polyhydron pvt ltd1final

People’s Education Society and Trust’sBelgaum Institute of Management Studies,

MBA, Belgaum.

(Approved by AICTE & Affiliated to Karnatak University Dharwad)

“A STUDY ON ANALYSIS OF FINANCIAL STATEMENTS OF

POLYHYDRON PVT. LTD AND SUGGEST LONG TERM PLANNING”.

A Report Submitted in Partial Fulfillment of the

Requirement for the Award of

MASTER’S DEGREE IN BUSINESS ADMINISTRATION

2006-2007

Submitted by

Anuja R. MadhumathExam No: MBA05006004

Institute Guide: Company Guide: Mr. Vinay Bangare Miss. Tejashwini S. Hundre

Finance Faculty Management Trainee PEST’s BIMS, Polyhydron Pvt. Ltd. MBA, BELGAUM Macche,

Belgaum.

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM 1

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People’s Education Society and Trust’sBelgaum Institute of Management Studies, MBA

Adjacent to KUD PG Center, Bhutramanhatti, Belgaum.

(Recognized by AICTE, New Delhi & Affiliated to Karnatak University Dharwad.)

This is to certify that Miss. Anuja R. Madhumath K.U.D.

Examination No. MBA05006004 of MBA 4th Semester has successfully

completed his Major Concurrent Project 2006-2007 for the period of 60

days from 2nd December 2006 to 31st December 2006 and 16 weeks (2 days

in a week from Jan 07 to April 07).

Project Guide Director

BELGAUM ISTITUTE OF MANAGEMENT STUDIES (MBA). BGM

CertificateCertificate

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ACKNOWLEDGEMENT

The completion and drafting is a solitary task but one which has been

made smoother with the help of many. Here I take this opportunity to thank

those who have made a vital contribution in shaping this study

I would like to express my profound gratuity to Mr. Suresh Hundre

(Chairman) and Miss. Tejashwini S. Hundre (Management Trainee) for giving

me an opportunity to take my Major Concurrent Project at Polyhydron Pvt.

Ltd, Macche, Belgaum.

Any accomplishment requires the efforts of many people. I am indebted

to all the Employees of Polyhydron Pvt. Ltd who extended their help and

cooperation in collecting data for my project

Regardless of the source I wish to express my gratitude to those who have

contributed to my project, even though anonymously

I extend my thanks to our Director, Dr. S. R. Bharamanaikar, and Mr.

Vinay Bhangare for providing me an opportunity to work for Polyhydron Pvt.

Ltd, Macche, Belgaum.

I would also like to thank my parent and friends for their infinite love,

valuable guidance, support and help during my project. This project wouldn’t

have seen the light of the day, if it wasn’t for the cooperation of all these people.

Place: Belgaum. Mahendrakumar. S. Konkane.

Date:


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Contents

Sl. No. Titles Page No.

I Chapter 1

Introduction

Literature Review

Statement of the Problem

Purpose of the Study

Scope of the study

Objectives of the Study

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27

28

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II Chapter 2

Organization Profile

Organization Chart

Research Design

Data Collection Method

Measuring tools

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46

47

48

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III Chapter 3

Results & discussion with Charts & graphs

Recommendations and Conclusion

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IV Chapter 4

Appendix

Balance Sheets

Bibliography

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CHAPTER – 1

Introduction

Literature Review

Statement of the Problem

Purpose of the Study

Scope of the study

Objectives of the Study


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1 - INTRODUCTION:

This is brief summary of the project “A study on analysis of financial

statements of polyhydron pvt ltd and suggest long term planning”. Belgaum and to

find the financial position of the company. Polyhydron Pvt. Ltd is the flag ship

company of Polyhydron Group of Industries. Polyhydron is known for its “Ethical

management”. People from all over India visit the company to interact and understand

the systems. It has become a kind of “Pilgrimage centre” for the corporate world of

India.

The study was conducted with an objective of finding out the financial

standing and its managerial efficiency in generating adequate operating profits on the

firm’s assets and to study how the firm finances its assets.

The study of the financial position of a company was accomplished by various

tools and techniques like Cash flow and fund flow analysis, Financial planning with

financial ratios to support the above with the appropriate graphs and tables.

Title of the Study:

“A study on analysis of financial statements of polyhydron pvt ltd and suggest

long term planning”.

Statement of problem:

Financial analysis being an integral part of overall corporate management and

it is one of the powerful tools of financial performance analysis. The analysis of

financial statement of PPL is done in order to know the company’s financial position

of the year.

Management Problem:


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To gauge the adequacy of returns/cash flows with respect to investment,

liquidity and growth and ascertain the opportunity for expansion

Research Problem



Objectives:

1. To analysis the firm’s financial statements

2. Is management generating adequate operating profit on the firm’s assets.

3. To know how is the firm financing its assets

4. Are the owners getting adequate returns?

5. To determine the progress of the company.

Recommendations and Conclusion

Suggestions

The firm is performing well and its sales are increasing over the years. But

still the following is the suggestion if considered will prove to be beneficial to the

company.

There is huge investment in the current assets of the concern.

The current ratio of the firm is very much higher than the normal standards.

The firm should not unnecessarily block excess money in the current assets

than normal requirement of the business.

The cost of goods sold had increased continuously from 2004 to 2005. The

firm should give attention to maximize the sale and minimize the direct costs.

The company can invest in mutual funds, which is more promising for higher

yield.


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Polyhydron has net working capital more than requirements an unhealthy sign

of profitability of the company.

Under the light of the inferences drawn from the analysis, it is no exaggeration

to conclude with information that the over all the financial analysis is fair and

reasonably good and that promising future awaits the company.

Conclusion

Earning position of the company is continuously and positively increasing.

The gross, operating and net profit margins are favorable. It makes uses some

Japanese techniques, like kanban cards, net work system, jit etc. to manage its

inventories. Various discount schemes to control and manage the accounts receivable.

The company has to keep an eye on its liquidity position. As the liquidity

position shows funds are lying idle, since they are idle, they are not being properly

utilized. Thus profitability of the income may be affected. So high a liquidity position

should be avoided in order to maintain and improve the profitability.


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2 - LITERATURE REVIEW:

Financial analysis

Financial analysis is the selection, evaluation and interpretation of financial

data, along with other pertinent information, to assist in investment and financial

decision- making. Financial analysis may be used internally to evaluate issues such as

employee performance, the efficiency of operations, and credit policies, and

externally to evaluate potential investments and the credit-worthiness of borrowers,

among other things.

The analyst draws the financial data needed in financial analysis from many

sources. The primary source is the data provided by the firm itself in its annual report

and required disclosures. The annual report comprises the income statements, the

balance sheet, and the statement of cash flows. Certain businesses are required by

securities law to disclose additional information.

The financial analyst must select the pertinent information, analyze it, and

interpret the analysis, enabling judgments on the current and future financial condition

and operating performance of the firm. In this reading, we introduce you to financial

ratios------ the tool of financial analysis. In financial ratio analysis we select the

relevant information---- primarily the financial statement data--- and evaluate it. We

show how to incorporate market data and economic data in the analysis and

interpretation of financial ratios and we show how to interpret financial ratio analysis,

Financial statements

The financial statements are the end product of the financial accounting

process. The financial statements are nothing but the financial information presented

in concise and capsule form, and the financial information is the information relating


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to the financial position of any firm. Therefore the financial statements are the

depiction of the financial position of firm.

The basic source which provides the financial information is the annual report

of the company, which is presented by the company to its shareholders at the annual

general meeting. This annual report contains the chairman’s report, the balance sheet,

the income statement , the auditors report together with number of schedules,

annexure etc. Every firm prepares the following financial statement.

1. The balance sheet

2. The income statement

Balance sheet

The balance sheet is regarded as the most significant and basic financial

statement of any firm. The balance sheet is prepared by a firm to present a summary

of financial position at a given point of time, usually at the end of a financial year. It

shows the state of affairs of the firm and the contribution of the owners of the firm.

The total value of the assets must be equal to the total claims against the firm and this

can be stated as

Total assets = total claims (debt + shareholders)

= liabilities + shareholders equity

The balance sheet includes: Assets and Liabilities

Assets:

Assets are the monetary value of the resources that owned by the concern at a

measurable cost. A resource is valuable if it is in form of the cash or convertible into

cash or expected to benefit in the future operation of the business, assets includes a)

physical resources like land, machinery, plant, building, stocks etc. B) non physical

resources like cash, securities, accounts receivables etc.) Intangible resources like


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goodwill, trademark and d) future benefit like expenses paid in advance. Some time

some fictitious assets also show like as incorporation cost of the company discount on

issue of debentures etc.

Fixed assets

Current assets

Fixed assets

Fixed assets are held in business for use not for sale. These assets provide

long-term benefits to the concern. Fixed assets will be higher in manufacturing

concern. The fixed assets involves – tangible assets – includes land, building,

machinery, equipment, furniture, fixtures etc. These assets are shown the balance

sheet deducting the depreciation there on.

a) Intangible fixed assets: These assets include the patents, copyright,

trademarks, trade name goodwill etc.

b) Long-term investment: These assets represent the firm’s long term

investments like investments in share, investments in debenture and bonds of

other firms or government bodies.

c) Other non current assets: These assets are those which represent the

deferred charges etc.

d) Current assets: Current assets consist of cash and other sources of cash which

get converted into cash during the period of operating cycle of the firm. These

assets are owned for a short period of time. The other name of the current

assets includes cash, debtors, bills receivables, stock of work in progress, bank

balance, advance payment of expenses like taxes and insurance, loan and

advances to customers and employees.


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2) Liabilities

Liabilities are the obligations of the concern that is to pay to the outsiders.

Importance of the position statement

a. It helps to calculate the working capital of the concern.

b. It indicates the long term as well as short-term financial position of the

concern.

c. With the help of this the various ratios will be calculated.

d. It indicates the value of the concern and helpful in calculating the value of the

shareholders equity and total assets.

e. It helps to make the arrangement for losses, which are expected to occur in the

future.

The balance sheet is relevant at a particular point of time. It is like a financial

snapshot at a point of time, before and after which the position may be different. So,

the balance sheet is a status report

Contents of annual report:

The Polyhydron Pvt. Ltd annual report for the year 2004-2005 contains

a) Report of the board of directors

b) Auditors report

c) Accounting policies

Report of the board of directors: Director’s report provides a summary of profits

made and appropriated by the company and other relevant information such as

industrial relations, investments, financing, organization, appointment of auditors and

directors etc. The report of the PPL board of directors gives a brief account of the

company profit and dividend during the 2003-2004.

Auditors report: Auditors report to shareholders verifies whether the balance sheet


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and profit and loss account provides a true and fair view of the state of a company’s

affairs. Auditors should obtain all necessary information’s and explanations and ensure

that proper books of accounts as required by law have been prepared by the company.

Accounting policies: Companies adopt different accounting policies for preparing

their balance sheet and profit and loss account. Annual reports incorporate major

accounting policies as well as changes made in current year.

Income statements

This is also known as the profit and loss account or the statement of earnings,

summarizes the revenues and expenses of the firm for an accounting period. It gives a

detail of sources of income and expenses and thus it provides the summery of the

operating results of the firm for a specific period. It matches the revenues with the

costs that are incurred in generating the revenues, and shows the difference between

the two as the net profit made or net loss incurred during the period. This shows the

results of the operations of the firm during the period. The is therefore, is a flow

report against the balance sheet which is a stock report or a status report. This depicts

the earning capacity of the firm during the period under consideration. Profit and loss

account presents the summary of revenues, expenses and net income of a firm. It

serves as a measure of the firm’s profitability.

