NIVED C NAMBIAR(MBA)

MY FINANCE PROJECT(FPA OF KELTRON)

CHAPTER 1 INTRODUCTION 1.1 INTRODUCTION TO THE STUDY Financial analysis is the process of identifying the financial strength and weaknesses of the firm by properly establishing the relationship between the items of the balance sheet and the profit and loss account. Financial analysis can be under taken by different people; the nature of analysis may differ according to the purpose of analysis. Financial performance analysis is a useful tool for comparing the financial statement for different periods. It helps to understand the strength and weaknesses of the organization. There are different types of tools for analyzing the performance of an organization. The tools used for financial analysis are ratio analysis, trend analysis, comparative balance sheet etc. From among above stated method ratio analysis is more important. Ratio analysis involves comparison for the useful interpretation of the financial statements. A single ratio in itself dose not indicate favorable or unfavorable condition. It should compare with some standards. The easiest way to evaluate the performance of a firm is to compare its current ratios with the past ratios. When financial ratios over period of time compared it is known as the time series (or trend analysis). It gives the indication of the direction of changes and reflects whether firms financial performance has improved, deteriorated or remain constant over a period of time. The analyst should not simply determine the change, but, more, importantly, he should under stand why ratio has changed. The change may be affected by change in the accounting policies without a material change in the firms performance. Some time future ratios are used as the standard of comparison. Future ratios can be developed from the projected Performa or financial statement. The comparison of past ratios with future ratios shows the firms relatively strength and weaknesses in the past and the future. If the future ratio indicates weak financial position, corrective action should be initiated. Another way of comparison is to compare the ratios of one firm with some selected firms in the same industry at the same point of time. This kind of comparison is known as the cross sectional analysis. This type of comparison indicates relative financial position and performance of the firm. The purpose of financial analysis is to diagnose the information contained in the financial statements so as to judge the profitability and financial soundness of the firm. Financial analyst analyzes the financial statement with various tools of analysis before commending up on the financial strength and weaknesses of the enterprise. The analysis and interpretation of financial statements is essential to bring out the mystery behind the figures in the financial statement. Financial performance analysis is an attempt to find out the performance of the organization according to the changing market conditions. Because of the above reason the study of financial performance analysis in KCCL has greater significance.

1.1.1 FINANCIAL PERFORMANCE ANALYSIS Financial performance analysis is an important tool used for find out the financial performance of a firm. It plays a dominant role in setting a frame work for managerial decision making, because it gives clear picture of the financial position of the organization that is whether the firm has sound financial position or not. So the management can take appropriate decision for the successful running of the organization. The term financial analysis is also known as analysis and interpretation of financial statement. It simply refers to the process of determining the financial strength and weaknesses of the firm by establishing strategic relationship between the item of balance sheet, profit and loss account and other operative data. DEFINITION According to MYERS financial statement analysis is largely a study of relationship among the various financial factor in a business as disclosed by a single set of statements and a study of the trend of these factors as shown in a series of statements According to METCALF AND TITARD financial statement is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firms position and performance

1.1.2 Types of financial analysis

On the basis of material used: According to material used financial analysis can be of two types: 1.External analysis: - This analysis is done by outsiders who do not have access to the detailed internal accounting records of the business firm. These outsiders include investors, creditors, potential investors, creditors, potential creditors, government agencies, credit agencies, and the

general public. For financial analysis, these external parties to the firm depend almost entirely on the published financial statement. 2.Internal analysis: - The analysis conducted by persons who have access to the internal accounting records of a business firm is known as internal analysis. Such an analysis can, therefore, be performed by executives and employees of the organization as well as govt. agencies which have statutory powers vested in them. Financial performance for managerial purpose is the internal type of analysis for managerial purposes in the internal type of analysis that can be affected depending upon the purpose to be achieved. On the basis of modus operandi: According to the method of operation followed in the analysis, financial analysis can also be two type 1.Horizontal analysis: - Horizontal analysis refers to the comparison of financial data of the company for several years. The figures for this type of analysis are presented horizontally over a number of columns. The figures of various years are compared with standard or base year. A base year is a year chosen as beginning point. This type of analysis is also called Dynamic analyses. 2.Vertical analysis: - Vertical analysis refers to the study of relationship of the items in the financial statement of one accounting period. In this type of analysis the figures from the financial statement of a year are compared with a base selected from the same years statement. It is also known as Static Analysis. 1.1.3 RATIO ANALYSIS Financial ratio analysis is the calculation and comparison of ratios which are derived from the information in a company's financial statements. The level and historical trends of these ratios can be used to make inferences about a company's financial condition, its operations and attractiveness as an investment. Financial ratios are calculated from one or more pieces of information from a company's financial statements. For example, the "gross margin" is the gross profit from operations divided by the total sales or revenues of a company, expressed in percentage terms. In isolation, a financial ratio is a useless piece of information. In context, however, a financial ratio can give a financial analyst an excellent picture of a company's situation and the trends that are developing. A ratio gains utility by comparison to other data and standards. Taking our example, a gross profit margin for a company of 25% is meaningless by itself. If we know that this company's competitors have profit margins of 10%, we know that it is more profitable than its industry peers which are quite favorable. If we also know that the historical trend is upwards, for example has been increasing steadily for the last few years, this would also be a favorable sign that management is implementing effective business policies and strategies. Ratio analysis is a widely-used tool used of financial analysis. It is defined as the systematic use of ratios to interpret the financial statements so that the strength and weakness of the firm as well as its historical performance and current financial conditions can be determined. The term ratios refer to the numerical or quantitative relationship between two items. Ratio is simply one number expressed in terms of another number. It refers to the numerical relationship between two figures.

In financial analysis, a ratio is used as an index or yardstick for evaluating the financial position and performance of a firm. The absolute accounting figures reported in the financial statements do not provide a meaning full under standing of the performance and financial position of a firm. An accounting figure conveys meaningful when it is related with some other relevant information The rationale of ratio analysis lies in the fact that it makes related information comparable. A single figure by itself has no meaning but expressed in terms of related figure, it yielded significant inferences. The ratio analysis, thus, as quantitative tool, enables analysts to draw quantitative answers to questions such as: Are the net profit adequate? Is the asset being used efficiently? Can the firm meats its current obligations? And so on. The use of ratio analysis as a tool of financial analysis has been considerable increased in these days. Ratio analysis can be of invaluable aid to management in the discharge of its basic functions of planning, forecasting, co-ordination, communication and control. It is a tool to diagnose the diseases of an enterprise. It is a powerful tool for financial analysis. The main advantages of ratio analysis are:1. Ratios are helpful in judging the financial performance of an enterprise over a period of time. 2. A study of the trend of strategic ratios may help the management in the task of planning and forecasting. 3. The ratio measures the efficiency of operation of enterprise. Hence they can be used as a tool for management control. 4. Ratio facilitates inter-firm comparison. 5. Ratio analysis simplifies the comprehension of financial statements. 6. Ratio analysis communicates the financial strength or weakness of a firm in a more easy and understandable manner. Thus, ratio analysis gives valuable information not only to management but also to creditors, investors and shareholders. 1.1.4 BASIS OF COMPARISION The ratio analysis involves a comparison for a useful interpretation of the financial statement. A single ratio in itself does not indicate favorable or unfavorable condition. It should be compared with some standard. Standers of comparison consist of:Ratios calculated from the past financial statement of the firm:The easiest way to evaluate the performance of a firm is to compare its current ratios with the past ratios. When financial ratios over a time are compared it is known as time series (or trend analysis). It gives an indication of direction of changes and reflects whether the firms financial performance has improved, deteriorated or remain constant over a period of time. Ratios developed by using the projected or pro forma, financial statement of the same firm:Future ratios can be developed from the projected or pro forma, financial statement. The comparison of past ratios with future ratios shows the firms relative strength and weakness in the past and future. If the future ratios indicate weak financial position, corrective action should be initiated. Ratios of some selected firms, especially the most progressive and successful, at the same point in time:Another way of comparison is to compare ratio of one firm with some selected firms in the same point in the time. This kind of comparison is known as the cross-sectional analysis. In most case, it is more useful to compare the firms ratios with ratios of a few carefully selected competitors, who have similar operations. This kind of a comparison indicates the relative financial position

and performance of the firm.

