Print Project

A STUDY ON RATIO ANALYSIS AT TRACO CABLE
COMPANY LTD
PROJECT REPORT
Submitted by
VIDHUNA TS
SNG17MBA88
Under the guidance of

Asst. Prof. RAJANI SUNNY T
in partial fulfilment of the requirements

for the award of the Degree of
MASTER OF BUSINESS ADMINISTRATION
of
Of APJ Abdul Kalam Technological University
SREE NARAYANA GURUKULAM COLLEGE OF ENGINEERING

APRIL 2019
1
DECLARATION
I, undersigned, hereby declare that the project titled ‘A STUDY ON RATIO ANALYSIS
ATTRACO CABLE COMPANY LTD’ submitted in partial fulfilment of the award of Degree
of Master Of Business Administration of A P J Abdul Kalam Technological University is bonafied
record of work done by me under guidance of Asst. Prof. RAJANI SUNNY T , Department of
Management Studies, Mangalam Studies, Mangalam College Of Engineering. This report has not
previously formed the basis for the award of any degree,diploma,or similar title of any university.
Place:
Date:
VIDHUNA TS
2
SREE NARAYANA GURUKULAM COLLEGE OF
ENGINEERING
CERTIFICATE
This is to certify that the report titled “A STUDY ON RATIO ANALYSIS AT

TRACO CABLE COMPANY LTD” being submitted by VIDHUNA TS,
SNG17MBA88, in partial fulfilment of the requirements for the award of the Degree
of Master of Business Administration, is a bonafide record of the project work done
by VIDHUNA TS of MBA Dept, SREE NARAYANA GURUKULAM
COLLEGE OF ENGINEERING.
PROF. RAJANI SUNNY T PROF. MADHUSOODHANAN
ASSISTANT PROFESSOR HEAD OF THE DEPARTMENT
3
ACKNOWLEDGEMENT
With deep sense of gratitude I express my

sincere thanks to Principal Prof. Dr. Kemthos P.Paul, Sree Narayana Gurukulam College Of
Engineering, Kadayirippu, for the encouragement rendered by him throughout my academic career
and for giving valuable suggestion for carrying out the study.
With the great respect, I express my sincere gratitude towards

Prof. Dr. C.K Madhusoodanan, Head Of Department, Sree Narayana Gurukulam College Of
Engineering, Kadayirippu, who has been my well=wisher throughout the course of my study.
I am very much indebted to my supervising faculty

Asst. Prof. Rajani Sunny T, Department of MBA for her able guidance, help and constant
encouragement in carrying out and completing study.
Last but not least, I deeply acknowledge the generous help and
whole hearted co-operation of my family and friends for all the help and encouragement o receive
from them.
VIDHUNA TS
4
LIST OF TABLES
Sl. No. Title Page No.

1. Current Ratio 36
2. Quick Ratio 37
3. Absolute Liquidity Ratio 39
4. Debt Equity Ratio 41
5. Fixed Asset to Net with Ratio 42
6. Proprietary Ratio 43
7. Current Assets to Net worth 44
8. Current Liability to Net worth 45
9. Operating Ratio 46
10. Operating Profit Ratio 48
11. Return on Capital Employed 49
12. Stock Turnover Ratio 50
13. Current asset Turnover Ratio 51
14. Fixed asset Turnover Ratio 52
15. Total asset Turnover Ratio 53
16. Inventory to Current asset Ratio 54
17. Working capital Turnover Ratio 55
18. Debtors to Turnover Ratio 56
19. Debtors Collection Period 57
20. Creditors Turnover Ratio 58
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21. Average Payment Period of Creditors 59
22. Trend percentage of Net Sales 61
23. Trend percentage of Working capital 62
24. Trend percentage of Current Asset 63
25. Trend percentage of Current Liability 64
26. Trend percentage of Fixed Asset 65
27. Comparative balance sheet of the year 66
2016 and 2017
2015 and 2016
2014 and 2015
2013and 2014
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LIST OF FIGURES
Sl. No. Title Page No.
1. Current Ratio 36
2. Quick Ratio 38
3. Absolute Liquidity Ratio 40
4. Debt Equity Ratio 41
5. Fixed Asset to Net with Ratio 42
6. Proprietary Ratio 43
7. Current Assets to Net worth 44
8. 21Current Liability to Net worth 45
9. Operating Ratio 47
10. Operating Profit Ratio 48
11. Return on Capital Employed 49
12. Stock Turnover Ratio 50
13. Current asset Turnover Ratio 51
14. Fixed asset Turnover Ratio 52
15. Total asset Turnover Ratio 53
16. Inventory to Current asset Ratio 54
17. Working capital Turnover Ratio 55
18. Debtors to Turnover Ratio 56
19. Debtors Collection Period 57
20 Creditors Turnover Ratio 58
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21. Average Payment Period of Creditors 59
22. Trend percentage of Net Sales 61
23. Trend percentage of Net Woking capital 62
24. Trend percentage of Current Asset 63
25. Trend percentage of Current Laibility 64
26. Trend percentage of Fixed Asset 65
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TABLE OF CONTENTS
Chapter Content Page No.