The main content of the income statement are: Net sales, Cost of goods sold,

Gross profit, operating expenses, Operating profit, Non operating surplus/deficit,

Profit before interest and tax, Interest, Profit before tax, Tax and Profit after tax.

Analysis of financial statement

Analysis of financial statement refers to the process of the critical examination

of the financial information contained in the financial statement in order to understand

and make decisions regarding the operations of the firm. The Analysis of financial


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statement is basically a study of the relationship among various financial facts and

figures as given in a set of financial statements. The basic financial statements i.e. The

balance sheet is, already discussed in the preceding section contain a whole lot of

historical data.

It is very important to analysis of financial statement to know the different

factors that are behind the change in the figures of the financial statement. Analysis of

financial statements contains comparison between different figures of different

periods, comparison.

Significance of the financial statement analysis:

The analysis of financial statement is very important for the different parties

related to the concern i.e. internal users and external users. The significance of the

financial statement analysis will be clear from the following points:-

This analysis simplifies and summarizes the accounting figures system that the

organization can provide information to the different parties.

Financial statement analysis is provides the management in basic functions like

forecasting, planning, directing, coordinating and control.

This analysis diagnose the financial health of the concern by evaluating different

facts of the business i.e. Liquidity, solvency, profitability, capital gearing etc.

The analysis of financial statements provides important and useful information to

the management as well as other users. If this analysis in not done than it is

difficult to take decision concerned to financial matters.

Techniques/tools of the Analysis of financial statement

The methodology adopted for the Analysis of financial statement may vary from

one situation to another. However, the following are some of the common techniques

of the Analysis of financial statement:


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1. Comparative financial statements

2. Common-size financial statements

3. Trend percentage analysis , and

4. Ratio analysis.

The last technique i.e., Ratio analysis is the most common, comprehensive and

powerful tool of the Analysis of financial statement.

Statement of changes in financial position

Two basic financial statements important to owners, management and investors

are balance sheet and profit and loss account. Balance sheet gives a summary of

firm’s resources (assets) and obligations (liabilities and owners equity) at a point of

time, the profit and loss account reflects the result of the business operations by

summarizing revenues and expenses during a period of time. Both these statement fail

to explain the changes in assets and liabilities and owners equity. This statement is

intended to summarize:

Changes in assets and liabilities resulting from financial and investment

transactions during the period, as well as those changes which resulted due to

change in owner’s equity.

The usage of firm’s financial resources during the period.

The statement of changes in financial position deals with the flow of funds during the

year i.e., the flow of funds in and out of the firm. It summarizes the sources from

where the funds might have been arranged by the firm and the uses for which the

funds might have been used by the firm during the year. The following are the

important concepts of funds:

The term funds may be taken to refer to cash only. This is a general notation of the

term funds and is used for expressing the liquidity of a firm. Therefore, this


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concept of funds will report and include only those transactions which are

affecting the cash balance; this will be just a summary of the cash transactions.

Hence, non-monetary transaction such as purchase of fixed assets by issue of

debenture will not be reported in a seep.

The term funds may also be used to denote the net working capital of the firm.

The net working is the difference between the total current assets and total current

liabilities. Since, cash is only one of the several current assets; this view of the

term funds is broader than the preceding concept. A sheet is prepared on the basis

of the net working capital concept of funds will include all those transactions

which affect the net working capital of the firm. So, any transaction affecting

current assets or current liabilities will find place in the sheet. However, there may

be different transaction which do not affect the net working capital and therefore,

will be outside the scope of sheet.

Because of the limitation of the above two concepts, the term funds is also used to

denote all the financial resources of the firm. In such a case, the term funds are

used in the broadest possible sense and the inherent short-comings of the other

two concepts are eliminated. Based on the concept of total financial resources, the

sheet will report ail the important and relevant transactions during a year?

Based on these three concepts of the term funds, the sheet can be prepared as follows:

1. sheet ( cash basis ) also known as a cash flow statement

2. sheet net working capital ) also known as a fund flow statement

Cash flow statement

Cash flow statement provides information about the cash receipts and

payments of a firm for a given period. It provides important information that

compliments the profit and loss account and balance sheet. The information about the


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cash flows of a firm is useful in providing users or financial statements with a basis to

assess the ability of the enterprise to generate cash and cash equivalent and the needs

of the enterprise to utilize these cash flows. The economic decisions that are taken by

users require an evaluation of the ability of an enterprise to generate cash and cash

equivalents and the timing and certainty of their generation.

Scope

Cash flow statement provides information about the cash receipts and payments of

enterprises for a given period. It provides important information that supplements

the profit and loss account and balance sheet.

The statement of cash flow is required to be issued by the institute of chartered

accountants of India in March 1997 which replaces the ‘changes in financial

position as per as-3’.

There are certain changes in the preparation of cash flow statement from the

previous methods as a result of the introduction of as-3.

Cash comprises cash on hand and demand deposit with banks.

Cash equivalents are short term highly liquid investments that are readily

convertible into known amounts of cash and which are subject to an insignificant

risk of changes in value. Examples of cash equivalents are, treasury bills,

commercial paper etc.

Cash flows are inflows and outflows of cash and cash equivalents. It means the

movement of cash into the organization and movement of cash out of the

organization.

Classification of cash flows

The cash flow statement relating to a particular period is classified into the

following three main categories of cash inflows and cash outflows:


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1. Cash flows from operating activities

2. Cash flows from investment activities

3. Cash flows from financing activities

Cash flow from operating activity

Operating activity are the principle revenue producing activities of the enterprise

and other activities that are not investing or financing activities. Operating activities

include cash effects of those transactions and events that enter into the determination

of net profit or loss. Following are examples of cash flows from operating activities.

Cash receipt from the sale of goods and the rendering of services.

Cash receipt from royalties, fees, commission, and other revenue.

Cash payments to suppliers for goods and services.

Cash payments to and on behalf of employees.

Cash receipts and payments of an insurance enterprise for premiums and claims,

annuities and other policy benefits.

Cash payments or refunds of income tax unless they can be specifically identified

with financing other policy benefits.

Cash receipts and payments relating to future contracts, forward contracts, option

contracts and swap contracts are held for dealing or trading purposes.

Cash flows from investments activities

Investing activities are the acquisition and disposal of long terms assets and

other investments not included in cash equality. Investing activities include

transactions and events that involve the purchase and sale of long-term productive

assets not held for resale and other investments. The following are examples of cash

flows arising from investing activities:


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Cash payments to acquire fixed assets (including intangibles). These payments

include those relating to capitalized research and development costs and self-

constructed fixed assets.

Cash payments to acquire shares, warrants, or debt instruments of other

enterprises and interests in joint ventures.

Cash receipts from disposal of fixed assets.

Cash receipts from disposal of shares, warrants, or debt instruments of other

enterprises and interests in joint ventures.

Cash advances and loans made to third parties.

Cash receipts from the repayments of advances and loans made to third parties.

Cash receipts and payments relating to futures contracts, forward contracts, option

contracts, and swap contracts except when the contracts are held for dealing or

trading purposes, or the receipts and payments are classified as financing

activities.

Cash flows from financing activities

Financing activities are activities that result in changes in the size and composition

of the owner’s capital and borrowings of the enterprise. Following are the examples of

cash flows arising from financing activities:

Cash proceeds from issuing shares or other similar instruments.

Cash proceeds from issuing debentures, loans, notes, bonds and other short term

borrowings.

Cash repayments of amounts borrowed, i.e., redemption of debentures, bonds, etc.

Cash payments to redeem preference shares.

Payment of dividend

1) Ability to generate future cash flows.


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2) Ability to pay dividends and meet obligations.

3) Reasons for the difference between net income and net cash provided

(used) by operating activities.

4) Cash invested and financing transactions during the period.

Information to prepare this statement

Usually comes from 3 sources:

Comparative balance sheet.

Current income statement.

Additional information.

The state of cash flow deals with cash receipts and Payments, so the accrual

concept is not used in the preparation of the state of cash flow.

Fund flow statement

The profit and loss account and balance sheet statements are the common

important accounting statements of a business organization. The profit and loss

account provides financial information relating to only a limited range of financial

transactions entered into during an accounting period and which have impact on the

profits to be reported. The balance sheet contains information relating to capital or

debt raised or assets purchased. But both the above two statements do not contain

sufficiently wide range of information to make assessment of organization by the end

user of the information.

The fund flow statement is also called as the ‘ statement of sources and

application of funds’ and ‘ statements of changes in financial position’.

The fund flow statement contains all the details of the financial resources have been

used up. This statement discloses the amounts raise from various sources of finance

during a period and then explains how that finance has been used in the business.


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It is very useful tool in analysis of financial statements which analysis the

changes taking place between two balance sheet dates. The statement analysis the

changes between the opening and closing balance amounts of the all items of balance

sheet for the period.

A balance sheet sets out the financial position at a point of time, setting

liabilities from which funds have been raised against assets acquired by the use of

those funds. A fund flow statement analysis the changes which have taken place in the

assets and liabilities during certain period as disclosed by a comparison of the opening

and closing balance sheets.

Concept of fund

The term ‘fund’ has been defined and interpreted differently by the different

experts. The ‘fund’ refers to all the financial resources of the company. On the other

extreme, ‘fund’ has been understood as ‘cash’ only.

The most acceptable meaning of the fund is ‘working capital’.

Concept of flow

The flow of funds refers to transfer of economic values from one asset equity

to another. When funds mean working capital, flow of funds refers to movement of

funds which cause a change in working capital of the organization.

Identification of flow of funds:

A flow of funds takes place only if a current account is involved. To identify a

flow, journalize the transaction, identify the two accounts involved as ‘current’ and

‘non-current’ and apply the general rule.

General rule

Transactions which involve only current accounts do not result in a ‘flow’.

Transactions which involve only non-current accounts do not result in a flow.


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Transactions which involve one current account and one non-current account

results in a ‘flow’ of funds.

The sources and application of the working capital or the funds may be examined as

follows:

Sources of fund

A firm numerous transactions during a year and most of these transactions may

affect one or the other current account i.e., most of these transactions may result in the

flow of the working capital. Neither it is necessary nor practical to identify the effect

of each and every transaction on the working capital. These transactions, instead, are

considered and analyzed

In a collective forms and then their effect on the working capital is identified.

Some of the major sources of working capital can be noted down as follows.

The funds generated by the operation of funds in term of the profits. Issue of

additional share capital or debenture for cash. It may be noted that the funds

generated in this case, are equal to the issue price of the securities. The face value

of share/debenture is irrelevant.

Borrowings made by the firm for a long term.

Sale of fixed assets, investment or intangible assets such as goodwill, patent etc.

Non-operating incomes such as income from investment or profits from the sale of

assets/investments.

Any other source e.g. Subsidy received from the government, claims received

from insurance company for the loss of a property etc.

Applications of funds

As already noted in the above list of sources of funds, that if there is business loss to

the firm then this tantamount to decrease or use of funds.


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Purchase of new assets/investments/patent rights/trade marks or any other

property reduces the working capital of the firm.

The redemption of preference share capital or debentures during a year also

utilizes the funds.

Repayment of a long term loan during the year.

Payment of dividends to the shareholders.

