ratio analys

7/30/2019 Ratio Analys

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Critical analysis of Financial Position at CHLLtd.

SUMMER TRANING REPORT

Ratio Analysis

At

Capusegul Health care Pvt. Ltd.

Submitted in partial fulfillment of requirements for

the award of the degree of Masters in Business Management

Session : 2012-2014

Under Supervision of: Submitted

by:

Mrs. Shalu Juneja Mohit Talwar

HOD & Assistant Professor MBA (3rd

sem

H.I.M.T., Rohtak Roll no-3218823

HINDU INSTITUTE OF MANAGEMENT &TECHNOLOGY

MAHARSHI DAYANAND UNIVERSITY, ROHTAK


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DECLARATION

I, Mohit Talwar, Roll No. 06 of MBA Semester 3RD of Hindu Institute of

Management & Technology, Rohtak, hereby declare that the project entitled

Analysis of Working Capital Management is an original work and the same has

not been submitted to any other institute for award of any other degree. The interim

report was presented to the supervisor on and the pre-submission

presentation was made Of. The feasible suggestions have been duly

incorporated in consultation with the supervisor.

Signature of the

Candidate

Counter signed

Mrs.Shalu Juneja


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HOD & Asst. Professor, HIMT

ACKNOWLEDGEMENT

Gratitude is not a thing of expression; it is more a matter of feeling.

There is always a sense of gratitude which one express for others for their help and

supervision in achieving the goals. We too express my deep gratitude to each and

everyone who has been helpful to us in completing the project report successfully.

We would like to thank almighty God for blessing showered on us during the

completion of Dissertation Report.

We give our regards and sincere thanks to Mrs. Shalu Juneja(HOD in MBA

Deptt.)and (Project guide) who has devoted her precious time in guiding us &

helping us complete it within time.

We feel self-short of words to thanks our parents and friends who had directly or

indirectly instrumental in the completion of the project. We are indebted to all

respondents for their time passion during the long conversations.

Mohit Talwar


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TABLE OF CONTENT

Preface i

Acknowledgement ii

Chapter-A

Introduction-CHL 1-17

Mission & objectives

Different Section of finance Department

Accounting of Assets

Audit in the organization

Chapter-B

Review of literature 18-25

Ratio Analysis

Common size P/L A/C

Common size Balance sheet

Comparative Balance sheet


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Comparative Balance sheet

Trend Analysis

Chapter-C

Research Method o logy 26-30

Chapter-D

Data Analysis & Interpretation 31-48

Chapter-E

Conclusion 49-54

Limitation of financial Analysis

Suggestion

BIBLIOGRAPHY

Chapter-A

Introduction-CHL


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EXECUTIVE SUMMARY

The avenues and scope of finance has changed drastically from the last ten years.

There has been major shift from accounts to finance, which is visualized in most of

the organizations. An Accountant to finance manager, from recording to

management of whole system of accounting procedure determines the worth of

management of finance in the organizations. A Finance manager occupies a key

position in the management of cash inflows and cash outflows for achieving

optimum level in the organization.

It is his prime responsibility to enhance the organization position in the most

efficient and effective manner. What are the requirements, what is the real worth of

the requirements would help the organization to increase the value of organizationin the competitive market.


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INDUSTRY PROFILE

Pharmaceutical industry in India has been a pioneer industry. Indias

industrialization in other fields has mainly been achieved on the back of the

resources generated by the industry. However, from the early seventies to the

introduction of liberalization in 1992, the industry tended to be neglected as

measures taken by the government with the apparent objective of protecting the

large labour force and the consumers have continuously eroded its profitability.

The recent liberalization measures have presented the industry with a golden

opportunity to region its last glory. The process has begun but a lot of work remains

to be done with the active help and encouragement from the government.


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BACKROUND OF THE COMPANY

Capsugel has emerged as a global leader creating innovative dosage forms for the

pharmaceutical and dietary supplements industries. Companies look to our

leadership to help them formulate new products, enhance existing product lines,

bring new products to market faster, and ensure their clinical trials are conducted

without bias.

Initially part of the Parke-Davis Company, Capsugel is now a division of Pfizer

Inc., a Fortune 100 global pharmaceutical company, and has numerous global

locationsto support customers on every major continent.

Capsugel Healthcare limited (a division of Pfizer is pharmaceutical company that

manufactures empty hard gelatine capsules. In India its plant is located at

Dharuhera, Haryana. Capsugels customers span the globe. Consequently, its

manufacturing and business centres also cover the world. With multiple production
http://www.capsugel.com/locations/index.phphttp://www.capsugel.com/locations/index.phphttp://www.capsugel.com/locations/index.phphttp://www.capsugel.com/locations/index.phphttp://www.capsugel.com/locations/index.php


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and business facilities worldwide, capsugel offers unmatched certainty of supplies.

Drawing on years of experience & successful outcomes, Capsugel is adept at

offering their customers custom solutions that precisely address their specific

needs. Capsugel with 10 global manufacturing facilities, produces two-piece

gelatine capsules, and vegetarian capsules for the neutraceutical, pharmaceutical,

OTC (Over the counter markets).

Capsugel manufacturing operations rely on sophisticated, often automated

monitoring systems to achieve high levels of liquid gelatine consistency when

producing empty gelatine capsules.

The formation of the empty capsule shape itself utilize a precision machine set of

molds, to which the liquid gelatine adheres forming both the cap & body sections

of the gelatine Capsules. High-speed machinery, custom design by Capsugel

specifically for empty gelatine capsules, GMP guidelines that are followed in

Capsugel Healthcare assure that the gelatine shell layers are removed cleanly from

the molds and then joined, printed & packed under stringent manufacturingcontrols.

Market Segment Served

Capsugel customers include leading pharmaceutical company and dietary

supplements manufacturers & marketers.