1.1.5 Importance As a tool of financial management, ratios are of crucial significance. The importance of ratio analysis lies in the fact that it presents fact on a comparative basis and enables the drawing of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following aspects. Liquidity position With the help of ratio analysis conclusion can be drawn regarding the liquidity position of the firm. The liquidity position of firm would satisfactory it is tile to meet its current obligation when they became due. A firm can be said to have the ability to meet its short term liabilities if it has sufficient liquid funds to pay interest on its short- maturity debt usually with in a year as well as to repay the principal. This ability is reflected in the liquidity ratios of a firm. The liquidity ratios are particularly useful in credit analysis by banks and other suppliers of shortterm loans. Long-term solvency Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This aspect of the financial position of a borrower is of concern to the long-term creditors, security analyst and the present and potential owners of a business. The long-term solvency is measured by the leverage/ capital structure and profitability ratios which focus on earning power and operating efficiency. The ratio analysis reveals the strength and weaknesses of a firm in this respect. Operating efficiency Another usefulness of ratio analysis is that it throws light on the degree of efficiency in the management and utilization of its assets. Various activity ratio measures this kind of operational efficiency Overall profitability Ratio analysis gives a clear picture about the overall profitability of the enterprises. This will be helpful for the management who are concerned about the ability of the firm to meet its short-term as well as long-term obligation to its creditors, to ensures a reasonable return to its owners and secure optimum utilization of the asset of the firm. This is possible if an integrated view is taken and all the ratios are considered together. Inter-firm comparison Ratio analysis provides data for inter-firm comparison. Ratio highlights the factors associated with successful and unsuccessful firms. The also reveal strong, firms, over valued an under valued an under valued firms. Trend analysis Finally, ratio analysis enables to know whether the financial position of a firm is improving or deteriorating over the years. This is made possible with the help of trend analysis the analyst can know the direction of movement that is whether the movement that is whether the movement is favorable or not. Ratio analysis reveals the strength and weaknesses of firm in his respect.

1.1.6 Limitations Ratios should be used with great care because they suffer from serious limitations. The important limitations are as follows; A particular ratio cannot be regarded as an indicator of good or bad performance of management. It only provides a clue to be further probed. Ratio will not reveal all relevant information about the business operations. They help in providing only a part of the information needed in the process of decision making. Ratios are not conclusions themselves. They are the only means to draw conclusions. Ratios are related to past data. A financial analyst is more concerned with the probable happening in the future rather than those in the past. Ratios do not reveal the non monitory aspect of the organizational environment; Eg: morale and loyalty of the employees, quality of supervision, human relation etc. Price level changes make the ratio analysis difficult. If too many ratios are calculated, it will be difficult to draw precise and meaningful conclusion. Financial statements can easily be window dressed to present a better picture of the financial positions. Hence one has to be very careful in making a decision on the basis of ratios calculated from such financial statement. 1.2 INTRODUCTION TO INDUSTRY INDUSTRY PROFILE Electronics is the study of properties and behavior of electrons and other carries of electronic charge especially with reference to technological and industrial application. Electronics plays a vital role in the economic and social development of a country; especially the liberalization policy followed by the govt., and enables the development of electronics industries in our country. Electronics is the study of the flow of charge through various materials and devices such as semi conductors, resistors, inductors, nano- structure and vaccum- tubes. Although considered to be a theoretical branch of physics, the design and contribution of electronic circuits to solve practical problems is an essential technique in the field of electronic engineering and computer engineering. The study of new semi conductor devices are surrounding technology is semi conductors considered a branch of physics. The article focuses on engineering on engineering aspects of electronics.

Electronic devices & components An electronic component is a physical entity in an electronic system whose intention is to affect the electrons or their associated fields in a desired manner consistent with the intended function of the electronic system. Components are generally intended to be Printed Circuit Board (PCB), to create an electronic circuit with a particular function (eg:- amplifier, radio receiver or oscillator) component may be packed singly or in more or less complex group as integrated circuit.

Types of circuits a) Analog circuit Most analog electronic appliances such as radio receivers are constructed from combinations of a few types of basic circuits. Analog circuits use a continuous range of voltage as opposed to discrete levels as in digital circuits. The number of different analogs circuits so far devised is huge, especially because a circuit can be defined anything from a single component, to system containing thousands of component goods. Example of analog circuit includes vaccum tubes and transistors, amplifiers, operational amplifiers and oscillators b) Digital circuit Digital circuits are electronic circuits based on number of discrete voltage levels. Digital circuits are the most common physical representation of Boolean algebra and are the basis of all digital computers. In most cases the number of different state of node is two, represented by two voltage levels and labeled Low(0) and High will be at a higher level depending on the supply voltage in use. To day we live in technology- driven world where speed, flexibility, intellectual capital development, and networks have become the basis of value creation - as connectivity and interactive technologies pervade all business activity. In this technology-driven environment, finds Keltron the assimilation, adoption and integration of technology in creating innovative solutions as the very basis of survival. Keltron's success has been in making technology work rather than inventing it. Keltron has been a catalyst in making electronics work in almost every aspect of our daily life, since 1973. Keltron's strength lies in the stable foundation and experience built over the years, its strong human capital, its nation-wide network and its agility to adapt itself to change. With over a 30year long track record as a manufacturer of sophisticated electronic devices and systems, Keltron presents itself in the global market as a one-stop-shop for manufacturing, system integration, and after-sales-support in India. Indian market for electronic devices Despite having population over one billion people, India has a relatively small electronic market being ranked twenty-six world wide. In terms of production the country is ranked twenty ninth. The consumer electronics sector dominates the industry and has benefited from a massive and expanding market T V set account for 22% of overall production. World market for electronic product Faster, better and cheaper is the slogan that devices todays electronic industry. Consumers are buying goods at a faster rate than the past. Electronics industry now follow the slogan innovate or perish thus we can see number of modified product in the market today. Electronics development has not been a study one. It is a cyclical in nature. There are many

fluctuations in demand & supply. But since future belongs to the electronic industry as for its proving as compact, simple and innovative product the demand for the electronic devices can be steadied after some time. Capacitors are also one of the major products of electronic industry. Keltron is the sole manufacture unit of capacitors in Kerala. These are some of the units which manufacture electrolytic capacitors. Meghalaya industrial development corporation Ltd. Navabharath enterprises, Hyderabad Pieco electronics & electrical Ltd. Bombay Rescon manufactures private Ltd. Pune Sab electronic devices, Sahibabad Webelson capacitors Ltd. Calcutta In addition to the above there are quit few units manufacturing electrolytic capacitors in small scale. The average capacity of each manufacturing in small scale is between 0.5 to 3 million numbers of electrolytic capacitors/ annum As per the information available all the major units of capacitors are working well. In fact some of the major units have taken effective step for their existing unit. The small scale industries are however facing some problems. The major problems they are facing is the non availability of indigenous good quality raw material. The organized sector is using 90% to 98% imported raw materials. The leading Asian producers of aluminum electrolyte capacitors are as follows. JAPAN Nippon Chemi-Con Nichicon Elna Shin el, Tsushin kogya SOUTH KOREA Korea Elna Samhwa electronics Samsung Pong sung TAIWAN Kaimei electronics Yeong Hong Matsushita Taiwan Teapo Anodia etc. The basic technology for manufacturing of aluminum electrolytic capacitors has changed a little since the first high performance. Aluminum electrolytic capacitors using formed and etched aluminum foil was developed in 1930s. However, over the years especially with the advent of modern equipment utilizing integrated circuits and with the demand imposed by improved consistent performance over extent period of time, substantially adoption and process improvement have been made.

The leading over seas manufactures to the following development are playing maximum attention. Improved materials and their performance Automation Reliability & quality assurance Low risk Higher temperature Miniaturization For the Indian aluminum electrolytic capacitors industry to improve its profitability of the company, the following is required, Increase the capacitors with in the excess of indigenous demand as stated for export. Further automation of the system resulting in high international standard yields Availability at competitive cost of international standard raw materials preferable from indigenous sources. All these factors are closely interrelated. Basic technology to manufacture electrolytic capacitors of standard type and range already exists in the country. The manufactures of electrolytic capacitors in the country is been more or less led by three or four large units which are serve the repository of basic technology, some acquired through foreign collaboration and some by other means such as through drawing/designs and diffusion of skilled personnel. The small size units squeezed out of the competition arising from both foreign & domestic companies.

Market trend in aluminum electrolytic capacitors industry The primary market for aluminum electrolytic capacitors remains the consumers himself. Electronics with Asia pacific the largest region, the area benefiting most from the move by Japanese manufactures to locate consumer electronic production offshore and the strong growth in the indigenous manufacturing base. Flat panel displays digital cameras and automotive will dive the growth. Number of markets is emerging as performance improves. Axial leaded aluminum capacitors are now viewed as mature technology with the number of manufactures discounting production. The medium to longer term aluminum will face continuous competitors from base metal multi layer ceramic development in super specialty appliances. The recent indigenous production is increasing day by day leading from an increase in demand. The gap there is met by import. Also import duty is supposed to be brought down as per WTO

agreement. As such the market prices are bound to fall further even while the demand increases. Thus even with complexities electronic industry has a bright future ahead.

1.3 INTRODUCTION TO THE COMPANY I.3.1 LOCATION KCCL Ltd. Is situated in Keltron nagar, mangattuparamba. Industrial estate of KELTRON it is set up to have a balanced regional development &to increase the standard of living of the people there. I.3.2 BRIEF HISTORY KELTRONS history is a saga of innovation in electronics. Within five years of its inception, Keltron had set up a production centre in every district of the State. More than 5,000 people were engaged directly or indirectly by Keltron for the manufacture of electronic goods. The model of a State-owned electronics Corporation was so successful that several other States in India followed suit; launching their own electronics corporations. A quarter century later, Keltron after having contributed substantially to the industrialization of the State, set about transforming Trivandrum, the capital city of Kerala, into one of the major electronics hubs of the country. Today, the city is home to Techno Park, the internationally known technology park where thousands of talented men and women participate in the development of a burgeoning information technology industry. Thus Keltron has in effect triggered a revolution that still keeps churning out its benefits to individuals and institutions in different parts of the world, continuing in its quest to innovate products and processes that would add further value to life and to the industry.