Sources of funds

1. Increase in liabilities

2. Increase in capital

3. Decrease in assets and investments

Applications of funds

1. Decrease in liabilities

2. Decrease in capital

3. Increase in non-current assets and investments

Financial planning

Financial manger must be able to analyze the current position of their own

firms as well as that of their competition. They must also plan for the company’s

financial future. Growth in sales is an important objective of most firms. An increase

in a firm’s market share will lead to higher growth. The firm would need assets to

sustain the higher growth in sales. It may have to invest in additional plant and

machinery to increase its production capacity. Also, it would need additional current

assets to produce and sell more goods or services.

The firm would have to acquire raw materials and convert them into finished

goods after incurring manufacturing expenses. It may have to sell goods on credit

because of the industry norms or to push up sales. The supplier of raw materials may


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extend credit to the firm. The firm may use its internally generated funds to finance

current and fixed assets. When the firm grows at higher rate, internal, funds may not

be sufficient. The process of estimating the funds requirements of a firm and

determining the sources of funds is called financial planning.

Steps in financial planning

Financial forecasting is the basis for financial planning. Forecasts are merely

estimates based on the past data. Historical performance may not occur to the future,

planning means what a company would like to happen in the future and includes

necessary action plans for realizing the predetermined intensions. The following steps

are involved in financial planning:

Past performance: Analysis of the firm’s past performance to ascertain the

relationship between financial variables, and the firm’s financial strengths and

weaknesses.

Operating characteristics; Analysis of the firm’s operating characteristics-

product, market, competition, production and marketing policies, control systems,

operating risk etc. To decide about its growth objective.

Corporate strategy and investment needs: Determining the firm’s investments

needs and choices, given its growth objective and overall strategy.

Cash flow from operations Forecasting the firm’s revenues and expenses and

need for funds based on its investment and dividend policies.

Financial alternatives: Analyzing financial alternatives within its financial policy

and deciding the appropriate means of raising funds.

Consequences of financial plans

Analyze the consequences of its financial plans for the long-term health and

the survival to firm.


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Consistency

Evaluate the consistency of financial policies with each other and with the

corporate strategy.

Financial planning involves the questions of a firm’s long-term growth and

profitability and investments and financial decisions. It focuses on aggregative capital

expenditure programs and debt-equity mix rather than the individual projects and

sources of finance.


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3 - STATEMENT OF THE PROBLEM:




of the year.

Management Problem:



Research Problem




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4 - PURPOSE OF THE STUDY

The purpose of doing this project is mainly to make a thorough study of the

financial analysis of the company.

To assess the company’s trends for the last five years with regard to liquidity

performance.

The purpose also includes assessing the impact of financial analysis on

liquidity strength of the company.


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5 - SCOPE OF THE STUDY

The scope of the study is conducted is only for organizational level. It is done

through the Balance sheet of the company, for the periods 1999-2000, 2000-01, 2001-

02, 2002-03, 2003-04, 2004-05 and 2005-06.

6 - OBJECTIVES OF THE STUDY:


2. To know whether management generating adequate operating profit on the firm’s

assets.


4. To know whether owners getting adequate returns?



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CHAPTER – 2

Organization Profile

o Polyhydron Pvt. Ltd.

Organization Chart

Research Design

Data Collection Method

Measuring tools


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1 - ORGANIZATION PROFILE (POLYHYDRON PVT. LTD.)

POLYHYDRON is known for its “ETHICAL MANAGEMENT”. People

from all over India visit the company to interact and understand the systems. It has

become a kind is “PILGRIMAGE CENTRE” for the corporate world of India. It is

established in 1981.it is located in Belgaum’s new industrial area at Mache.

Polyhydron manufactures hydraulic equipments like hydraulic valves, radial

piston pumps etc. The range of products spans over 30 types and 700 models. PPL

have won a national award for entrepreneurship in 1985 and NACOSU-SIMA award

for excellence in management instituted by the national confederation of small

industry madras in 1992.

Polyhydron, ‘natural business’ is performed to the customer is offered a range

of products manufactured by the company. Polyhydron customer includes OEM’s and

Stockiest.

HISTORY

The Three young enthusiastic engineers Mr. S.B.Hundre, Mr. Chitins and Mr.

V.K Samant together started Hydrotechnic, a hydraulic tube fittings and accessories

manufacturing unit in the year 1974.

With the toe in the hydraulic market door began to pen for newer concept and

the next logical step was to sell valves and pumps. Sooner the expansion was

necessary to keep up with the demand.

Following table summarizes how Polyhydron Group of Companies has developed:

1974—M/s Hydrotechnic was established to manufacture, hydraulic tube coupling

for metric tubes, flanged fittings shut offs, needle valves, throttle check valves etc.

1981—M/s Polyhydron was set up for manufacturing radial piston pumps , relief

valves , directional control valves , check valves etc.


31

1986—M/s Polyhydron System was started to manufacture oil hydraulic systems,

hydraulic actuators and piston type accumulators.

1989—Polyhydron become private limited company.

1991—Polyhydron Systems become private limited company.

1993—Polyhydron System Pvt. Ltd. went in collaboration with oil gear touter of

USA to become Oil gear touter Pvt. Ltd (OTPL)

M/s Polyhydron is considered to be one among the very few plants in India

which has been practicing JIT concept over last several years apart from employee

involvement and similar other quality management concepts. PPL is the only

company, which is manufacturing pumps and valves without any collaboration.

MISSION

We will nurture an ethically managed organization,

We will not exploit our customers,

Employees, suppliers, government, society and nature.

VISION

We will create an island of excellence

Through

Focus on customer,

Employee’s empowerment

And continuous improvement

The Vision and Mission at PPL came into being before ISO came to India.

The Vision statement emerged in 1995 and the Mission statement in 1996. the mission

statement is used as a ‘ constant guide’ for action of managers and workers.

MANUAL PROCEDURE


32

When the order for the product is received from the customer, the assembly

Coordinator has to convey the ordered quantity of the product to the monitor of the

workstation where that particular product is assembled.

Then monitor has to start the assembling of the product of mentioned quantity.

At the evening (that is when working hours of the company are going to finish ) the

monitor has to inform the assembly coordinator about the quantity of the product

assembled throughout the day and the name and quantity of the items which are used

to assemble the product as well as the Stock of the items.

Then assembly coordinator has to see, how many items are below reorder

level on the workstation. If there are items below reorder level then he has to generate

the purchase orders to the suppliers. Since there is no any purchase department in the

company the assembly coordinator has to do all these things. There is only one

supplier for one item but one supplier may have many items to supply.

Again, the assembly coordinator has to see how many items are rejected from

the workstation and how many products are rejected from the customer; and he has to

update the stock of items and products on the workstation.

AWARDS AND ACHIVEMENTS

National award to small scale entrepreneur in the year 1984.

NACOSI-SIMA award in the year 1992 as certificate of excellence.

The president’s award for entrepreneurship in the year 1984.

The Belgaum chamber of commerce and industries conferred on them an award

for outstanding performance in the field of industry in the year 2002.

The Rotary club of Belgaum gave them vocational award for “HIGH ETHICAL

STANDARDS IN VOCATION” in the year 1993-1994. The commissioner of

commercial Taxes, Belgaum declared PPL as the ‘Deligent tax payer’.


33

Rotary club, Bangalore, vijaynagar in July 2000 conferred vocational excellence

award to shri. Suresh B. Hundre for conviction in Ethical values and practicing these

values. They have said he has translated his industry into a temple of ethics, an

industrial pilgrimage may this honor people him to create further awareness of ethical

management practices, and hereby inducing in more and more people that ethics is the

only lasting measure of one’s success and satisfaction.

The institute of Engineers (India) local centre, Belgaum has honored shri. Suresh. B.

Hundre for excellence achieved and outstanding services rendered in the field of

Engineering on 15th Sep 1998.

PRODUCTION SYSTEM

QUALITY POLICY: We at polyhydron, strive to achieve Quality by increasing the

rate of Improvement better than the rise in Customer expectations

PPL emphasizes on the quality of the product. If any customer is dissatisfied

with the product, then every arrangement is made to replace that product with the new

one. Next comes into the pictures, the reason for the product failure which would be

either the fault of R and D

Types of Hydraulic systems and companies

Hydraulic systems Companies

1. SERVO TECH Moog controllers, Rexroth controllers, Vickers

controllers

2. Proportional technology Vickers, Rexroth, Yukers, Denfoss

3. Basic Hydraulic Vickers, Rexroth, Bosch, Herion, Yulker, Denfoss

MCKINSEY 7S MODEL


34

The Seven-Ss is a framework for analyzing organizations and their

effectiveness. It looks at the seven key elements that make the organizations

successful, or not: strategy; structure; system’s, or not: strategy; structure; systems;

style; skill; staff; and shared values.

Consultants at McKinsey & Company developed the 7S model in the late

1970s to help managers address the difficulties of organizational change the model

shows that organizational immune systems and the many interconnected variables

involved make change complex, and that an effective change effort must address

many of these issues simultaneously

COMPANY PROFILE WITH RESPECT TO 7S MODEL

Strategy: The direction and the scope of the company over the long term.

Based on market research, competitive analysis and self analysis, the crucial


35

differentiating competencies or strong sides of the company are identified and

formulated. Business strategy of PPL.“We shall develop and continuously improve

our products which shall be offered to our customers at reasonable price.

Structure: The basic organization of the company, its departments, reporting

lines, areas of expertise, and responsibility (and how they inter-relate).

Systems The Company safeguards its assets and ensuring that its usage is

authorized and is done in the right manner. The company also maintains proper

accounting records as statutorily required and as per pre prescribed accounting

standards and generally accepted accounting practices so as to ensure reliability of

financial information.

The company has the following general system in place.

Accounting (Accounts, Budgets etc.) Manuals, Administrative manuals and other

functional manuals have been complied and are updated periodically.

The company has a well organized management information system.

Skills: Skills include those characteristics company believes its members in a

key position. It includes such as:

Technical skill: (Sophisticated measuring and calibrating instruments, CAD

facility and special testing facility, Well equipped R and D center. Qualified

personnel.)

Management skills: (Just-in-time production system implemented has bourn

unimaginable, Benefits in spite of the non conductive environment in the country.

Holds a very good collection of technical (hydraulic) and management books

Temple of Ethics. Business Ashram.)

Shared Values: Originally called super ordinate goals; the guiding concepts and

principles of the organization – values and aspirations, often unwritten - that go


36

beyond the conventional statements of corporate objectives; the fundamental ideas

around which a business is built; the things that influence a group to work together for

a common aim.

The Values shared by the employees of PPL are:

Respect for individuals, Customer orientation, Leveraging technological development,

Desire for excellence, Ethical way of doing business, Financial acumen , Passion for

excellence, Live quality, Integrity, Honesty, Trust, Transparency, Delegation of

authority.

Staff: Staff means that the company has hired able people, trained them well

and assigned them to the right jobs. Selection , training reward and recognition,

retention, motivation and assignment to appropriate work are all key issues.

Total employees: 60.

Style: “we will grow together we will provide you opportunities to learn, to be

involved, to practice new skills, to have responsibilities to be respected and valued,

and to be rewarded and recognized for your contribution”. In return we seek your

commitment to our company’s mission. Your association with our company will

certainly ensure that you will be a more talented, responsible, self confident and well-

mannered person. To encourage, Team spirit, Creativity, Ingenuity, Develop talent.