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About Pfizer

CHL Philosophy could be summarizes into five points:

A WINNING PHILOSOPHY

Quality

Determination

Diversification

Dynamism

Profitability

SOCIAL ACCOUNTABILITY

CHL is sincerely committed to workers and communities

CHL has a well defined Social Accountability Code of Conduct

All CHL facilities are fully compliant with Social Accountability Standards


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CHL is approved by several world class buyers for Social Compliance

Use of only eco-friendly chemicals & materials

Effluent treatment plant in each facility to protect the environment

CHLS Social Accountability initiatives include Legal Compliance, Safety

measures, Continuous Workers Training Canteens, Interest Free Loans.

OBJECTIVES OF CHL LIMITED.

TO SERVE THE NATIONAL INTEREST

CHL Limited. Is having the very first objectives of serving the national interest in pharmaceutical

sector and other related sectors in accordance and consistent with the government policies.

TO ENSURE AND MAINTAIN FUNCTIONING

CHL Industrys second objective is to ensure and maintain continuous and smooth satisfaction

supplies of capsules by way of different kinds and marketing activities and to provide and

appropriate assistance to the customers

TO EARN REASONABLE RATE OF INTERESTTo work towards the achievement of self sufficiency in the field of pharma industry

by setting up adequate capacity and building up expertise in manufacturing of it

and make a reasonable rate of interest on investments.

TO CREATE STRONG BASE

CHL has main objective for creating a strong research and development base in

pharmaceutical field and stimulate the development of new product formulation

with a view to minimize their imports and to have next generation products.


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TO MAKE MAXIMUM UTILISATIONEvery step is made with keeping in mind this objective to make maximum

utilization of the existing facilities in order to improve efficiency and increaseproductivity and to optimize utilization of its

Finishing capacity and contributing in making minimum exchange outgo.

TO ENHANCE DISTRIBUTION NETWORK

To make enhancement of distribution network for providing service to customers

throughout the country through expansion of seller- network as per marketing plan.

FINANCIAL MISSION OF FINANCE DEPARTMENT

To provide high quality financial staff support for decision making &

control to all levels of management corporate divisional, unit & location toenable the achievement of overall corporate objectives goals.

To play a lead role in scanning the domestic & international financial

environment, the formulation and implementation of all financial policies &

plans different time spans consistent with & conductive to the business

plans for expansions, diversification, productivity etc.

To interact pro-actively with the government agencies on pricing &

investment & with financial institution, depositors & creditors, withsensitivity & promptness, for mobilization and provision of funds for

uninterrupted operations and project execution optimal costs.

To maintain review & update all accounting records, system and procedures

for discharging the responsibilities and enabling compliance with statutory

obligations.

To inculcate financial awareness, cost benefit attitudes and system

orientation in the entire organization.

To develop the human resources, systems & techniques of finance for


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continuing innovation & contribution towards CHL Industries excellent.

FINANCIAL OBJECTIVES OF FINANCE DEPARTMENT

To ensure adequate return on capital employed and maintained a reasonable

annual dividend on its equity capital.

To ensure maximum economy in expenditure

To generate sufficient internal resources for financing partly/ wholly

expenditure on new capital projects.

To develop long term corporate plans to provide adequate growth of the

activities of the corporation.

To continue to make an effort in bringing reduction in the cost of

production of products by means of products by means of systematic cost

control measures.

To endeavor to complete all plan projects with in stipulated time and within

stipulated cost estimates.


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DEPARTMENTS OF COMPANY

There are 16 departments in CHL Industry. These are following

Accounts Department

Documents Department

EDP Department

Production Department

Maintenance Department

Marketing Department

P & A Department

Purchase Department

Sampling Department

Research & Development Department

All the departments of CHL are inter related and coordinated among themselves for

achieving the mission by way of filling the objectives of CHL Industries.

As every department has its own importance and its way of functioning to fulfill the

need and requirements of its existing.


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OBJECTIVES OF PERSONNEL DEPARTMENT

The primary objectives of personnel department are to:

1. Design and develop an organizational structure with well-definedrelationships with the business plans & corporate strategies.

2. Promote and develop cooperative attitude, amongst employees for

harmonious relation at all levels and create sense of belongings.

3. Evolve progressive & pragmatic personnel policies, procedures and

practices and ensure its uniform interpretation & judicious implementation.

4. Develop the capability & proficiency of employees & their advancement

through appropriate training & continuous knowledge updating to face

corporate challenges & new technologies.

5. Promote & inculcate the culture of employees participation in management

to achieve higher productivity and harmonious relations with smooth

workings.


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6. Inculcate productivity consciousness among the employees.

FUCTIONING OF PERSONNEL DEPARTMENT

A Planning manpower requirements

Estimating vacancies

Recruitment to seek and attract potential qualified applicants (candidates) to

fill vacates.

B Organizing the manpower resources

Organizational planning to determine the organizational structure &

manpower needed to effectively meet the company objectives.

Selection

Classification of employees

C Staffing

Induction B- familiar of few employees with organization

Transfer & promotions


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Manpower planning

Training

D Motivation

Job analysis

Recreation

Communication

Employees discipline

Performance evaluation

Employee counseling

Safety

Medical

Precautions & security

VARIOUS SECTION OF FINANCE DEPARTMENT AT CHL

INDUSTRIES CHL

1 GELATINE SECTION

The Gelatine movement and storage section in the CHL is responsible for handling

of receipt, storage and dispatch transactions for Gelatine & product made with help

of it. Gelatine accounting section handles the following function: -

Accounting of the Gelatine receipts.

Accounting of the customs duty of Gelatine.

Accounting of finished product receipts.

Accounting of dispatch of products.

Material balance.


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Production statistics.

2)CUSTOM SECTION :

Customs section became the part of finance department in 1996; earlier it was the

part of production department. 3 types of custom duties are also available: -

1. Basic custom duty

2. Additional custom duty or countervailing customs duty.

3. Special Additional duty.

3)MAIN SECTION

Main section of CHL Industries is responsible to prepare the financial statements of

the unit.

Preparation of financial statements

Financial statements (Profit & Loss A/c and Balance sheet) are prepared quarterly

as suitable and smooth can be carried on.

Annual Accounts are prepared with the proper way by following

guidelines of all laws strictly in preparation of annual accounts.

