project reoprt on sidco 2010 - 2013

PROJECT REPORT ON“A STUDY ON THE FINANCIAL PERFORMANCE OF

SIDCO”

Submitted to the regular fulfillment of the requirementsFor the award of degree of

BACHELOR OF BUSINESS ADMINISTRATION

By

SHANAVAS.S, SACHIN U.G,&

ARUN J MOHAN ANANTHU GOKULUnder The Guidance of

Mrs.S.KUMARIPREETHA[Lecturer in Commerce]

UNIVERSITY INSTITUTE OF TECHNOLOGY

NEYYATTINKARA CENTRE

UNIVERSITY OF KERALA

2011 – 2014

PROJECT REPORT ON“A STUDY ON THE FINANCIAL PERFORMANCE OF

SIDCO”

Submitted to the regular fulfillment of the requirementsFor the award of degree of

BACHELOR OF BUSINESS ADMINISTRATION

By SHANAVAS.S SACHIN U.G (Reg. no:12234567) (Reg.no:12345679) & ARUN J MOHAN ANANTHU GOKUL (Reg. no:12345678) (Reg.no:12345678)

Under The Guidance ofMrs.S.KUMARIPREETHA

[Lecturer in Commerce]


NEYYATTINKARA CENTRE

UNIVERSITY OF KERALA

2011 - 2014


NEYYATTINKARA CENTRE UNIVERSITY OF KERALA

CERTIFICATE

This to certify that the project report titled “A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO” submitted by SHANAVAS.S,SACHIN U.G,ARUN J MOHAN,ANANTHU GOKUL in partial fulfillment of the requirements for the award of Degree of Bachelor of Business Administration, University of Kerala, is the project work undertaken by during the year 2011-2014 under my supervision and guidance.

Prof. N. SADASIVAN NAIR Smt. S. KUMARIPREETHA

Principal Lecturer in CommerceUniversity Institute of Technology University Institute of TechnologyUniversity of Kerala University of KeralaNeyyattinkara Centre Neyyattinkara Centre

(Seal)

DECLARATION

We undersigned, SHANAVAS.S,SACHIN U.G,ARUN J MOHAN,ANANTHU GOKUL, hereby declare that this this project entitled “A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO”, Thiruvananthapuram has been done under the guidance of S.KUMARIPREETHA LECTURER In commerce,University Institute of Technology Neyyatinkara Centre, Trivandrum.We also declare that this project report has not been submitted by us fully or partial for the award of any degree or diploma earlier.

Signature

SHANAVAS.S

Date : /03/2013 SACHIN U.G

Place : Thiruvananthapuram ARUN J MOHAN

ANANTHU GOKUL

ACKNOWLEDGEMENT

Gratitude is certainly to be placed on record at the right time with the right sense of morality.

In take this opportunity to acknowledged by indebtedness to all those who have helped me in carrying my project work. We express our sincere thanks to Prof. N. SADASIVAN NAIR Principal, UIT, Neyyattinkara centre for his encouragement and efficient help.

We are thankful to Smt. S.KumariPreetha Lecturer in Commerce, University Institute of Technology Neyyattinkara Centre, University of Kerala for the valuable advices and timely assistance during the course of the study. We express my sincere gratitude to Mr. Dinu Raj.R.P, Upper Division Accountant of SIDCO and Mr. K. SASI, Sr. Manager for Accounts in this Organization.

We express my thanks to all my teachers, friends and classmates for their support and encouragement. And finally, we bow head before GOD Almighty who blessed me with enough physical and mental strength for successful completion of project.

CONTENTSChapter Description Page No

LIST OF TABLES

LIST OF CHARTS

1 INTRODUCTION OBJECTIVES OF THE STUDY SCOPE AND SIGNIFICANCE OF THE STUDY RESEARCH METHODOLOGY LIMITATION OF THE STUDY

1 – 8

2 REVIEW OF RELATED LITERATURE

2.1 COMPANY PROFILE 2.2 INDUSTRY PROFILE 2.3 WORKING CAPITAL MANAGEMENT 2.4 FINANCIAL STATEMENT

9 – 27

3 ANALYSIS AND INTERPRETATION 28 - 80

4FINDINGS

SUGGESTIONS

CONCLUSION

81 - 85

5 APPENDIX 86 -

6 BIBILIOGRAPHY

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 2014

LIST OF TABLES

Sl no. Particulars Page no.I LIQUIDITY RATIOS

a. Current Ratiob. Quick Ratioc. Absolute Liquidity Ratio

29 - 34

II LEVERAGE RATIOSa. Proprietary Ratiob. Fixed Asset To Net Worth

35 - 38

III ACTVITY RATIOSa. Fixed Asset Turn over Ratio 39 - 40

IV PROFITABILITY RATIOSa. Net Profit Ratiob. Operating Ratioc. Return On Total Assetd. Return On Shareholder’s Fund

41 - 48

V Comparative Balance sheet 2007 - 2008 60VI Comparative Balance sheet 2008 - 2009 61VII Comparative Balance sheet 2009 - 2010 62VIII Comparative Balance sheet 2010 - 2011 63IX Comparative Balance sheet 2011 - 2012 64X Common size Income Statement 2007 66XI Common size Income Statement 2008 67XII Common size Income Statement 2009 68XIII Common size Income Statement 2010 69XIV Common size Income Statement 2011 70XV TREND ANALYSIS

a. 2007b. 2008c. 2009

72 - 80

XVI BALANCE SHEETa. 2007 – 2008b. 2008 – 2009c. 2009 – 2010d. 2010 – 2011e. 2011 – 2012

86 -

LIST OF CHARTS

Sl NO: PARTICULARS Page No:I LIQUIDITY RATIO

a. Current Ratio 49

b. Quick Ratio 50c. Absolute Liquidity Ratio 51

II LEVERAGE RATIOS

a. Proprietary Ratio 52b. Fixed Asset To Net Worth 53

III ACTVITY RATIOSa. Fixed Asset Turn over Ratio 54

IV PROFITABILITY RATIOS

a. Net Profit Ratio 55b. Operating Ratio 56

c. Return On Total Asset 57

d. Return On Shareholder’s Fund 58


CHAPTER - 1

INTRODUCTION


INTRODUCTION OF THE STUDY The financial statement of the company provides a rich information about the operational result of the company and much can be learned from a careful examination of these statement for decision making purpose. The profit and loss account and balance sheet are indicators of two significant factors – profitability and financial soundness.

The financial statements are mirrors which reflect the financial position and operating strength or weakness of the company. A proper analysis and interpretation of these statements enable a person to judge the profitability and financial strength of the company. Financial analysis includes detailed enquiry of financial data. It is a grad – stick which measures relationship between variables. It is the technique to check upon the efficiency with which working capital is being used in the company.

The company can easily perform forecasting, inter-firm comparison, cost control through financial analysis. Financial analysis is the powerful tool in the hands of the management. So it always maintains a significant value to the management.


DESIGN OF THE STUDY


Objectives

The main objectives of the study are:-

To analyse liquidity position of the company. To analyse profitability and financial soundness of the company. To analyse fixed asset, working capital and total asset. To ascertain the nature of assets and liabilities of the firm. To analyse net worth of the company. To disclose the information according to the needs of the user.


Scope and significance of the study

The scope of financial statement analysis is comparatively wider than other method of analisation and this include both analysis and interpretation of the financial data. The financial statements are the mirror which reflects the financial position and operating strength or weakness of the concern. Through the interpretation anything change can be making in the financial structure of the organization and study the running in various situations in the economy and find out solution to the financial position to arrived change to loss.

Collection of data

The secondary data have been used for the study. The secondary data have been obtained from annual reports and other published documents of the company. Besides, information has also collected from various books connected with the subject.

Tools of Analysis

For analysing data simple mathematical and percentages has been employed.

Period of Study

A five year period was taken for the purpose of the study beginning from the financial year 2007 – 2008 and ending on the financial year 2011 – 2012.


