,262 4.1

2006-07 12,851,161 217,610,149 5.9

2007-08 22,785,265 736,541,123 3.0

2008-09 38,725,408 1,276,752,957 3.0


INTERPRETATION:

Operating expenses ratio is 6.3%of sales in the year 2005 it decreased to 4.1% in

the year 2006 and increased in 2007 to 5.9% and it decreased in the next two years

2008&2009 to 3.0% subsequently.

15.RETURN ON EQUITY RATIO: -

Determines the rate of return on your investment in the business. As an owner or

shareholder this is one of the most important ratios as it shows the hard fact about the

business—are you making enough of a profit to compensate you for the risk of being in

business.

Formula: Profit after tax X 100 Net worth

Table no: 15 return on equity ratio

YEARPROFIT AFTER

TAXNET WORTH

R.O.E.RATIO

(%)

2004-05 988,237 88,666,655 1.11

2005-06 38,958,439 130,625,094 29.82

2006-07 48,471,758 179,093,162 27.06

2007-08 74,513,415 252,774,317 29.47

2008-09 119,003,145 371,777,461 32.00

Net

Pro

fit

Mar

gin


INTERPRETATION:

Return on equity is 1.11 in the year 2005 and again it increased to 29.82 in the

year 2006. Return on Equity of the company is at satisfactory level and then it decreased

to 27.06 in 2007 and again increased to 27.47 in 2008.And increased to 32.00% in the

year 2009.

FINDINGS

Except in the year 2005-06, the company is not maintaining current ratio as more

than 2 i.e., in the remaining years the company not reached the standard ratio. It

shows that the company is not strong in short term liabilities repayment.

The company is maintaining quick assets over the quick ratio. As the company

having quick assets above the quick ratio, so quick assets would meet quick

liabilities.

The company is failed in keeping sufficient cash & bank balances and marketable

securities.

By observing current assets ratio are better in the year 2005-06 only. In

the same way by observing the absolute and super quick ratio the company

cash performance is in down position.

The debt ratio’s are not much increase or decrease.

Net working capital ratio is 0.12 in the year 2007 and 2.30 in the year 2008. It is

increasing trend so the business working capital ratio is good position. .


Debt Equity ratio is increasing and decreasing by year by year .so the company

not depends on the debt funds fully.

Total liabilities ratio is increasing from 2004-05 to 2007-08

Inventory turnover ratio increased by year to year that is company production

sales are also increased.

The net profit ratio of the company increasing over the study period. Hence the

organization having the good control over the operating expenses.

SUGGESTIONS

The company g .p. ratio was decrease from 39.32 % to 16.81 % in the year 2006-

07 to 2007-08.respectively so it has to improve profit the g .p .ratio.

By considering the profit maximization in the company the earning per share,

investment and working capital also increases. Hence, the outsiders are interested

to invest there amount in the company

The company should maintain sufficient cash and bank balances; they should

invest the idle cash in marketable securities or short term investments in shares,

debentures, bonds and other securities.

The net profit of the company is in fluctuating in all the years. Hence the

organization should excuse its control on its expenses. Then only it can improve

its net profit.


CONCLUSIONS

Liquidity ratios, both current ratio and quick ratio are showing effectiveness in

liquidity as in all the years current ratio is not greater than the standard 2:1 and quick

ratio is also not greater than the standard 1:1 ratio. The firm is maintaining a low cash

balance and marketable securities which means they done cash payments. Debt equity

ratios are showing an average increase in the long term solvency of the firm. Fixed assets

turnover ratio is showing that the firm needs lesser investment in fixed assets to generate

sales.

The increasing trend of current assets turnover ratio indicates that the firm needs

more investment in current assets for generating sales. The gross profit ratio, net profit

ratio is showing the increasing trends. The profitability of the firm the increasing

Operating ratio of the company has observed decreasing trend, hence it may be good

control over the operating expenses. The company financial performance is very good

and also they will increase their business year by year by expanding their branches.