Before to close of each year, a time schedule are drawn by Head officein consultation with the units for preparation, finalization and audit


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of annual accounts by all units.

4) PURCHASE SECTION

Various function of purchase section are given below :-

1. Security and concurrence of purchase proposals

2. Deposits and advance payment of suppliers.

3. Passing of bills for supplier received.

4. Pricing of Goods Receipt Notes.

5. Accounting of cash purchase made by material department.

6. Arrangement for insurance of transit risk.

7. Maintenance of books of accounts.

6) STORE SECTION :

This section is the most responsible for the CHLs success because Finance

management is mostly applicable in this section.

7) CASH SECTION

Cash section of the init is responsible for:-

1) Receipts of cash,cheque & bank draft.

2) Payment by cash, cheque and bank draft

3) Handling of bank deposits/withdrawal, custody of cash and transfer of


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funds.

4) Security arrangement for cash handling.

5) Safe custody of valuables and documents.

6) Petty cash imprest.

7) Maintenance of subsidiary cash credit account and special current account.

8) Maintenance of cash book and bank book.

AUDITS IN THE ORGANISATION

There are 5 different types of audit in the organization as:-1. Statutory Audit

2. Internal Audit

3. Technical Audit

4. Compliance of foreign buyess Audit

5. Tax Audit

STATUARY AUDITThe statutory auditors/ branch (charted Accountants) are appointed by the company


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Law Board in consultation with the Audit General of India of the companies Act,

1956 for conducting the audit in accordance with the prestigious of the companies

ACT.

All important points raised by the auditors during the course of audit will be

brought to the notice of head of finance Department by the concerned officers and

stored out before completion of audit. Whenever, the comments are raised by the

statutory auditors involving a policy decision either on presentation of accounts or

to accounting of a transaction, the same should be advised to HO for immediate

examination and decision at corporate level. The audit is made an yearly basis.

INTERNAL AUDIT

Internal audit examines independently the final accounts and attached schedules to

the balance sheet and profit & loss A/C concurrently with finalization of Annual

Accounts.

Any point of finance Department considers acceptable for modification of the

accounts may be accepted and changes made in accounts. However, comments but

Internal Audit should be offered before the finalization of the accounts at the unit

level. This type of audit is made by periodical basis.

TECHNICAL AUDIT

Technical audit cell works directly under the technical service department. In

discharge of its functions duties, any information required but technical audit, if

available with the finance department is provided to the cell. Apart from that if any

expert advice sought by the Technical Audit from time to time on financial matters

is also provided but the finance department. This audit is made time to time basis.

COMPLIANCE OF FOREIGN BUYERS AUDIT

This is an important audit for CHL Industries which is an order base company.

Foreign buyers audit about proper salary, proper training, cleaning atmosphere


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about workings by the employees and workers.

They check the applicability of Industrial Laws, factory act is respect of child

labour, safety, health and welfare conditions. They audit in every unit of the

company and after fulfilling this audit they place orders to CHL Industries.

TAX AUDIT

This audit is mandatory according to income tax act 1961. Tax audit report is

required to be submitted & filled along with the return of Income by 31st December

data for tax. Audit gets complied simultaneously along with the closing of

accounts.


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Chapter-B

Review of literature

WHAT MEANING DOES FINANCIAL ANALYSIS HOLDS :

Financial statements provide a summarized view of the financial position and operation of

a firm of company. Therefore, much can be learnt about a firm from a careful examination

of its financial statement as invaluable documents/Performance reports. The critical

analysis of financial statements is thus, an important aid to financial analysis. The focus of

financial analysis is on key figure in the statements of financial nature and the significant

relationships that exist between them. The analysis of financial statements to obtain a


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better understanding of the companys position and performance. In brief, financial

analysis is the process of-

SELECTION

RELATION

EVALUATION

The methodology, I have adopted for my study is the various tools, which basically

analyse critically financial position of to the organization:

I. COMMON-SIZE P/L A/C

II. COMMON-SIZE BALANCE SHEET

III. COMPARTIVE P/L A/C

IV. COMPARTIVE BALANCE SHEET

V. TREND ANALYSIS

VI. RATIO ANALYSIS

The above parameters are used for critical analysis of financial position. With the

evaluation of each component, the financial position from different angles is tried

to be presented in well and systematic manner. By critical analysis with the help of

different tools, it becomes clear how the financial manager handles the finance

matters in profitable manner in the critical challenging atmosphere, the

recommendation are made which would suggest the organization in formulation of

a healthy and strong position financially with proper management system.

I sincerely hope, through the evaluation of various percentage, ratios and comparative

analysis, the organization would be able to conquer its in efficiencies and makes the

desiredchanges.


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FINANCIAL ANALYSIS OF CHL INDUSTRIES

FINANCIAL STATEMENTS :

Financial statement is a collection of data organized according to logical and

consistent accounting procedure to convey an under-standing of some financial

aspects of a business firm. It may show position at a moment in time, as in the case of

balance sheet or may reveal a series of activities over a given period of time, as

in the case of an income statement. Thus, the term financial statements generally

refers to the two statements: -

(1) The position statement or Balance sheet.

(2) The income statement or the profit and loss Account.

OBJECTIVES OF FINANCIAL STATEMENTS:

According to accounting Principal Board of America (APB) states

The following objectives of financial statements: -

1. To provide reliable financial information about economic resources and obligation

of a businessfirm.

2. To provide other needed information about charges in such economic resources and

obligation.

3. To provide reliable information about change in net resources (recourses less

obligations) missing out of business activities.

4. To provide financial information that assets in estimating the learning potential of

the business.


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LIMITATIONS OF FINANCIAL STATEMENTS:

Though financial statements are relevant and useful for a concern, still they do not present a

final picture a final picture of a concern. The utility of these statements is dependent upon a

number of factors. The analysis and interpretation of these statements must be done

carefully otherwise misleading conclusion may be drawn.

Financial statements suffer from the following limitations: -

1. Financial statements do not given a final picture of the concern. The data given in

these statements is only approximate. The actual value can only be determined when

the business is sold or liquidated.