RESEARCH METHODOLOGY

Research methodology is a science. It is a way to systematically solve the research problem. It explains why a research has been undertaken, how the research problem has been defined, in what way and why the hypothesis has been formulated, what data have been collected, how to calculate various statistical measures how to apply a particular research technique, which of the various research method available is more relevant and so on. Research methodology helps in studying how research is done scientifically. Research methodology provides various steps that can be adopted by the researcher in studying his research problems. Research methodology explains why we are using a particular method and why we are not using another so that research results are capable of being evaluated either by the researcher or by others. The research design refers to preplanning of what a researcher does in his study. The design adopted in the study comes under exploratory and evaluatory research. Since the data collected from the financial statements of the company is analyzed under various financial and tactical tools. Research design indicates the plan if action to be carried out in connection with a proposed research work. As such the design includes an outline of what the researcher will do from writing hypothesis and its operational implications to the final analysis of data in operational point of view.

DATA COLLECTION: The study is based on the two types data is obtained from the Kerala SIDCO, Thiruvananthapuram. They are;

Primary Data Secondary Data

Primary Data Primary data obtained through the discussion with staffs of the Kerala SIDCO, Thiruvananthapuram.

Secondary Data Secondary data is based on the past data, i.e. [Five year annual reports 2008 – 2012]


Limitations of the study

The study has the following limitations:-

The study is done by applying the tool of ratio analysis. So the report may suffer from the disadvantages of ratio analysis.

The findings are arrived based only on five years under study. The sources information for this project belongs to annual reports published

by the organization. Time constraint is also a limiting factor.


RATIO ANALYSIS – AN OVERVIEW

Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “the indicated quotient of two mathematical expressions” and as “the relationship between two or more things”. The relationship between the two figures expressed mathematically is called ratio.

Significance of Ratio Analysis

Basically, ratio analysis is useful to the same extent and in the same way, for financial analysis a statistics are useful in the study of numerical aspect of a problem. It simplifies, summarizes and systematizes a long array of accounting figures. The following are its advantages:-

i) It is an instrument for diagnosis of the financial health of an enterprise. It facilitates the comprehension of financial statement and evaluation of several aspects such as profitability and operational efficiency of the undertaking.

ii) Ratio analysis can be of invaluable aid to management in the discharge of its basic function of forecasting, planning, co-operation, communication and control with the help of trend analysis which is possible.

iii) It provides inter-firm comparison to measure efficiency and helps the management to make remedial measures.

iv) It is helpful in forewarning corporate sickness and helps the management to take remedial measures.

v) It helps in investment decisions in the case of investor and lending decisions in the case of banks and financial institutions.

vi) It helps to ascertain the soundness of the firm.


LIMITATIONS OF RATIO ANALYSIS

Ratio analysis has a number of pitfalls and in many respects it is equally important to have an idea of these as it is to know the mechanization process of calculating ratios any deriving results. They are as follows:-

1. Ratios are useful so far as they give expression to a study of the relative aspect of a problem because ratio is meaningless by itself and acquire significance only when it is studied with other ratios.

2. Ratios are tools of quantitative analysis and it is quite possible that quantitative factors may over ride numerical aspects.

3. The data are usually estimates. Estimates regarding the life of the assets, the rate of depreciation, provision for doubtful debts etc. may or may not correct.

4. Ratio analysis is only a beginning and gives just a fraction of information needed for decision making.

5. In a way ratios are an attempt of delve in the past as financial statements, from which they are derived, are historical documents. On the other hand in modern business it is more important to have an idea of the probable happening in future rather than those in the past.

6. Ratio share with other statistical concepts all the limitations of the later-determination of proper standard for comparison, lack of the homogeneity of data, danger of fallacious conclusions if accounting data is form from its context, susceptibilities of the accounting data to manipulation etc., and to that extent, ratio analysis becomes weak as a tool of financial analysis.

7. In the ratio analysis arithmetical window dressing is possible and firms may be successful in concealing the real position.


CHAPTER - 2

REVIEW OF RELATED LITERATURE

2.1 COMPANY PROFILE2.2 INDUSTRY PROFILE2.3 WORKING CAPITAL MANAGEMENT2.4 FINANCIAL STATEMENT


2.1 PROFILE OF THE COMPANY

The Kerala SIDCO, a government owned public sector corporation, was established in November 1975 for the development and promotion for small scale industries. Currently, SIDCO IS expanding its area of works by diversification to give new vision to the small scale industries.

God’s own country, Kerala, is gifted with abundant natural resources essential for establishing industrial units and SIDCO is taking the initiative to set up industrial units. Kerala SIDCO is the ‘Total solution provider’ for small scale sector as it offers all facilities and help to set up a small scale unit.

This corporation is rendering valuable assistance to small scale units in the state, including consultancy at the beginning of the project to the identification of industrial site, commissioning of project, providing infrastructure facilities, distribution of essential raw material, marketing of the small scale industrial products, undertaking civil and electrical works, and setting up of the small scale unit, Kerala SIDCO competently handles the necessary requisites of any project.

Kerala SIDCO is now in the path of considerable profit and is now granting basic facilities and marketing security to the industrialists and new entrepreneurs through its diversified activities and new working style.


ORGANIZATIONAL STRUCTURE

CHAIRMAN

MANAGING DIRECTOR

GM i/c

EI&P

Division

CE i/c

(Construction Division)

HEAD

(ProductionDivision)

PD&M

(MD’sSect.)

AV/VO

(PersonnelDivision)

PRO

(PublicRelationsDivision)

Head (F&A)

(Accounts division)

Senior Manager(Head-IE Division)(Industrial Estate

Division)

AGM

(IT & TCDivision)

EstateOfficer

AGM

(Head)R.M.

Division

SeniorManager

(Marketing)

AGM

(Industrial Park

Division)

Manager(Admn)

VigilanceSn.

8 ProductionUnits

17 IndustrialEstates &36 MiniIndustrial Estates

14 R.M.Depots

7 Emporia & 7 marketing Centre’s &

2 Marketing Cells

Industrial Parks

(7 Industrial

Parks)


2.2 INDUSTRIAL PROFILE

SIDCO

Ever since its establishment in 1975 by amalgamating erstwhile Kerala Small Industries Corporation and Kerala Employment Promotion Corporation, Kerala SIDCO caters overarching needs of Small Scale Industries in the State -provision for land and building, supply of scarce raw materials at low cost, marketing of MSME Products etc to name a few. SIDCO is a fully owned Government Corporation with its registered office at Trivandrum. SIDCO owns and operates production units, raw materials depots, Industrial Estates/ Mini Industrial Estates, marketing cell/emporia/centers, Civil Construction Division, IT&TC Division, Export & Import/ Project Division and Industrial Parks. Kerala SIDCO has been distinguished as No.1 SIDCO among South Indian SIDCO’s during 2010-2011 in the wake of the achievement of an unprecedented turnover of Rs.127.81 Crores. Add to its credential, Government of Kerala recognized the IT&TC Division of Kerala SIDCO as a Total Solution Provider to Government of Kerala. During 2011-12, SIDCO achieved a total turnover of Rs. 204 crores from its activities with a profit of Rs. 2.39 crores.

The various divisions under Kerala SIDCO include;

1. Marketing Division

2. Production Division

3. Industrial Estate Division

4. Industrial Park Division

5. Raw Material Division

6. Construction Division

7. IT&TC and Trading Division

8. Export, Import & Project Division

9. Consultancy Division


Marketing Division

SIDCO provides marketing support to Micro Small and Medium Enterprises functioning in the State. During 2010-11 a total of 50.71 Crore worth SSI Products have been marketed successfully to various Government Departments and PSU’s. In the course of this mission, we have contributed Rs.103 lakhs to state exchequer towards collections and remittance of VAT. During 2012-13, the division achieved a turnover of Rs. 74 crores. SIDCO is also entrusted as the nodal agency for the fixing of prices for electrical items-one among the reserved items for MSME Sector.

