Ratio Anaysis Hemalatha Projectt 2007-08

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INTRODUCTION

Financial performance analysis is essential in the complex environment to

spot out the weakness of the firm. 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 statements are prepared primarily for decision making. They

play a dominant role in setting the framework of managerial decisions. There

are number of tools developed up to recent days to evaluate the financial

statement. Even though there are number of tools for financial analyst ratio is

widely used tool.

Ratio expresses the relationship between two financial variables, evaluate

the financial statements.

Ratio analysis is a technique of analysis and interpretation of financial

statements. It is the process of establishing and interpreting various ratios for

helping in making certain decisions. The Ratio Analysis is one of the most

powerful tools of financial analysis. It is used as a device to analyze and

interprets the financial health of the enterprise.

However Ratio analysis is not an ends in itself. It is only a means of better

understanding of financial strengths of a firm. Ratio analysis helps in ensuring

effective control of the business. They also facilitate establishing of a standard

costing system and budgetary control.

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OBJECTIVES OF THE STUDY:

To analyze the financial statements of APNPDCLtd.

To use ratio as a tool for financial performance analysis.

To analyze liquidity, leverage, activity and profitability performance of

APNPDCL.

To know overall performance of APNPDCL.

To evaluate the efficiency utilization of assets of APNPDCL.

SCOPE OF THE STUDY:

The study is related to financial performance of APNPDCL,

Hanamkonda. The performance analyze for period of 5yrs.i.e 2005-06 to 2009-10

for effective research are calculated further methodology of the project deals with

related work.

METHODOLOGY OF THE STUDY:

With a view to achieve the objectives, data and information for the study

are collected from both primary and secondary sources. The stress is however

more on the later.

The primary data was collected from the discussions with the concerned

officers and staff of the organization.

The secondary data was gathered from published and unpublished

records and annual reports of the company, further textbooks of financial

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management and also from web sites of the company and from other sources of

secondary data.

Data can be calculated through primary & secondary sources. For our

analysis purposes, I have collected the data from the financial statements as P&L

account and balance sheet of APNPDCLtd, the data is secondary in nature. I

have also collected information through other published sources such as

Journals, magazines and books of Financial Management.

LIMITATIONS OF THE STUDY:

Ratio analysis is an important tool to understand a firm's performances.

But there are certain limitations that have been encountered by the study. The

limitations of the study are as follows:

• This study has been limited to Five years (From 2005-06 to 2009-

10).

• All the ratios could not be covered under the study because of

inadequate information.

• Price level changes are not taken into account in the financial

statements over the years.

•The overall judgment about the firm's financial position cannot be

viewed only from the ratio analysis besides that, the other

techniques like cash analysis, funds flow analysis and trend

analysis would also reflect financial position.

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• The major limitation of the project under study was time. Since it

was to be completed within a short period of time, which is not

sufficient to undertake a comprehensive study.

• Since the financial matters are sensitive in nature the same could

not be acquired easily.

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ORIGIN & HISTORY OF COMPANY:

APSEB (Andhra Pradesh State Electricity Board) was unbundled into two

independent corporation viz. Transmission Corporation of Andhra Pradesh

Limited (APTRANSCO) and Generation Corporation of Andhra Pradesh

Limited (APGENCO) with enactment of AP Electrical Reform act 1998. The

distribution functions were kept under APTRANSCO in addition to transmission

system.

Recognizing the critical importance the reforms in the distribution sector,

the Govt. of A.P. has further unbundled the distribution business of

Transmission Corporation of Andhra Pradesh Limited (APTRANSCO) into four(4)

Distribution Companies (DISCOMs) vide G.O. Ms NO. 31 Energy (power.III)

Department Dt. 27-03-2000 to function as financially and commercially viable

entities. Northern Power Distribution Company of Andhra Pradesh Limited

(APNPDCL). One of the DISCOM was imported under the company’s act 1956

as a public limited company.

The register of companies, Hyderabad issued certificates of incorporation

on 31-3-2000 and the certificate of commencement of business on 31-3-2000.

Northern Power Distribution Company Of Andhra Pradesh Limited (APNPDCL),

has taken up the Distribution Business Of Transmission Corporation Of Andhra

Pradesh Limited (APTRASCO) join the District of Warangal, khammam,

karimnagar, Nizamabad, and Adilabad. The effective date of functioning of

APNPDCL was 1-4-2000. Company was not a license under Andhra Pradesh.

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Electricity Reforms Act 1998 for the year 2000-2001.The Andhra Pradesh

Electricity Regulatory Commission (APERC) pending consideration of grant of

license of APNPDCL, allowed APTRANSCO to assign its function under the

distribution and retail supply license to the APNPDCL in the specified area of

supply.

The opening balance were adopted in the books of APNPDCL, as notified

by the Government of AP vide G.O. Ms No.35, Energy (Power-III) Department

Dt: 31-3-2000, as amended in G.C.M s No. 109, Energy (Power-III), Dated 29-9-

2001.

Four distribution companies with Head Quarters at Warangal (NPDCL),

Hyderabad (CPDCL), Vishakhapatnam (EPDCL) and Tirupathi (SPDCL) with

effort from April 1, 2000, to look after the distribution network through DISCOMs.

APNPDCL was formed on l-4-2000; it covers five North Telangana Districts i.e.

Warangal, Karimnagar, Khammam, Nizamabad, and Adilabad.

About the company:

Northern Power Distribution Company of A.P.Ltd., (NPDCL) was

incorporated under the Companies Act, 1956 as a Public Limited Company

on 30-03-2000 with head quarters at Warangal. The Company has obtained

license for carrying out distribution and retail supply of energy from APERC

under A.P. Electricity Reforms Act 1998 on 29-12-2000. The Company caters the

requirements of Warangal, Karimnagar, Khammam, Nizamabad and Adilabad

Districts.

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Distribution Net Work:

As on 31.03.2007, NPDCL has a robust distribution network to cater to the

Customers spread across five districts. NPDCL caters the requirement of 34.68

lacks consumers spread in the five districts of Andhra Pradesh i.e. Warangal,

Karimnagar, Khammam, Nizamabad and Adilabad. The peak demand on a day

during the year (2006-07) is 1747 MW and peak consumption on a day during

the year (2006-07) is 31 MU.