2. Financial statements have been prepared for different accounting periods, generally

one year, during the life of a concern. The costs and incomes are apportioned to

different periods with a view to determine profits etc. The allocation of expenses and

income depends upon the personal judgment of the accountant. The existence of

contingent assets and liabilities also make the statements imprecise. So financial

statement are at the most interim reports rather than the final picture of the firm.

3. The financial statements are expressed in monetary value, so they appear to give final

and accurate position. The value of fixed assets in the balance sheet neither represent

the value for which fixed assets can be sold nor the amount which will be required to

replace these assets. The balance sheet is prepared on the presumption of a going

concern. The concern is expected to continue in future. So fixed assets are shown at

cost less accumulated deprecation. Moreover, there are certain assets in the balance

sheet which will realize nothing at the time of liquidation but they are shown in the

balance sheets.

4. The financial statements are prepared on the basis of historical costs Or original

costs. The value of assets decreases with the passage of time current price changes

are not taken into account. The statement are not prepared with the keeping in view

the economic conditions. The balance sheet loses the significance of being an index


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of Current economics realities. Similarly, the profitability shown by the income

statements may be represent the earning capacity of the concern.

5. There are certain factors which have a bearing on the financial position and

operating result of the business but they do not become a part of these

statements because they cannot be measured in monetary terms. The basic

limitation of the traditional financial statements comprising the balance sheet,

profit & loss A/c is that they do not give all the information regarding the

financial operation of the firm. Nevertheless, they provide some extremely

useful information to the extent the balance sheet mirrors the financial position

on a particular data in lines of the structure of assets, liabilities etc. and the

profit & loss A/c shows the result of operation during a certain period in

terms revenue obtained and cost incurred during the year. Thus, the financial

position and operation of the firm. Therefore, to know a firm form a careful

analysts point of view a careful examination of its financial statements is,

thus, an important aid to financial analysis.

FINANCIAL ANALYSIS

Financial analysis is the analysis and interpretation of Financial statements, It

is the process of determining Financial strength and weakness of the firm by

establishing relationship between the items of balance sheet, profit & loss

a/c and other operative data. Thus financial statement is basically a study

Financial statements in such a way so that Financial strength and weaknesses

of the Organization can be find out. Financial analysis can be undertaken by

management of the firm, or by parties outside the firm,

Objectives of financial analysis :

The focus of financial analysis is on key figure on the financial

statements and the relationship that exist between them.

The analysis of financial statements is a process of evaluating

relationship between component parts of financial statements to

obtain a better understanding of the firm position andperformance.


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Under this study, financial statements of the organization

Are being analysed so as to find out the financial soundness

of the organization.

The objective of the financial analysis is to diagnose the information

contained in the financial statements so as to judge the profitability and

financial soundness of the organization.

RATIO ANALYSIS BASES ASP / L & B / S

Balance Sheet Income Statement & IncomeRatio Statement/ Balance sheet

Ratios

Financial Leverage(debt) Coverage ratios relate the financial

Ratios shows the extent to charges of a firm to its abilitywhich the firm is financed to service or cover them

by debt

Liquidity ratio measure a Activity ratios measure how

ability to meet short term effectively the firm using

obligations its assets

Profitability ratio relate profit to

sales & investment

A Coverage ratio also shed light on significance of the firms use of financial


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leverage (debt)

b Receivables and inventory based activity ratio also shed light on the liquidity of these

current assets.

Ratios can be classified in to different categories depending upon the basis of

classification

The traditional classification has been on the basis of the financial statement to

which the determination of ratios belongs.

CALCULATIONS OF RATIOS

Ratios are relationship expressed in mathematical terms between figures, which are

connected with each other in some manner.

CLASSIFICATION OF RATIOS

These are:-

Profit & Loss account ratios

Balance Sheet ratios

Composite ratios or Inter statement ratios

RATIOS

Liquidity Leverage Profitability Activity

Ratios Ratios Ratios Ratios

____Current ____Debt-Equity _____Gross Profit _____Debtors

Ratio Ratio Margin Ratio Velocity

Ratio

____Liquid ____ Debt Ratio ____ Net Profit

_____CreditorsRatio Ratio Velocity

Ratio


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____Current _____Overhead Ratio _____

Inventory

Assets Ratio Velocity

Ratio

____Working _____Debtors

Capital Turnover

Ratio Ratio

_____

Creditors

Turnover

Ratio

_____

InventoryTurnover

Ratio

Fixed

Assets

Ratio

Chapter-C


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RESEARCH

METHODOLOGY

Research Methodology

Research in a layman language means a search for knowledge. One can also define

research as a scientific and systematic search for potential information on a

specific topic. In fact Research is an art of scientific investigation. The dictionary

meaning of Research is a careful investigation or inquiry especially through search

for new facts in any branch of knowledge.

Redman and Mory define Research as a systematized effort to gain new

knowledge. Some people consider research as a movement from known to

unknown.

Research is as academic activity and as such the term must be used in a technical

sense. Research is an original contribution to the existing stock of knowledge

making for its advancement. It is the pursuit of truth with the help of study,

observation, and experiment.


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The systematic approach concerning generalization and formulation of theory. The

purpose of Research is to discover answers to questions through the application of

systematic procedure. The main aim of Research is to find out the truth which has

been not discovered.

According to Clifford Woody Research comprises defining and redefining

problems, formulating hypothesis or suggested solutions, collecting, organizing and

evaluating data, making deductions and reaching conclusions.

Research design:-

The Research problem having been formulated in clear cut terms, the Researcher

will be required to prepare a Research design i.e. he will have to state the

conceptual structure with in which Research would conducted. The preparation of

such a design facilitates Research to be as efficient as possible yielding maximal

information. Research design may group in four categories:-

Exploration

Description

Diagnosis

Experimentation


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NATURE OF RESEARCH:-

The research methodology adopted during the project is Descriptive in nature. A

characteristic of research studies in business management is their reliance on

secondary data source in particulars and primary data in general.