Production Division

SIDCO owns 8 Production Units across the States, manufacturing Wooden and Steel Furniture, Survey equipments, Pressure Die Cast Components, Jigs and fixtures and machining of precision component. A major expansion and modernization policy has set in motion to transmute the Division to enlarge the product line.

Industrial Estate Division

SIDCO presently manages 17 major Industrial Estates and 36 Mini Industrial Estates. These estates are the havens of numerous SSIs, where SIDCO provides common infrastructural facilities for all the units.

Industrial Park Division

Government has devised Industrial Park as a tool for developing industries in our State for which SIDCO is accepted as a Nodal Agency for constructing such Parks. Government of Kerala envisages at least one IP in each assembly constituency as a measure for employment generation. In this venture, SIDCO has completed 7 Industrial Parks that host 218 Industrial Units with a direct employment opportunity for nearly 1000 people.


Raw Material Division

This division aims to distribute scarce raw materials to small scale industries. As low cost raw materials is inevitable to sustain the MSME in the field owing to cutthroat competition, SIDCO sacrificing its margin while supplying essential raw materials at the lowest possible cost. The Division achieved a turnover of Rs.54 Crore during 2010-11 and 79 crores during 2011-12. SIDCO seeks to widen its horizon by working in tandem with other central and state public sector undertaking for the best help of MSME Sector.

Construction Division

Our Civil Construction Division that undertakes civil construction works caters the needs for various PSU’s, Tourism Department, various Government Departments, Industrial Estates / Mini Industrial Estates etc. The Division is at the behest of a Chief Engineer whose mission is assisted and supplemented by a group of experienced civil and Electrical engineers. The Division offers a host of integrated services-Structural design, preparation of detailed estimate, surveying, execution and management of civil and electrical works.

IT&TC Division

The division, now conferred as a Total Solution Provider of Government of Kerala undertakes all gamuts of activities related to the arena of information technology. Now it ventures Telecom City, a major project with a total outlay of Rs.600 Crores on BOT basis with a 50000 Nos of prospective employment opportunities. The prestigious Tool Room cum Training Centre with state-of- the art technology, set up with a total outlay of Rs. 12 crore for the manufacture of tooling equipments and training is also functioning under the Division.

Export, Import & Project Division

This division is created to undertake special projects. Under this division it is proposed to start IOC/ONGC Petro/Diesel Pumps at Cherthala, Ollur, Kanichukulangara, Olavakkode, Pachalam and Ernakulam. This division also undertakes supply / installation of LED Street Lights, e-toilets, High Security Number Plates etc. SIDCO is playing a vital role for the promotion of Small Micro and Medium Industries in the State that provides more than 10000


Direct employment opportunities and over 20,000 indirect employment opportunities, its activities to lift this sector is very vital from social and economic view point.

Consultancy Division

This division is mainly constituted for assisting entrepreneurs and Government/semi Government institutions right from project development to its execution. Consultancy extends its service for project development, preparation of project report, assistance for obtaining term loans and finally its implementation. So far the division has bagged a handful of prestigious project for the consultancy services.


2.3 WORKING CAPITAL MANAGEMENT

Working capital refers to that part of the capital which is required for financing short-term or current assets such as cash, marketable securities, debtors and inventories. Funds thus invested in current assets keep revolving fast and are being constantly converted into cash and this cash flow out again in exchange for other current assets. Hence, it is also known as revolving or circulating capital or short-term capital.

The working capital requirements of a concern depend upon a large number of factors such as:

1. Nature or character of business.2. Size of business/ scale of operations.3. Production policy.4. Manufacturing process/ length of production cycle.5. Seasonal variation.6. Working capital cycle.7. Rate of stock turnover.8. Credit policy.9. Business cycle.10. Rate of growth of business.11. Earning capacity and dividend policy.12. Price level changes.13. Other factors.

To avoid the shortage of working capital at once, an estimate of working capital requirements should be made in advance so that arrangements can be made to procure adequate working capital. The working capital should be determined by estimating the investments in current assets minus money expected from current liabilities. The following factors should be taken into consideration while making an estimate of working capital requirements:

1. Total assets incurred on material, wages and overhead.2. The length of time for which raw materials are to remain in stores

before they are issued for production.3. The time taken for conversion of raw material into finished goods.4. The length of sales cycle during which finished goods are to be kept

waiting for sales. 5. The average period of credit allowed to customers.6. The amount of required to pay day-to-day expenses of the business.7. The average amount of required to make advance payments, it any.8. The average credit period expected to be allowed by suppliers.9. Time lag in payment of wages and other expenses.


From the total amount blocked in current assets estimated on the basis of the first seven items given above, the total of the current liabilities, i.e. the last two items deducted to find out the requirements of working capital.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 162.4 FINANCIAL STATEMENT

Meaning:

Financial Statement is an organized collection of data according to logical and consistent accounting procedures. Its purpose is to convey an understanding of some financial aspects of a business firm. It may show apposition at a moment of time as in the case of a balance sheet or may reveal a series of activities over given period of time as in case of an Income statement. The statements are the source of information on the basis of which conclusion is drawn about the probability and financial position of the concern. The primary objective of the financial statement is to assist in decision making.

Thus, the term 'financial statements' generally refers to two basic statements.

i. The income statement and

ii. He Balance sheet of course , a business may also prepare

iii. A statement of Retained earnings and

iv. A statement of changes in financial position in addition to the above two statements.

The meaning and significance of each of the statement is being explained below:

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 17 Income Statement

Financial Statement

Income Statement

Balance sheet

Statement of Retained Earnings

Statement Of changes in

financial position

The income statement is generally considered to be the most useful of financial statements. It explains what has happened to a business as a result of operation between two balance sheet dates. For this purpose it matches the revenue and costs incurred in the process of earning revenues and shows the net profit earned or loss suffered during a particular period.

Balance Sheet

It is a statement of financial position of a business at a specified moment of time. It represents all assets owned by the business at a particular moment of time and the claims of the owners and outsider5 against those assets that time.

Statement of Retained Earnings

The term retained earnings means the accumulated excess of earnings over loss & dividends. The statement is also termed as Profit & Loss appropriation Account in case of companies.

Statement of Changes in Financial Position (SCFP)

The Balance Sheet shows the financial condition of the business at a particular moment of time while the Income Statement discloses the result of operation of business over a period of time.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 18ELEMENTS OF FINANCIAL STATEMENT

The main purpose of financial statements is to provide financial information to the users to assist them in their economic decisions. The financial statement basically presents the financial information in such form that it is not only understandable but also useable. That is why financial statements present the financial effects of different business events that also include business transition.

In order to enhance the quality information in financial statements, business transaction is grouped in different classes or categories on the basis of their economic characteristics. The board classes or categories are called elements of financial statements. There are five elements of financial statements which are as follows.

a. Assets

b. Liabilities

c. Equity

d. Income

e. Expense

Frame work went on further to explain which combination of elements are used to measure financial position, financial performance and changes in financial position of the study.

The elements directly related to the measurement of financial position of the entity are assets, liabilities and equity. There elements are presented in the statement of financial position which was previously known as Balance sheet.

The elements directly related to the measurement of financial performance of the entity are income and expense. These elements are presented in the income statement.

The element directly related to the measurement of changes in financial position involves the elements of both balance sheet and income statement and depends on the circumstances. So elements that are used to measure the change in financial position cannot be strictly specified.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 19 Statement of changes in equity and statement of cash flows collectively provide

an insight into the changes in financial position of the company. And as we how

both of these statements involves mostly all of the above five items and sometimes less therefore, elements are not mentioned in the framework for such measurement.