S. No. Particulars Unit

1 33/11 KV Sub-Stations 656 no’s2 Length of Lines 183021 KM

33 KV Lines 7925 km

11 KV Lines 51,540 km

LT Lines 1,23,555 km

3 Distribution transformers 1,16,884 no’s

4 Electrification 24280

Towns 32

Villages 5612

Hamlets & Tribal habitations 5573

Dalitwadas 8631

Weaker section colonies 4432

Social Cause:

Company is giving high importance to social development of the area.

Company is working towards electrification of all villages/ habitation, providing

access of electricity to all households and strengthening of rural electricity

infrastructure.

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Promoters of NPDCL:

Company is having an authorized share capital of Rs.275.00 corers and paid

up share capital of Rs.274.76 corers. The Government of Andhra Pradesh along

with its nominees owns Rs.274.76 corers of equity share capital representing

100% of the total paid-up capital of the Company.

Management:

The Company is managed by Board of Directors of the Company (collectively

refereed as Board). The Board consist of Chairman & Managing Director,

Director (Finance), Director (Operation), Director (Projects), Director (HRD),

Director (P&MM & Q.C) and Two (2) Non-whole time Directors. The Government

of Andhra Pradesh appoints Directors from time to time. The Board lay down the

policy decisions for system development, tariff fixation, proper utilization of man

and material, distribution and sale of energy, fixing of budgets, revenue targets,

consumer service, Employees service and welfare matters for efficient, effective,

integrated, economical and commercial functioning of the Company.

Company is giving high importance to social development of the area.

Company is working towards electrification of all villages/ habitation, providing

access of electricity to all households and strengthening of rural electricity

infrastructure.

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Organization Structure:

Corporate functions are discharged at corporate office at Warangal.

Corporate office has various departments for carrying out different functions of

the Company. The Company has Two (2) zonal offices one functioning with

headquarters at Warangal and other at Nizamabad, Warangal Circle, Karimnagar

Circle, and Khammam Circle come under Warangal Zone. Adilabad Circle and

Nizamabad Circle come under Nizamabad Zone. The Company has 5 Circles

offices each at Warangal, Karimnagar, Khammam, Adilabad, and Nizamabad.

Company has Twenty (21) Operation Divisions at various places within its

jurisdiction in addition to Ten (10) no’s divisions for carrying out

MRT/Transformer activities, Four (4) no’s Divisions for Construction Activities,

Five (5) no’s Divisions for DPE, 2 Divisions for Assessment activities

Contribution to Agricultural Sector:

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S. No. Particulars Unit1 Zones 2 no’s2 Circles 5 no’s3 Operation Divisions 21 no’s4 Transformers Divisions 10 no’s5 Construction Divisions 4 no’s6 DPE Divisions 5 no’s7 Assessment Division 2 no’s8 Operation Sub-Divisions 66 no’s

9 Operation Section offices 284 no’s

10 ERO/SUB-ERO 50 no’s



Company is playing a key role in support to the Agricultural Sector.

About 37.00 % of the total energy is consumed by the Agricultural Sector. The

details are given as below:

• The Company is supplying free power to agricultural sector (765856 free

services and 17069 non-free services).

• Company is giving high importance for improving infrastructure for quality

supply to agricultural sector. There are 1808 no’s feeders dedicated for

supply to agriculture out of the total 2361 no’s feeders. For improving

quality of supply to agriculture sector, the following measures are taken.

• New sub-stations have been set up in rural / predominantly agricultural

areas to augment voltage and reduce low voltage problems.

High Voltage Distribution system (HVDS): From April, 2000 onwards an

amount of Rs. 11106.00 lacks has been spent so far for setting up HVDS. In this

system 11KV supply is extended near to the Agricultural fields and then voltage

is stepped down to 440 Volts. This ensures less Voltage drop, reduction in

technical losses and improves quality of supply.

Distribution Transformers are now being needed primarily to promote quality

supply to Agriculture. An amount of Rs. 1274.11 lacks being spent annually on

Distribution Transformers repairs to support power to Agriculture Sector.

Fixing up of Capacitors to Agricultural Pump-sets: Company has given

priority for fixing capacitors to Agricultural pump sets which will improve quality of

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supply. 6, 49,850 no’s Capacitors were fixed to agricultural pump sets by

October, 2006.

Thus all the above measures indicates that the NPDCL’s attention to the

development of Agricultural Sector. These measures have not only contributed

for the improvement in food grain production from this area but also contributed

for improving standards of living of the farmers of this area.

Vision:

“NPDCL shall become one of the best Power Distribution Utilities in the

Country, with high customer focus, financial strength and operational efficiency”.

Mission:

“Provide safe, reliable, uninterrupted and quality power to all its customers

at a competitive cost and a reasonable return to all its stakeholders duly following

sound commercial practices and business ethics”.

Focus on Customer delight:

We have provided a host of features to improve our service to customers. A

notable few are:

• Consumer Service Center (C.S.C) was established to receive new

service requests, complaints, and to attend fuss-off calls etc. And to

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improve consumer services. 56 no’s C.S.C. s were established across the

company by end of March, 2006.

• Consumer Service Centre at Hanamkonda was awarded ISO

Certification.

• Spot billing to issue error –free bills at customer site.

• Easy payment facilities through Computerized collection Centers,

e-save centers, EROs etc.

•

Monthly vidyuth Adulate for resolving issues at rural areas, Mandal

headquarters and all municipalities.

• Citizen Charter being displayed at all offices specifying standards of

performance.

RESPONSIBILITY OF THE COMPANY:

It is the responsibility of the APNPDCL to keep accounting records,

prepare on a consistent basis the accounting statements. And in respect of the

first six months of each financial year and interim profit and loss accounts, cash

flow statement and balance sheet.

An auditor report for each financial year stating whether in their opinion

these statement have been properly prepaid in accordance with accounts and

give true and fair view revenues, costs, assets, liabilities reserves and provisions

of (or) responsibility attributable to such business to which the statements relate

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and also a copy of each interim profit and loss account not later three months

after the end of the period to which it relates.

OBJECTIVES:

In pursuance of the above vision and mission, the corporate objectives of

APNPDCL are:

• To modernize and strengthen the distribution network so as to provide

reliable and uninterrupted and quality power.

• To develop a customer and redresses their organization which quickly

responds to the needs of customer and redresses their grievances in the

shortest possible time.

• To achieve financial viability and strength through prudent financial

management practices.

• To achieve high operational efficiency and safety.

• To promote a performance driven culture in organization.

• To create a culture of accountability and committeeman among the

employees to achieve excellence.