Keltron Component Complex Limited is a Government of Kerala undertaking promoted by Kerala State Electronics Development Corporation Ltd (KELTRON). The Company is located in the district of Kannur in Kerala. It commenced commercial production of Aluminums Electrolytic Capacitors in August 1978 in technical collaboration with M/s N.V Sprague Electromag, Belgium a subsidiary of the world famous Sprague Electric Company of USA. K.P.P.Nambiar is the founder and managing director of KELTRON. In June 1973 Mr. Nambiar joined Kerala State Electronics Development Corporation Limited (KELTRON) as its first Chairman and Managing Director and its first employee. KELTRON, the brand name Mr.Nambiar gave to the company, was the first autonomous Corporation in the State sectoring India and this example was emulated by several state Governments in the country. As a Chairman and Managing Director from June 1973 to September 1983 and Executive Chairman from September 1983 to February, 1985. Mr. Nambiar introduced for the first time in India the concept of village women's co-operative / women's societies for manufacture of

electronic assembly oriented products and implemented several schemes in different parts of Kerala thereby taking industries to the villages of Kerala. All Keltrons medium and large scale manufacturing units are also situated all over the state in rural areas, directly and indirectly employing several thousand people. The concept of women's co-operatives in villages was emulated by various State Governments like Punjab, Bihar, Manipur, Pondicheery and Uttar Pradesh.KELTRON also trained a number of unskilled girls/boys into skilled electronic equipment assembly operators enabling them to work in Womens Co-operatives and SSI units in Ranchi, Pondicherry and Imphal in 1981-82period and in Lakshadweeps in 1988. The total sales turnover of KELTRON rose from Rs.95 lakhs from 1974 - 75 to Rs.70 crores in 1984-85 andRs.125 crores in 1989-90. With the catalytic promotional role of KELTRON, Kerala's electronic output rose from Rs.2.5 crores in 1973 toRs.250 crores in 1989-90. Keltron Component Complex Limited markets its products under the brand name KELTRON of its parent Company.. The manufacturing technology is constantly upgraded by R&D Centre of the Company which has the recognition of the Department of Scientific & Industrial Research, Ministry of Science & Technology, and Govt. of India. The Company's Quality system has been conferred with the ISO 9001 accreditation by M/S electro mark.

Organizational chart

PLG- planning department E&F- etching and forming department MFG -manufacturing department MAT-materials department PE - plant engineering department HRD&ADF- human resources & administration department CAL- calibration department E&D- engineering and design department QA quality assurance department MKT- marketing department R&D research and development department FIN- finance department EDP-electronic data processing dept Strategic vision To be a world-class, growth-oriented electronics corporation specialized in providing quality, market- focused product, services and cost effective system solution to a large clientele.

To attain leadership position in the knowledge industry by training and utilizing the rich knowledge capital available in kerala, and creating a wide technology horizon for the development of knowledge wares and intelligent systems. Mission The company aims at maximum satisfaction to its customers by providing goods by which meet, their requirements. The company is committed to achieve its goal with the involvement of employees at all levels. TECHNOLOGY The company acquired the technology for design, development, manufacturing and testing from the collaboration with M/S.N.V.Sprague electromag. The company upgraded the manufacturing process which was mainly semi automatic manual in nature, subsequently by sourcing state of the art automatic machinery from Japan during the expansion undertaken. The company could also update the technology by obtaining information from suppliers on the latest development taking place in Japan, Korea and Taiwan on size reduction and temperature categories of capacitors with its house R&D efforts. The major raw materials viz. aluminum etched and formed foil was initially sourced from various countries. The company had developed and mastered the technology for forming aluminum foil for low voltage use. At the moment, Keltron has an arrangement with C-DAC, a research and development organization under the Government of India, which is located in the Keltron campus, for technology development and adaptation. Awards and recognitions National productivity awards 1988-1989 under large scale electronic component from national productivity council, New Delhi. ELCINA award 1995 for excellence in research & development for work done in the field of forming technology. Development of science & industrial research. Ministry of science and technology govt. of India approval for research and development. ISO 9001-2000 certificate from M/S intertek-UK. Plant & Machinery The original plant and machinery for 18 million pieces/annum of capacitors where sourced from M/S N.V.Sprague electromag, Belgium, subsequently for the expansion project the company sourced automatic state of the machinery from M/S JCC engineering company Japan. M/S CKD corporation Japan & M/S Dons enterprises, Taiwan. The company has scheme for break down maintenance, preventive maintenance& machinery over hauling. All the critical automatic equipment is covered under the inspection maintenance scheme. The engineers & technicians trained in Japan & Taiwan on the machines supervise the repair activities. The technicians are provided on the job training staffs. Stock of spares are sourced and stocked from suppliers for fabrication of spare parts, tool room facility is available. The machine is maintained in good condition and the expected life is extended by proper maintenance. Human resource The present manpower of the company is 279. They are split in to category wise as follows; Executives: 4

Unskilled: 37 Skilled: 162 Clerical: 38 The range of experience of all the category of employees is from 12-25 The company has human resource development program where by training needed by employees are identified & necessary classroom or on the job training is provided. Key technology performance is trained by collaboration with suppliers of machinery, over seas on the processing of capacitors and maintenance of machinery. Customer acceptance and order position Keltron electrolytic capacitors are expected by wide cross section of customer electronic manufacturer to professional equipment manufacturer & defense establishment. Keltron electrolytic capacitors are rated as first quality available in the market. The following type approvals are obtained by the company endorses the quality of capacitors. 1. ECSO (Electronic component standardization organization) 2. CACT approval 3. C- DOT approval 4. DGQA (defense) approval 5. UL India pvt. Ltd Quality Ensuring quality is a continuous on-going process at all production units. Each facility has a Quality Department whose business is to see that all quality norms are strictly adhered to in the manufacturing process. The manufacturing centers at Trivandrum, Aroor (Near Cochin), kannur and Kuttipuram (In Malappuram) are ISO 9001:2000 certified. Inspectorate of Naval Armament (SINA-T), has implemented their customized quality systems at KELTRON equipment complex Trivandrum. The manufacturing plants for Capacitors, Crystals & Resistors have been granted LCSO approval. In order to meet the stringent quality requirements of ISRO, ESD-control measures have been strictly adopted at the specified areas. Quality Policy Quality Policy of KELRTON is to achieve total customer satisfaction through continual improvement and effective Quality Management. Keltron aims at maximum satisfaction towards customers by providing goods to meet the requirement of the customers. They are committed to achieving their policy with involvement of employees at all levels through all levels through well defined quality management. The system which continuously received to enhance its effectiveness and update changing needs.

Future plan The company is going to reduce the material cost through value engineering, internal R&D efforts etc. efforts are made to increase the volume of production and sales to enhance its market share countering the competition from domestic as well as foreign suppliers. The company had designed motor start capacitors meeting UL safety requirements and the

product has been certified by UL India private Ltd. The company is hopeful o f receiving orders for these types of capacitors from manufactures of compressor / motors who exports their end products to Canada& USA. The companys quality system is presently accredited with Intertek Quality Registration UK ISO 9001yr 2000 system. Board of directors Chairman : Captain O.P. Dua Managing Director : Mr. K.M. Gopinath Directors : Princess Gouri Parvathi Bai : Mr.C.Prasanna Kumar : Mr. K. Radhakrishnan : Mr.U.V.Praveen : Mrs. Susheela Titus : Mrs. Alexy Jose : Mr.K. Balan 1.3.3 Product profile Aluminum electrolytic capacitors basically consist of a node foil cathode foil and condenser tissue paper inter leaved and rolled to form cylindrical capacitor section. The section is taped and subsequently impregnated in to suitable electrolyte based on the working voltage of the capacitors. The impregnated capacitor section is encapsulated in the aluminum casing with leads take out this end seal such as rubber bang, rubber Bakelite cove or model cover. After aging and testing capacitors are provided with printed insulation PVC sleeve. The aluminum electrolyte capacitor is classified into polar and non-polar/bi polar. Based on the working voltage they are grouped in to decreasing voltage, medium voltage and increasing voltage range. The polar capacitor has polarity. Positive mark indicates cathode foil. In non-polar capacitor both the foil used are anodes. A node foil used in aluminum electrolyte capacitor is of high parity at about 99.98%. The foil etched to increase the surface area and formed to the required voltage based on the working voltage. Cathode foil is etched for increasing parity of aluminum foil. The thickness of foil range from 20 micros to 110 micros based on the type of foil. (Anode or cathode). There is no change in the area of anode foil for different type of KELTRON products such as Radial, Axial, can type and AC motor start. Aluminum electrolyte capacitors with decreasing voltage will have increasing voltage formed foil. The standard width of 50mm foil will split in to 30mm to 82 mm based on capacitor size. The split foil is switched with parity tabs to lead out for external circuit. The capacitor elements are impregnated electrolyte used in the production of Aluminum electrolyte capacitors depends on the working voltage & temperature category of the capacitors. 1.3.4 FUNCTIONAL DEPARMENTS Planning department To plan is to look ahead and chart out the future courses of action. It is a determinant of courses of action to achieve the desired results. It cannot be denied that planning by itself cannot make the enterprise successful for success the enterprise has to operate and realize its goals. In Keltron planning is done in all departments. As based on the annual indent from top management and marketing department, planning department will prepare an annual budget based on the marketing trend, demand and prices existing in the market. After getting approval

of MD the annual budget is sent to marketing department and other proposed departments. Objectives To reduce wastages as possible To attain maximum productivity The work order prepared is analyzed and pending work list is should be given to prepare the material storage list