No.
1. INTRODUCTION 12
1.1 OVERVIEW 13
1.2 Need and Significance of the study 14
1.3 Statement of the problem 14
1.4 Objective of the Study 15
1.5 Scope of the study 15
1.6 Limitation of the study 16
1.7 Organization of the report 16
2. LITERATURE REVIEW
2.1 Industry Profile 18
2.2 Company Profile 18
2.3 Product Profile 19
2.4 Review of Literature 20
3. THEORITICAL FRAMEWORK
3.1 Nature of Ratio analysis 22
3.2 Advantages of Ratio Analysis 23
3.3 Uses and Significance 24
3.4 Limitations 25
4 RESEARCH METHEDOLOGY
4.1 Ratio Analysis Techniques 27 – 34
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5 DATA ANALYSIS
5.1 Financial Analysis
5.2 Statistical Analysis
6 FINDINGS 77
7 RECOMMENDATION 79
8 CONCLUSION 81
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CHAPTER 1
INTRODUCTION
11
1.1. INTRODUCTION
In this paper, we demonstrate the use of actual financial data for financial ratio analysis. The goal
of such an analysis is to determine the efficiency and performance of the firm’s management, as
reflected in the financial records and reports. The present study aims to identify the financial
strengths and weaknesses of the TRACO CABLE COMPANY and to know the relationships between
the items of the balance sheet and profit and loss account
Ratio analysis is a powerful tool of financial

analysis. A ratio is defined as “the indicated quotient of two mathematical expressions” and “the
relationship between two or more things”. In financial analysis, a ratio is used as a benchmark for
evaluation the financial position and performance of a firm. The absolute accounting figures
reported in the financial statements do not provide a meaningful understanding of the performance
and financial position of a firm. An accounting figure conveys meaning when it is related to some
other relevant information. For example, an Rs.5 core net profit may look impressive, but the
firm’s performance can be said to be good or bad only when the net profit figure is related to the
firm’s Investment.
The relationship between two accounting figures expressed mathematically, is known as
a financial ratio (or simply as a ratio). Ratios help to summarize large quantities of financial data
and to make qualitative judgment about the firm’s financial performance. For example, consider
current ratio. It is calculated by dividing current assets by current liabilities; the ratio indicates a
relationship- a quantified relationship between current assets and current liabilities. This
relationship is an index or yardstick, which permits a quantitative judgment to be formed about the
firm’s liquidity and vice versa. The point to note is that a ratio reflecting a quantitative relationship
helps to form a qualitative judgment. Such is the nature of all financial ratios.
12
1.02 OVERVIEW
Financial Management is that managerial activity which is concerned with the planning and
controlling of the firm’s financial resources. Though it was a branch of economics till 1890 as a
separate or discipline it is of recent origin.
Financial Management is concerned with the duties of the finance manager in a business firm. He
performs such varied tasks as budgeting, financial forecasting, cash management, credit
administration, investment analysis and funds procurement. The recent trend towards globalization
of business activity has created new demands and opportunities in managerial finance.
Financial statements are prepared and presented for the external users of accounting information.
As these statements are used by investors and financial analysts to examine the firm’s performance
in order to make investment decisions, they should be prepared very carefully and contain as much
investment decisions, they should be prepared very carefully and contain as much information as
possible. Preparation of the financial statement is the responsibility of top management. The
financial statements are generally prepared from the accounting records maintained by the firm.
Financial performance is an important aspect which influences the long-term stability, profitability
and liquidity of an organization. Usually, financial ratios are said to be the parameters of the
financial performance. The Evaluation of financial performance had been taken up for the study
with “TRACO CABLE COMPANY LTD” as the project.
Analysis of Financial performances are of greater assistance in locating the weak spots at the
TRACO CABLE COMPAY LTD even though the overall performance may be satisfactory. This
further helps in
 Financial forecasting and planning.