Descriptive Design:-

Descriptive Research studies are those studies which are concerned with describing

the characteristics of a particular individual, or a group. Studies concerned with

specific prediction, with narration of facts and characteristics concerning

individual, group, or situation are all examples of descriptive Research studies. In a

descriptive study the first step is to specify the relevant. The design must be rigid

and not flexible and must focus attention of the following:

Formulating the objective of study.

Designing the methods of data collection.

Selecting the sample Collecting the data.

Processing and analyzing the data.

Report the findings.

DATA:

The data collected for the above problem is generally secondary in nature. The

analysis has been done on the basis of past financial management of the company.

The primary data has been collected after interviewing the officials of the company

at various stages. The judgment sampling has been used, as the sample size is

limited in case of different problems. The following methods are adopted for

collecting informations:

Observation.

Special Record Searching.


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Collection of data:

The task of data collection begins after a Research problem has been defined and

Research design/plan chalked out. The collection of data is done to support tour

findings and interpret the result whether the result you havefound is according to

yourhypothesis or not. The data can be collected by various methods. These are

broadly classified into two ways, as follows:

Primary data.

Secondary data.

Primary data:-

Primary data are those which are collected a fresh and for the first time and thus

happen to be original in character. We collect primary data during the course of

doing experiments in an experimental Primary research. It is the first hand Primary

data and nobody else has collected this before. There are various ways of collectingprimary data, they are as follows:

Secondary data:-

Secondary data means data that are already available i.e., that refer to the data

which have already been collected and analyzed by someone else. When the

research utilizes secondary data, then he has to look into various sources form

where he can obtain them. In this case certainly he is not confirmed with the


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problem that is usually associated with collection of original data.

Annual report

Books

M.I.S

Other material and report published by company

This report is based on the secondary data collected. Data has been collected by the

various documents available in the finance department. The theory has been

collected from the detail available on the net and old project reports available in

company.

RESEARCH OBJECTIVES :-

The following are the general problems of the research:

To study of Financial management of the Company.

The system of holding cash and expenses.

Cost effectiveness in various operations of the company.

The coordination of Inventory management objectives with organizational

objective.


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Chapter-D

Data Anaysis


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CALCULATION OF LIQUIDITY RATIO

The importance of adequate liquidity in the sense of the abierty of a firm to meet

current/ short term obligations when they become due for payment can be hardly be

overstressed.

The liquidity ratios are:-

1) Current Ratio = Current Assets .

Current Liabilities

Current Assets = Inventories + Sundry Debtors + Cash & Bank Balances

+Bank Balances + Loan & Advances + Other Current Asset

Current Liabilities = Current Liabilities + Provision (Excluding Gratuity) +Secured Loans + Unsecured Loans (Short Terms)

Years Ratios

2006

2007

2008

2558 = 1.603:1

1596

2962

1506 = 1.79:1

4226 = 1.79:1

2588


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INTERPRETATION OF CURRENT RATIO OF CHL

INDUSTRIES: -

The current Ratio of CHL of the years 2006,2007 & 2008 are 1.603:1 , 1.971:1 &

1.79:1 respectively. From the above, it can be seen that ratio is showing fluctuating

trend. Ideal 2:1 is considered

as good. If ratio of three years are analyzed they are ok but they to reach their ideal

point. From the above analysis it appears that year 2008 is having more satisfactory

about Current Assets & Liabilities

2) Quick Ratio = Quick AssetsCurrent Liabilities

Year Ratios

2006 1572

1596

2007

2008

INTERPRETATION OF QUICK RATIO OF CHL

INDUSTRIES:-

The Quick Ratio or Acid Test Ratio of CHL for the last three years 2006, 2007 &

2008 are 0.985:1, 1.315:1 and 1.216:1 respectively from above it can be seen that

ratio is showing trend. It has come to 1:1 ratio. Which are less or more 1:1 should

more towards ideal ones.

From the above analysis, it can be seen that the any company has maintain a good

level of current assets which can be liquidated quickly (excluding inventories)

=

=

29621506 = 1.97:1

4226

2588 = 1.79:1


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Working Capital Turnover Ratio = Sales .

Working Cap.

Working Capital = Current Assets Current Liabilities

Year Ratios

2006 8748

962

2007 90141456

2008 9542 2038

INTERPRETATION OF WORKING CAPITAL RATIO OF CHL

INDUSTRIES:-

The working capital turnover ratio are 9.1:1, 6.2:1 & 4.7:1 respectively in the years

2006 ,2007 & 2008. These ratios can be concluded that the ratios are showing

downward trend.(times per years)

4) Current Assets Turnover Ratio = Sales .

Current Assets

Year Ratios

2006 8748

1596

2007 9014

1506

2008 9542

2588

=

=

=

= 3.42 :1

=

= 3.04 : 1


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INTERPRETATION OF CURRENT ASSETS TURNOVER

RATIO OF CHL INDUSTRIES:-

The current capital ratios for the last 3 years are 2006, 2007 & 2008 are 3042:1,

3.04:1 & 2.06:1 1 times for yearly respectively. These ratios are shown downward

trend where the sales are generated with respect to current

PROFITABILITY RATIOS:-

5) Gross Profit Ratio = Gross Profit x 100 .Sales

Gross Profit = Sales Cost of goods sold

Year Ratios

2006 1373 x100

8748

2007 1913 x100

9014

2008 2183 x1009542

= 15.7%

=

=


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INTERPRETATION OF GROSS PROFIT RATIO OF CHL

INDUSTRIES:-

The gross profit ratios of CHL Limited. 15.7%, 21.22% & 22.88% in years 2006,

2007 & 2008 respectively. As gross profit having upward trend. It is beneficial for

CHL Limited.

6) Net Profit Ratio = Net Profit after interest and tax x 100 .

Sales

Year Ratios

2006 244.6 x100

8748

2007 1612 x100

9014

2008 1888 x100

9542

INTERPRETATION OF NET PROFIT RATIO OF CHL

INDUSTRIES:-

As like the gross profit ratios, the trend to net profit ratios are upward tend &

maintaining same level. It is the position, which is going towards growth of the

company. The net profit ratios are 2.8%, 17.88% and 19.79% in years 2006, 2007,

&2008 respectively.