Manufacturing department Management of production is considered to be the crucial in any industrial organization. It is the process of transferring raw materials in to finished product. In Keltron production is done according to the orders received to the marketing department. Processes of receiving orders: Production is an order placed by the marketing department Safety:In KCCL safety measures and instructions are provided to for its employees. Management provided fire fighting equipments & number of first aid boxes to its workers. Power KCCL is located is situated near to Electricity Board Kannur, so power related problems is relatively less. In case of power distraction it has alternative power supply with 750KV generator.

Plant engineering department For modern product it is useful to analyze the design logic. This means starting with desired product factor and then identifies the necessary characteristics for raw material and process steps such as an approval goes to be named as engineering in KCCL Ltd. Plant engineering department takes core of maintenance of KELTRON.Maintanance is an essential activity in every manufacturing establishment. Because it is necessary to ensure the activity and availability of the machine, building and services needed by other parts of the organization. Functions 1.Break down maintenance 2.Preventive maintenance 3.Maintenance of utility equipment which are directly related to production. Area of maintenance Civil : Civil maintenance include maintaining building maintenance such as water steam

compressed air, ventilation plat equipment etc.It also include gardening, house keeping, drainage maintaining etc. Mechanical :Mechanical maintenance include maintenance of machine, equipment steam generator Electronics and electrical : It includes electronic equipment such as generator, transformer, motor, telephone system etc. Calibration department Calibration quantifies and control errors or uncertainties of the measurement process to an acceptable level. The set of operation, which established under specific condition. The relationship between values of quantities indicated by measuring instrument or system, or value represented by material measure or a reference material and corresponding values by standards. Objectives 1. To control calibrate at prescribed intervals and maintained inspection, measuring and testing equipments used by manufacturing departments and quality assurance departments so that the required measurement capability is measured. 2. Maintain calibration records for the complete set of instruments. 3. Evaluation of the external source for calibration for adequate facility and also for traceability to national / international standards. Responsibility The Head of the Department will responsible for implementing and maintaining the procedure. Concerned department heads are responsible for getting inspection, measuring & test equipments calibration on schedule.

Quality Assurance department Quality refers to the sum of attributes or properties that describe a product. these are expressed in terms of specific product characterized such a length width color& specific gravity etc. quality leads to productivity and quality reduces cost for repair, scraps, work and product warranties, increased productivity results profit & customer loyalty. Quality control is a staff function with prevention of defects in manufacture so that items may right at the first time and not to be. Inspection is another factor in quality assurances. Objectives Bring down pending work reduces clearances in inspection. Reduces rejection Reduce cost of inspection Research and development department Research and development has a crucial role in innovation and quality control. To survive in the competitive market research and development is very important. The department of scientific & industrial research, ministry of science and technology, govt. of India has approved the in house research and development activities of the company. Functions Developing high, medium& low voltage forming

 Developing technology for etching of electrolytic capacitors Adapting manufacturing of electrolytic capacitor Etching and forming department Etching Etching is the electro chemical process by which effective surface area of aluminum is increased beyond geographical area. Forming It is the first process of making capacitors. Electrochemical oxidation process of developing aluminum oxide polarized barrier on the etched foil at different volts to make use of the capacitors of different working voltage. Materials department Materials are the main thing used for production. Materials department is responsible for ensuring that there is continuous availability of raw materials for the smooth functioning of the production department. Functions Purchasing raw materials, components, consumable spare capital and goods at least cost. Maintenance of proper issue of purchasing date Receipt, storage, issue and control of materials Training of personal in the department

Human resources and administration department Personnel department is responsible for all the human resources matters in an organization. All matters relating to the employees are looking after by the personnel department. Recruitment, training wage and salary etc are come under in this department. Recruitment Recruitment is done on central enterprise. External recruitment is the main sources for filling the vacancies. It is fair and flexible. After selection a orientation program is conducted by the organization. Training One month training is given to fresher to make him the part of the organization. Wage and salary Wage and salary provided to the employees is fair and reasonable. The trade unions are Keltron employee association Keltron employee union Keltron employee organization Keltron employee congress Welfare Washing, toilet and bathroom For drying clothing Facilities for sitting

 First aid equipment Canteen Engineering and design department To attract the customers design for existing product is necessary. The modern product is useful to document and analyze the design. This means starting with desired products and make changes in its existing feature Marketing department Marketing is the process of making popularize the products of the organization. Marketing department is responsible for generating business of the organization. all the sales promotion are undertaken by the marketing department. Objectives To generate maximum profit at best possible way. Speedy realization of payment. Make advertisement for the products. Distribution channel Directs and dealer net work is followed by the organization. dealers are appointed by the marketing department in area wise. Brand name The brand name of the product of KCCL is given as KELTRON Competitors The competitors of KCCL are India- Incaps (Hyderabad), Nichicon etc. Foreign- Samsung, Samha, etc. Finance department Finance is the life blood of every business activity. The performance of the organization is based on its financial strength. Financial department is very much careful about the collection and application of fund. Function Investment or long term asset mix decision Financing or capital mix decision Profit allocation decision Liquidity or long term asset mix decision Electronic data processing department Data processing department collect data from all the departments and process. And they transfer required information to other departments when it is needed. Function Entering and processing data Develop program for various department

CHAPTER 2 ABOUT THE STUDY 2.1 OBJECTIVES The objectives can be classified in to primary objectives and secondary objectives. These objectives are discussed below. Primary objective Primary objective of the study is to find out how efficiently the management manages the fund available to the organization. Secondary objective To analyze the financial performance of KCCL Ltd. To know the liquidity position of the company To study the long term solvency position of the company and interest paying capacity of the firm. To study the profitability position of the firm. To study the capital structure of KCCL.

2.2 SCOPE OF THE STUDY Financial analysis is a power full mechanism of determining the strength and weaknesses of the firm through analysis of present and past performance of the organization. The study will provide an insight in to the different aspect of working of the organization, especially the financial performance. The Scope of the study restricted to the financial analysis and interpretation of financial statement of KCCL from the year 2003-04 to 2007-08. Financial analysis has been done through ratio analysis and trend analysis. The annual report was used for the calculation of various ratios.

2.3 Limitation of the study This work has so many limitations due to various reasons. Also Ratio analysis and trend analysis

have its own limitations. The limitations are listed below; The analysis of financial performance is limited for the period of 5 years. So the conclusion drawn is not complete. Lack of in-depth knowledge regarding the financial aspects. The report may suffer from the disadvantages of ratio analysis. Disclosure of the matters regarding the financial position of the company to a certain extent and officials are afraid of giving much information regarding the concerned subject.

CHAPTER 3 RESEARCH DESIGN 3.1 RESEARCH METHODOLOGY Research means a careful investigation or enquiry especially through search for new facts in any branch of knowledge. Research methodology is systematic way of solving a problem through scientific methods. The methodology adopted in the study comprises collection of primary and secondary data and their systematic analysis by using ratio analysis and trend analysis. Primary data is obtained by primary sources through personal interview, discussion etc... and secondary data have been collected from published sources like annual reports, journals and other books , official website of the company 3.2 AREA OF THE STUDY The area of study strictly limited to KCCL Ltd. Keltron Component Complex Ltd Is situated in Keltron nagar, mangattuparamba in the Industrial estate of KELTRON it is set up to have a balanced regional development &to increase the standard of living of the people there. The financial datas are obtained from the annual reports that are published by the company. The study has to be done for a period of five years analysis of financial statements commencing from 2003-2004 to 2007-2008 3.3 Data collection Data collection is done through two sources 1. Primary source 2. Secondary source Primary sources Primary sources of data collection are through

 Discussion Interviews etc. Secondary sources Published annual report of the organization like Journals and periodicals. 3.4 Chapterisation The study is divided into five chapters. The first chapter is the introductory chapter, which describes an introduction about the study, industry and the company. The second chapter presents details about the study. The third chapter deals with research design of the project. The analysis of data and interpretation of the data of KELTRON is included in the fourth chapter. The fifth chapter summaries the finding and conclusion with recommendations.