IMPORTANCE OF FINANCIAL STATEMENT

At regular period public companies must prepare documents called financialstatements. Financial statements show the financial performance of the company. Theyare used for both internal & external purposes. When they are used internally, themanagement & sometimes the employees use it for their own information. Managersuse it to plan ahead & set goals for upcoming periods. When they use financialstatements that published, the management can compare them with their internally

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 20TYPES OF FINANCIAL ANALYSIS

Financial analysis can be classified into different categories depending upon.

I. The material used,

ii. The modus operandi of analysis

1) On the Basis of Material Used.

i. External analysis

This analysis is done by those who are outsiders for the business. The term outsiders include investors, credit agencies, government agencies and other creditors who have no access to the internal records of the company. These persons mainly depend upon the published financial statements. Their analysis serves only a limited purpose. The position of these analysis has improved in recent times on account of increased governmental control over companies and governmental regulation requiring more detailed disclosure of information by the companies in their financial statements.

ii. Internal analysis

This analysis is done by persons who have access to the books of account and other information related to the business. Such analysis can therefore, be done by executives and employees of the organization or by officers appointed for this purpose by the Govt. or the court under powers vested in them. The analysis is done depending upon the objective to be achieved through this analysis.

2) On the Basis of Modus Operandi

According this financial analysis can also be of two types;

i) Horizontal Analysis

In case of this type of analysis, financial statements for a number of years are reviewed and analyzed the current year's figures are compared with the standard or base year. The analysis statement usually contains figures for two or more years and the changes are shown regarding each item from the base year usually in the form of percentage. Such an analysis - gives the management considerable insight into levels


areas of strength and weakness. Since this type of analysis is based on the data from year to year rather than on one date, it's also termed as 'Dynamic Analysis'.

ii) Vertical Analysis

In case of this type of analysis a study is made of the quantitative relationship of the various items in the financial statements on a particular date. For example, the ratios of different items of costs for a particular period may be calculated with the sales for that period. Such an analysis is useful in comparing the performance of several companies in the same group, or divisions or departments in the same company. Since this analysis depends on the data for one period, this not very conductive to a proper analysis of the company's financial position. It is also called 'Static Analysis’s it is frequently used for referring to ratios developed on one date or for one accounting period.

It is to be noted that both analyses- vertical and horizontal- can be done simultaneously also. For example, the Income Statement of a company for several years may be given. Horizontally it may show the change in different elements of cost and sales over a number of years. On the other hand, vertically tie, may show the percentage of each element of cost to sales.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 22TECHNIQUES OF FINANCIAL ANALYSIS

A financial analyst can adopt one or more following techniques/ tools of financial analysis.

1. Comparative Financial Statements

Comparative financial statements are those statements which have been designed in a way so as to provide time perspective to the consideration of various elements of financial position embodied in such statements. In these statements figures for two or more periods are placed side by side to facilitate comparison.

Both the Income statement and Balance sheet can be prepared in the form of comparative financial statements.

i) Comparative Income Statement

The Income Statement discloses Net profit or Net loss on account of operations. A comparative Income statement will show the absolute figures for two or more periods, the absolute change from one period to another and, if desired, the change in terms of percentages. Since the figures for two or more periods are shown side by side, the reader can quickly ascertain whether sales has increased or decreased, etc. Thus only a reading of data included in comparative income statements will be helpful in deriving meaningful conclusions.


Financial Analysis

Techniques

Comparative financial

Statement

Common Size Financial

Statements

Trend Percentages

Fund Flow Analysis

Cash Flow Analysis

CVP Analysis

Ratio Analysis

ii) Comparative Balance sheet

Comparative Balance sheet as on two or more differentiates can be used for comparing assets and liabilities and finding out any increase or decrease in those items. The changes in periodic balance sheet items reflect the conduct of the business. The changes can be observed by comparison of the balance sheet at the beginning and at the end of the period and those changes can help in forming an opinion about the progress of an enterprise.

2. Common size Financial Statements

Common size financial statements are those in which figures reported are converted into percentages to some common base. In the Income Statement the sale figure is assembled to be100 and all figures are expressed as a percentage of this total. It is also known as 100% statements. Common size statement includes common size balance sheet and common size income statement.

i) Common size Balance sheet

A statement in which balance items are expressed as percentage of each asset to total of assets and percentage of each liability total of liabilities is called common size balance sheet. This statement establishes the relationship between each asset to total value of assets and each liability to total of liabilities.

ii) Common size Income Statement

A common size income statement is a statement in which each item of expense is as shown as percentage of net sales. A significant relationship can established between items of income statement and volume of sales.

3. Trend Percentages

Trend percentages are immensely helpful in making comparative study of the financial statement for several years.

The method of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base


year. The method of trend percentage is a useful analytical device for the management since by substituting percentage for large amounts; the brevity & read ability are achieved.

4. Funds Flow Analysis

Funds flow analysis has become an important tool in the analytical kit of financial analysts, credit granting institution & financial managers. This is because the Balance Sheet of a business reveals its financial status at a particular point of time. Funds flow analysis reveals the changes in working capital position. It tells about the source from which the working capital was obtained & the purpose of which it was used.

5. Cost Volume Profit Analysis

Cost Volume Profit Analysis is an important tool of profit planning. It studies the relationship between cost, volume of production, sales & profit. It tells the volume of sales at which the firms will break-even, the effect on profit on account of variation in output, selling price & cost, & finally, the quantity to be produced & sold to reach the target profit level.

6. Ratio Analysis

This is the most important tool available to financial analysts for their work. An accounting ratio shows the relationship in mathematical terms between to inter related accounting figures. These ratios may be compared with the previous year or base year ratios of the same firm. A comparison may also be made with the selection firms in the same industry.


CLASSIFICATION OF ACCOUNTING RATIOS


Accounting Ratios

Traditional Functional

P&L A/C Ratios

Balance sheet Ratios

Composite Ratios

Financial Ratios

Turn over RatiosCoverage

Ratios

Profitability Ratios

Stability Ratios

Liquidity Ratios

LIMITATIONS OF FINANCIAL ANALYSIS

Financial statements are based on historical costs and as such the impact of price level changes in completely ignored. They are incurring reports. The basic nature of financial statements is historic. These statements are neither complete nor exact. They reflect only monetary transactions of a business. The following limitations may be noted.

The financial position of a business concern is affected by several factors-economic, social and financial, but financial factors are being recorded in these financial statements. Economic and social factors are left out. Thus the financial position disclosed by these statements is not correct and accurate.

The profit revealed by the profit and loss account and the financial position disclosed by the Balance sheet cannot be exact. They are essentially interim reports.

Facts which have not been recorded in the financial books are not depicted in the financial statement. Only quantitative factors are taken into account. But qualitative factors such as reputation and prestige of the business with the public, the efficiency and loyalty of its employees, integrity of management etc. do not appear in the financial statement.

Many items are left to the personal judgment of the accountant. For example, provision of depreciation, stock valuation, bad debts provisions etc. depend on the personal judgment of accountant.

On account of convention of conservation the Income Statement may not disclose true income of the business since probable losses are considered while probable incomes are ignored.

The fixed assets are shown at cost less depreciation the basis of "going concern concept" (one of the accounting concept). But the value placed on the fixed asset may not be the same which may be realized on their sale.

The data contained in the financial statements are dumb; they do not speak themselves. The human judgment is always involved in the interpretation of statement. It is the analyst or user who provides to those data and makes them to speak.


CHAPTER – 3

ANALYSIS AND INTERPRETATION


ANALYSIS AND INTERPRETATION OF RATIO

A. LIQUIDITY RATIOS:

Liquidity is the ability of the firm to meet its current liabilities as they fall due. Since liquidity is basic to continuous operations of the firm it is necessary to determine the degree of liquidity of the firm. The financial manager analyses the following important ratios for this purpose:

1. CURRENT RATIO

Current ratio is the relationship between current assets and current liabilities. It reveals how efficiently the firm can meet the short term demand. Current assets include cash in hand, debtors, bills receivables, short term marketable securities and inventories. Current liabilities include creditors, bills payable, bank overdraft, provision for taxation, unclaimed dividend and outstanding expenses. Current ratio is also called working capital ratio. Current ratio can be calculated by using the formula;

Current ratio = Current Asset Current Liabilities

Current ratio of 2:1 is treated as ideal for determining short term solvency of the business.