• To enhance the skills of employees and build up team spirit through tailor

made continuous training program.

• To expand the distribution system and business optimally and diversify

into other related areas for business growth.

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• To adopt the best project evaluation and management techniques to get

optima returns on investments; and

• To be a socially responsible and environment friendly power business

organization with the best corporation governance practices

Governing acts and rules:

The Company NPDCL is mainly governed by the following Acts and rules:

• The Electricity Act, 2003.

• The Companies Act, 1956.

• The Andhra Pradesh Electricity Reforms Act, 1998.

• The Indian Electricity Act, 1910 and the rules made there under.

• The Electricity (Supply) Act, 1948 and the rules made there under.

• The erstwhile APSEB and APTRANSCO rules and regulations to the

extent they are adopted.

FINANCIAL PERFORMANCE ANALYSIS - THEORETICAL FRAME WORK

There are various methods or techniques used in analyzing financial

statements. Such as:

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• Helps in decision making:

Financial statements are prepared primarily for decision making.

But the information provided in financial statements is not an in itself and

no meaningful conclusion can be drawn from these statements alone.

• Helps in financial forecasting and planning:

Ratio analysis is so much helpful in financial forecasting and

planning. Planning is looking ahead and the ratios calculated for a number

of years work and a guide for the future.

• Helps in communicating:

The financial strength and weakness of a firm are communicated in

an easier and understandable manner by the use of ratios.

• Helps in co-ordination:

Ratios even help in co-ordination, which is of utmost important in

effective business management. Better communication of efficiency and a

weakness of an enterprise result in better co-ordination in the enterprise.

• Helps in control:

Ratio analysis also helps in making effective control of the

business. Standard ratios are based upon the performance of financial

statements and variances or deviation. If anyone can found by comparing

with the standards as to take a corrective action at the right time.

Importance of ratio analysis:

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• Ratio analysis helps in simplifying the financial statements for easy

understanding.

• It helps in drawing out meaningful conclusion from the information

provided in the financial statements, which is useful for decision making

and framing sound policies for business in future.

• It helps in assessing the financial strength and weakness of the firm

and thus enhances the value of the financial statements.

• Comparative study of the ratio between the competing firms helps

to know the efficiency of the firm.

• It helps the investor to assess the financial position of the concern

in which he is going to invest.

• Ratio analysis helps the employees interested in wage increase

and fringe benefits that are related to the volume of profits earned by the

concern.

Advantages of ratio analysis:

• Ratio analysis simplifies the understanding of financial statements.

• Ratio bring out the inter relationship among various financial figures and

bring to light their financial significance,

• Ratio analysis is a device to analyze and interpret the financial health of

the enterprise.

• Ratios contribute significantly towards effective planning and forecasting.

A study of a trend in the past works as a helpful guide for the future.

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• Ratio facilitate inter firm and intra firm comparison. They bring out the

strengths, weakness and efficiency of firms and their departments.

• Ratio serves as effective control tools. They also facilitate establishment of

a standard costing system and budgetary control.

• Ratios cater to the particular information need of a particular person,

depending on his interest in the business for which ratios are to be

calculated.

• A creditor may be interested in liquidity ratios. While an investor may want

to study profitability ratios.

• It helps in the identification, tracing and fixing of the responsibilities of

managerial personnel at different levels.

Interpretation of the ratio:

The interpretation of ratio is an important factor. Though calculation of

ratio is also an important but it is a critical task where as interpretation needs

skill, intelligence and foresightedness. The impact of, such as price level

changes, change in accounting, window dressing etc. should also be kept in

mind while attempting to interpret ratios. The interpretation of the ratios can be

made in the following ways:

1. Single absolute ratio: Generally speaking one cannot draw any meaningful

conclusion when a single ratio is considered in isolation. But single ratio may be

studied in relation to certain rules of thumb which are based upon proven

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conventions as for example 2:1 is considered to be a good ratio for current

assets to current liabilities.

2. Group of ratio: Ratios may be interpreted by calculating a group of related

ratios, a single ratio supported by other related additional ratios becomes more

understandable and meaningful.

3. Historical comparison: One of the easiest and most popular ways of

evaluating the performance of the firm is to compare its present ratios with the

past ratios called comparison overtime.

4. Projected ratio: Ratios can also be calculated for future standards based

upon the projected or preformed financial statements. These future ratios may be

taken as standard for comparison and the ratios calculated on actual financial

statements can be compared with the standard ratios to find out variance, if any

such variances help in interpreting and taking corrective action for improvement

in future.

5. Inter- firm comparison: Ratios of one firm can also be compared with the

ratios of some other selected firms in the same industry at the same point of

time. This kind of comparison helps in evaluating relative financial position and

performance of the firm.

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Limitations of ratio analysis:

The ratio analysis is one of the most powerful tools for financial

management. Though ratios are simple to calculate and easy to understand, they

suffer from some serious limitations.

1. Limited use of a single ratio:

A single ratio, usually, does not convey much of a sense. To make a

better interpretation a number of ratios have to be calculated which is

likely to confuse the analysts that help him in making any meaning

conclusion.

2. Lack of adequate standards:

There are no well accepted standards or rules of thumb for all ratios

which can be accepted as norms. It renders interpretation of the ratio

difficult.

3. Inherent limitation of accounting:

Like financial statements ratios also suffer from the inherent

weakness of accounting records such as their historical nature. Ratios of

the past are not necessarily true indicators of the future.

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4. Change of accounting procedure:

Change in accounting procedure by a firm often makes ratio

analysis misleading, e.g. a change in the valuation of methods of

inventories, from FIFO to LIFO increases the costs of sales and reduces

considerably the value of closing stocks which makes stock turnover ratio

to be lucrative and an unfavorable gross profit ratio.

5. Personal bias:

Ratio is only means of financial analysis and not an end in itself.

Ratios have to be interpreted and different people may interpret the same

ratio in different ways.

6. Uncomparable:

Not only industries differ in their nature but also the firms of the

similar business widely differ in their size and accounting procedures etc.,

It makes comparison of ratios difficult and misleading. More over

comparisons are made difficult due to differences in definitions of various

financial terms used in the ratio analysis.

7.

Price level changes:

While making ratios analysis, no consideration is made to the

changes in price levels and this makes the interpretation of ratios invalid.

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Guidelines or precautions for use of ratios:

The calculations of ratios may not be difficult task but their use is not easy.