3.4 Tools used for financial analysis The tools used for financial performance analysis of KCCL are A) RATIO ANALYSIS a) NET WORKING CAPITAL b) CURRENT RATIO c) QUICK RATIO d) INVENTORY TURN OVER RATIO e) WORKING CAPITAL TURN OVER RATIO f) DEBTORS TURN OVER RATIO g) AVERAGE COLLECTION PERIOD OF DEBTORS h) CREDITOS TURN OVER RATIO i) AVERAGE COLLECTION PERIOD OF CREDITORS j) DEBT EQUITY RATIO k) PROPREITORY RATIO l) SOLVENCY RATIO m) NET PROFIT RATIO n) SELLING AND DISTRIBUTION EXPENSES RATIO o) RETURN ON INVESTMENT B) TREND ANALYSIS

3.5 CLASSIFICATION OF RATIOS Accounting ratios can be classified in several ways. In general, accounting ratios may be classified on the following basis. Classification according to accounting statement

 Classification according to importance Classification according to nature or function Liquidity ratios Turn over ratios Leverage ratios Coverage ratios Profitability ratios

a) Classification according to accounting statement: According to this, ratios may be of the following three types: 1. Balance sheet or financial ratios: The items used for the calculation of these ratios are taken out from the balance sheet. Eg:-current ratios, proprietary ratios etc. 2. Profit and loss account ratios: These establish relationship between two items in the profit and loss account. Eg:-gross profit ratio, operating ratio etc. 3. Combined or mixed ratio: These ratios are calculated by taking out one item from the profit and loss account and the other from the balance sheet. Eg:-stock turn over ratio, fixed asset turn over ratio etc. b) Classification according to importance According to this, ratios are divided into the following two types: Primary ratios: The success of any business is measured by the amount of profit earned. Therefore, ratios like profit to sales return on capital employed etc. Secondary ratios: These ratios are used for explain the primary ratios. c) Classification according to nature or function: This is the most important classification. On the basis of nature or function ratios are of the following types: Liquidity ratios: These ratios measure the capacity of the firm to meet its short term liabilities out of the short tem resources. Eg:-current ratio, quick ratio etc. Leverage ratios: These are also called capital structure ratios. These ratios analyze the long term solvency or financial position of the firm. Eg: - debt equity ratio, capital gearing ratio, proprietary ratio etc. Activity ratios: These are also called turn over ratios. These ratios indicate how effectively the resources are being utilized by a firm. Eg: - stock turnover ratio, fixed asset turnover ratio, debtors turnover ratio etc. Profitability ratios: These ratios measures the profitability or operating efficiency of a firm. Eg: - gross profit ratio, operating ratio, return on investment, earning per share etc.

\ d) LIQUIDITY RATIOS The importance of adequate liquidity in the sense of the ability of a firm to meet current/short-

term obligations when they became due for payment can hardly be overstressed. Christy and Roden define the liquidity of an asset as money ness. In fact, liquidity is the prerequisite for the very survival of the firm; it is required for the preparation of the cash flow statement and fund flow statement. The firm should ensure that it dose not suffer from lack of liquidity, and also that it is not too much highly liquid. The failure of the company to meets its obligations, due to lack of sufficient liquidity, will result in bad credit image, loss creditors confidence, or even in law suits resulting in the closure of the company. A very high degree of liquidity is also bad; idle asset earn nothing. The firms fund will unnecessarily tied up in current asset. Therefore it is necessary to strike proper balance between liquidity and lack of liquidity. The ratios which indicate the liquidity of the firm are: Net working capital Current ratio Acid test/quick ratio Turn over ratio Inventory turn over ratio Debtors turnover ratio Creditors turnover ratio Working capital turnover ratio

Net working capital Net working capital (NWC) represents the excess of current asset over current liabilities. Current assets refer to the assets which in the normal course of business get converted in to cash with in a shot period of time. Current liabilities are those liabilities are those liabilities which at the inception are required to be paid in a short period, normally one year. Current ratio Current ratio is defined as the ratio of current asset to current liability. It shows the relationship between total current asset and total current liability. It measures the firms shot term solvency. The higher the current asset, the higher the current ratio, the greater the firms ability to meet short term debt. An unusually high current ratio indicates that the funds are being economically used in the firm. An unusually low current ratio indicates that the firm may have some difficulty in paying off its debts. It is essential that a firm should have a reasonable current ratio. Conventionally, a current ratio of 2:1 is satisfactory. The main limitation of current ratio is that it dose not indicate the liquidity of individual components of current assets. Even if the ratio is favorable, the firm may be in financial trouble because of more stock and work in progress which is not easily realizable in to cash. Quick ratio/ Acid test ratio/liquid ratio Liquid ratio is the ratio of liquid assets to liquid liabilities. It is established the relationship between quick asset and quick liability.

Quick ratio is considered to be superior to current ratio in testing the liquidity position of the firm. It is an improvement of current ratio because in the calculation of quick ratio, the weakness of current ratio is overcome. It provide better picture of the firms liquidity. A quick ratio of 1:1 is ideal Turn over ratios The liquidity ratios discussed so far relate to the liquidity of the firm as a whole. Another way of examining the liquidity is to determine how. Quickly certain current assets are converted in to cash. The ratios to measure these are referred to as turnover ratios. The relevant turnover ratios are: a) Inventory turnover ratio: Inventory turn over ratios is also known as stock turnover ratios. It establishes the relationship between costs of goods sold and average inventory. Besides helps in determining the liquidity of the business concern, this ratio indicates how many times during the period firm has turned its inventory. In other words, it shows the rate at which inventories are converted in to sales and then in to cash. Inventory turn over ratio is a measure of liquidity of inventory. This ratio indicates the speed with which the inventory is sold. A high turnover ratio indicates that inventory is sold fast. It is an indication of good inventory management. On the other hand, a low turnover ratio reflects over investment in inventories, accumulation of huge stock etc. In other words, a low turnover ratio indicates that inventories are lying in stock for a long time. This ratio is also an index of profitability. A ratio of 6 or 7 times is considered satisfactory. It should be remembered that, for a meaningful analysis, this ratio should be compared with similar ratios in the previous years or with the ratios of other similar firms. b) Debtors turn over ratio Debtor turn over ratio is also called receivables turn over ratio. It relates net credit sales to sundry debtors. It measures how fast debts are collected. The debtors turnover ratio indicates the quality of debtors by measuring the rapidity or slowness in the collection process. A shorter collection period (or higher turn over ratio) indicates prompt payment of debtors, while a longer period (lower turn over ratio) indicates the inefficiency of the credit collection. c) Creditors turn over ratio Creditors turn over ratio is the ratio between net credit purchase and the amount of sundry creditors. It implies the credit period enjoyed by the firm in paying creditors. This ratio reflects whether terms of credit allowed by suppliers are liberal or stringent. A high creditors turnover ratio (shorter period) shows that creditors are being paid promptly, while a low turnover ratio (longer period) reflect liberal credit terms granted by suppliers. d) Working capital turnover ratio This ratio is computed to test the efficiency with which the net working capital is utilized. In other words, this ratio indicates whether working capital is effectively used in making sales. A low working capital turnover ratio may reflect an inadequacy of working capital and lower turn over inventories or receivables. e) Fixed asset turnover ratio Fixed asset turnover ratio shows the relationship between sales and fixed assets are fully utilized. To be more clearly, this ratio measures the efficiency with which the firm is utilizing its fixed asset in generating sales.

This ratio measures the efficiency in the utilization of fixed asset. A high turnover ratio reflects overtrading. On the other hand, a lower ratio indicates idle capacity and excessive in fixed assets. Generally, a slandered or ideal ratio is five times.

e) LEVERAGE RATIO As already observed, the short term creditors like banks and suppliers of raw material, are interested in the short term solvency of a firm. For the analysis of shot term solvency or the current financial position, liquidity ratios are used. The share holders and debenture holders and long term creditors like financial institutions are more interested in the long term financial position or long term solvency of the firm. Leverage or solvency ratios are used for such an analysis. These ratios are also used to analyze the capital structure of the company that is why these ratios are also called capital structure ratio. The term solvency generally refers to the firms ability to pay the interest regularly and repay the interest regularly and repay the principle amount of debt on due date. There are two aspects for long term solvency of a firm. Leverage or solvency ratios are used for such an analysis. These ratios are also used to analyze the capital structure of a company. That is why these ratios are also called capital structure ratios. The term solvency generally refers to the firms ability to pay the interest regularly and repay the principle amount of the debt on due date. There are two aspect of long term solvency of a firm 1. Ability to repay the principle amount of loan on due date. and 2. Regular payment of interest. Accordingly there are two types of leverage ratios. The first type of leverage ratios are based on the relationship between owned capital and borrowed capital. These ratios are calculated from the balance sheet items. The second type of leverage ratios are coverage ratios. These are computed from the profit and loss account. The important solvency or leverage ratios are;