The current assets of SIDCO include inventories, sundry debtor’s cash and bank balances, other current assets and loans and advances. Current liabilities are creditors and other liabilities and provisions. Current assets, current liabilities and current ratio of SIDCO is given in Table - 1


Table – 1CURRENT ASSETS, CURRENT LIABILITIES AND CURRENT RATIO

OF SIDCO DURING 2006-2007 TO 2010-2011

Year Current Asset Current Liabilities Current Ratio

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

232926204

252665320

311296522

396799717

482881737

433012441

419974517

475949952

559027665

631671439

0.53

0.60

0.65

0.70

0.76

Source: Complied from Annual Report

Interpretation: In the year 2006– 2007, the current ratio was 0.53 and increased to 0.76. An increase in current ratio represents in improvement in liquidity position of the company. The standard of the current ratio is 2: 1.


2. QUICK RATIO

This ratio is a measure of judging the immediate ability of the company to pay off its current obligations. This is calculated by dividing quick assets by current liabilities. A quick ratio of 1:1 is considered as a standard rate.

The quick assets of the company include cash, debtors, loans and advances and other current assets. Current liabilities include bill payable, creditors and other liabilities and provisions.

Quick ratio = Quick or Liquid AssetCurrent Liabilities

The quick asset, current liabilities and quick ratio of SIDCO is shown in Table – 2


Table – 2QUICK ASSET, CURRENT LIABILITIES AND QUICK RATIO OF

SIDCO DURING 2006-2007 TO 2010-2011

Year Quick orLiquid Asset

Current Liabilities Quick Ratio

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

225109764

239920026

312935521

384079673

468736873

433012441

419974517

475949952

559027665

631671439

0.51

0.57

0.65

0.68

0.74


Interpretation: The standard value of the quick ratio is 1: 1. This graph shows the company can pay off current obligations immediately. In the year 2007 the quick ratio was 0.51 that is increased by 0.74 in 2011.


3. ABSOLUTE LIQUIDITY RATIO

This ratio helps the firm to calculate the cash percentage against the current liabilities. This ratio is also known as cash position ratio. The cash position ratio is the logical consequences of the elimination of inventory from the quick ratios. Here, the debtors are eliminated from the computation of cash position ratio.

Absolute Liquidity Ratio

= Cash + Marketable Securities Current Liabilities

The cash, current liabilities and absolute liquidity ratio of SIDCO shown in Table – 3


Table – 3CASH, CURRENT LIABILITIES AND ABSOLUTE LIQUIDITY RATIO

OF SIDCO DURING 2006-2007 TO 2010-2011

Year Cash Current Liabilities Absolute Liquidity Ratio

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

33928983

52892491

87050383

71452725

86996280

433012441

419974517

475949952

559027665

631671439

0.07

0.12

0.18

0.12

0.13


Interpretation: The acceptable norm for this ratio is 0.5:1. In 2011 the absolute liquidity ratio is 0.13. It is not satisfactory because it is much lower than 0.5.


B. LEVERAGE RATIOS

Many financial analysts are interested in the relative use of debt and equity in the firm. These ratios measure the long term solvency position of the firm. The following are the important leverage ratios:

1. PROPRIETARY RATIO

Proprietary ratio relates to the shareholders fund to total assets. This ratio shows the long term solvency of the business. It is calculated by dividing shareholders funds by the total assets.

Proprietary Ratio = Shareholders FundsTotal Assets

(Shareholders Fund = equity share capital + preference share capital + Reserves and surplus – Fictitious assets)

Total assets include all assets including goodwill (excluding fictitious assets). The acceptable norm of the ratio is 1:3 (i.e.; 0.33).

The shareholders fund, total assets and proprietary ratio of SIDCO shown in Table – 4


Table – 4SHAREHOLDERS FUND, TOTAL ASSETS AND PROPRIETARY

RATIO OF SIDCO DURING 2006-2007 TO 2010-2011

Year Shareholders fund

Total assets Proprietary Ratio

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

241549074

245549074

247833782

250833782

252833782

256561946

269145755

344416880

420941720

508625178

0.94

0.91

0.71

0.59

0.49


Interpretation: In 2006 – 2007 the proprietary ratio was 0.94 and decreased to 0.49 in 2011. It shows that the company is better to meet long term solvency.


2. FIXED ASSET TO NET WORTH

This ratio shows the relationship between fixed assets and shareholders fund. The purpose of this ratio is to find out the percentage of the owners fund invested in fixed assets.

Fixed Assets to Net worth = _______Fixed Assets_________ Net worth or Shareholders Fund

If the ratio is greater than one, it means that creditor’s funds have been used to acquire a part of the fixed assets.

The fixed assets, Net worth or Shareholders Fund of SIDCO

shown in Table – 5

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 37 Table – 5

FIXED ASSETS, NET WORTH OR SHAREHOLDERS FUND OF SIDCO DURING 2006-2007 TO 2010-2011

Year Fixed assets Net worth orShareholders fund

Fixed assets to Net worth

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

23635742

16481435

18769349

24142003

25743441

241549074

245549074

247833782

250833782

252833782

0.09

0.06

0.07

0.09

0.10


Interpretation: In 2006 – 2007 the fixed asset to net worth ratio was 0.09. It increased to 0.10 in 2010 – 2011. It shows the ratio is less than one, so the creditor’s funds have not used to acquire a part of the fixed asset.


C. ACTIVITY RATIOS

The published accounts of a firm also provide a useful data for the measurement of the company’s level of activities. These ratios are also called as “Turnover ratios”. This ratio highlights upon the activity and operational efficiency of the business concern. Activity ratios measure how efficiently the assets are employed by the firm. These ratios indicate the speed with which assets are being converted into sales. These ratios are also called as efficiency ratios.

1. FIXED ASSETS TURNOVER RATIO This ratio indicates the extent to which the investments in fixed assets contribute towards sales. If compared with a previous year, its indicate whether the investment in fixed assets has been judicious or not. The ratio is calculated as follows:

Fixed Assets Turnover Ratio = ___Net Sales____ Fixed Assets

The Net sales, Fixed Assets of SIDCO shown in Table – 6


Table – 6NET SALES, FIXED ASSETS FUND OF SIDCO DURING 2006-2007

TO 2010-2011

Year Net Sales Fixed assets Fixed assets turnover ratio

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

514653049

517668751

505355738

890183779

917536488

23635742

16481435

18769349

24142003

25743441

21.77

31.40

26.92

36.87

35.67


Interpretation: In 2006 – 2007 fixed asset turn over ratio was 21.77; it increased up to 36.87% in 2009 – 2010. But it decreased 35.67 in 2010 – 2011. The ratio indicates the extent in which the investments in fixed assets contribute towards sales.


D.PROFITABILITY RATIOS

A business firm is basically a profit earning organization. The income statement of the firm shows the profit earned by the firm during the accounting period. Profitability is an indication of the efficiency with which the operations of the business are carried on. Poor operational performance may indicate poor sales and hence poor profits. The profit figure has, however, different meanings to different parties interested in financial analysis. The following are the important profitability ratios: 1. NET PROFIT RATIO

This ratio is also called as the net profit to sales or net profit margin ratio. It is determined by dividing the net income after tax to the net sales for the period and measures the profit per rupee of sales.

Net Profit Ratio = Net Profit x 100 Sales

In this context, the term net profit means “net profit after interest and tax but before dividend”.