Particulars As at 31.03.2005 As at 31.03.2004Rupees Rupees Rupees Rupees

SOURCES OF FUNDSShareholders FundsShare Capital 3,803,500 3,803,500Reserves & Surplus 84,863,155 85,851,394

Loan FundsSecured Loans 100,267,121 62,911,726Unsecured Loans 14,658,539 14,541,702

Deferred Tax liability 17,762,931 17,762,931Total 221,355,246 184,871,253

APPLICATION OF FUNDSFixed AssetsGross Block 215,888,399 183,076,692Less: Depreciation 33,293,141 23,135,030Net Block 182,595,258 159,941,662Capital Work-in-Progress 32,004,232 21,879,262

Investments 13,625,725 13,625,725Current Assets, Loans & AdvancesInventories 5,980,521 6,161,205Sundry Debtors 3,631,690 782,840Cash & Bank Balances 4,377,358 3,879,120Loans, Advances & Deposits 6,279,054 7,342,992

BALANCE SHEET AS AT 31 MARCH 2005


Other Current Assets - 20,268,624 - 18,166,157

Less: Current Liabilities & Provisions

27,138,593

Liabilities 28,741,553Provisions

Net Current Assets 6,869,969 10,575,396

Misc. Expenditure -- --Total 221,355,246 184,871,253

PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 MARCH 2005

ParticularsYear Ended on 31.03.05 Rupees

Year Ended on 31.03.04 Rupees

INCOME

SalesJob work charges

9,438,24460,583,694

7,379,216 43,606,633

Other Income 959,836 858,426Increase / (Decrease) in stocks 712,471 787,738Total 71,694,245 52,629,013ExpenditureRaw Material Consumed 17,053,807 15,475,342Payments & Benefits to Employees 19,424,712 17,690,847Mfg., Selling Admn., & Other Expenses

11,199,3264,434,725

7,981,696

Taxes & Licenses 223,6314,202,237

284,972Financial charges 10,221,362 3,689,583Depreciation 10,158,111 6,638,011Total 72,715,674 55,962,688Profit Before Taxation (1,021,429) (3,333,675)

Add: Excess provision in earlier years

33,192 1,431

Less: provision for taxation -- -- Differed tax liability -- 5,084,625 Short provision in earlier 1,481,252 --Profit After Taxation (988,237) ( 9,898,121)


Profit / (loss) b/f from previous years 36,578,034 46,476,155

Profit available for appropriation35,589,797

36,578,034

Less: Transfer to General Reserve Net profit carried to balance sheet

35,589,797 36,578,034






Investments 13,625,725 13,625,725Current Assets, Loans & AdvancesInventories 8,527,973 5,980,521Sundry Debtors 12,481,508 3,631,690Cash & Bank Balances 2,039,036 4,377,358Loans, Advances & Deposits 12,723,698 6,279,054

35,772,215 - 20,268,624




24,404,996 27,138,593


--Total 264,504,763 221,355,246




INCOME

Sales 18,160,0319,438,244

60,583,694Job work charges 111,601,231 959,836

712,471Total 129,761,262 71,694,245ExpenditureRaw Material Consumed 12,180,558 17,053,807Payments & Benefits to Employees 23,188,980 19,424,712Mfg.,& Selling Admn., & Other Expenses

16,907,278 5,322,708

11,199,3264,434,725

Taxes & Licenses 4,051,678 223,631Financial charges 12,118,083 10,221,362Depreciation 12,166,722 10,158,111

Total

Profit from operationsAdd: prior period incomeOther income

85,936,00743,825,255

1,029,6961,433,219

72,715,674

Profit Before Taxation 46,288,170 (1,021,429)Add: Excess provision in earlier years

1,402,470 33,192

Less : provision for taxation 3,895,149 -- Deferred tax liability 4,570,882 -- Provision for fringe benefit tax Short provision of income tax of earlier years

257,0959,074

1,481,252


Profit After Taxation 38,958,439 (988,237)Profit brought forward Year from Previous

35,589,797 36,578,034

Profit available for appropriation 74,548,23635,589,797

Less: Transfer to General Reserve --

Balance carried to Balance Sheet 74,548,236 35,589,797








112,032,994 35,772,215


69,630,463 24,404,996


Total 337,735,853 264,504,763






INCOMESales 58,389,926 18,160,031Job work charges 159,220,223 111,601,231

Total 217,610,149 129,761,262ExpenditureRaw Material Consumed 42,114,496 12,180,558Payments & Benefits to Employees 31,496,788 23,188,980Mfg.,& Selling Admn., & Other Expenses

25,127,13113,254,632

16,907,278 5,322,708

Taxes & Licenses 10,774,420 4,051,678Financial charges 9,270,517 12,118,083Depreciation 15,451,421 12,166,722