=

=

=


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7) Overhead Ratio = Overhead (Expenses) .

Sales

Year Ratios

2006 1456 x100

8748

2007 1202 x100

9014

2008 1166 x100

9542

The Overhead Expenses are having downwards trend to it is good for CHL

Limited.

ACTIVITY RATIOS:-

8) Inventory Turnover Ratio = Cost of Goods Sold .Average Inventory

Cost of goods sold = Sales Gross Profit

Average Inventory = Average Inventor+ClosingInventory . (Finished

Goods) 2

Year Ratios

2006 7375

399.3

2007 7101

455.8

2008 7359

408.4

9) Inventory velocity Ratio = Average Inventroy .

Cost of Goods Sold

=

=

=

=

= 18 (times per year)

= 15.6


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Year Ratios

2006 399.3 x 365

399.3

2007 455.8 x 365

455.8

2008 408.4 x 365

408.4

INTERPRETATION OF INVENTORY TURNOVER &

VELOCITY RATIO OF CHL INDUSTRIES:-

The days in velocity period about inventory about inventory are quick proper as 20

days , 23 days and 20 days respectively in the years 2006, 2007 & 2008 respect

truly & turnover ratio about inventories are is years 2006 , 2007, & 2008 are 18.5,

15.6, & 18 respectively.

10) Debtors Turnover Ratio = Sales (Credit) .

Accounts Receivables

Year Ratios

2006 8748

970.4

2007 9014

940.4

2008 9542

1072.5

Debtors velocity Ratio = Average Accounts Receivable x 365

Net Credit Sales

Year Ratios

= 20 days

= 20 days

= 23 days

= 9.02 times

= 8.9 times

= 9.58 times


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2006 970.4 x 365

8748

2007 940.4 x 3659014

2008 1072.5 x 365

9542

11) Creditors Turnover Ratio = Net Purchase .

Accounts Payable

Year Ratios

2006 4583

1010

2007 3972

641

2008 4327

739

12) Creditors velocity Ratio = Average Accounts Payable x 365

Net Purchase (Credit)

Year Ratios

2006 1010 x 365

4583

2007 641 x 365

3972

2008 739 x 365

4372

INTERPRTATION OF DEBTORS & CREDITORS RATIOS:

As if Creditors velocity (periods) are observed it is concluded that velocity as they

= 40.5 days

= 41 days

= 38 days

= 4.54 times

= 5.86 times

= 6.2 times

= 80 days

= 62 days

= 59 days


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are less in days. The turn over ratio of both debtors and creditors are fluctuating as

debtors are about 9 times of sales (net) & creditors are about 5 or 6 times of net

purchase.

13) Fixed Assets Turnover Ratio = Sales .

Fixed Assets

Net Fixed Assets = Fixed Assets - Depreciation

Year Current Ratios

2006 874766343

194081337

2007 901365204

91423583

2008 954198398

358198284

INTERPRETATION OF FIXED ASSETS TURNOVER RATIO

The Fixed Assets Turnover ratio for the last three years 2006,2007 & 2008 are 4.51

,4.71 & 2.66 (times per year) respectively. The assets turnovers ratio indicates the

no. of times the assets have been rotated in process of doing business form the

above ratio, it is concluded that in the year 2006,2007 & 2008 the sales are

generated 4.51 , 4.71 &2.66 (times per year) for the fixed assets invested in it.

LEVERAGE RATIOS:-

14) Debt Ratio = Total Debt .

Total Debt + Net Worth

Net Worth = Shareholders fund Preliminary Expenses

Year Ratios

2007 1362

1362+3810

2008 3023

3023+5450

= 4.51:1 time

= 2.66:1 times

= 4.71:1 times

= .36

= .26


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Debt ratio used to analyse the long term solvency of the firm.

15) Debt Equity Ratio = Total Debt .

Net Worth

Year Ratios

2007 1362

3810

2008 3023

5450

INTERPRETATION OF DEBT EQUITY RATIO OF CHL:-

Contribution for each rupees of the owners contribution is called debt equity ratio

as year 2008, Debt equity ratio is .55:1 which is more as comparison with year

2007 in which the debt equity ratio is .36 :1.

COMMON SIZE STATEMENTS

Its one of the useful ways of analyzing financial statements is to convert then

into common size statements by expressing absolute rupee amounts into

percentages. When this method is pursued the income statement exhibits each

expense item or group of expense items as a percentage of net sales are layer

as 100 per cent. Similarly, each individual assets and liability classification is

shown as a percentage of total assets and liabilities respectively. Statement

Prepared in this way are referred to as

COMMON SIZE STATEMENTS.

# COMMON SIZE P/L A/C

= .55

= .36


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# COMMON SIZE BALANCE SHEET.

Common size comparative statement for one firm over the years would highlight the

relative change in each group of expenses, assets and liabilities. These

statements can be equally useful for inter-firm comparisons.

COMMON SIZE P/L & B/S

As it is an analysis of 3 years as years as 2006,2007 & 2008 first sales is

considered then it has an increasing trend and in common size P/L, they are

supposed to be 100% in each year.

In increasing trend, the other expenses are increasing and it is (9.28%) in

2006, (13.45%) in 2007 & (13.49%) in 2008. The increasing % is made

more between years 2006-2007

The expenses are going towards downwards in % so it is good indication for

the company efficiency. The expenditure amortised are approximately

same.

The profit before depreciation is in upwards trend & % increased in this

profit is made between 2006-2007. The main reason is that there is

increasing in other incomes with less expenses.

As it is company so due to more income and fixed assets maintained, the

expenses become more in ascending years, so the ultimate net profit offer

interest and taxes are in increasing trend & more % (different b/w 2006-

2007) increase is made in year 2007 as increase in 2008 is made

comparatively less due certain reasons.

It is an order based company. So, sales target are not achieved.


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Reserve and surplus is increased in 2007 over 2006 as % increased is

(17.204) which shows efficiency of the company.