The information on which these are based, the constraints of financial

statements, objective for using them, the caliber of the analyst, etc., are

important factors which influence the use of ratios. The following

guidelines or factors may be kept in mind while interpreting various ratios:

1) Accuracy of financial statements

2) Objectives or purpose of analysis

3) Selection of ratios

4) Use of standards

5) Caliber of the analyst

6) Ratios provide only a base.

• Comparison of a firm with its own performance in the past.

• Comparison of a one firm with another firm in the industry.

• Comparison of one firm with the industry as a whole.

•

Comparison of an achieved performance with pre-determined standards.

• Comparison of one department of a concern with another department.

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CLASSIFICATION OF RATIOS:

The use of ratio analysis is not confined to financial manage only. There

are different parties interested in the ratio analysis for knowing the financial

position of a firm for different purposes. In view of various users of ratios, there

are many types of ratios which can be calculated from the information given in

the financial statements. The particular purpose of the user determines the

particular ratios that might be used for financial analysis.

I.LIQUIDITY RATIOS:

These are the ratios which measure the short term solvency / financial

position of a firm. These ratios are calculated to comment upon the short term

paying capacity of a concern or the firm's ability to meet its current obligations.

Liquidity ratios provide test to resources the ability of corporation to cover its

short term obligations out of its short-term resources. Interpretation of liquidity

ratios provides considerable insight into the present cash solvency of the

corporation and its ability to remain solvent in times of adversities.The various

liquidity ratios are:

1) Current ratio

2) Quick / acid test / liquid ratio

3) Absolute liquid ratio

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1) CURRENT RATIO:

Current ratio may be defined as the relationship between current

assets & current liabilities, this ratio also known as working capital ratio ,is a

measure of general liquidity & is most widely used to make the analysis of a short

term financial position/ liquidity of a firm.

Current assetsCurrent ratio = -------------------------------------

Current liabilities

The two basic components of this ratio are: Current assets and current

liabilities. Current assets include cash and those assets which can be easily

convertable into cash within a short period of time generally one year .prepaid

expenses should also be included in current assets because they represent

payments made in advance which will not have to be paid in near future. Current

liabilities are those liabilities which are to be re-paid within a period of one year.

Components of current ratio:

Current Assets Current Liabilities

1. Cash in hand 1. Outstanding expenses

2. Cash at bank 2. Bills payable

3. Sundry Debtors 3 .sundry creditors

4. Short term investments 4. Short term advances

5. Bills receivable 5. Bank over draft

6. Inventory (stock) 6. Dividend payable

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2) QUICK RATIO:

Quick ratio is also known as acid test/liquid ratio, is more vigorous of

liquidity than the current ratio. The term liquidity refers to the ability of a firm to

pay its short term obligations as and when they become due.

The two determinants of current ratio as a measure of liquidity are current

assets &current liabilities.

Quick/Liquid assetsQuick/ Liquid/Acid test ratio = ----------------------------------Quick/current liabilities

Sometimes, bank overdraft is not included in current liabilities while

calculating quick or acid test ratio, on the argument that bank overdraft is

generally a payment way of financing and is not subject to be called on demand

In such cases the quick ratio is found out by dividing the total quick assets by

quick liabilities [i.e. Current liabilities-Bank overdraft]

Components of quick/liquid ratio:

Quick/liquid assets Current liabilities

1. Cash in hand 1. O/s accrued expenses

2. Cash in bank 2. Bills payable

3. Bills receivable 3. Sundry creditors

4. Sundry debtor's 4. Short-term advance (payable Short)

5. Marketable securities 5. Income tax payable

6. Temporary investments 6. Dividends payable

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Quick assets can also be calculated as:

Current assets-(Inventories+prepaidexpenses): Inventories here will mean all

types of stock i.e. finished, work-in-progress, raw materials.

3) ABSOLUTE LIQUID RATIO:

Although receivables, distributors and bills receivables are generally more

liquid than inventories, yet there may be doubts regarding their realization into

cash immediately/in time.

It is the ratio of Absolute liquid assets to current liabilities.

Absolute liquid assetsAbsolute liquid ratio = ------------------------------------------

Current liabilities

Absolute liquid assets include cash in hand & at bank & marketable

securities/ temporary investments. The acceptable norm form for this ratio is 0.5

or 1:2 i.e. real worth absolute liquid assets are considered adequate to pay Rs. 2

worth current liabilities in time as all the creditors are not expected to demand

cash at the same time and then cash may also be realized from debtors and

inventories.

.

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II. LEVERAGE OR LONG TERM SOLVENCY RATIOS:

The term "solvency" refers to the ability of a concern to meet its long term

obligations. The long term in debtedness of a firm includes debenture holders.

Financial institutions are providing medium and long term loans and others

creditors selling goods on installment basis. The long term creditors of a firm are

primarily interested in knowing the firm's ability to pay regularly interest on long

term borrows repayment of the principal amount at the maturity & the security of

their loans.

The leverage ratios indicate the relative interests of owners and creditors

in a business.

The following ratios serve the purpose of determining the solvency of the

concern.

Analysis of long term financial position/test of solvency:

1) Debt - equity ratio

2) Proprietary ratio

3) Fixed assets ratio

4) Interest coverage ratio

5) Funded - debt to total capitalization ratio

6) Capital gearing ratio

7) Dividend coverage ratio

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1) DEBT-EQUITY RATIO:

Debt-equity ratio is also known as external-internal equity ratio. It is

calculated to measure the relative claims of outsiders & owners (i.e., share

holders) against the firm's assets. This ratio indicates the relationship between

the external equities/the outsiders’ funds and the internal equities / the share

holder's funds.

Outsiders' fundsDebt-equity ratio = -----------------------------------------

Shareholders’ funds

The two basic components of the ratio are outsiders funds i.e., external

equities & shareholders’ funds i.e., internal equities.

The share holder's funds consist of equity share capital, preference share

capital, capital reserves. Revenue reserves & reserves representing accumulated

profits surpluses like reserves for contingencies, sinking funds etc.

The debt-equity ratio is calculated to measure the extent to which debt

financing has been used in a business the ratio indicates the proportionate

claims of owners & the outsiders against the firm's assets.

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2) PROPRIETARY RATIO:

It expresses the relationship between Net worth and Total assets. A high

Proprietary ratio is indicative of strong financial position of business. The higher

the ratio, the better is.