Thus the management aims at reducing direct control on individuals to

promote motivation, quality improvement and productivity

PRODUCT PROFILE

Polyhydron manufactures Hydraulic Radial Piston Pumps, Mobile Valves,

Directional Control Valves, Solenoid Valves, Pressure Controls, Manifolds, Covers,

Logic Cartridges, Pressure Switches, and Check Valves.Polyhydron products are


37

priced at unbeatably low and PPL has changed the prices very marginally in last 15

years. The following products of Polyhydron

Hand Pumps – HP10

Heavy duty construction. Renewable internal parts by replacement. Integral Relief and Release valves.

Nominal flow and pressure ratings

ModelMax. working pr. (bar)

Flow capacity c.c./stroke

Oil tank capacity (cc)

HP10 350 1.25 250

Feed and Power Hand Pumps - HP5012 & HP5016


38

http://www.polyhydron.com/PPLProduct/1_pumps/p09700-index.htm

Automatic change-over from high discharge at low pressure to low discharge at high pressure. Renewable internal parts by replacement. Collapsible Hand lever for compact size and short hand movement.

ModelMaximumworkingpr. (bar)

Flow capacity upto 30 barc.c./stroke

Flow capacityabove 30 bar c.c./stroke

Oil tank

capacity (ltrs.)

HP5012 700 49 2.813

HP5016 350 49 5

Radial Piston Pumps - 2R

Radial piston arrangement, with 3, 5 or 7 Pumping elements each per pump section. Fixed delivery, Oil immersed type, Open execution, face mounting, Valve controlled. Bi-directional rotation of shaft. Flows can be combined internally, externally to feed one circuit or used independently to feed Two circuit

Radial Piston Pumps - 2RC / 2RCE

Radial piston arrangement, with 3, 5 or 7 pumping elements. External mounting type. Face mounting, Valve controlled, Fixed delivery. Bi-directional rotation of shaft. Available with extension shaft for through drive. With extension bracket assembly for coupling a low pressure pump having standard flange.

Pumping Element - 1R / 2R

Pumping Element Assembly for 1R / 2R.Oil immersed type, open execution, face mounting, valve controlled, fixed delivery.

Radial Piston Pump - 12R

Radial piston arrangement, with 5 or 7 pumping


39




http://www.polyhydron.com/PPLProduct/1_pumps/D11100-index.htm


elements each per pump section. Oil immersed face mounting. Valve controlled. Fixed delivery. Bi-directional rotation of shaft. With extension shaft for through drive. Available with extension bracket assembly for coupling a low pressure pump having standard flange.

Bell Housing Assembly (Factory Standard) - BHP

The bell housing series BHP are designed for coupling hydraulic pumps having flanges to electric motors having metric flanges. These bell housings are precisely machined to reduce misalignment of coupled shafts. The correct alignment of the shafts along with the cushioned power transmission through a resilient spider increases the life of the bearings of the pump/motor coupled. The construction also reduces the noise generation considerably.

Direct Operated Pressure Relief Valve - DPR

Direct acting with guided cushioned poppet. Available in Cartridge, Threaded and Subplate types.

Nominal pressure and flow ratings

ModelMax. workingpr. (bar)

Max. flow

in l / min

DPR 06 700 30

DPR 10 400 80

DPR 20 400 160

Direct Operated Pressure control Valve - DPC

Hydraulically cushioned valves, used to control sequencing, relieving, unloading or counter-balancing operations.


Max. flow handling capacity

160 l/min

Max. setting pressure 160 bar

Max. working pressure 350 bar

Pilot Operated Pressure Relief Valves (Cartridge Type) - PPR 06K

Two stage Spool type Relief / Reducing Valve Cartridge Low pressure override due to larger


40


http://www.polyhydron.com/PPLProduct/2_pressure_controls/p04896-index.htm


http://www.polyhydron.com/PPLProduct/2_pressure_controls/D23100A-index.htm

flow area.Two options for pressure adjustment, - With set screw and lock nut. - With hand knob and lock nut.Internal drain valves can be converted to external drain

Pilot Operated Pressure Relief cum Unloading Valve - PPRU

Two stage pilot operated construction. These valves are normally open type valves. When the pressure in the secondary port ( port B ) increases to set pressure, the valve closes against the spring.

PPM10

315adjustable upto5 to 315

80

PPM20 200

PPM30 300

Pressure Control Modules - PCM 06-06

Designed to control double pumps of a Hi-Low system. Unloads low pressure pump when system pressure rises above the pressure set on unloader valve. Relieves high pressure pump when system pressure reaches the value.


Model

Max. pr. for High pr. relief (bar)

High pr. Flow (l/min)

Max. pr. Forunloading (bar)

Low pr. Flow

(l/min)

PCM 06-06 400 25 50 25

Pressure Control Modules - PCM 20-16

Designed to control Double pumps of a Hi-Low system. Consists of a High pressure relief valve, a Check valve and a low pressure unloading valve. Unloading of pumps by Solenoid valve / Valves as an optional feature.


PCM20-16 315 100 100 160

Counter Balance Valve - CB Design series 30

Counter balance valves are seat type valves. They offer free-flow from their port B to A and give leak free closure in opposite direction upto a predetermined pressure. This predetermined cracking pressure can be adjusted within its


41




maximum specified range.

Flow handling capacity 200 lpm

Max. Set Pressure 50 bar

Operating pressure 315 bar

Solenoid Operated Directional Control Valve (CETOP 03) - DE 06

Direct solenoid operated,spool type, mounting on ISO 4401-03-02. Five chamber body and spool design provides low-pressure drop, with maximum performance. Balanced spool design ensures proper shifting force for maximum reliability and long life. All spools and bodies are interchangable, simplifying maintenance. Wet pin DC solenoids ensure better heat dissipation, quitter operation, there by increasing solenoid life. Moulded solenoid coils eliminate moisture problems and ingress of dust. Plug-in-coils for ease of maintenance. Indicator lights are a standard option.

Lever Operated Directional Control Valve (Old Series) - DL10 ( Series 10 )

Completely encapsulated control mechanism for protection against dirt. Five chamber design. Flexibility in rotating the operating mechanism by 90° x 4. Wide variety of spools available in subplate model only.


Model

Max. working pr. (bar)Max. flow l/min.

4DL 10

Port P, A and B ..... 350 Port T ................ 100

100

Pilot Operated Directional Control Valve (New Series) - DP 10

Pilot operated directional control valves are hydraulically operated spool valves. They control the start, stop & direction of fluid flow. Available in 19 spool configurations. Available as spring centered and spring offset.


42


http://www.polyhydron.com/PPLProduct/3_directional_controls/p09321-index.htm


Mounts on standard ISO 4401, IS10187.


Model

Max. working pr. (bar)Max. flow l/min.

4DP 10

Port P, A and B ...... 350 Port T ................... 250 Port X and Y .......... 150

120

Solenoid Pilot Operated Directional Control Valve - DEP 20

Available as spring centered, spring offset Valve mounting interface conforms to International and National standards. Minimum pilot pressure is 5 bar.

Lever Operated Pressure Holding D.C.V. - DLS 20

Specially designed to control Up-stroking, gravity return, single acting hydraulic cylinders, where pressure holding, smooth de-compression and quick return of the ram is desired. These valves are totally encapsulated for trouble-free operations. valves with quick exhaust feature has large return passage to achieve extra fast return of the ram.

Monoblock Directional Control Valve - MDL 10

Monoblock directional control valve consisting of body, the control spool, incorporated with built-in non-return valve ( Anti-cavitation ) and Direct acting pressure relief valve. The valve is available in spring centred or detented model.In order to have flexibility in mounting, the operating head can be rotated by 90ºx4 positions around the spool axis. Port configuration and valve mounting interface conforms to factory standards.

Pressure compensated flow control valve - PF

Pressure compensated. Check valve option for reverse-free flow. Four rotations of hand knob to facilitate the setting with ease. Thumb screw provision to retain valve setting. Stroke limiter


43

http://www.polyhydron.com/PPLProduct/3_directional_controls/D32200-index.htm




available as an option.

Max. working pr. 315 bar

Flow controlling capacity

Min. 0.25 to 4, 8, 16 or 32 l/min.

Flow divider valve - FD

Flow divider valves provide dual flow from a single source at a predetermined ratio, regardless of load. Maximum dividing error is <5%, Threaded port body.

Max. Pr. (bar)

315

Dividing Ratio (%)

50 : 50

Check Valve, SCREW-IN CARTRIDGE - KSC / KSD

Two port screw-in cartridge valves that are designed to fit in a cavity confirming to ISO 7789 : 1998 (E). These are seat type vales, available in four different sizes and with five different cracking pressure in each size. Check valves allow free flow in one direction while providing leak-free closure in reverse direction.

Check Valve - C (ISO)

Seat type valves. Allow free flow from port A to port Band offer leakage free closure in opposite direction. Available in four sizes of standard interfaces conforming to ISO 5781IS 10187DIN 24340Each model available with options of four cracking pressures: 0.5, 1.5, 3 and 5 bar.

Check Valve - CL


44

http://www.polyhydron.com/PPLProduct/4_flow_controls/p05083-index.htm

http://www.polyhydron.com/PPLProduct/4_flow_controls/p06727-index.htm

http://www.polyhydron.com/PPLProduct/5_check_valves/p06199-index.htm

Seat type valves, CL with external drain. Threaded or Sub-plate mounting construction.


ModelMax. working pr. (bar)

Max. flow l/min.

CL10 315 80

CL20 315 160

CL30 315 350

Check Valve - 2CI

These valves are available with the pilot operated check valve facility on either A or B or both A and B threaded ports. The hydraulic opening operation for free flow in reverse direction is achieved by means of internal pilot pressure available from the other working port.

Check Valve (Modular) - CM 10

These are seat type valve in sandwich plate design for use in vertical stacking assemblies. Its hardened metallic seat ensures leakage free closure. Porting pattern conforms to ISO 4401-5, IS 10187, DIN 24340. Available in 8 configurations with 4 cracking options for each configurations.

Size Flow

10 100 lpm

Pilot operated check valve (Modular) - CIM 06

These modular valves are available with the pilot operated check valve facility on either 'A' or 'B' ports. The hydraulic opening operation for free flow in reverse direction is achieved by means of internal pilot pressure available from the other working port.

Shuttle Valves - SL

Seat type construction. Automatically connects it's P port to either A or B depending upon whichever of the two ports is at higher pressure level. Isolates port A and B from each other. Port P gets connected to tank, only if, port A and port B are connected to tank. Available both in Threaded and Sub-plate type.


45



http://www.polyhydron.com/PPLProduct/5_check_valves/P06151-index.htm



Prefill valve ( PV 40 - 80 )

Intended for prefilling and exhausting of large hydraulic cylinders. Can be used as anticavitation check valves. Decompression feature is optional up to size 80.

Prefill valve ( PV 100 - 200 )

Intended for prefilling and exhausting of large hydraulic cylinders. Can be used as anticavitation check valves.

Cartridge Valves - CV 16 to CV 40

These valves are suitable for mounting in manifold cavities machined as per ISO 7368. By selecting suitable cartridge and cover, it is possible to achieve functions like


46



http://www.polyhydron.com/PPLProduct/6_logic_cartridges/p03426-index.htm

2 - ORGANIZATION CHART

3 - RESEARCH DESIGN:


Shareholders Shareholders

Chairperson Chairperson

Managing DirectorManaging Director

FinanceFinance

SalesSales

Production Production

AdministrationAdministration

R & D DeptR & D Dept

Design Design

A/c OfficerA/c Officer

AccountantAccountant

Manager

Manager

Sales CoordinatorSales Coordinator

Sales AssistantSales Assistant

AssemblyAssembly

Machine ShopMachine Shop

ManagerManager

Administrative assistent

Administrative assistent

Excise sales Tax billingExcise sales Tax billing

Manager Manager

AssistantAssistant

Engineer Engineer

Design EngineerDesign Engineer

EngineerEngineer

Draft menDraft men

47

47

Title of the Study:



Statement of problem:




of the year.