The loan taken (secured) is much & increased made in 2008 over 2007 so

the company should make decrease & should manage its own capital &

reserves.

The company has made the current creditors decrease so it is good for

company and other liabilities are the same.

Provisions for wealth tax, proposed dividend and dividend tax are made but

soon the company is maintaining them in 2008.

Net fixed assets are in downwards trend and (4.29%) decrease in 2008 over

2007 and (.77%) decrease is made 2007 over 2006.

Capital work in progress is fluctuating in percentage but investment has

very proper trend as increasing year by year (11.476) and 2007 over 2006.

Inventories in current assets have a downward trend in year 2008 (3.979)

and 2007 over 2006.

Sundry debtors are increasing trend but in 2008 the based on total assets are

less year 2007

Cash & Bank Balances has increased in 2008 over 2007 as it is good

indication to maintain cash & bank as comparison in year 2007 over 2006.

Loans & advances has increased in year 2007 over 2006 (2.759) but it is

less increasing in year 2008 over year 2007.

These miscellaneous expenses are decreasing and the main reasons for their

decreasing are: -


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Less in preliminary expenses.

Less in deferred revenue expenditures in trend in years 2006,2007 &

2008

COMPARATIVE FINANCIAL STATEMENTS

In comparative financial statement technique, the financial data for 2 or more years

are placed and presented in adjacent columns and there by the financial data is

provided a time perspective in order to facilitate periodic comparison.

The comparative financial statement is based on the premises that a covering a

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

year only. As two comparative financial charts are as follows:

COMPARATIVE P/L A/C

COMPARATIVE BALANCE SHEET

INTERPRETATION OF COMPARATIVE P & L BALANCE

SHEET

Sales of year 2008 is more as comparison to year 2007. In year 2008 is

Rs. 9541 (in lakhs) with compare to sales amount of Rs. 9014(in lakhs)

Manufacturing expenses are increased in the year 2008 with compare to

year 2007 but the gross profit is also higher and the comparative amount


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is proper as showing the growth of the company.

Other incomes which add the net profit of the company is higher in the

year 2008 as compare to year 2007.

Advertising & publicity expenses are important and increased these

expenses in year 2008 (Rs.1.61 in lakhs) with compare to (Rs. .64) in

the year 2007. It is beneficial for growth of the company.

Interest paid a secured long terms loans more in the year 2008 but

interest on other become decrease in year 2008 as compare to year 2007

Preliminary expenses and deferred reserve expenses become same in the

years 2007 & 2008.

Net profit is also increasing trend in the year 2006 in compare to year

2007 as (Rs. 2303 in 2008 & Rs. 1923 in year 2000).

Reserve & surplus in the year 2008 is maintained very good in amount

with compare to year 2007.

Loan (secured) is taken more Rs. 3023 (in lakhs) in year 2008 with

comparison to year 2007 Rs. 1362 (in lakhs).

Current liabilities are much more in 2008 as compare to 2007 as result

of provision of wealth tax, proposed dividend & dividend tax.

Net fixed assets are more in the year 2008 due to purchase of fixed

assets in comparison of year 2007.

In current assets, inventories, sundry debtors, loans & advances are

increased in year 2008 with compare to year 2007. But Cash & Bank


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balances become reduction way in year 2008 with compare to year

2007.

Miscellaneous expenditure is less in the year 2008 Rs. 1.17 (in lakhs) with

comparison to Rs. 1.61 (in lakhs)

TREND ANALYSIS

In financial analysis the direction of changes over a period of years is of crucial

importance. Times series analysis or trend analysis indicates direction of change.

When a comparison of financial statements covering more than three years is

undertaken, the year-to-year method of comparison may become too cumbersome.

The best way to understand such long-term trend comparison is by means of index

numbers. The competition of series of index number requires the choice of a base

year that will for all item have an index amount of 100.

An important use of this method is when we want to see how the variables of the

particular statements are changing over a longer period of time. For eg. The index

number trend series for CHL Limited. over last four years is given in the next pages

makes over all picture of change at a glance then the actual balance sheet. In

summary, an important value of trend analysis is that it can convey to analyst a

better understanding of managements philosophies, policies and motivations or

other wise that have brought about a changes revealed over the years. The more

diverse the economic environments covering the periods comparison are the bettera picture can be obtain by the analyst in which the company has came out and taken

advantage of its opportunities.

SWOT ANALYSIS OF THE ORGANISATION

As everything has two sides of coin, one has strengths and other side has weakness

too. CHL Industries has the following strength and weaknesses.


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STRENGTHS:

1. CHL Industries Limited is a big concern with annual turnover of

Rs. 90,00,00,000 which is achieved only in few years.

2. CHL is one of the biggest companies manufacturing and

exporting the quality capsules.

3. It has captured the big share of international market with proper

goodwill and quality of good products.

4. CHL Industries provides welfare activities to its employees.

5. CHL is a major supplier for various types of capsules like,

Softgel Capsules, Li CAPS, VCAPS, NPCAPS, DBCAPS,

SGCAPS, in international market.

6. CHL has a huge capacity of manufacturing different capsules.

7. CHL makes the full capacity utilization more than 100% as the

annual through put of CHL is more than installed capacity.

8. It has a separate HRD section for maintaining its manpower

recourses.

9. It provides various loan facilities to its employees for different

purposes.It has proper Industrial Relation section for maintaining

Industrial relation.

10. Canteen and Bus facilities are available for employees at

different purposes.

11. It provides insurance benefits for its employees.


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12. Intensive measures have been undertaken for pollution control

and environment protection.

13. Decision-making is smooth in process in CHL Industries

Limited.

WEAKNESS

1. CHL avoids the community develop which is must for growing companies.

2. CHL should have more employees to get its work in more systematic &

peaceful way.

3. About 8% to 12% sale is made in domestic basis. The % should be

increased i.e focus should be give to domestic market.

4. Proper planning centres should be maintained so that wastage as scrap can

be less in quantities.

5. The proper stock of colour & chemical should be maintained

6. The budgets (proper & periodical) are not prepared in reference of

development of workers & employees.