Net worthProprietary ratio = ----------------------------------

Total assets

3) FIXED ASSETS RATIO:

This ratio indicates the mode of financing the fixed assets. A financially

well-managed company will have its fixed assets financed by long term funds.

Therefore, the fixed assets ratio should never be more than 1. A ratio of 0.67 is

considered ideal. It is calculated as:

Fixed assetsFixed assets ratio = ----------------------------------Capital employed

.

4) INTEREST COVERAGE RATIO:

Net income to debt, Debt service ratio /simply debt service ratio is used

to test the debt servicing capacity of a firm. This ratio is also known as debt

coverage ratio /fixed charges cover /times interest earned. This ratio is calculated

by dividing the net profit before interest & taxes by fixed interest charges.

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PBITDebt-service Ratio/Interest coverage = ----------------------------------------------

Fixed interest charges

Where, PBIT = profit before interest and taxes.

5) FUNDED - DEBT TO TOTAL CAPITALIZATION RATIO:

This ratio establishes a link between the long term funds raised from

outsiders & total long term funds available in the business. The two words used

in this ratio are

a. Funded debt

b. Total capitalization

Funded debt = debentures + mortgage loans + bonds + other long term loans

Total capitalization = equity share capital + preference share capital

+ Reserves + surplus + other undistributed reserves +

Debentures + Mortgage loans + bonds + other long term

Loans.

Funded debt

Funded debt to total capitalization = ------------------------------------- x 100Total capitalization

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6) CAPITAL GEARING RATIO: The term capital gearing is used to describe the

relationship between equity share capital including reserves & surpluses to

preferences capital &other fixed interest- bearing loans.

It preference share capital & other fixed interest bearing loans exceed the

equity share capital including reserves the firm is said to be highly geared. The

firm is said to be in low year. If preference shares capital & other fixed interest

-bearing loans are less than equity capital & reserves.

Equity share capital + Reserves &surplusCapital Gearing Ratio = --------------------------------------------------------------------------Preference capital + long term debt bearing fixed

interest.

III. ACTIVITY RATIOS OR TURNOVER RATIOS:

Activity ratios are calculated to measure the efficiency with which the

resources of a firm have employed. These ratios are also called turnover ratios

because they indicate the speed with which assets are being turned into sales,

e.g. debtor’s turnover ratio. They are based on the relationship between level of

activity and levels of various assets. The various turnover ratios are:

1) Inventory Turnover Ratio

2) Debtors Turnover Ratio

3) Creditors Turnover Ratio

4) Fixed Assets Turnover Ratio

5) Working Capital Turnover Ratio

6) Total Assets Turnover Ratio

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1) INVENTORY TURNOVER (OR) STOCK TURNOVER RATIO:

Every firm has to maintain a certain level of inventory of finished goods

so as to able to meet the requirements of the business. But the level of inventory

should neither be too high nor two low. It is harmful to hold more inventories for

the following reasons:

• It unnecessarily blocks capital which can otherwise be profitably used

somewhere else.

•Over stocking will require more godown space, so more rent will be paid.

There are chances of obsolescence of stock consumers will prefer goods

of latest design etc.

• Slow disposal of stocks will mean slow recovery of cash also which will

adversely affect liquidity.

• There are chances of deterioration in quality if the stocks are held for more

periods.

Cost of goods soldInventory turnover ratio = ----------------------------------------

Average inventory at cost

32



2) DEBTORS TURNOVER RATIO:

Debtor’s turnover ratio indicates the velocity of debt collection of firm.

In simple words, it indicates the number of times average debtors (receivables)

are turned over during a year thus;

DebtorsDebtors turnover ratio/velocity = ------------------------------------ x 365

Sales

Trade Debtors = sundry debtors +bills receivables & accounts receivable.

The debtor’s turnover ratio or the average collection period should be

compared with the period of credit allowed to judge the efficiency of the collection

department. As a rule of thumb, the average collection period should not exceed

1 ½ times the credit period.

The objective of computing this ratio is to determine the efficiency with

which the trade debtors are managed. This ratio indicates how rapidly debts are

collected. In general high ratio indicates the shorter collection period which

implies prompt payments by debtors and a low ratio indicates a longer collection

period which implies delayed payments by debtors.

33



5) WORKING CAPITAL TURNOVER RATIO:

Working capital of a concern is directly related to sales. The current

assets like debtors, bills receivable, cash, stock etc.change with the increase or

decrease in sales.

Working capital turnover ratio indicates the velocity the utilization of net working

capital. The difference between current assets and current liabilities excluding

short-term bank borrowings called Net working capital. Working capital is

sometimes used as a measure of firm’s liquidity. It is considered that, between

two firms, the having the larger working capital has the greater ability to meet its

current obligations. Working capital = current assets-current liabilities

Net salesWorking capital turnover ratio = --------------------------------

Working capital

6) TOTAL ASSETS TURNOVER RATIO:

Total assets turnover ratio is the ratio of Net sales to total assets. The

higher the ratio, the better it is.

Net salesTotal assets turnover ratio = --------------------------------

Total assets

35



IV. PROFITABILITY RATIOS:

The primary objective of a business undertaking is to earn profits. Profit

earning is considered essential for the survival of the business.

In the words of Lord Keynes, profit is the engine that drives the business

enterprise. A business needs profits not only for its existence but also for

expansion & diversification. The various profitability ratios are discussed below:

A) General profitability ratios: The following are the general profitability ratios.

They are as follows:

1) Gross Profit Ratio

2) Operating Ratio

3) Net profit Ratio

4) Operating profit Ratio

5) Expenses ratio

B) Overall profitability ratios: The various overall profitability ratios are:

1) Return on shareholders’ investment/Net worth ratio

2) Return on equity capital

3) Earnings per share (EPS)

4) Return on capital employed

5) Price earning (earning yield) ratio

6) Dividend yield ratio

7) Dividend pays out ratio

8) Return on Investments ratio

36



A) GENERAL PROFITABILITY RATIOS:

1) GROSS PROFIT RATIO:

Gross profit ratio measures the relationship of gross profit to net sales &

is usually represented as a percentage. Thus it is calculated by dividing the gross

profit by sales:

Gross profitGross profit Ratio = ----------------------------- X 100

Net sales

Gross profit = Net sales - cost of goods sold

2) OPERATING RATIO:

Operating ratio establishes the relationship between cost of goods sold

& operating expenses on the one hand & the sales on the other. In other words, it

measures the cost of operations per rupee of sales, the ratio is calculated by

dividing operating costs with the net sales and it's generally represented as a

percentage.