Total

Profit from operationsAdd: prior period incomeOther income

147,489,40570,120,744

--1,724,074

85,936,00743,825,255

1,029,6961,433,219

Profit Before Taxation 71,844,818 46,288,170Add: Excess provision in earlier years

-- 1,402,470

Less : provision for taxation 17,468,268 3,895,149 Deferred tax liability 5,754,792 4,570,882 Provision for fringe benefit tax Short provision of income tax of earlier years

150,000

--

257,0959,074

Profit After Taxation 48,471,758 38,958,439Profit brought forward Year from Previous

74,548,236 35,589,797

Profit available for appropriation 123,019,994 74,548,236Less: Transfer to General Reserve

-- --

Balance carried to Balance Sheet 123,019,994 74,548,236

Particulars As at 31.03.2008 As at 31.03.2007



Rupees Rupees Rupees RupeesSOURCES OF FUNDSShareholders FundsShare Capital 17,008,750 6,803,500Reserves & Surplus 235,765,567 172,289,662



APPLICATION OF FUNDSFixed AssetsGross Block 444,006,523 338,682,137Less: Depreciation 79,231,536

364,774,98760,623,578

278,058,559

Add : capital work in progress 345,413 3,649,038Net block 365,120,400 281,707,597


291,374,165 112,032,994


177,861,294 69,630,463


Total 492,258,996 337,735,853


Particulars As at 31.03.2009 As at 31.03.2008


Rupees Rupees Rupees RupeesSOURCES OF FUNDSShareholders FundsShare Capital 34,017,500 17,008,750Reserves & Surplus 337,759,961 235,765,567



APPLICATION OF FUNDSFixed AssetsGross Block 620,014,868 444,006,523Less: Depreciation 104,463,670 79,231,536

Net Block 515551197 364,774,987Capital Work-in-Progress 9,093,519 345,413

Investments 13,625,725 13,625,725Current Assets, Loans & AdvancesInventories 124,642,747 96,791,638Sundry Debtors 181,063,357 98,157,048Cash & Bank Balances 6,115,764 10,549,904Loans, Advances & Deposits 143,920,257 85,875,576Total of Current Assets - 455,742,126 287,612,725

Less: Current Liabilities & ProvisionsLiabilities 155,436,682 116,889,033Provisions 104,651,509 57,210,756

260,088,191 174,099,789Net Current Assets 195,653,935 113,512,871

Misc. Expenditure --Total 733,924,377 492,258,996





INCOMESales 1,543,800,353 924,910,348Job work charges -- --Less : duties and taxes 267,047,396 188,369,225Total net sales 1,276,752,957 736,541,123ExpenditureIncrease /decrease I stocks

Raw Material Consumed

6,718,488846,203,098

27,935,159466,897,823

Payments & Benefits to Employees 86,800,828 56,891,277Mfg., Selling Admn., & Other Expenses

128,206,095 73,637,871

Taxes & Licenses 380494 931,601Financial charges 28,677,162 15,285,108Depreciation 25,356,282 18,607,961TotalProfit from operationsOther income

1,115,623,959161,128,998

20,771,436

631,320,039105,221,084

10,476,318Profit Before Taxation 181,900,434 115,697,403

Less : provision for tax Deferred tax Provision for fringe benefits Earlier years Tax provision

47,900,00014,361,295

470,000165,994

31,800,0008,983,988

400,000-------------

Profit After Taxation 119,003,145 74,513,415Profit b/f from previous year 197533409 123,019,994Profit available for appropriation 316,536,554 197,533,409

Less : proposed dividend, Transfer to General Reserve and Dividend tax

----

----

Net profit carried to Balance Sheet

316,536,554 197,533,409

BIBLIOGRAPHY


M.Y.khan & p. k. jain (2007) financial management: Text, problems& cases, 4/e,

Tata Mcgraw-Hill publications: New delhi.

2.I.M. pandey (2004), financial management, 9/e, Vikas publications, New Delhi

Prasanna Chandra (2003), financial management, 5/e, Tata Mcgraw-Hill

publication: New Delhi.

Balla, V.K. (2006), Financial management and policy: Text and cases, 5/e,

Anmol publications: New Delhi.

http://www.amararaja.co.in.

Ratio Analysis of Amararaja Batteries

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