The Net profit, Sales of SIDCO shown in Table – 7


Table – 7NET PROFIT, SALES OF SIDCO DURING 2006-2007 TO

2010-2011

Year Net profit x100 Sales Net profit Ratio

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

1601274900

435685000

229845400

343709600

1839668500

514653049

517668751

505355738

890183779

917536488

3.11

0.84

0.45

0.38

2.00


Interpretation: In 2006 – 2007 net profit ratio was 3.11 decreased to 0.38 in 2009 – 2010. In 2009 it increased to 2.00. Net profit ratio increases the overall profitability of the concern. In 2011 it is satisfactory.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 42 2. OPERATING RATIO

Operating ratio is an indicative of the proportion that the cost of sales bears to sales. ‘Cost of sales’ includes direct cost of goods sold as well as other operating expenses. It is an important ratio that is sued to discuss the general profitability of the concern. It is calculated by dividing the total operating cost by net sales. Total operating expenses include all costs like administration, selling and distribution expenses, etc. but do not include financing cost and income tax.

Operating Ratio = (Cost of goods sold + Operating expenses)x100 Net Sales

The Cost of goods sold + operating expenses, Net Sales of SIDCO shown in Table – 8


Table – 8COST OF GOODS SOLD + OPERATING EXPENSES, NET SALES OF

SIDCO DURING 2006-2007 TO 2010-2011

2006 – 2007

2007 – 2008

2008 – 2009

2009– 2010

2010 – 2011

50505033600

46193223000

45406746600

82885542600

92528190900

511376464

514653049

505355738

890183779

988072053

98.7

89.7

89.8

93.1

93.6


Interpretation: In 2006 – 2007 operating ratio was 98.7% decreased to 93.6%in 2010 – 2011. It shows the general profitability of the concern. Lower the ratio shows the more profitable are operations indicating an efficient control over cost and an appropriate selling price. It is one of most important efficiency ratio.


3. RETURN ON TOTAL ASSETS

Profitability can be measured in terms of relationship between net profit and total assets. This ratio is also known as return on gross capital employed. It measures the profitability of investment. The overall profitability can be known by applying this ratio.

Return on Total Assets = Net Profit x 100 Total Assets

The term “Net profit” stands for “Net profit before interest, tax and dividend.”

The Net profit, total assets of SIDCO shown in Table – 9


Table – 9NET PROFIT, TOTAL ASSETS OF SIDCO DURING 2006-2007 TO

2010-2011

Year Net profitx100 Total Assets Return on total assets

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

16012749

435685000

229845400

343709600

1839668500

256561946

269146755

344416880

420941720

508625178

0.06

1.61

6.67

0.81

3.59


Interpretation: In 2006 – 2007 the return on total asset was 0.06, increased up to 0.81 in 2009 – 2010. Then it increased 3.59 in 2011. It measures the profitability of investment. The current amount is satisfactory.


4. RETURN ON SHARE HOLDERS’ FUND This ratio shows the rate of profit on share holders’ fund. It relates the profit available for the share holders to their total investment. It is also known as ‘profit on net worth’ ratio.

Return on share holders’ fund = (Net profit after interest and tax) x 100 Share holders’ fund

Where, shareholders’ fund = Equity share capital + preference share capital + Reserves and surplus – Fictitious assets.

The Net profit after interest and tax, Share holders’ fund of SIDCO shown in Table – 10


Table – 10NET PROFIT AFTER INTEREST AND TAX, SHARE HOLDERS’

FUND OF SIDCO DURING 2006-2007 TO 2010-2011

Year Net profit after interest and tax

x 100

Share holders’ fund Return on share holders’ fund

2006 – 2007

2007 – 2008

2008 – 2009

2009 – 2010

2010 – 2011

1626107600

409325700

214218300

319063700

1823714000

241549074

245549074

247833782

250833782

252833782

6.73

1.66

0.86

1.27

7.21


Interpretation: In 2006 – 2007 the return on share holder’s fund was 6.73, it increased to 7.21 in 2010 – 2011. It shows the rate of profit on share holder’s fund. It relates the profit availability of share holder’s total investment. The current rate is satisfactory.


Exhibit No: 1Exhibit showing position of CURRENT RATIO

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 20110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Current Ratio


Exhibit No: 2Exhibit showing position of QUICK RATIO

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 20110

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

Quick Ratio


Exhibit No: 3

Exhibit showing position of ABSOLUTE LIQUIDITY RATIO

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 20110

0.02

0.04

0.06

0.08

0.1

0.12

0.14

0.16

0.18

Absolute Liquidity Ratio


Exhibit No: 4

Exhibit showing position of PROPRIETARY RATIO

2006 - 20072007 - 2008

2008 - 20092009 -2010

2010 - 2011

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.9

1

Proprietary Ratio

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 52 Exhibit No: 5

Exhibit showing position of FIXED ASSET TO NETWORTH

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 20110

0.01

0.02

0.03

0.04

0.05

0.06

0.07

0.08

0.09

0.1

Fixed Asset To Networth


Exhibit No: 6

Exhibit showing position of FIXED ASSET TURNOVER RATIO

2006 - 2007 2007 - 2008 2008 - 2009 2009 -2010 2010 - 20110

5

10

15

20

25

30

35

40

Fixed Asset Turnover Ratio


Exhibit No: 7

Exhibit showing position of NET OPERATING RATIO

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 20110

0.5

1

1.5

2

2.5

3

3.5

Net Profit Ratio


Exhibit No: 8

Exhibit showing position of OPERATING RATIO

2006 - 20072007 - 2008

2008 - 20092009 - 2010

2010 - 2011

84

86

88

90

92

94

96

98

100

Operating Ratio


Exhibit No: 9

Exhibit showing position of RETURN ON TOTAL ASSET

2006 - 20072007 - 2008

2008 - 20092009 - 2010

2010 - 2011

0

1

2

3

4

5

6

7

Return On Total Asset


Exhibit No: 10

Exhibit showing position of RETURN ON SHAREHOLDERS FUND

2006 - 2007 2007 - 2008 2008 - 2009 2009 - 2010 2010 - 20110

1

2

3

4

5

6

7

8

Return On Shareholders Fund


COMPARATIVE BALANCE SHEET

C.B. 1 C.B. 2 C.B. 3 C.B. 4 C.B. 5

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 59C.B. 1

Comparative balance sheet during the year 2006 -2007Year Ending31st march

Increase(+) / Decrease(-)

Amount Rs.

Percentage (%)2006 2007

Assets Current Assets 313957851 315277441 -1319590 -0.42

Fixed Assets 23635742 16481435 +7154307 +30.26

Profit and loss a/c 446093807 442000550 +4093257 +0.97

Total Assets 783687400 773759426 +9927974 +1.26

Liabilities Current Liabilities 433012441 419974157 +13038284 +3.01

Shareholders/loan funds

350674959 353785269 -3110310 -0.88

Total Liabilities 783687400 773759426 +9927974 +1.26

Interpretation: The comparative balance sheet of the company reveals that during 2007 has been an increase in fixed asset of Rs.7154307 that is 30.26% while short term liability of outsiders have increased by Rs.13038284 that is 3.01%. This fact that shows the policy of the company is not affecting the working capital. The current have been increased by Rs.29548035 that is 18.79%. The company has raised long term finance even for the current resulting into improvement of the liquidity position of the company. The overall financial position of the company is satisfied.

A STUDY ON THE FINANCIAL PERFORMANCE OF SIDCO 60 C.B. 2



Amount Rs.



Fixed Assets 16481435 18769349 -2287914 -13.88


Total Assets 773759426 833301228 -59541802 -7.69

Liabilities Current Liabilities 419974157 475949952 -55975795 -13.32


353785269 357351276 -3566007 -1.00

Total Liabilities 773759426 833301228 -59541802 7.69

Interpretation: The comparative balance sheet of the company reveals that during 2009

has been an increase in fixed asset of Rs.36986355.5 that is 0.19% while long term liabilities of provisions have increased by Rs.4857867 that is 4.86%. This fact that shows that the policy of the company is to purchase fixed assets from the long term source of funds

thereby not affecting the working capital. The current have been increased by Rs.29548035 that is 18.79%. The company has raised long term finance even for the current resulting into improvement of the liquidity position of the company. Current asset have increased by Rs.369863.5 that is 25.7%. It is resulting into the improvement of the liquidity position of the company. The overall financial position of the company is satisfied. The overall financial

position of the company is satisfied.