Management Problem:



Research Problem



Objectives:


7. Is management generating adequate operating profit on the firm’s assets.


9. Are the owners getting adequate returns?


4 - DATA COLLECTION METHOD


48

Secondary data: The major source of data for this project was collected from

annual reports, profit and loss account, manuals & some more information collected

through the internet.

5 - MEASUREMENT TOOLS:

This study is conducted with the help of statistics figures & techniques like

Graphs & charts for better comparison and interpretation.

This project is an analytical research where in the researcher has to use the

available facts as information and analyze these to make a critical evaluation of

materials. This is also an applied research with an aim to find a solution for immediate

problems facing industry or the firm.

The methodologies followed in the analysis of the financial statement are

comparative statement, Common size statement, Trend analysis and Ratio analysis.

The following are the methods of financial analysis used in general.

Comparative financial statements

Common-size financial statements

Trend percentage analysis

Ratio analysis

Limitations

The study is done only on the Balance sheet and Profit and loss account.


49

Study is based on information provided by the company.

The limitation of ratio analysis is itself a limitation in achieving the set

objective


50

CHAPTER – 3

Results & discussion with Charts &

graphs

Recommendations


51

Comparative Financial Statement

In Comparative Financial Statement (CFS), two or more Balance Sheet and/ or

the Income Statement (IS) of a firm are presented simultaneously in columnar form.

The financial data for two or more years are placed and presented in adjacent columns

and thereby the financial data is provided a times perspective in order to facilitate

periodic comparison.

The preparation of the CFS is based on the premise that a statement covering a

period of a number of years is more meaningful and significant than for a single year

only, and that the financial statement for one period represent only 1 phase of the long

and continuous history of the firm. The CFS can be prepared for both the BS and the

IS.

Comparative Balance Sheet (CBS)

The CBS shows the different assets and liabilities of the firm on different

dates to make comparisons of absolute balances and also of changes if any, from one

date of another. The CBS may be helpful in analyzing and evaluating the financial

position of the firm over a period of number of years.


52

Comparative Balance Sheet

Particulars 2004 2005 Increase/ Decrease (amount)

Increase/Decrease(percentage)

Liabilities and capitalCurrent liabilitiesDeferred liabilitiesShare capitalReserves and surplusTotal

Assets Current assetsNet fixed assetsInvestments Total

7498212.4514522346.003487500.00109107265.2

134615323.80

45873660.62 88669138.154500.00134615323.80

10450017.9015798239.003487500.00133134146.42

162869903.30

60072876.22102792527.104500.00162869903.30

(+) 2951805.45(+) 1275893.00 (+) 0.00(+)24026881.10

28254579.50

(+)14199215.60(+)14123388.95(+) 0.0028254579.50

(+) 39.36%(+) 8.78% (+) 0%(+) 22.02%

(+) 20.98%

(+) 30.95%(+) 15.92% (+) 0%(+) 20.98%

Comparative Balance Sheet

PARTICULARS 2005 2006Increase/ Decrease (Amount)

Increase/ Decrease (Percentage)

Liabilities and Capital

Current Liabilities 10450017.90 11913873.50 1463855.60 14.01

Deferred Liabilities 15798239.00 16340996.00 542757.00 3.44

Share Capital 3487500.00 3487500.00 0.00 0.00

Reserves and Surplus 133134146.42 181808939.28 48674792.86 36.56

TOTAL 162869903.32 213551308.78 50681405.46 31.12

Assets

Current Assets 60072876.22 90110670.72 30037794.50 50.00

Net Fixed Assets 102792527.10 123436138.06 20643610.96 20.08

Investment 4500.00 4500.00 0.00 0.00

TOTAL 162869903.32 213551308.78 50681405.46 31.12

INTERPRETATIONCurrent assets

The investments in the current assets are very high and it has increasing trend

over the period under study. The current assets have increased by Rs. 30037794.50

i.e., 50.00% in 2006 when compared to 2005. So it is significantly effects on the


53

liquidity position of the company and it also increase the working capital of the

company. These shows there are huge investments in the inventories and debtors.

Net fixed assets

The net fixed assets increased by 14123388.95 i.e., almost 15.92% in 2005

when compared to 2004. In the year 2005-06 in has increased to 20.08%. This is due

to capacity expansion in Plant II.

Investments

There is no change in investments for comparing the previous year and the

current year. The company will spend lot of money on the current assets only. So

there is no change in investments in the company. For previous year it will be Rs.

4500 and for current year also it will be Rs. 4500.

Current liabilities

Current liabilities include current liabilities and provisions. Current liabilities

and provisions increased by 2951805.45 i.e., about 39.36% in 2005 when composed

to 2004. in the year 2005-06 current liabilities have increased by 14.01 Since the

increase in current assets is more than increase in current liabilities, therefore the net

working capital has increased.

Deferred liabilities

Deferred liabilities increased by 1275893.00 i.e., about 8.78% in current year

when compared to previous year i.e, in the year 2004-05. But in the year 2005-06 it

has just increased by only 3.44%.

Reserve and surplus

The Reserve and Surplus has increased by Rs. 24026881.10 i.e, about 22.02%

in 2005 as compared to 2004. In the year 2005-06 reserves and surplus have increased

by 36.56%.


54

COMPARATIVE INCOME STATEMENT (CIS)

A CSI shows the figure of different items of the IS of the firm in absolute

terms, the absolute changes from one period to another and if desired, the changes in

percentage form. The CIS is helpful in deriving meaningful conclusions regarding

changes in sales volume, cost of goods sold, different expenses items etc. from the

CIS, a financial analyst can quickly ascertain whether sales are increasing or

decreasing and by how much amount or by how much percentage

Comparative income statement

Particulars 2004 2005 Increase/DecreaseInamount

Increase/ Decrease(%)

Net sales 136364336.3 167929269.9 31564934 23.24less: Cost of goods sold 91352117.1 120863073.7 29510957 32.3Gross profit 45012219.2 47066196.2 2053977 4.56Less: selling and administrative exp

11512089.16 9996610.74 -1515478.4 -13.16

Operating income 33500130.04 37069585.46 33719572 100.65Add: other income 1884091.8 3408823.66 1524731.9 80.92EBIT 35384221.84 40478409.12 5094187.3 14.39Less: interest 0 0 0 0PBT 35384221.84 40478409.12 5094187.3 14.39less: Taxes 11000000 13000000 2000000 18.18Deferred tax adjustments 1928195 1342918 -585277 30.35PAT 22456026.84 26134491.12 3678464.3 16.38


55

Comparative income statement

PARTICULARS 2005 2006Increase/ Decrease (Amount)

Increase/ Decrease%

Net sales 167929269.9 219589944.9 51660674.96 30.76

Less: Cost of Goods Sold 110445067.7 125833343.3 15388275.57 13.93

Gross profit 57484202.18 93756601.57 36272399.39 63.10Less: Selling and Admin. exps 20414616.74 21024256 609639.26 2.99

Operating income 37069585.44 72732345.57 35662760.13 96.20

Add: Other Income 3408823.66 4149147.89 740324.23 21.72

EBIT 40478409.1 76881493.46 36403084.36 89.93

Less: Interest 0 0 0 0.00

PBT 40478409.1 76881493.46 36403084.36 89.93

Less: Taxes 13000000 25000000 12000000 92.31

Prov. for FBT for 2006 0 150000 150000 0.00

Deferred tax adjustments 1343918 542757 -801161 -59.61Add: Excess/short Prov. for I.T. 0 973553.9 973553.9 0.00

PAT 26134491.1 52162290.36 26027799.26 99.59

InterpretationOn the basis of comparative income statement it can be said that gross profit

for the year 2006 has increased by 63.10% over the profit for the year 2005. The Net

sales during the same period have increased by 30.76%. The cost of goods sold

increased by 13.93%. The selling and Administrative expenses increased by 2.96%.

Other income for the year 2006 is increased by 21.72. The EBIT is increased by

75.54% during the year 2006. The Net profit is increased 89.93%.

COMMON SIZE STATEMENT

The CCS represents the relationship of different items of a financial statement

with some common item by expressing each item as a percentage of the common


56

item. In common size Balance sheet, each item of the Balance sheet is stated is stated

as a percentage of the total of the Balance sheet. Similarly in common size income

statement, each item is stated as percentage of the net sales. The percentage for

different items is computed by dividing the absolute amount of that item by the

common base and then multiplying by 100. The percentage so calculated can be easily

compared with the corresponding percentages in some other period.


57

Common Size Income statement

PARTICULARS 2004 2005 2006

Net sales 100.00 100.00 100.00

Cost of Goods Sold 66.99 65.77 57.30

Gross Profit 33.01 34.23 42.70

Less: Selling and Admin. exps 8.44 12.16 9.57

Operating Income 24.57 22.07 33.12

Add: Other Income 1.38 2.03 1.89

EBIT 25.95 24.10 35.01

Less: Interest 0.00 0.00 0.00

PBT 25.95 24.10 35.01

Less: Taxes 9.48 7.74 11.70

PAT 16.47 16.36 23.31


58

COMMON – SIZE BALANCE SHEET

Current liabilitiescurrent liabilitiesprovisionsTotal

Loan fundsecured loanUnsecured loanDeferred tax liability Total

Total liabilities

Net worthshare capitalreserves and surplus

Total

Total funds

Current assetsInventory Trade debtorsCash and Bank balanceOthersLoans and advancesTotal

Fixed assetsGross blockLess: depreciationNet blockCapital work-in-progress

Total

Total Assets

4.071.475.54

0.000.0011.8511.85

17.39

3.1579.9683.11

100.00

5.308.1015.860.031.77

31.06

83.8917.0566.842.0768.94

100.00

4.021.545.56

0.000.0010.7810.78

16.34

2.5981.0583.64

100.00

6.458.6922.930.052.63

40.75

97.2120.4476.772.0478.81

100.00

4.801.606.40

0.000.009.699.69

16.09

2.1481.7483.88

100.00

8.0310.9414.570.063.26

36.86

77.6615.7661.901.2063.10

100.00

2003 2004 2005


59

COMMON – SIZE BALANCE SHEET

Liabilities 2004 2005 2006

CURRENT LIABILITIES 4.02 4.80 3.05

Provisions 1.54 1.60 2.53

Total 5.56 6.40 5.58

Loan Fund

Secured Loan 0.00 0.00 0.00

Unsecured loan 0.00 0.00 0.00

Deferred Tax Liability 10.78 9.69 7.65

Total Liabilities 16.34 16.09 13.23

NET WORTH21.71 45.94 93.21

Share Capital 2.59 2.14 1.63

Reserves & Surplus 81.05 81.74 85.14

Total 83.64 83.88 86.77

TOTAL FUNDS 100.00 100.00 100.00

Assets 2004 2005 2006

Inventory 6.45 8.03 8.07

trade Debtors 8.69 10.94 12.45

Cash & Bank Balance 22.93 14.57 19.10

Others 0.05 0.06 0.11

Loans & Advances 2.63 3.26 2.46

Total 40.75 36.86 42.20

Fixed Assets

Gross Block 77.65 77.66 67.74

Less: Accumulated Dep. 20.44 15.76 13.03

Net Block 57.21 61.90 54.71

Capital work in progress 2.04 1.20 3.09

Total 59.25 63.10 57.80

TOTAL ASSETS 100.00 100.00 100.00

INTERPRETATION


60

The common size BS and the common size IS reveal that proportion of fixed

assets out of total assets has reduced from 63.10 to 57.80 whereas the proportion of

current assets has increased from 36.86 to 42.20. Out of total liabilities the proportion

of current liabilities has decreased from 6.40 to 5.58 and the proportion of deferred

tax liabilities has decreased from 9.69 to 7.65. The Net worth has increased from

83.88 to 134.77%.