7. CHL has a weakness of not possessing the workers & employees for a long

time in the concern.

OPPORTUNITY

Larger market potential (Domestic and International)


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Improve market goodwill

Improve mind and heard share of individuals

Consolidation over existing sales (export) and profits

THREAT

Comparative less growth

Loss of market share

Stiff competitors from transactional


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Chapter-E

Conclusion


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LIMITATIONS OF FINANCIAL ANALYSIS

Financial analysis is a powerful mechanism of determining financial strengths and

weakness of a firm. But the analysis is a based on the information available in the

financial statements. Thus financial analysis suffers from the serious inherent

limitations of financial statements some of the limitations of financial analysis are:-

1. It is only a study of interim reports.

2. Financial analysis is purely based upon the financial statements so any sort

of manipulation, window dressing in financial statements cannot be detected

through financial analysis.

3. Financial analysis is based upon only monetary information and non-

monetary factors are ignored.

4. Any change in the policy or procedure of the organization may lead to

misleading results to the analyst till the time he is not familiar with the

internal reasons of various policy changes.

5. Analysis is only means and not an end in itself. The analyst has to makeinterpretation and draw his own conclusions. Different people may interpret

the same analysis in different ways.


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SUGGESTIONS

Looking at the computation and analysis for the project the calculation of interest

and inferences from the graphs lead to conclusions that there should be

rationalization to the financial management, the position of an organization holds at

present.

The following suggestions are made to the CHL Industries Limited.

CHLshould try to cut operating cost as much as possible.

CHL Industries Limited should have better inventory management

techniques for going the proper level as Economic order Quantity (EOQ),

Re-order, safety point, safety stock, calculation of lead time so as to

minimize the inventory cost of the organization.

Better classification of inventory must be done so that insurance items can

be segregated from the less important items and according lead time

materials should be procured. ABC analysis techniques of stock should be

implied in CHL Industries Limited.

Various cost control techniques must be taken up so as to minimize the cost

of production.

Time motion study should be applied in the processing at CHL

CHL and all units must make its financial statements in millions either than

absolute figures as per international standards.

Proper fixed assets turnover ratio should be maintained by taking corrective


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actions.

Employees must be motivated to be more productive in the concern and

higher effort to improve productivity and profitability of organization.

CHL should maintain the goodwill in domestic too.

To make proper planning with the help of various budgets and proper

standards.

Proper provision for bad debts should be maintained by the company.


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FINDINGS & CONCLUSIONS

The overall analysis over the topic Critical analysis of financial position of

CHL Industry Limited is making clear much about the financial management. The

findings or conclusion based on studied are as under.

As Balance sheet is mirror of any company. The capital of this company is fixed

on the years. There is payment of attention of financial manager towards the more

maintenance of reserves and surplus (as increasing in years 2006 ,2007 & 2008) but

secured loans are taken much due to certain reasons as for purchasing the fixed

assets but the effective utilization is not made as not much increased in fixed assets

& investments are increased much and its percentage is an excellent.

Inventory is maintained fluctuating trend, as the company is not adopting the

economic order quality, safety point and certain inventory control technique, as

ABC analysis of stock is not used.

Provision of bad debts, wealth tax, dividend are not maintained as for making the

future certainty at some cash & bank balances are increasing in amount yet there is

sometimes not enough cash to pay immediate small payments.

The appropriate options/measures should be later to be met with the loans and

advances amount.

The company is unable to pay its expenses and payments in year in which they aredue. They are making carry forward in its burden for next years.


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The cost of the products can be reduced but effective cost control techniques are

not adopted by this company.

The company has higher cost having a reason that the scrap is not able to sell, as it

is having that must cost.

As the CHL is a growing concern but it has needed to improve more in its future

and financial management of CHL Industries requires systematic, efficient,

promote & corrective actions with proper management.

The company has higher cost having a reason that the scrap is not able to sell, as it

is having that must cost.

As the CHL is a growing concern but it has needed to improve more in its future

and financial management of CHL Industries requires systematic, efficient,

promote & corrective actions with proper management.


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Bibliography


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Bibliography

BOOKS

Pandy, I.M., Financial Management, Vikas Publishing House, New Delhi

Khan M.Y, and Jain P.K., Financial Management, Tata McGraw Hill, New

Delhi

Keown, Arthur J., Martin, John D., Petty, J. William and Scott, David F,

Financial Management, Pearson Education

Chandra, Prasanna, Financial Management, TMH, New Delhi

Van Horne, James C., Financial Management and Policy, Prentice Hall of

India

Brigham & Houston, Fundamentals of Financial Management, ThomsonLearning, Bombay.

Kishore, R., Financial Management, Taxmans Publishing House, New

Delhi

Suggested Readings:

Zikmund, Millian G., Business Research Methods , Thomson Learning ,

Bombay

Cooper, Donald R- and Pamels Schindler, Business Research Methods ,

Tata McGraw Hills, New Delhi

Geode, Millian J. & Paul K. Hatl, Methods in Research, McGraw Hills,


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New Delhi

Sekran, Uma, Business Research Method, Miley Education, Singapore

Kothari, C.R., Research Methodology

WEBSITES www.writercorporation.com

www.smallbusiness.chron.com

www.Exec-appointments.com

www.3imperical.ac.uk

www.en.wikipedia.org

www.tutor2u.net

www.thebasicproject.org.uk

www.ocas.org.uk

ANNUAL REPORTS

Annual report of CHL --- 2009-2010


http://www.writercorporation.com/http://www.smallbusiness.chron.com/http://www.exec-appointments.com/http://www.3imperical.ac.uk/http://www.en.wikipedia.org/http://www.tutor2u.net/http://www.thebasicproject.org.uk/http://www.ocas.org.uk/http://www.writercorporation.com/http://www.smallbusiness.chron.com/http://www.exec-appointments.com/http://www.3imperical.ac.uk/http://www.en.wikipedia.org/http://www.tutor2u.net/http://www.thebasicproject.org.uk/http://www.ocas.org.uk/


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