Operating costOperating ratio = ---------------------------------X 100

Net sales

Cost of goods sold + operating expensesOperating cost = ------------------------------------------------------------------ X 100

Net sales

37



3) NET PROFIT RATIO:

Net profit ratio establishes a relation between net profit (after tax) &

sales, and indicates the efficiency of the management in manufacturing, selling,

administrative & other activities of the firm. This ratio is the overall measure of

firm's profitability & is calculated as:

Net profit after taxNet profit ratio =------------------------------------- X 100

Net sales

4) EXPENSES RATIO:

Expenses ratio indicate the relationship of expenses to net sales. The

operating ratio reveals the average total variations in expenses. But some of the

expenses may be increasing while some may be falling.

Hence, expense ratio is calculated by dividing each item of expenses/

groups of with the net sales to analyze the cause of variation of the operating

ratio.

Particular expensesExpenses ratio = ------------------------------------ X 100

Net sales

38



B) OVERALL PROFITABILITY RATIOS:

1) RETURN ON SHAREHOLDERS INVESTMENT / NET WORTH RATIO:

Return on shareholders’ investment, popularly known as return on

shareholder/ proprietors funds is the relationship between net profits (after

interest &tax) & the proprietor’s funds.

Net profit after interest and taxReturn on shareholders’ investment = -------------------------------------------------

Shareholders’ funds

Shareholder fund = equity share capital + preference share capital + reserves

&surplus - (accumulated losses, if any)

Net profit = net profits after payment of interest & taxes.

2) RETURN ON EQUITY CAPITAL RATIO:

In real sense, ordinary shareholders are the real owners of the company.

They assume the highest risk in the company. Preference shareholders have a

preference over ordinary shareholders in the payment of dividend as well as

capital. Return on equity, which is the relationship between profits of a company

its equity capital, can be calculated as:

Net profit after tax-preference dividendReturn on equity capital = ---------------------------------------------------------Equity share capital (paid-up)

39



3) EARNINGS PER SHARE (EPS):

Earnings per share are a small variation on equity capital & are calculated

by dividing the net profit after taxes and preference dividend by the total no of

equity shares.

Net profit after tax-preference dividendEPS = -----------------------------------------------------------------

No. of equity shares

4) RETURN ON CAPITAL EMPLOYED RATIO:

Return on capital employed established the relationship between profits

& the capital employed. It is the primary ratio and is most widely used to measure

the overall profitability and efficiency of a business. The term capital employed

refers to the total of investments made in a business & can be defined in a no. of

ways.

The most widely used definitions of this term are:

a) Gross capital employed

b) Net capital employed

c) Proprietors net capital employed.

Net profit before interest and tax

Return on capital employed ratio = ------------------------------------------------- x100Capital employed

40



5) PRICE EARNINGS RATIO (OR) P/E RATIO (EARNINGS YIELD RATIO):

Price earning is the ratio between market price per equity share &

earnings per share. The ratio is calculated to make an estimated of appreciation

in the value of a share of a company and is widely used by investors to divide

whether / not to buy shares in particular company. The ratio is calculated as

Market price per equity sharePrice earnings ratio = ------------------------------------------------------

Earnings per share

6) DIVIDEND YIELD RATIO:

This ratio also shows a relationship between dividend per share & market

value of shares. It expresses the return on investment by purchasing a share in

the stock market, without accounting for any capital appreciation. It can be

calculated as follows.

Dividend per shareDividend Yield ratio = -------------------------------------------x 100

Market price

41



TABLE-1 :CURRENT RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

INTERST ACCRUER ON

INVESTMENTS 1.09 0.50 - - -INVENTORIES(STOCK) 41.49 52.40 62.50 68.76 53.16

SUNDRY DEBTORS 644.26 378.94 561.59 922.73 439.88

CASH & OTHER BALANCES 222.25 326.81 152.98 71.21 49.93

OTHER RECIEVABLES 2143.54 1266.92 315.07 352.07 288.80

LOANS & ADVANCES 19.62 29.58 26.22 11.26 12.02

TOTAL CURRENT ASSETS 3072.25 2055.15 1118.36 1426.03 831.71

CURRENT LIABILITIES 1307.30 1348.93 1017.18 1463.13 831.71

PROVISIONS 120.69 102.56 - - -

TOTAL CURRENT LIABILITIES 1427.99 1451.49 1017.18 1463.13 831.71

CURRENT RATIO 2.15 1.42 1.10 0.97 1.01

SOURCE: ANNUAL REPORT OF APNPDCL LTD 2006-2010

INTERPRETATION:

The standard current ratio of any firm is 2:1.In the above table the current

ratio of APNPDCL for the year 2009-10 is 2.151 when compared to the year

2005-06 is 1.01.The current ratio says that the firm with the higher the current

ratio has better liquidity or short term solvency. In 2006-07 the current ratio is

very low i.e. 0.97:1, but it is gradually improving from 0.97 to 2.15.However the

firms liquidity position is satisfactory in 2009-10 .

42

CURRENT RATIO

0

0.5

1

1.5

2

2.5

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06



QUICK RATIO

0

0.5

1

1.5

2

2.5

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06

TABLE 2 :QUICK RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

INTERST ACCRUED ONINVESTMENTS 1.09 0.50 - - -

SUNDRY DEBTORS 644.26 378.94 561.59 922.73 439.88

CASH & OTHER BALANCES 222.25 436.81 152.98 71.21 49.93

OTHER RECIVABLES 2143.54 1266.92 315.07 352.07 288.80

LOANS & ADVANCES 19.62 29.58 26.22 11.26 12.02

TOTAL CURRENT ASSETS 3030.76 2002.75 1055.86 1357.27 790.63


PROVITIONS 120.69 102.56 - - -

TOTAL CURRENT LIABILITES 1427.99 1451.49 1017.18 1463.13 831.71

QUICK RATIO/LIQUID RATIO 2.12 1.38 1.04 0.92 0.95

SOURCE: AN UAL REPORT OF APNPDCL LTD 2006-2010

INTERPRETATION:

The standard form of quick ratio is 1:1.from the above table we obscured that it is

less than 1 is the years 2005-06 and 2006-07, but it gradually increase from

2007-08 to 2009-10 .In 2009-10 the liquid ratio is 2.12:1.This ratio measures of a

firm ability to service short term liabilities.so the solvency position of the firm is

very satisfactory in the year 2009-10.