Debt- equity ratio Debt equity ratio shows the relationship total debt and owned capital. It is the ratio of the amount invested by the shareholders. It is also known as External-Internal Equity Ratio. This ratio reflects the relative claim of the shareholders and creditors against the asset of a company. Alternatively, this ratio indicates the relative proportion of debt and equity in financing the asset of a company. The term external equity refers to total outside liabilities or borrowed funds. Outside liabilities include all debts whether long term and short term. The term internal equity or share holders fund includes equity share capital, preference share capital and reserves and surpluses. This ratio is one of the most important measures of long term solvency. It reflects the relative contribution of creditors and owners of the business in its financing. It is an index of degree of protection the creditors have invested more in the business than the share holders. A low ratio indicates a smaller claim of creditors. More precisely, the greater the debt-equity the greater the creditors. Both high and low debt-equity ratios are not desirable from the companys point of

view. There must be a proper balance between debt and equity. Normally the ideal or standard ratio is taken to be 1:1 for public sector and 2:1 for private sector. The controller of capital issue prescribes debt-equity ratio should not exceed 2:1 Proprietary ratio This is relevant of the debt equity ratio. This ratio establishes the relationship between shareholders fund and total asset. It indicates the proportion of total assets financed by shareholders. It is usually computed as percentages. Like debt equity ratio, proprietary ratio gives result relating to capital structure of a company. It reflects the general financial strength of a company. It enables the creditors to find out the proportion of shareholders funds in the total assets. A high proprietary ratio indicates a relative favorable position to the creditors at the time of liquidation. Solvency ratio The solvency ratio is used to test the solvency of a firm. Solvency means the ability to meet the outside liability out of to total asset. This ratio establishes the relationship between total asset and outside liabilities. g) COVERAGE RATIOS The second type of coverage ratios are leverage ratios. These ratios are computed from the profit and loss account. The claims of creditors are usually met out of the earnings or operating profit. These claims consist of interest on loans, interest on debentures, preference dividend or repayment loans or redemption of preference capital on maturity. Creditors test the firms ability to service their claims with the help of coverage ratios. These ratios measure the relationship between operating profit and the claims of the outsiders. The important coverage ratios are discussed below. Interest coverage ratios The interest coverage ratios are also known as debt service ratio. This ratio relates the fixed interest charges to the operating profit or the Earnings Before Interest and Tax (EBIT). It indicates whether the firm earned sufficient profits to pay periodically the interest charges. This ratio is very important for the long term creditors. It shows how many times the interest charges covered by the EBIT. It indicates the ability of the company in the payment of interest to creditors. It reflects the financial strength of a company. The standard for this ratio is that interest charges should cover six to seven times. The higher the ratio, the stronger is the ability of the company to pay interest. But too high a ratio may imply unused debt capacity. A low ratio may indicate excessive use of debt and the inability to offer assured payment of interest to creditors. Dividend Coverage Ratio Dividend coverage ratio measures the ability of a company to pay dividend on preference shares carrying a fixed rate of dividend. It is obtained by dividing the net profit after tax by the amount of dividend. Total coverage ratio This ratio is also called fixed charges coverage ratio. It measures the ability of the company to service of all fixed obligations out of its earnings h) PROFITABILITY RATIOS The ultimate aim of any business enterprises is to earn maximum profit. Lord Keynes remarked, profit is the engine that drives the business enterprises. The firm should earn profit to survive and grow over a long period of time. To the management, profit is the measure of efficiency and

control. To the owners it is a measure of worth of their investment. To the creditors, it is the margin of safety. The In other words, the management of the company is very much interested in the profitability of the company besides management creditors and owners also are interested in the profitability of the company. Creditors want to get interest and repayment of principal regularly. Owners want to reasonable return on their investment. The profitability of the firm can also be measured by its profitability ratios. Profitability ratios measure the ability of the firm to earn an adequate return on sales, total asset and invested capital. Profitability ratios are generally calculated either in relation to sales or in relation to investment. The profitability ratios are in relation to investment. The profitability ratios in relation to sales are Gross profit ratio, Net profit ratio, operating ratio, Expenses ratio etc. the profitability ratio in relation to investment are Return on investment, return on asset , return on equity capital etc. Net profit ratio Net profit ratio is the ratio of net profit to net sales. It is known as profit margin. It is usually expressed as percentages. Net profit ratio indicates management efficiency in manufacturing, administering and selling the product. This is a measure of overall profitability. It indicates what portion of sales is left to the owners after all expenses have been met. This ratio is also indicates the firms capacity to withstand adverse economic conditions. A high N/P ratio would indicate higher overall efficiency of the business, better utilization of limited resources and reasonable returns to its owners. A low N/P ratio would mean low efficiency and inadequate return to owners. Operating ratio This is the ratio of cost of goods sold plus operating expenses to net sales. This ratio shows the percentage of sales absorbed by the cost of goods sold and operating expenses. In fact this ratio explains the change in the N/P ratio. This is an important ratio for analyzing the profitability of a concern. This ratio should compare over a period of time with industry average as well as similar firms. As a rule low ratio is favorable because it will leave a large amount of operating income to meet interest, tax, and a fair return to its owners. A high operating ratio is unfavorable because it will leave a small amount of operating income to meet financial expenses like interest, tax, dividend etc. an operating ratio ranging between 75%and 85%is generally considered as ideal for manufacturing concern. Expenses ratios When the operating ratio is further analyzed, we shall get expense ratio. The expense include 1. Cost of goods sold 2. office and administrative expenses and 3. selling and distribution expenses The operating ratio should also equal to sum of expenses ratios Return on investment The overall objective of the business is to earn a satisfactory return on capital invested. The

management owners are very much interested in the rate of earning on capital employed. The rate of earning on capital employed is referred to as ROI. This is the overall profitability ratio. This is used as a measure of success of a business.

3.10 TREND ANALYSIS The term "trend analysis" refers to the concept of collecting information and attempting to spot a pattern, or trend, in the information. In some fields of study, the term "trend analysis" has more formally-defined meanings. Although trend analysis is often used to predict future events, it could be used to estimate uncertain events in the past, such as how many ancient kings probably ruled between two dates, based on data such as the average years which other known kings reigned. Comparing the past data over a period of time with a base year is called trend analysis. Under this technique, information for a number of years is taken up and one year (usually the first year) is taken as the base year. Each item of the base year is taken as 100 and on that basis the percentages of other years are calculated. The object of calculating the trend percentage is to show the direction of change upward or down ward. The trend percentage is generally computed for the major item in the statement. Computation of trend percentage The following steps are involved in the computation of trend ratios: 1. The statement probably relating to the earliest year may be taken as the base with reference to which all other financial statements are compared and analyzed. 2. Each statement in the base statement is taken as 100. 3. If the amount of the same item in the other statement is more than that in the base statement, the trend percentage would be more than 100% and if the amount is less than the base amount, the trend percentage would be less than 100%. This trend ratio is computed by dividing each amount in the other statement with the same item in the base statement. CHAPTER IV ANALYSIS AND INTERPRETATION I. LIQUIDITY RATIOS Net working capital Net working capital is the excess of current asset over current liability. Net working capital is the amount which is kept in the organization in order to meet the day-to-day requirement of the organization. The greater the amount of working capital the greater is the liquidity of the firm. It can be computed as follows;

NWC = CURRENT ASSET- CURRENT LIABILITY Table.No:4.1 Table showing net working capital YEAR CURRENT ASSET ( lakhs) CURRENT LIABILITY (lakhs) NWC (lakhs) 2003-2004 2643.99 1090.69 1553.3 2004-2005 2306.08 978.67 1327.42 2005-2006 2470.43 1069.58 1400.85 2006-2007 2267.07 1160.61 1106.4 2007-2008 2498.28 1130.02 1368.26 Chart. No 4.1 Chart showing net working capital

Interpretation:From the above we could interpret that the company is maintaining adequate working capital in each concerned years which will be helpful to meet its short term requirements. The company is also possessing adequate capital structure.

Current ratio Current ratio is a ratio which measures the firms sort-term solvency. It indicates the availability of one rupee in every one rupee of current liability. The formula used for calculating current ratio is; CURRENT RATIO = CURRENT ASSET CURRENT LIABILITY

Table.No:4.2 Table showing current ratio YEAR CURRENT ASSET (LAKHS) CURRENT LIABILITY(LAKHS) CURRENT RATIO 2003-2004 2643.99 1090.69 2.42

2004-2005 2306.08 978.67 2.67 2005-2006 2470.44 1069.58 2.31 2006-2007 2267.01 1160.61 1.95 2007-2008 2498.28 1130.02 2.21

Chart.No:4.2 Chart showing current ratio

Interpretation:The current ratio of 2:1 is satisfactory for an organization. In the case of KCCL the firm is having satisfactory liquidity position from 2003-2004 to 2007-2008, except 2006-2007 there is a slight decrease in the current ratio,becase of increase in the amount of current liability.