C.B. 3



Amount Rs.


Assets Current Assets

374673511 470070222 -95396711 -25.46

Fixed Assets 18769349 24142003 -5372654 -28.62


Total Assets 833301228 930879956 -97578728 -11.70

Liabilities Current Liabilities

475949952 559027665 -83077713 -17.45


357351276 371852291 -14501015 -4.05

Total Liabilities 83301228 930879956 -97578728 -11.70

Interpretation: The comparative balance sheet of the company reveals that during 2010 has been an increased by Rs.57595775.5 that is 25.7% while long term liabilities of the provision decreased by Rs.20434732 that is 19.4%. This fact that shows the policy of the company is not affecting the working capital. The current assets have increased by Rs. 57595775.5 that is 25.7%. It results into improvement of the liquidity position of the company. The overall financial position of the company is satisfied.


C.B. 4

Comparative balance sheet during the year 2009 -2010

Year Ending31st march


Amount Rs.



Fixed Assets 24142003 25743441 -1601438 -6.63


Total Assets 930879956 1007223505 -76343549 -8.20

Liabilities Current Liabilities 559027665 631671439 -72643774 -12.99


371852291 375552066 -3699775 -0.99


Interpretation: The comparative balance sheet of the company reveals that during 2011 has been an increased in fixed asset of Rs.93745280 that is 32.7% while long term liability decreased by Rs.109620 that is 0.12%. This fact that shows the policy of the company is not affecting the working capital. The current assets have increased by Rs. 93745280 that is 32.7%. This results into improvement of the liquidity position of the company. The overall financial position of the company is satisfied.


C.B. 5Year Ending31st march


Amount Rs.



Fixed Assets 25743441 109394959 -83651518 -32.40


Total Assets 1007223505 1265692074 -258468569 -25.66

Liabilities Current Liabilities

631671439 780432674 -148761235 -23.55


375552066 485259400 -109707334 -29.21


Comparative balance sheet during the year 2010 -2011

Interpretation: The comparative balance sheet of the company reveals that during 2012 has been an increased in fixed asset of Rs.33938769 that is 8.93% while long term provision have relatively increased by Rs.18212283 that is 21.5%. This fact that shows that the policy of the company is to purchase fixed assets from the long term source of fund there by not affecting the working capital. The current assets have increased by Rs.33938769 that is 8.93%. This resulting shows the improvement of the liquidity position of the company. The overall financial position of the company is satisfied.


COMPARITIVE INCOME STATEMENT

1.1 1.2 1.3 1.4 1.5


1.2

Year ending 31st march Increase(+)/Decrease(-)

Amount Percentage%

2007 2008

Net sales

Less:Cost of goods sold

Gross profit:

567277854

442910996

552975895

438202970

+14301959

+4708026

2.52

1.06

124366858 114772925 +9593933 7.71

Operating expense 113918520 109176359 +4742161 4.16

Operating profit

(GP-OE)

-10448338 -5596566 -4851772 46.43

Less:

Prior period expense

19620430 7486774 +12133656 61.84

Add:

Prior period income 13528942

4188662

+9340280 69.03

Profit before tax -16539826 -8894678 -7645148 46.22

Less :

Income tax

263593

156271

+107322

2.91

Profit after tax -16803419 -9050949 -2584368 15.38

COMPARITIVE INCOME STATEMENT DURING THE YEAR 2007-2008

Interpretation:


1.2


Amount Percentage%

2007 2008

Net sales


Gross profit:

567277854

442910996

552975895

438202970

+14301959

+4708026

2.52

1.06

124366858 114772925 +9593933 7.71


Operating profit

(GP-OE)

-10448338 -5596566 -4851772 46.43

Less:


19620430 7486774 +12133656 61.84

Add:


4188662

+9340280 69.03


Less :

Income tax

263593

156271

+107322

2.91

Profit after tax -16803419 -9050949 -2584368 15.38


Interpretation:


1.2


Amount Percentage%

2007 2008

Net sales


Gross profit:

567277854

442910996

552975895

438202970

+14301959

+4708026

2.52

1.06

124366858 114772925 +9593933 7.71


Operating profit

(GP-OE)

-10448338 -5596566 -4851772 46.43

Less:


19620430 7486774 +12133656 61.84

Add:


4188662

+9340280 69.03


Less :

Income tax

263593

156271

+107322

2.91

Profit after tax -16803419 -9050949 -2584368 15.38


Interpretation

In 2009 the operating expense was 1.86% and the operating profit was 1.89%. So the profit of the company is 0.3%.


1.2


Amount Percentage%

2007 2008

Net sales


Gross profit:

567277854

442910996

552975895

438202970

+14301959

+4708026

2.52

1.06

124366858 114772925 +9593933 7.71


Operating profit

(GP-OE)

-10448338 -5596566 -4851772 46.43

Less:


19620430 7486774 +12133656 61.84

Add:


4188662

+9340280 69.03


Less :

Income tax

263593

156271

+107322

2.91

Profit after tax -16803419 -9050949 -2584368 15.38


Interpretation:

In 2010 the operating expense was 2.66% and the operating profit was increased to 2.73%. When the company compared with 2009 shows the improving profitable position.


1.2


Amount Percentage%

2007 2008

Net sales


Gross profit:

567277854

442910996

552975895

438202970

+14301959

+4708026

2.52

1.06

124366858 114772925 +9593933 7.71


Operating profit

(GP-OE)

-10448338 -5596566 -4851772 46.43

Less:


19620430 7486774 +12133656 61.84

Add:


4188662

+9340280 69.03


Less :

Income tax

263593

156271

+107322

2.91

Profit after tax -16803419 -9050949 -2584368 15.38


Interpretation:

In 2011 the operating expense was 2.49% and the operating profit was 2.55%. In previous year operating profit was 2.73%. It shows slight improvement in the profi


CHAPTER – 4

FINDINGS, SUGGESTIONS & CONCLUSION


FINDINGS

The current ratio of Kerala SIDCO reveals that the management of current assets and current liabilities are satisfactory. It represents the improvement of liquidity position of the company.

Quick ratio shows the increasing trend. In the year 2008 the quick ratio was 0.57% that is increased in 0.79% in 2012.

Absolute liquid ratio reveals that the company has not satisfactory. Most of the year the company has not achieved standard norm of 0.5: 1.

Proprietary ratio reveals that the company has good solvency position. It shows the favourable position of the company.

Fixed assets to net worth ratio shows the ratio is less than one, so the creditor fund have not used to acquire a part of the fixed asset.

Fixed asset turnover ratio shows a decreasing trend in 2011 – 2012.

Return on share holder’s fund reveals that the profit on share holder’s fund. The current rate is satisfactory.

Net profit ratio reveals that the company is not satisfactory. In 2012 net profit decreased 1.11%.

Operating ratio of the company reveals that the favourable condition of the company. Low rate of operating ratio indicates efficient control over cost.

The comparative balance sheet reveals that the favourable financial position of the company:

Liquidity position of the company is favourable. Working capital of the company is favorable. Solvency of the company also favourable. The overall financial performance of the company.


Common size income statement reveals that the profitability of the concern. Most of the year we found slight variations. But the company has run by profitably.

Trend analysis of the company reveals that is not satisfactory. The working capital of the company is not favourable. So the liquidity position and solvency position of the company is unfavourable.


SUGGESTIONS

Formulate adequate policies and procedures to improve the solvency and financial leverage of Kerala SIDCO.

Utilize the secured and unsecured loans provided by various financial institutions, whether long term or short term.