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ABSOLUTE LIQUID RATIO

0

0.05

0.1

0.15

0.2

0.25

0.3

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06

TABLE3: ABSOLUTE LIQUID RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-082006-07

2005-06

CASH & BANK BALANCE 325.25 326.81 152.98 71.21 49.93

INVESTMENTS 30.69 19.51 13.31 28.89 27.88

TOTAL ABSOLUTE LIQUID ASSETS 255.94 346.32 166.29 100.10 77.81


PROVISIONS 120.69 102.56 - - -

TOTAL CURRENT LIABILITIES 1427.99 1451.49 1017.18 1463.13 831.71

ABSOLUTE LIQUID RATIO 0.18 0.24 0.16 0.07 0.09


INTERPRETATION:

The standard form of Absolute liquid ratio is 1:1.But where we obsured the

above table in any year the ratio is less than 1 only in the year 2008-09 is very

higher i.e. 0.24 and it is very low in2006-07 i.e. 0.07 .the firm must improve their

44



DEBT EQUITY RATIO

0

0.5

1

1.5

2

2.5

3

3.5

4

4.5

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06

super quick assets in the coming year presently the super quick ratio is not

satisfactory.

TABLE4 DEBT EQUITY RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-0

Secured Loans 704.65 436.25 830.22 796.12 744.17

Unsecured Loans 2068.31 1219.93 215.00 58.01 0

Total outside Liabilities 2772.96 1656.18 1045.22 854.13 744.17

Share Capital 274.76 274.76 274.76 274.76 274.76

Reserves & Surplus 410.53 34.59 286.84 257.30 266.41

Total share holders funds 685.29 615.35 561.60 532.06 541.17

Debt Equity Ration 4.05 2.69 1.86 1.61 1.43


INTERPRETATION:

The standard from the Debt equity ratio is 1:2. It implies that

every one rupee of Liability, the firm has two rupees of owner’s capital (or) the

stake of creditor is only half of the owner’s. From the above table we observed

that in every year it is more than 1. In the year 2009-10 it is very high i.e. 4.05:2.

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When compared the 2005-06 i.e. 1.43. From 2005-06 the ratio is increasing

rapidly. This is not healthy for the firm. So the firm should take precaution to

decrease this ratio to less than 1.

TABLE 5: PROPRIETARY RATIO OF APNPDCL 2006-2010

PARTICULARS

2009-10 2008-09 2007-08 2006-07 2005-06

SHARE CAPITAL 274.76 274.76 274.76 274.76 274.76

RESURES & SURPLUS 410.53 340.59 286.84 257.30 266.41

TOTAL PROPRIETORY FUNDS 685.29 615.35 561.60 532.06 541.17

TOTAL ASSESTS 4866.05 3697.10 2592.84 2812.72 2104.88

PROPRIETORY RATIO 0.14 0.17 0.22 0.19 0.26


PROPRIETARY RATIO

0

0.05

0.1

0.15

0.2

0.25

0.3

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06

INTERPRETATION:

The standard from of proprietary ration is 1:2. In the above

table, the proprietary ratios in all years are less than 1. So the firm is in good

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condition and is in a position to meet its Liabilities. In the year 2009-10 it is very

low i.e. 0.14:2 when compared to 2005-06 i.e. 0.26:2.

TABLE6: FIXED ASSETS RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

FIXED ASSETS 1499.75 1300.08 997.83 958.48 934.64

CAPITAL EMPLOYED

[TA-CL]

3438.06 2245.61 1575.61 1349.59 1273.17

FIXED ASSETS RATIO 0.44 0.58 0.63 0.71 0.73


INTERPRETATION:

There is no thumb rule to interpret this ratio but 60 to 65

percent is considured to be satisfactry in case of industuries undertakeing. In the

above table fixed Assets to capital employed ratio is very high in the year 2005-

06 and followed by 2006-07 to 2009-10. This ratio is gradually declines from

47

FIXED ASSETS RATIO

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06



2005-06 to 2008-09. Fixed assets ratio form 2009-10 is 0.44, this is very low

when compared to previous year.

TABLE7 :INTEREST COVERAGE RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

PBIT 8.54 8.12 7.99 6.96 6.38

FIXED INTEREST CHARGES 183.28 122.88 93.09 97.47 108.02

INTEREST COVERAGE RATIO 0.05 0.07 0.09 0.07 0.06


INTERPRETATION:

Interest coverage ration indicates the numbers of times

interest covered by the profits available to pay the interest changes. Generally

higher the ration will be the satisfactory, but too high interest coverage ratio may

not be good for the firm because it may improve that firm is not using debt as a

source of finance so as to increase the earning per share.

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INTEREST COVERAGE RATIO

0

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06



From the above table we observed that the interest coverage ratio is very

high in the year 2007-08 and it is followed by 2008-09. In 2009-10 this ratio is

very low i.e. 0.05 times when compared to previous years.

TABLE8: DEBTORS TURNOVER RATIO OF APNPDCL 2006-2010

PARTICULARS

2009-10 2008-09 2007-08 2006-07 2005-06

SUNDRY DEBTORS 644.26 378.94 561.59 922.73 439.88

NET SALES 1947.14 1592.54 1485.01 1264.55 1205.55

DEBTORS TURNOVERRATIO 0.33 0.24 0.38 0.73 0.36


INTERPRETATION:

The Debtors velocity indicates the number of times the

debtors are turned over during a year. There is no ‘rule of thumb’ which may be

used as a norm to interrupt the ratio generally, the higher the value of debtors

turnover the rule efficient is the management of debtors (or) more liquid are the

debtors.

49

DEBTORS TURNOVER RATIO

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06



In the above table the debtors velocity is very high is the year 2006-07 i.e.

0.73 time and it is followed by 2007-08 and 2005-06. In the present year 2009-10

this ratio is 0.33. This ratio is constantly going in all year except in the year 2006-

07. However this ratio indicates satisfactory level of industry.

TABLE 9 :WORKING CAPITAL TURNOVER RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

NET SALES 1947.14 1592.54 1485.01 1264.55 1205.55

WORKING CAPITAL[CA-CL] 1644.26 603.66 101.18 -37.10 12.08

WORKING CAPITALTURNOVER RATIO 1.18 2.64 14.68 -34.08 99.78


INTERPRETATION:

Working capital turnover ratio indicates the volocity of the utilization of networking capital. This ratio indicates the number of times the working capital is

turned over in the course of a year. A higher ratio indicates efficient utilization of

working capital and a low ratio indicates otherwise.