Quick ratio/ Acid test ratio/liquid ratio This ratio establishes a relationship between quick asset and current liability. Quick ratio can be computed as follows; QUICK RATIO= QUICK ASSET CURRENT LIABILLITY QUICK ASSET=CURRENT ASSET-STOCK+PREPAID EXPENCES

Table.No:4.3 Table showing quick ratio YEAR QUICK ASSET (lakhs) CURRENT LIABILITIES (lakhs) QUICK RATIO 2003-2004 1107.6 1090.69 1.02 2004-2005 1132.46 978.67 1.16 2005-2006 775.81 1069.58 .73

2006-2007 832.17 1130.02 .73 2007-2008 681.87 1160.61 .59

Chart.No:4.3 Chart showing quick ratio

Interpretation:The adequate position of quick ratio is 1:1.quick ratio of this organization shows a decreasing trend. In the year 2003-2004 the organization have adequate liquidity position.

II. Turnover ratios Inventory turnover ratio: Inventory turn over ratio measures the liquidity of inventory. This ratio indicates the speed with which the inventory is sold fast. Low turn over ratio reflects the over investment in inventories and accumulation of huge stock etc. the formula is: INVENTORY TURN OVER RATIO= SALES AVERAGE STOCK OR INVENTORY

Table.No:4.4 Table showing net inventory turn over ratio YEAR SALES AVERAGE STOCK OF INVENTORY (LAKHS) INVENTORY TURN OVER RATIO 2003-2004 3089.85 1568.36 1.97 2004-2005 2448.6 1508.92 1.62 2005-2006 2455.21 1442.99 1.70 2006-2007 2382.5 1346.63 1.76 2007-2008 2505.04 1330.25 1.88

Chart.No:4.4 Chart showing inventory turn over ratio

Interpretation: In the above table shows that the inventory turns over ratio of the company is very poor that means the company holds more inventory than actually required.

Working capitals turn over ratio This ratio indicates the efficiency with which the net working capital is utilized for sales. It is calculated as follows; WORKING CAPITAL TUROVER RATIO= NET SALES NET WORKING CAPITAL

Table.No: 4.5 Table showing working capital turn over ratio YEAR NET SALES (LAKHS) NET WORKING CAPITAL (LAKHS) WORKING CAPITAL TUROVER RATIO (LAKHS) 2003-2004 3089.85 1886 1.64 2004-2005 2448.60 1327.41 1.84 2005-2006 2455.21 1400.85 1.04 2006-2007 2382.5 1106.4 1.01 2007-2008 2505.04 1368.26 2.26

Chart.No: 4.5 Chart showing working capital turn over ratio

Interpretation:The working capital turn over ratio test the efficiency with which the working capital is utilized. In the case of KCCL the working capital turn over ratio is very low. This indicates working capital is not used properly for making sales.

Debtors turn over ratio Debtors turn over ratio measure how rapidly the firm collects its debtors. The computation of this ratio is; DEBTORS TURN OVER RATIO= NET CREDIT SALES DEBTORS+ BILLS RECEIVABLE

Table.No: 4.6 Table showing debtors turn over ratio YEARS NET CREDIT SALES (LAKHS) DEBTORS+BILLS RECEIVABLE(LAKHS) DEBTORS TURN OVER RATIO (LAKHS) 2003-2004 3089.85 981.88 3.15 2004-2005 2448.6 714.24 3.43 2005-2006 2455.21 649.92 3.78 2006-2007 2382.5 599.20 3.98 2007-2008 2505.04 552.03 4.54

Chart No: 4.6 Chart showing debtors turn over ratio

Interpretation:Debtor turn over ratio shows an increasing trend. It will be beneficial to the organization, so that the organization could collect the amount with in a short period of time.

Average collection periods of debtors The average collection period of debtors indicates the time with in which the organization collects its amount of debtors, AVERAGE COLLECTION = DEBTORS+ BILLS RECEIVABLE PERIOD OF DEBTORS CREDIT SALES PERDAY

Table No: 4.7 Table showing the collection period of debtors YEARS DEBTORS+ BILLS RECEIVABLE (LAKHS) CREDIT SALES/DAY (LAKHS) AVERAGE COLLECTION PERIOD OF DEBTORS 2003-2004 981.88 8.58 114 2004-2005 714.24 6.8 105 2005-2006 649.92 6.82 95 2006-2007 599.20 6.62 91 2007-2008 552.03 6.96 79

Chart No 4.7 Chart showing the collection period of debtors

Interpretation:The quality of debtors is determined by measuring the rapidity or slowness in the collection process. A shorter the collection period indicates promotes payment of debtors, while longer period indicates the efficiency of the credit collection period.

Creditors turn over ratio Creditors turn over ratio is the ratio between net credit purchase and the amount of sundry creditors. It implies the credit period enjoyed by the firm in paying creditors.

CREDITORS TURN OVER RATIO = NET CREDIT PURCHASE SUNDRYCREDITORS+BILLS PAYABLE

Table No 4.8 Table showing creditors turn over ratio YEARS NET CREDIT PUCHASE(LAKHS) SUNDRY CREDITORS+BILLS PAYABLE (LAKHS) CREDITORS TURN OVER RATIO 2003-2004 1619.54 821.83 1.97 2004-2005 1121.62 668.06 1.68 2005-2006 1309.02 717.06 1.82 2006-2007 1207.28 778.6 1.55 2007-2008 1318.98 725.99 1.82

Chart No: 4. 8 Chart showing creditors turn over ratio

Interpretation:-

Creditor turnover ratio shows a fluctuating trend. Lower creditor turn over ratio is beneficial to the organization. In the year 2007-2008 it is comparatively high position.

Average collection period of creditors Average collection period of creditors shows the time with in which the organization settled the payment of its creditors. A lower ratio or a less payment period shows the liberal credit term granted by the suppliers. While a high ratio shows that the accounts are settled down rapidly.

AVERAGE COLLECTION PERIOD OF CREDITORS = CREDITORS+BILLSPAYABLE X 365 NET CREDIT PURCHASE Table No: 4 .9 Table showing average collection period of creditors YEARS CREDITORS+BILLS PAYABLE (LAKHS) NET CREDIT PURCHASE (LAKHS) AVERAGE COLLECTION PERIOD OF CREDITORS 2003-2004 821.83 1619.54 185 2004-2005 668.06 1121.62 217 2005-2006 717.07 1309.02 200 2006-2007 778.60 1207.28 235 2007-2008 725.99 1318.96 201

Chart No: 4 .9 Chart showing average collection period of creditors

Interpretation:The collection period of creditors or payment period of organization shows a fluctuating trend. In the year 2006-2007 is the higher payment period enjoyed by the organization.

III. LEVERAGE RATIOS Debt- equity ratio Debt equity ratio shows the relationship total debt and owned capital. It is the ratio of the amount invested by the shareholders. It is also known as External-Internal Equity Ratio. DEBT-EQUITY RATIO = LONG TERM BORROWALS SHARE HOLDERS FUND

Table No: 4 .10 Table showing debt equity ratio YEARS LONG TERM BORROWALS (LAKHS) SHARE HOLDERS FUND(LAKHS) DEBTEQUITY RATIO 2003-2004 2217.75 264.73 8.38 2004-2005 2302.51 264.73 8.7 2005-2006 2054.22 575.73 3.57 2006-2007 1982.03 575.73 3.44 2007-2008 2108.16 805.75 2.67

Chart No: 4 .10 Chart showing debt equity ratio

Interpretation:The debt- equity ratio shows a decreasing trend. Here share holders fund is more than outsiders fund that is outsiders investment is less in the organization.

Proprietary ratios This is relevant of the debt equity ratio. This ratio establishes the relationship between shareholders fund and total asset. It indicates the proportion of total assets financed by shareholders. It is usually computed as percentages. PROPRIETARY RATIO = SHARE HOLDERS FUND X 100 TOTAL ASSET

Table No: 4 .11 Table showing proprietary ratio YEARS SHARE HOLDERS FUND(LAKHS) TOTAL ASSET (LAKHS) PROPRIETARY RATIO 2003-2004 264.73 2297.49 11.52 2004-2005 264.73 2310.81 11.46 2005-2006 575.73 2314.2 24.89 2006-2007 575.73 2315.04 24.86 2007-2008 805.75 2317.89 34.76

Chart No: 4 .11 Chart showing proprietary ratio

Interpretation:The proprietary ratio is increasing year after year that is the investment of shareholders fund in fixed asset is increasing.

Solvency ratios The solvency ratio is used to test the solvency of a firm. Solvency means the ability to meet the outside liability out of to total asset. This ratio establishes the relationship between total asset and outside liabilities. SOLVENCY RATIO= TOTAL ASSET TOTAL OUTSIDE LIABILITY

Table No: 4 .12 Table showing solvency ratio YEARS TOTAL ASSET (LAKHS) TOTAL OUTSIDE LIABILITY(LAKHS) SOLVENCY RATIO 2003-2004 4941.48 4105.46 1.2 2004-2005 4616.89 4009.29 1.15 2005-2006 4784.64 3517.04 1.36 2006-2007 4582.09 3148.43 1.46 2007-2008 4816.17 3526.58 1.37

Chart No: 4. 12 Chart showing solvency ratio

Interpretation:The solvency position of the organization is quite satisfactory, that is the organization can paid of its outside liability out of its total assets.