Further, the cost of goods sold has decreased from 65.77% to 57.30%. The

Gross profit has increased from 34.23% to 42.70%. EBIT has also increased from

24.10% to 35.01% in the year 2005 to 2006. The Profit after tax has also increased

from 16.36 to 23.31%.

It can be observed that the CSS can be used for analyzing and comparing the

financial position of a firm for two different periods or between two firms for the

same year. This comparability was not available in the CFS because of difference in

firm’s sizes or in different years. Of course, in order to make the CSS more

meaningful, the analyst should ensure that accounting policies of different firm’s

being compared or for different year are unchanged or not significantly different.

TREND PERCENTAGE ANALYSIS

The TPA is a technique of studying several financial statements over a series

of years. In TPA the trend percentage are calculated for each item by taking the figure

of that item for some base year as RS. 100. So, the trend percentage is the percentage

relationship which each item of different years bears to the same item in the base year.

Any year may be taken as the base year, but generally the starting/initial year is taken

as the base year. So, each item for base year is taken as 100 and then the same item

for other years is expressed as a percentage of the base year.


61

TREND ANALYSIS IN (AMOUNT)2003 2004 2005 2006

Net sales Gross profitOperating incomeEBIT PBT PAT Current assetsCurrent liabilitiesFixed assetsNet worthDividend

106434777.9038391735.2828474596.4529601699.3529584724.3518367679.3534366668.456134656.7576202825.74104439337.441220625.00

136364336.3445012219.2033500130.0435384221.8435384221.8422456026.8423749400.787498212.4588669138.15127117111.321569375.00

167929269.9147066196.2037069585.4640478409.1240478409.1226134491.1260072876.2210450017.90102792527.10152419885.421848375.00

219589944.8793756601.5772732345.5776881493.4676881493.4652162290.3684857213.726504252.88123436138.06201793598.903058537.50

Trend analysis (in percentages)2003 2004 2005 2006

Net sales Gross profitOperating incomeEBIT ( Earning before interest and Taxes)PBT ( Profit before taxes)PAT ( Profit after taxes)Current assetsCurrent liabilitiesFixed assetsNet .worthDividend

100100100100

100100100100100100100

128.12117.24117.64119.53

119.60123.31 69.10122.22116.35121.71128.57

157.77 122.59130.18136.74

136.82143.51174.79170.34134.89145.94151.42

120.63244.21255.42259.71

259.86283.98246.91106.02161.98193.21250.57

ANALYSIS OF PROFIT & LOSS ACCOUNT AND BALANCE SHEET

The Net sales of the company have been increased by 130.76 in the year 2005-

06 to Rs.219589944.87 being the highest sales in the last year. The increase in sales is

because of high prospects of the company.

The Gross profit of the company is increased from 122.59 in 2005 to 163.10 in

the year 2006.


62

Operating income has increased by 192.92 in the year 2006 as compared to

130.18 in the 2005.

EBIT (earning before interest and taxes) has increased 119.53 in 2004 and

136.74 in the 2005.

ANALYSIS OF FINANCIAL STATEMENT

SALES:

sales

0

50000000

100000000

150000000

200000000

250000000

1 2 3 4 5

years

sale

s years

sales

Interpretation

There is an increase in the sales of a company compared to other sales

stations. The company registered a growth of 130.76 in 2005-2006 as compared

157.77 to the year 2004-05

The impact of turnover is indicated by the increased profits of the company.


63

GROSS PROFIT:

Gross Profit

0

20000000

40000000

60000000

80000000

100000000

1 2 3

years

Gro

ss P

rofi

t

years

gross profit

Interpretation

The gross profit for the year 2003-2004 was 45012219.20 it has increased

93756601.57 in the year 2005-2006as compared to 2004-2005 was 47066196.20.

Gross profit includes sales- cost of goods sold.

The gross profit is increased because of increase in sales and service of the company..


64

OPERATING INCOME:

operating profit

0

1000000020000000

30000000

40000000

5000000060000000

70000000

80000000

1 2 3

years

op

erat

ing

pro

fit

years

OI

Interpretation

The operating income of the company was Rs. 93756601.57 in the year 2005-

2006 and Rs.37069585.46 in the year 2004-2005. The company has increased its

incomes for the last few years. In the year 2003-2004 it was Rs.33500130.04.

The increase in operating income of the company is due to increase in sales.


65

PROFIT BEFORE TAX:

Profit before Tax

0100000002000000030000000400000005000000060000000700000008000000090000000

1 2 3

years

PB

T years

pbt

Interpretation

The profit before tax is showing very good progress in their profit taxes during

the few years.

The companies profit before tax increased from Rs.35384221.84 in 2003-2004

& 40478409.12 in 2004-2005 and in 2005-2006 it was 76881493.46. That is increased

by 119.60, 136.82, and 259.86 in the year 2003-2004, 2004-2005 & 2005-2006

respectively.


66

PROFIT AFTER TAX:

Profiit After Tax

0

10000000

20000000

30000000

40000000

50000000

60000000

1 2 3

years

PA

T years

pat

Interpretation

The company is showing very good progress in their net profit during the few

years. The company’s net profit increased from Rs. 22456026.84, 26134491.12,

52162290.36 in 2003-2004, 2004-2005 & 2005-2006. That is increased by 123.31,

143.51 & 283.98 in 2003-2004, 2004-2005 & 2005-2006 respectively.


67

CURRENT ASSETS:

Current Assets

0100000002000000030000000400000005000000060000000700000008000000090000000

1 2 3

years

CA years

CA

Interpretation

The current assets and loans and advances all put together for the year 2004-

2005 were Rs. 60072876.22. In the year 2005-06 it amounts to 84857213.72, current

assets consists of inventories, cash & Bank balance and sundry debtors.


68

CURRENT LIABILITIES:

current Liabilities

0

2000000

4000000

6000000

8000000

10000000

12000000

1 2 3

years

CL years

CL

Interpretation

The current liabilities and provisions of the company stood at Rs.

10450017.90 in 2004-2005. it was Rs. 6134656.75 in 2003-2004.

Compared to 2004-2005 the current liabilities have increased from 170.34 to

122.22 in 2003-2004.And in the year 2005-06 the liability have decreased to 106.02


69

FIXED ASSETS:

020000000400000006000000080000000

100000000120000000

Fixed assets

1 2 3 4 5

years

Fixed Assets

year

fixed assets

Interpretation

The fixed assets needs of the company have increased from 116.35 to 134.89

in 2003-2004 & 2004-2005. For the year 2005-06 it is 161.98.

The total fixed assets are arrived after deducting depreciation from the gross

block & net block is calculated capital. Fixed assets include: land & building,

Furniture’s etc.


70

NET WORTH:

Net Worth

0

50000000

100000000

150000000

200000000

250000000

1 2 3

Years

Net

Wo

rth

years

NW

Interpretation

The net worth has increased from 121.71 to 145.94 in the year 2003-2004 &

2004-2005. for the year 2005-06 it is 193.21

The net worth includes share capital, Reserves and loans.


71

DIVIDEND:

Dividend

0

500000

1000000

1500000

2000000

2500000

3000000

3500000

1 2 3

Years

Div

iden

d

years

Dividend

Interpretation

The dividend of the company has increased from 1848375 in the year 2004-

2005. That is in 2003-2004 it was 128.57 & 151.42 in 2004-2005. In the last year the

dividend declare was 3058537.50 and the percentage increase is upto 250.57%.


72

RATIO ANALYSIS

Meaning

Ratio analysis is a widely-used tool of financial analysis. It is defined as the

systematic use of ratio to interpret the financial statements to that the strength and

weaknesses of a firm as well as its historical performance and current financial

condition can be determined. A ratio is relationship expressed in mathematical terms

between two individual and groups of figures connected with each other in some

logical manner. The relationship between two or more accounting figures/groups is

called financial ratio. A financial ratio helps to summarize a large mass of financial

data into a concise form and to make meaningful interpretation and conclusion about

the performance and positions of a firm.

Types Of Ratio

Ratio can be classified into four broad groups: Liquidity ratios, Leverage

ratios, Activity ratios and Profitability ratios.

Liquidity ratio

Liquidity ratio measures the ability of the firm to meet its current obligation.

In fact, analysis of liquidity needs the preparation of cash budgets and cash and fund

flow statements; but liquidity ratio, by establishing a relationship between cash and

other current assets to current obligation, provide a quick measure of liquidity. The

most common ratios which indicate the extent of liquidity are: Current ratio and

Quick ratio

Current Ratio: The current ratio is calculated by dividing current assets

by current liabilities:


73

Current ratio = Current assets Current liabilities

Current assets include cash and those assets which can be converted into cash

within a year, such as marketable securities, debtors and inventories. The current ratio

gives the margin by which the value of the current assets may go down without

creating any payment problem for the firm. This represents a margin of safety for the

liabilities.

The higher the current ratio, the greater is the margin available and the less is

the chance of firm’s failure to meet its commitments in time. It must be noted that the

current ratio considers only the quantity of current assets ignores the quality of current

assets.

Chart showing current assets to current liabilities:

Interpretation


0

1

2

3

4

5

6

7

8

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

74

74

As a matter of policy or as referred to as banker’s rule of thumb, the current

ratio of 2:1 is considered to be satisfactory. The analysis is proved that the current

ratio position of the PPL is excellent. That is 2.50 times in 2000, 3.09 times in 2001,

7.45 times in 2002, 5.60 times in 2003 and in 2004 it was 6.12 times.

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. Inventories are

considered to be less liquid. Inventories normally require some time for realizing into

cash; their value also has a tendency to fluctuate. The quick ratio is found out by

dividing quick asset by current liabilities.

Quick ratio = Current assets—Inventories _______________________ Current liabilities

A Chart Showing That Quick Assets To Current Liabilities


0

1

2

3

4

5

6

1999-2000 2000-2001 2001-2002 2002-2003 2003-2004

Series1

75

75

Interpretation

As a rule of thumb or as a conversion, quick ratio of 1:1 is considered

satisfactory. The company having an excellent liquidity. That is in the years

2000,2001,2002,2003 and 2004 the quick conversion ratio is 1.97, 2.35, 5.54, 4.65

and 5.15 times respectively of the current liabilities. However the satisfaction or

unsatisfaction of the liquidity position will entirely depend on debtors the company

cannot be liquid in spite of its liquidity ratio if it has slow paying ratio.