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WORKINGCAPITAL TURNOVER RATIO

-60

-40

-20

0

20

40

60

80

100

120

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06



NET PROFIT RATIO

0

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.4

0.45

0.5

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06

This ratio indicates the relationship between the fixed assets

and net sales. This ratio is very high in the year 2007-08 i.e. 1.49 times and is

very low in the year 2008-09. In the present year 2009-10 this ratio shows 1.29

times and it is equal lent to the year 2005-06. This ratio fluctuates from year to

year from 2007-08 to 2009-10. This ratio is increases continuously from 2005-06

to 2007-08 and gradually decreasing. In over all fixed assets turnover ratio is

satisfaction.

TABLE11 NET PROFIT RATIO OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

NET PROFIT AFTER TAX 6.86 6.45 6.53 5.58 5.35

NET SALES 1947.14 1592.54 1485.01 1264.55 1205.55

NET PROFIT RATIO 0.35 0.41 0.44 0.44 0.44


INTERPRETATION:

This ratio says that the relationship between the profits after

taxes and net sales. Profit is one of the important point measure the efficiency of

52



the organization. Generally sales are affects the profits. If this ratio is high it

indicates, the performance of the industry is good and vice versa.

From the above table, we observed that the net profit ratio is 0.44% in

2005-06 and it is continued up to the year 2007-08 and declines from 2007-08 to

2009-10. In the year 2009-10 it is declined to 0.35 from 0.44 of the year 2007-08.

The net profit ratio is not in a position of satisfactory.

TABLE12 : RETURN ON SHAREHOLDERS INVESTMENT OF APNPDCL

2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

NET PROFIT (AFTER TAX) 6.86 6.45 6.53 5.58 5.35

SHARE HOLDERS FUNDS 685.29 615.35 561.60 532.06 541.17

RETURN ON SHAREHOLDERSINVESTMENT RATIO 1.00 1.04 1.16 1.04 0.98


NTERPRETATION:

53

RETURN ON SHAREHOLDERS INVESTMENT

0.85

0.9

0.95

1

1.05

1.1

1.15

1.2

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06



EARNING PER SHARE

0

0.05

0.1

0.15

0.2

0.25

0.3

2009-10 2008-09 2007-08 2006-07 2005-06

2009-10

2008-09

2007-08

2006-07

2005-06

The returns are share holder funds for the current year 2009-

10 is 1.00%.These returns are continuously increasing from the year 2005-06 i.e.

0.98 to 2007-08 i.e. 1.16.Thsi is very good indication for the performance of

industry but it decrease from the year 2008-09 to 2009-10 i.e. 1.00.

TABLE13 :EARNING PER SHARE OF APNPDCL 2006-2010

PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

PROFIT AFTER TAXES 6.86 6.45 6.53 5.58 5.33

NO OF SHARES 27.47 27.47 27.47 27.47 27.47

EARNING PER SHARE 0.25 0.23 0.24 0.20 0.19


INTERPRETATION:

54



Earning per share is the very powerful investments for

measuring the efficiency of the organization. In the above table shows the high

earning per share in the year 2009-10. In the year 2005-06 it is only 0.19 per

rupees but it is increases to 0.25 in the yea r2009-10. It is gradually increases

from 2005-06 to 2007-08 but in the year 2008-09 it declines to 0.213 per rupees.

The overall performance of the industry from the last five year is very

satisfactory.

COMPARATIVE STATEMENTS OF ALL RATIOS OF APNPDCL 2006-2010

. NO PARTICULARS 2009-10 2008-09 2007-08 2006-07 2005-06

1. Current Ration 2.15 1.42 1.10 0.97 1.01

2. Quick Ration 2.12 1.38 1.04 0.92 0.95

3. Absolute liquidRatio

0.18 0.24 0.16 0.07 0.09

4. Debt – EquityRation

4.05 2.69 1.86 1.61 1.43

5. Proprietary Ratio 0.14 0.17 0.22 0.19 0.26

6. Fixed Assets Ratio 0.44 0.58 0.63 0.71 0.73

7. Interest CoverageRatio

0.05 0.07 0.09 0.07 0.06

8. Debtors Turnover Ratio

0.33 0.24 0.38 0.73 0.36

9. Working CapitalTurnover Ratio

1.18 2.64 14.68 -34.08 99.78

10. Fixed AssetsTurnover Ratio

1.29 1.22 1.49 1.32 1.29

11. Net profit Ratio 0.35 0.41 0.44 0.44 0.44

12. Returnshareholder’sfunds

1.00 1.04 1.16 1.04 0.98

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SUGGESTIONS AND CONCLUSION

1. The Company liquidity position is satisfactory. It should maintain it.

2. The company having a good solvency position in the year 200-10. It

should maintain in future also.

3. Presently the super quick ratio is not satisfactory. The firm must improve

their super quick assets in the coming year.

4. The firms debt equity ratio is increasing rapidly. This is not healthy for the

firm so the firm should take precaution to decrease this ratio to less than

1.

5. The proprietary ratio in all years are lees than 1. Hence it should increase

its financial position. It is suggested that the capital structure has to be

modified to reach more returns.

6. Fixed assets ratio from 2009-10 is 0.44 this is very low when compared to

previous year. Hence it should increase its mode of financing the fixed

assets

7. The interest coverage ratio is very low in the year 2009-10 i.e. 0.03 so the

company should increase their interest coverage ratio.

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8. The debtors turnover ratio is 0.33 in 2009-10. This is constantly going in

all year except in the year 2006-07. How ever this ratio indicates

satisfactory level of industry.

9. The firm necessary to take precaution to improve the working capital in the

organization.

10. Over all fixed assets turnover ratio is satisfaction.

11. The company’s net profit position is also analyzed by using net profit ratio

in 2005-06 it is 0.44 and 2009 – 10. It is declined to 0.35 it shows

decrease in the trend so, it is not profitable to the company.

12. Return on shareholders investment is most important tool of overall

profitability ratio. Return on shareholders investment position is not

satisfactory for the firms operation.

13. Earning per share is the very powerful investments is gradually increase

except in 2008-09 is 0.23 and 2009-10 is 0.25.

14. The over all performance of the industry from the last five years is very

satisfactory

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Ratio Anaysis Hemalatha Projectt 2007-08

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