IV. COVERAGE RATIOS Interest coverage ratios The interest coverage ratios are also known as debt service ratio. This ratio relates the fixed interest charges to the operating profit or the Earnings before Interest and Tax (EBIT). It indicates whether the firm earned sufficient profits to pay periodically the interest charges. INTEREST COVERAGE RATIO = EBIT INTEREST

Table No: 4. 13 Table showing interest coverage ratio YEARS EBIT (LAKHS) INTEREST (LAKHS) INTEREST COVERAGE RATIO 2003-2004 461.19 295.97 1.56 2004-2005 704.06 319.32 2.2 2005-2006 515.91 211.28 2.44 2006-2007 403.6 158.33 2.55 2007-2008 233.03 183.61 1.26

Chart No: 4.13 Chart showing interest coverage ratio

Interpretation:The ability of the company to payoff interest to its creditors is not satisfactory. That means the organizations financial position is not strong.

V. PROFITABILITY RATIOS Net profit ratio Net profit ratio is the ratio of net profit to net sales. It is known as profit margin. It is usually expressed as percentages. NET PROFIT RATIO= NET PROFIT X100 NET SALES

Table No: 4 .14 Table showing net profit YEAR NET PROFIT (LAKHS) NET SALES (LAKHS) NET PROFIT RATIO 2003-2004 232.17 3089.85 10.46 2004-2005 706.13 2448.6 28.84 2005-2006 1014.95 2455.21 41.34 2006-2007 1263.4 2382.5 51.9 2007-2008 1314.78 2505.04 52.49

Chart No: 4 .14 Chart showing net profit

Interpretation:Net profit of the organization is increasing, it shows the managements efficiency in manufacturing, administering and selling of products. The return to the owners will be increasing.

Expenses ratios When the operating ratio is further analyzed, we shall get expense ratio. The expense include SELLING AND DISTRIBUTION = SELLING AND DISTRIBUTION EXPENCES RATIO EXPENCES X 100 SALES

Table No: 4 .15 Table showing selling and distribution expenses ratio YEAR SELLING AND DISTRIBUTION EXPENCES SALES SELLING AND DISTRIBUTION EXPENCES RATIO 2003-2004 75.93 3089.85 2.46 2004-2005 223.36 2448.6 9.12 2005-2006 178.15 2455.21 7.26 2006-2007 185.11 2382.5 7.77 2007-2008 262.09 2505.04 10.46

Chart No: 4.15 Chart showing selling and distribution expenses ratio

Interpretation:This ratio also shows a fluctuating trend. It is the actual amount that the organization spends for increasing sales. In the year 2003-2004 this amount is very low.

Return on Investment (ROI)

The overall objective of the business is to earn a satisfactory return on capital invested. The management owners are very much interested in the rate of earning on capital employed. ROI= NET PROFIT X 100 CAPITAL EMPLOYED CAPITAL EMPLOYED = SHARE HOLDERS FUND+RESERVES & SURPLUSES

Table NO: 4 .16 Table showing ROI YEAR NET PROFIT (LAKHS) CAPITAL EMPLOYED(LAKHS) ROI 2003-2004 232.17 264.73 87.70 2004-2005 706.13 264.73 266.74 2005-2006 1014.95 575.73 176.29 2006-2007 1263.4 575.73 219.44 2007-2008 1314.78 578.68 227.2

Chart No: 4 .16 Chart showing ROI

Interpretation:The return on capital employed is not satisfactory in the organization. After 2004-2005 it is in the decreasing trend. It means that the share holders not get adequate return on their investment made in the organization. This situation is not good for the organization.

VI. Trend analysis Trend analysis is often used to predict future events, it could be used to estimate uncertain events in the past, such as how many ancient kings probably ruled between two dates, based on data such as the average years which other known kings reigned.

 Trend analysis of fixed asset

Table No: 4. 17 Table showing trend analysis of fixed asset YEAR AMOUNT OF FIXED ASSETS (LAKHS) INCREASE/DECREASE AMOUNT (LAKHS) TREND PERCENTAGE 2003-2004 366.02 - 100 2004-2005 298.31 -67.71 81.50 2005-2006 276.13 -89.89 75.44 2006-2007 247.95 -118.07 67.74 2007-2008 281.04 -84.98 76.78

Chart No: 4 .17 Chart showing trend analysis of fixed asset

Interpretation:The fixed asset is decreasing slightly. So it shows that the decreasing of fixed asset due to normal ware and tire in the fixed asset.

Trend analysis of Sale Table No: 4 .18 Table showing the trend analysis of sales YEAR SALES INCREASE/DECREASE AMOUNT (LAKHS) TREND PERCENTAGE 2003-2004 3089.85 - 100

2004-2005 2448.6 -641.25 79.25 2005-2006 2455.21 -634.64 79.46 2006-2007 2382.5 -707.35 77.10 2007-2008 2505.04 -584.81 89.07

Chart No: 4.18 Chart showing the trend analysis of sales

Interpretation:The sales of the organization are almost same in all the years. Sales are the most important sources of income, so the organization should try to increase the sales.

Trend analysis of Current asset Table No: 4 .19 Table showing trend analysis of current assets YEAR CURENT ASSET (LAKHS) INCREASE/DECREASE AMOUNT (LAKHS) TREND PERCENTAGE 2003-2004 2643.99 - 100 2004-2005 2306.08 -337.91 87.22

2005-2006 2470.44 -73.55 93.44 2006-2007 2267.01 -376.98 85.74 2007-2008 2498.28 -145.71 94.49

Chart No: 4 .19 Chart showing trend analysis of current asset

Interpretation:The current asset of the company is shows a fluctuating trend. The increasing trend of current asset will increase the liquidity position of the company. Here more than 20% of current ratio is decreasing it is not favorable to the organization. The current ratio is high in the year 2003-2004.

Trend percentages of Current liability Table No: 4 .20 Table showing trend analysis of current liability YEAR CURRENT LIABILITY(LAKHS) INCREASE/DECREASE AMOUNT (LAKHS) TREND PERCENTAGE 2003-2004 1090.69 - 100 2004-2005 978.67 -112.01 89.73 2005-2006 1069.58 -21.1 98.07 2006-2007 1160.61 69.93 106.41 2007-2008 1130.02 39.34 103.61

Chart No: 4. 20 Chart showing trend analysis of current liability

Interpretation:In the case of KCCL the current liability of the organization is increasing year after year up to the year 2006-2007, and then it shows a decreasing trend. When current liability is increasing the liquidity position of the organization will be low, it is not suitable to the organization.

Trend percentage of Share holders fund Table No: 4 .21 Table showing trend analysis of shareholders fund YEARS SHARE HOLDERS FUND(LAKHS) INCREASE/DECREASE AMOUNT (LAKHS) TREND PERCENTAGE 2003-2004 264.73 - 100 2004-2005 264.73 - 100 2005-2006 575.73 311 217 2006-2007 575.73 311 217 2007-2008 805.75 541 304.36

Chart No: 4. 21 Chart showing trend analysis of shareholders fund

Interpretation:The share holders fund shows an increasing trend. That means the outsiders investment on total asset is decreasing. The major part of the total asset is owned by the owners.

CHAPTER V FINDINGS, SUGGESTIONS AND CONCLUSIONS 5.1 Findings 1. The organization maintain adequate amount of working capital. 2. The current ratio of the organization is satisfactory. That is the organization can payoff its current liability out of its current asset.

3. The quick ratio position of the organization is not satisfactory. 4. Inventory verification and management of KCCL is adequate. 5. Average collection period of debtor is good. 6. Capital structure of the company includes huge debt. The organization may not able to pay the interest regularly. 7. Expenditure is greater than income.

8. Investment of share holders fund is increasing. 9. The management has conducted physical verification of fixed assets, stores, spare parts and raw materials at reasonable intervals. 10. The company has not issued debentures for raising money. 11. The amount of loan is properly utilized for the purpose for which they raised.

5.2 Suggestions 1. KCCL is suffering from huge amount of interest, so it is advisable to minimize the borrowing from outside sources 2. The amount blocked on working capital and inventory should be reduced to increase short term liquidity position of the organization 3. The board of directors should take immediate action when the department required any change in the current procedure. . 4. The company should improve the debtor turn over ratio by speeding up the collection period of debtors

5.3 Conclusion The study of financial performance analysis is under taken from Keltron Component Complex limited, Kannur. This study is conducted for analyzing the performance of the organization, for finding out whether the organization is in profit or loss. From the analysis we could find that the liquidity position of the organization is satisfactory except quick ratio. The organization should try to improve the turn over ratio of the working capital in order to increase the sales. This will helps to increase the profitability of the organization. The organization is in loss, to recover from this position the management should take utmost care in its functioning.

BIBLIOGRAPHY Khan and M.Y & Jain, P.K, Financial management, Tata McGraw- Hill publishing company Ltd. 3rd Edition Kothari.C.R, Research methodology Vikas publications pvt.Ltd. 2000 Pandey, I.M, Financial management, New Delhi, Vikas publications pvt.Ltd.9th Edition R.K Shama & Shashi. Gupta Financial management, New Delhi, kalyani publications Pvt. Ltd, 2000 Websites Www. Keltron. Org Www. Google.com

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