Calculation of Liquidity Ratio’s

Explanation 1999-

2000

2000-

2001

2001-

2002

2002-

2003

2003-

2004

(a) CURRENT RATIOCurrent assets Current liabilities (b) QUICK RATIOCurrent assets-inventories Current liabilities

2.50

1.97

3.09

2.35

7.45

5.54

5.60

4.65

6.12

5.15

Fixed Assets to Net Worth

Fixed assets = Net fixed assets ______________ Net worth

Chart Showing Net Fixed Assets to Net Worth

62

64

66

68

70

72

74

76

78

80

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1


76

Interpretation

The fixed assets to net worth ratio are continuously decreasing. In 1999-2000

it was very high. In 2000-2001 it was constant. coming to 2001-2002, 2002-2003 and

2003-2004 it is come down.

Current Assets To Net Worth

Current assets = Current assets _____________ Net worth

Chart Showing Current Assets to Net Worth

Interpretation

The ratio of PPL is fluctuating for all this years. It was 30.00 for the year

ending 2000. In the year 2001 increased to 31.7 and for the year 2002 it was

decreased to 29.02 and it was increased to 32.90 for the year 2003.again it is largely

increased to 36.10 for the year ending 2004.maintaining the efficient utilization

current assets for this year.


0

5

10

15

20

25

30

35

40

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

77

77

Current Liabilities To Net Worth

Current liabilities = Current liabilities To net worth _________________ Net worth

Chart Showing Current Liabilities To Net Worth

0

2

4

6

8

10

12

14

Series1

Interpretation

This ratio is higher in the year 1999-2000. It is continuously decreased it is a

good sign for the company. In the year 2001-2002 this ratio is very low i.e. 3.89.

Again it increased in the year 2002-2003 and 2003-2004 it was 5.87 and 5.90.

Calculation Of Ratio’sExplanation 1999-

20002000-2001

2001-2002

2002-2003

2003-2004

FIXED ASSETS TO NET WORTH Net fixed assets * 100 Net worth CURRENT ASSETS TO NET WORTH Current assets * 100 Net worth © CURRENT LIABILITIES TO NET WORTH Current liabilities * 100 Net worth

78.53

30.00

11.95

77.47

31.75

10.27

72.31

29.02

3.89

70.76

32.90

5.87

67.97

36.10

5.90

Activity Ratio


78

Funds of creditors and owners are invested in various assets to generate sales

and profits. Better the management of assets, the larger the amount of sales. Activity

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

utilizes its assets. This ratio also called turnover ratio because they indicate the speed

with which assets are being converted or turned over between sales and assets

generally reflects that assets are managed well.

Types of Activity Ratio

Cash turnover ratio, Debtors turnover ratio, Collection period, Working capital

ratio and Total asset ratio

Cash Turnover Ratio

Formula:

Cash turnover ratio = Net annual sales ______________ Cash

Chart Showing Net Annual Sales to Cash

Interpretation


0

2

4

6

8

10

12

14

1

year

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

79

79

The ratio of PPL was 5.28 for the year ending 2004. It is increased to 12.62 for

the year ending 2000. Again it decreased to 9.51, 7.38 & 6.06 for the year ending

2001, 2002 and 2003 respectively. The cash turnover ratio is continuously decreasing.

Debtors Turnover Ratio

It indicates the velocity of debt collection of the firm. In simple words, it

indicates the number of times average debtors are turned over during a year.

Debtors turnover ratio = Net annual sales __________________ Average Debtors

Chart Showing Debtors To Sales

Interpretation

The PPL Debtors turnover ratio has been continuously decreasing from past

four years i.e. 2000, 2001, 2002 and 2003. This means that the company is not

realizing its money from its debtors or it can also mean that the company is not

generating more cash sales.

Working Capital Turnover Ratio


0

2

46

8

10

1214

16

18

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

80

80

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

debtors, bills receivables, cash, stock etc. change with the increase or decrease in

sales. The working capital is taken as Working capital = current assets – current

liabilities.

Working capital = Net annual sales Turnover ratio ___________________ Working capital

Chart Showing Net Annual Sales To Working Capital

0

1

2

3

4

5

6

7

8

9

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

Interpretation

The working capital turnover ratio is 6.61 times in 2000 & the same is reduced

by 5.38 times in 2001. In 2002 and 2003 it is further reduced by 3.61 & 3.77. In 2004

it is increased from 8.39 times. The working capital turn over ratio is low in 2000,

2001, 2002, and 2003 when compared to 2004.

Total Assets Turnover

This ratio shows the firms ability in generating sales from all financial

resources committed to total assets.

Total assets turnover = Sales


81

_________ Total asset

Chart Showing Sales To Total Asset

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

Interpretation

The Total assets turnover ratio of PPL has been increasing for the last two

years i.e. 2003 and 2004. The higher assets turnover ratio being in the year 2004 i.e.

1.40 & lowest being in the year 2002 i.e. 1.00. The company is utilizing its fixed

assets effectively than earlier years.


82

Calculation Of Activity Ratio’sExplanation 1999-

2000 2000-2001

2001-2002

2002-2003

2003-2004

(b) CASH TURNOVER Net annual sales Cash(c ) WORKING CAPITAL TURNOVER Net annual sales Working capital (d) DEBTORS TURNOVER Net annual sales Debtors (e) TOTAL ASSETS TURNOVER Sales ________ Total assets

12.62

6.61

16.55

1.16

9.51

5.38

15.65

1.13

7.38

3.61

14.33

1.00

6.06

3.77

11.87

1.11

5.28

8.39

13.93

1.40

Profitability Ratio

Profit is the difference between Revenues and Expenses over a period of time.

Profit is the ultimate output of a company and it will have no future if it fails to make

sufficient profits. The profitability ratios are calculated to measure the operating

efficiency of the firm. Besides the management, the creditors and the owners are also

interested in the profitability of the firm. This is possible only when the company

earns enough profits.

Types Of Profitability Ratios

Gross profit margin, Net profit margin, Earning per share, Dividend payout

ratio, Dividend earning ratio and Price earning ratio

Gross profit margin


83

The Gross profit ratio is also called the average mark up ratio. It is

calculated by comparing the Gross profit of the firm with the Net sales as

follows:

GP ratio = Gross profit ______________ * 100 Net sales

Chart Showing Gross Prof To Net Sales

Interpretation:

The operating profit margin is high in the year 2001 and 2003. and then the

operating profits has reduced in the year 2000, 2002, 2004 that is because of increase

in the inventory high cost of production and inefficient utilization of current as well as

fixed assets. The highest being in the year 2003 i.e. 31.19 & the lowest being in the

year 2002 is 27.94.

Net Profit Margin

Net profit margin ratio establishes between net profit and sales and indicates

Manufacturing, Administration and selling the products.


0

5

10

15

20

25

30

35

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

84

84

Net profit margin = Profit after taxes _______________ Sales

Chart Showing Profit after Tax To Sales

ratio

02468

101214161820

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

ratio

Interpretation

The Net profit margin behaves same as the operating profits/Gross profits

margin. The higher operating expensive being in the year 2003 and the lowest in the

year 2000.

Earning Per Share

Earning per share shows the profitability of the firm on a per share basis,

it does not reflect how much is paid as dividend and how much is retained in the

business.

Earning per share = Profit after taxes ___________________ Number of common share


85

Chart Showing Profit After Taxes To Number Of Common Shares

Interpretation

EPS as a measure of profitability of a firm from the owners point of view,

should used. The EPS is continuously increasing. In the year 1999-2000 it was 305. in

the year

Dividend Payout Ratio

Earnings not distributed to the shareholders are retained in the business.

Thus retention ratio is 1— payout ratio.

Dividend payout ratio = Dividend per share ___________________ Earnings per share

Chart Showing Dividend Per Share To Earning Per Share


0

100

200

300

400

500

600

700

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

86

86

ratio

00.010.020.030.040.050.060.070.080.09

1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

ratio

Interpretation

The dividend payout ratio is an important and widely used ratio. In the year

1999-2000 it was 0.077 it was continuously decreased for the year 2000-2001, 2001-

2002, 2002-2003, & 2003-2004. it was 0.072, 0.060, 0.066, & 0.069.

Dividend Earnings/Yield Ratio

The dividend yield and the earnings yield evaluate the shareholders return in

relation to the market value of the share. The earnings yield is called the earnings

price ratio.

Dividend earnings ratio = Dividend per share ____________________ Market value per share


87

Chart Showing Dividend Per Share To Market Value Per Share

Interpretation

The dividend earning ratio is fluctuating. In the year 1999-2000 it was 0.061 it

was increased in the year 2000-2001 was 0.071, in the year 2001-2002, 2002-2003

and 2003-2004 it was 0.055, 0.090 & 0.116.

Price Earnings Ratio

The reciprocal of the earnings yield is called the price earning ratio.

Price earning ratio = Market value per share/ Book value per share _____________________________________ Earning per share

P/E Ratio reflects investor’s expectations about the growth in the firm’s earnings.


0

0.02

0.04

0.06

0.08

0.1

0.12

0.14

year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

88

88

Chart Showing Market Value Per Share To Earning Per

Interpretation

This ratio is popularly used by security analyst to assess a firm’s performance

as expected by the investors. It is continuously decreasing from the year 2000-2001 to

2003-2004.


0

20

40

60

80

100

120

140

Year 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Series1

89

89

Calculation Of Profitability Ratio’s

Explanation 1999-2000

2000-2001

2001-2002

2002-2003

2003-2004

Gross ProfitGross profit * 100 Net sales Net Profit Net profit * 100 Net salesEarning Per Share Profit after tax * 100 No of common sharesDividend Payout Ratio Dividend per share Earning per shareDividend Earning Ratio Dividend per share Market value per share Price Earning Ratio Market value per share/book Earning per share

28.82

14.24

305

0.077

0.061

126.14

30.69

15.48

384

0.072

0.071

100.19

27.94

15.87

356

0.060

0.055

108.07

31.19

17.25

526

0.066

0.090

73.14

28.55

16.46

644

0.069

0.116

59.74

Calculation Of Net Worth

Particulars 1999-2000 2000-2001 2001-2002 2002-2003Fixed Assets 51235135.49 58614758.98 6443831.90 76202825.74Investments 9500.00 9500.00 4500.00 4500.00Current Assets 18762894.52 23749400.78 24979849.06 34366668.45Less: Payment of Advance tax

0.00 0.00 0.00 0.00

70007530.01 82373659.76 89428180.96 110573994.2Less:Outside Liabilities Secured Loans 0.00 0.00 0.00 0.0

0Unsecured Loans

0.00 0.00 0.00 0.00

Current liabilities & provisions

7477234.04 7682954.36 3354562.37 6134656.75

Less: Provision for tax

0.00 107475.00 0.00 0.00

Net worth 62530295.97 74798180.40 86073618.09 104439337.5


90

Findings

The sales of the company are increasing so is the profits. In 2003-2004 the

company earned the higher turnover. Profit in the last five years of comparison, the

major portion is contributed by sales of the company.

The company’s profit over the last few years is increasingly high. The income

of the company is increasing at a steady rate.

The Share capital of the company has remained constant. The current assets of

the company have decreased in 2002-2003 and it increased in the year 2001-2002 &

2003-2004.


Particulars 2003-2004 2004-2005 2005-2006Fixed Assets 88669138.15 102792527.10 123436138.06Investments 4500.00 4500.00 4500.00Current Assets 45873660.62 54760716.02 84857213.72Less: Payment of Advance tax

0.00 0.00 0.00

134547298.80 157557743.12 208297851.78Less:Outside Liabilities Secured Loans 0.00 0.00 0.00Unsecured Loans

0.00 0.00 0.00

Current liabilities & provisions

7498212.45 7828695.91 6504252.88

Less: Provision for tax

0.00 0.00 0.00

Net worth 127049086.4 149729047.21 201793598.90

91

91

Debtors are the major current assets that the company holds. The debtor’s

turnover ratio is 13.93 times in 2003-2004.