CONCLUSION

The study on the “financial performance of SIDCO” was conducted to analyse the company’s financial position, profitability and performance over the 5 years. The study incorporated the methods of Ratio analysis, Comparative balance sheet, Common size income statement and trend analysis. Liquidity position and solvency has to improving the concern. The objective of the study is to analyse profitability, liquidity, solvency and leverage of the company. The liquidity position is satisfactory condition.


CHAPTER – 5

APPENDIX


Schedules As at 31-03-2008 As at 31-03-2007I .SOURCES OF FUND 1.SHARE HOLDER’S FUNDS

(a) Share Capital A 227691464 225381464(b) Reserves and surplus B 20142318 20167610

247833782 245549074 2.LOAN FUNDS

(a) Secured Lone C 2536368(b) Unsecured Lone D 109517494 105699827

109517494 108236195TOTAL 357351276 353785269

II. APPLICATION OF FUNDS1. FIXED ASSETS E

(a) Gross Block 54336913 51707448(b) Less Accumulated Depreciation 36396965 35226013(c) Net Block 17939948 16481435(d) Capital Work in Progress 829401

18769349 16481435 2.INVESTMENTS F 818300 518300 3.CURRENT ASSETS,LOANS & ADVANCES G A. CURRENT ASSETS

(a) Inventories 12712010 12745294(b) Sundry Debtors 213110042 175749076(c) Rent & Water charges Receivable 12775096 11278459(d) Cash and Bank Balances 87050383 52892491

325647531 252665320 B. LOANS & ADVANCES 48207679 62093821

373855211 314759141Less: CURRENT LIABLITIES & PROVISIONS H

(a) Current Liablities 375999836 324128451(b) Provisions 99950116 95845706

475949952 419974157 NET CURRENT ASSETS G-H (102094742) (105215016) 4.PROFIT & LOSS ACCOUNT (LOSS) (439858368) (442000550)

TOTAL 357351276 353785269KERALA SMALL INDUSTRIES DEVELOPMENT CORPORATION LIMITED, THIRUVANANTHAPURAM

BALANCE SHEET AS AT 31-03-2008


KERALA SMALL INDUSTRIES DEVELOPMENT CORPORATION LIMITED, THIRUVANANTHAPURAM

PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31-03-2008

Schedules FOR THE YEAR ENDED 31-03-2008

FOR THE YEAR ENDED 31-03-2007

INCOME

Sales less Returns I 505355738 517668751Service Charges 4719210 10302724Rent 4405349 5161204Profit on Sale of Assets 3970204 18413747Hire Purchase Interest 523339Interest on Bank Deposit and Other Advances(TDS NILL) 4172781 1775645Other Income J 28562721 7241675Excess Provision Written Back 1789892 6190771

TOTAL 552975895 567277854

EXPENDITURECost Of Goods Sold /Material Consumed K 438202970 442910996Staff Expenses L 82296538 84400502Operative, Administrative and Other Expenses M 17514324 19940712Finance Charges N 7730083 8491315Depreciation 1635414 1085991

TOTAL 547379329 556829516

PROFIT/(LOSS) 5596566 10448338Prior Period Expenses 7486774 19620430Prior Period Income 4188662 13528942Net Profit /( Loss) for the year 2298454 4356850Taxes On IncomeFringe Benefits Tax 156271 263593Net Profit /( Loss) after tax 2142183 4093257

Accumulated Losses Brought Forward (442000551) (446093807)Balance Carried Forward to Balance Sheet (439858368) (442000550)

Earnings Per ShareBasic Earnings Per Share 10 33Diluted Earnings Per Share 9 18



(c) Share Capital A 230691464 227691464(d) Reserves and surplus B 20142318 20142318

250833782 247833782 2.LOAN FUNDS

(e) Secured Lone C 5115114(f) Unsecured Lone D 115903395 109517494

121018509 109517494TOTAL 371852291 357351276


(c) Gross Block 60497555 54336913(d) Less Accumulated Depreciation 37184953 36396965(g) Net Block 23312602 17939948(h) Capital Work in Progress 829401 829401


(c) Inventories 12720044 12712010(d) Sundry Debtors 297845511 213110042(e) Rent & Water charges Receivable 14481437 12775096(f) Cash and Bank Balances 71752725 85871766

396799717 311296522 B. LOANS & ADVANCES 51028205 62558688


(c) Current Liablities 454219682 375999836(d) Provisions 104807983 99950116







Schedules FOR THE YEAR ENDED 31-03-2009


INCOME

Sales less Returns I 890183779 505355738Service Charges 5457057 4719210Rent 6089133 4405349Profit on Sale of Assets 13913300 3970204Hire Purchase InterestInterest on Bank Deposit and Other Advances(TDS NILL) 5170571 4172781Other Income J 12461740 28562721Excess Provision Written Back 2071451 1789892

TOTAL 935347031 552975895


TOTAL 933485734 547379329


Accumulated Losses Brought Forward 439858368 (442000551)Balance Carried Forward to Balance Sheet (436667730) (439858368)

Earnings Per ShareBasic Earnings Per Share 15.19 10Diluted Earnings Per Share 14.01 9



(a) Share Capital A 23269164 230691464(b) Reserves and surplus B 20142318 20142318

252833782 250833782 2.LOAN FUNDS

(a) Secured Lone C 428986 5115114(b) Unsecured Lone D 122289298 115903395

122718284 121018509TOTAL 375552066 371852291


(a) Gross Block 63863269 60497555(b) Less Accumulated Depreciation 39103224 37184953(c) Net Block 24760045 23312602(d) Capital Work in Progress 983396 829401


(a) Inventories 14144864 12720044(b) Sundry Debtors 365474545 297845511(c) Rent & Water charges Receivable 16266048 14481437(d) Cash and Bank Balances 86996280 71752725

482881737 396799717 B. LOANS & ADVANCES 80137736 51028205


(a) Current Liablities 547298188 454219682(b) Provisions 84373251 104807983







Schedules



INCOME


TOTAL 999127971 935347031


TOTAL 979978993 933485734


Accumulated Losses Brought Forward 436667731 439858368Balance Carried Forward to Balance Sheet (418430591) (436667730)

Earnings Per ShareBasic Earnings Per Share 79.61 15.19Diluted Earnings Per Share 78.98 14.01



(c) Share Capital A 274691464 232691464(d) Reserves and surplus B 20142318 20142318

294833782 252833782 2.LOAN FUNDS

(e) Secured Lone C 170123 428986(f) Unsecured Lone D 168675221 122289298

168845344 122718284TOTAL 463679125 375552066


(c) Gross Block 67380898 63863269(d) Less Accumulated Depreciation 41712317 39103224(g) Net Block 25668581 24760045(h) Capital Work in Progress 60445024 959209


(c) Inventories 18083583 14144864(d) Sundry Debtors 440530869 393495810(e) Rent & Water charges Receivable 19244007 16266048(f) Cash and Bank Balances 162637460 85540727

640465919 509447449 B. LOANS & ADVANCES 118793216 62321126


(c) Current Liablities 701820773 556383739(d) Provisions 84482871 84373251







Schedules



INCOME


TOTAL 1321493259 998929491


TOTAL 1305920352 979887613

PROFIT/(LOSS) 15572907 19041878Prior Period Expenses 1393363 805330Prior Period Income 31654 160137Net Profit /( Loss) for the year 14211198 18396685Fringe Benefits Tax - 31881Net Profit /( Loss) after tax 14211198 18237140

Accumulated Losses Brought Forward (418302927) 436667731Balance Carried Forward to Balance Sheet (404091729) (418302927)

Earnings Per ShareBasic Earnings Per Share 55.93 80.17Diluted Earnings Per Share 55.31 79.53




CHAPTER – 6

BIBLIOGRAPHY

BIBLIOGRAPHY

1. Financial Management - K.G.C. NAIR

2. Company Data Base

3. Research Methodology - L.R. POTTI

4. Annual Report of SIDCO

5. Magazines and Publications

6. Company Website

project reoprt on sidco 2010 - 2013

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