The current ratio is increasing continuously. In the year 1999-2000 it was

2.50. It is increased to 7.45 in the year 2001-2002.

The profitability ratio has improved over the years due to increase sales and profits.


92

2 - RECOMMANDATION AND CONCLUSSION

Suggestions

The firm is performing well and its sales are increasing over the years. But

still the following is the suggestion if considered will prove to be beneficial to the

company.

There is huge investment in the current assets of the concern.

The current ratio of the firm is very much higher than the normal standards.

The firm should not unnecessarily block excess money in the current assets

than normal requirement of the business.

The cost of goods sold had increased continuously from 2004 to 2005. The

firm should give attention to maximize the sale and minimize the direct costs.

The liquidity ratio of the company is too high, so the company can invest its

ideal funds in short-term securities, which can yield a favorable return to the

company.

The company can invest in mutual funds, which is more promising for higher

yield.

Polyhydron has net working capital more than requirements an unhealthy sign

of profitability of the company.

Under the light of the inferences drawn from the analysis, it is no exaggeration

to conclude with information that the over all the financial analysis is fair and

reasonably good and that promising future awaits the company.


93

Conclusion

Earning position of the company is continuously and positively increasing.

The gross, operating and net profit margins are favorable. It makes uses some

Japanese techniques, like kanban cards, net work system, jit etc. to manage its

inventories. Various discount schemes to control and manage the accounts receivable.

The company has to keep an eye on its liquidity position. As the liquidity

position shows funds are lying idle, since they are idle, they are not being properly

utilized. Thus profitability of the income may be affected. So high a liquidity position

should be avoided in order to maintain and improve the profitability.


94

CHAPTER - 4

Appendix

Bibliography


95

APPENDIXPolyhydron Pvt. Ltd.Profit & Loss Account for the year ended 31st March 2000 Sch Amount (Rs)Income Sales Less: Trade Discount

Other Income

Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Net Profit Short provision for Income Tax Balance Brought Forward from Previous Year Profit available for appropriation

Appropriation : Transfer to General ReserveDividend Proposed(Final) Interim Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet

I

J

KLMNO

81,455,069.806,782,668.4474,662,401.36492005.7575,154,407.11

43,986,206.48

4,973,424.142,221,983.475,551,158.605,580.002,463,515.45 59,201,868.14

15952538.975325000.0010627538.9719023.00495130.0011,103,645.97

9312500.000.00825000.0090750.00875395.9711,103,645.97


96

Polyhydron Pvt. Ltd.Profit & Loss Account for the year ended 31st March 2001 Sch Amount (Rs)Income Sales Less: Trade Discount

Other Income

Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Net Profit Less: Short Provision for Income tax Balance Brought Forward from Previous Year Profit available for appropriation

Appropriation : Transfer to General Reserve Proposed Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet

I

J

KLMNO

93,819,359.257,315,522.4486,503,836.81498,691.7387,002,528.54

49,584,125.39

5,964,329.602,154,133.995,621,735.001,357.003,041,673.63 66,367,354.6120,635,173.937,240,000.0013,395,173.93170,191.00

875,395.9714,100,378.90

12,000,000.00966,037.5098,536.001,035,805.40

14,100,378.90


97

Polyhydron Pvt. Ltd.Profit & Loss Account for the year ended 31st March 2002 Sch Amount (Rs)Income Sales Less: Trade Discount

Other Income

Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Excess/ Short Provision for Income Tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation

Appropriation : Transfer to General Reserve Dividend Proposed(Final) Interim Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet

I

J

KLMNO

90,176,177.5011,933,579.0078,242,598.50880,895.7279,123,494.22

44,779,400.33

6,274,616.001,989,378.564,736,170.331,605.003,615,369.81 613,965,540.03

17,726,954.19(5,500,000.00)191,501.0012,418,455.19

1,035,805.4013,454,260.59

12,000,000.00

209,250.00749,812.5076,480.00418,718.0913,454,260.59


98

Polyhydron Pvt. Ltd.Profit & Loss Account for the year ended 31st March 2003Particulars Sch Amount (Rs)Income Sales Less: Trade Discount

Other Income

Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Deferred Tax Adjustment Excess/ Short Provision for Income Tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation

Appropriation : Transfer to General Reserve Dividend: Proposed(Final) Interim Dividend Provision for Corporate Dividend Tax Balanced Carried to Balance Sheet

I

J

KLMNO

123,058,719.9016,623,942.00106,434,777.901,127,102.90107,561,880.80

59,518,046.01

6,021,954.202,503,042.415,984,892.6916,975.003,932,246.14 77,977,156.45

29,584,724.35(10,000,000.00)1,375,058.00158013.0018,367,679.35

418,718.0918,786,397.44

16,000,000.00

1,220,625.000.00156,393.001,409,379.4418786,397.44


99

Polyhydron Pvt. Ltd.Profit & Loss Account for the year ended 31st March 2004Particulars Sch Amount (Rs)Income Sales Less: Trade Discount

Other Income

Expenditure : Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Deferred Tax Adjustment Excess/short provision for Income tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation

Appropriation : Transfer to General Reserve Proposed Dividend Corporate dividend Tax Balanced Carried to Balance Sheet

I

J

KLMNO

157630517.3421266181.00136364336.341884091.80138248428.14

79956380.80

8019583.303376153.007087973.870.004424115.29 102864206.26

35384221.8811000000.001928195.000.0022456026.88

1409379.4423865406.32

20000000.001569375.00205098.002090933.32

23865406.32


100

Polyhydron Pvt. Ltd.Profit & Loss Account for the year ended 31st March 2005

Particulars Sch Amount (Rs)Income Sales Less: Trade Discount

Other Income

Expenditure :

Material Consumed Emoluments to and Provisions for Employees Manufacturing Expenses Administrative & Selling Expenses Interest Depreciaton Profit before Taxation Provision for Taxation Deferred Tax Adjustment Excess/short provision for Income tax Net Profit Balance Brought Forward from Previous Year Profit available for appropriation Appropriation : Transfer to General Reserve Proposed Dividend Corporate dividend Tax Balanced Carried to Balance Sheet

I

J

KLMNO

194,391,257.9126,461,988.00167,929,269.913,408,823.66171,338,093.57

101613720.51

10418006.008831347.224904786.160.005091824.58130859684.4740478409.1013000000.001343918.00 0.0026134491.10

2090933.3228225424.42

23151068.001848375.00259235.002966746.4228225424.42


101

Polyhydron pvt. Ltd.Balance Sheet as at 31st March 2000ParticularsSources of FundsShareholders Funds a) Share Capital b) Reserve & SurplusLoan FundSecured LoansUnsecured LoansTotal

Application of FundsFixed AssetsGross BlockDepreciationNet BlockCapital work in progress

Investments

Current Assets Loans & AdvancesInventorySundry DebtorsCash & Bank balanceOther current AssetsLoans & Advances

Current Liabilities & ProvisionsCurrent LiabilitiesProvision

Net Current AssetTotal

Sch.

AB

CD

E

F

Amount

3,487,500.0059,042,795.97

____

61,022,127.9111,914,795.8249,107,332.092127803.40

3,982,026.844509093.465913957.8028,341.774,329,474.6518,762,894.52

6438784.041038450.007,477,234.04

Amount

62,530,295.97

_____________62,530,295.97

51,235,135.49

9500.00

11285660.4862530295.49


102



Investments


Current Liabilities & ProvisionsCurrent LiabilitiesProvisionNet Current AssetTotal

Sch.

AB

CD

E

F

Amount

3,487,500.0071,203,205.40____

72,445,401.0614,492,454.9857,952,946.08661,812.90

5,636,731.455,524,714.279,092,050.5558,444.773437459.7423,749,400.78

6,358,245.861,324,708.507,682,954.36

Amount

74,690,705.40

_____________74,690,705.40

58,614,758.98

9500.00

16,066,446.4274,690,705.40


103


Application of Funds

Fixed AssetsGross BlockDepreciationNet BlockCapital work in progressInvestments


Current Liabilities & Provisionsa)Current Liabilitiesb)Provision


Sch.

AB

CD

E

F

Amount

3,487,500.0082,586,118.09

____

78,535,008.9716,288,541.9762,246,467.002,197,364.90

6383108.915458492.5410,598,594.619024.002530629.0024,979,849.06

29,59,930.87394,632.003,354,562.87

Amount

86,073,618.09

_____________86,073,618.09

64,443,831.90

4500.00

21,625,286.1986,073,618.09


104

Polyhydron pvt. Ltd.Balance Sheet as at 31st March 2003ParticularsSources of FundsShareholders Funds a) Share Capital b) Reserve & SurplusLoan FundSecured LoansUnsecured LoansDeferred Tax Balance Deferred Tax liabilities [less] Deferred Tax assets

Application of FundsFixed AssetsGross BlockDepreciationNet BlockCapital work in progressInvestmentsCurrent Assets Loans & AdvancesInventorySundry DebtorsCash & Bank balanceOther current AssetsLoans & Advances



Sch.

AB

CD

E

F

Amount

3,487,500.0088,425,711.44

____

13,106,352.00580,226.00

92,764,524.1618859757.3273904766.842298058.90

5,862,566.508,963,006.2917,539,009.8843,024.001,959,061.7834,366,668.45

4502472.751632184.006,134,656.75

Amount

91,913,211.44

12,526,126.00104,439,337.44

76,202,825.744500.00

28,232,011.70104,439,337.44


105

Polyhydron pvt. Ltd.Balance Sheet as at 31st March 2004ParticularsSources of FundsShareholders Funds a) Share Capital b) Reserve & SurplusLoan FundSecured LoansUnsecured LoansDeferred Tax liabilities Total


Investments

Deferred Tax AssetCurrent Assets Loans & AdvancesInventorySundry DebtorsCash & Bank balanceOther current AssetsLoans & Advances

Current Liabilities & ProvisionsCurrent LiabilitiesProvisionNet Current AssetTotal

Sch.

AB

CD

E

F

Amount

3,487,500.00109107265.32

____

109361707.5222998420.2786363287.252305850.90

7257595.919785217.3625804229.2563930.002962688.1023,749,400.78

5421145.452077067.007498212.45

Amount

112594765.32

_____________112594765.32

14522346.00127117111.32

88669138.15

4500.00

68025.00

38375448.17127117111.32


106

Polyhydron pvt. Ltd.Balance Sheet as at 31st March 2005ParticularsSources of FundsShareholders Funds a) Share Capital b) Reserve & SurplusLoan FundSecured LoansUnsecured LoansDeferred Tax liabilities Total


Investments




Sch.

AB

CD

E

F

Amount

3,487,500.00133,134,146.42____

126,494,000.79 25,671,425.59100,822,575.20 1,969,951.90

13,089,152.0017,827,350.7323,739,746.57104,467.085312,159.8460,072,876.22

7,828,695.912621321.9910450017.90

Amount

136,621,646.42

15,798,239.00

152,419,885.42

102,792,527.104500.00

49622858.32152,419885.32


107

2 - BIBLIOGRAPHY

1. Prasanna Chandra, “Financial management”

Tata MC Grew Hill Publishing. Pp – 557- 580

2. I.M pandey, “Financial management”

Vikas publishing, PP – 108 – 180.

3. R.P Rustagi, “Financial management”

Galgotia Publishing Company

4. M.Y Khan “Financial management”


108

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