 Communicate the strength and financial standing of the company.
 For effective control of business.
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1.2 NEED AND SIGNIFICANCE OF THE STUDY
 It is beneficial to management of the company by providing crystal clear picture regarding

important aspects like liquidity, leverage, activity and profitability.
 The study is also beneficial to employees and offers motivation by showing how actively
they are contributing for company’s growth.
 The investors who are interested in investing in the company’s shares will also get
benefited by going through the study and can easily take decision whether to invest or not
to invest in the company’s shares.
 By analyzing variance, the company can control the cost and reduce cost of production bt
fixing responsibilities to each functional head.
 The result of the analysis helps the management to improve efficiency and profitability by
reducing wastages and increasing productivity.
 This study enables the organization to make better control of production cost and thereby
increase the productivity in order to compete with the importers of organic chemicals.
1.3 STATEMENT OF PROBLEM
 The title of the project is “STUDY ON RATIO ANALYSIS IN TRACO CABLE

COMPANY LTD” is an attempt to make an analysis of the changes in the profitability and
efficiency of the firm.
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1.4OBJECTIVES OF THE STUDY
The main objective of the study is to find the area where there is scope for improvement to increase
the productivity and profitability of the company.
Following are the related objectives of the study;
1.To check the financial position of TRACO CABLE COMPANY Ltd. Irumpaam, ,with the help
of ratio analysis.
2.To analyze the liquidity position of the TRACO CABLE COMPANY
3.To study the overall earning capacity or profitability position of the TRACO CABLE
COMPANY
4. To analyze the current asset and current liabilities of TRACO CABLE COMPANY
5.To know the return on investment
6.To make a comparison of profit of last five years
7.To suggest measures for improving the efficiency and profitability
1.5 SCOPE OF THE STUDY
The analysis is mainly carried out to find out the financial performance of the company for the
period 5 years from from 2012-2013 to 2016-2017 as revealed from the financial data of TRACO
CABLE COMPANY annual reports, manuals and accounting records the analysis helps to
determine the profitability, liquidity and solvency position of TRACO CABLE COMPANY. This
indirectly helps the investors, governments, employees, creditors and others stakeholders in
financial forecasting and planning and also for decision making. The financial tool used for this
study is ratio analysis.
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1.6 LIMITATION OF THE STUDY
 The study is mainly based on the secondary data obtained from the annual reports of the
company
 Time is an important limitation. The whole study was conducted in a period of 15 days, which
is not sufficient to carry out proper interpretation and analysis.
 The study doesn’t consider external and environmental factors, which affect the performance
of the company
 The study was limited to the financial statements of 5 years from 2012-2013 to 2016-2017.
 The study confined to a period of 5 years. So the study will not give clear picture about the
industry.
 Since the study is confined to a single unit only the comparisons was not possible and hence
the suggestion may not have universal applicability.
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CHAPTER 2
LITERATURE REVIEW
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2.1 FINANCIAL PERFORMANCE ANALYSIS
Financial performance analysis is vital for the triumph of an enterprise. Financial performance
analysis is an appraisal of the feasibility, solidity and fertility of a business, sub-business or
mission. Altman and Eberhart (1994) reported the use of neural network in identification of
distressed business by the Italian central bank. Using over 1,000 sampled firms with 10 financial
ratios as independent variables, they found that the classification of neural networks was very close
to that achieved by discriminant analysis. They concluded that the neural network is not a clearly
dominant mathematical technique compared to traditional statistical techniques.
Gepp and Kumar (2008) incorporated the time “bias” factor into the classic business
failure prediction model. Using Altman (1968) and Ohlson’s (1980) models to a matched sample
of failed and non-failed firms from 1980’s, they found that the predictive accuracy of Altman’s
model declined when applied against the 1980’s data. The findings explained the importance of
incorporating the time factor in the traditional failure prediction models.
Campbell (2008) constructed a multivariate prediction model that estimates the probability of
bankruptcy reorganization for closely held firms. Six variables were used in developing the
hypotheses and five were significant in distinguishing closely held firms that reorganize from those
that liquidate. The five factors were firm size, asset profitability, the number of secured creditors,
the presence of free assets, and the number of under-secured secured creditors. The prediction
model correctly classified 78.5% of the sampled firms. This model is used as a decision aid when
forming an expert opinion regarding a debtor’s likelihood of rehabilitation. No study has
incorporated the financial performance analysis of the central public sector enterprises in Indian
drug & pharmaceutical Industry. Nor has any previous research examined the solvency position,
liquidity position, profitability analysis, operating efficiency and the prediction of financial health
and viability of public sector drug & pharmaceutical enterprises in India.
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2.2 COMPANY PROFILE
TRACO CABLE COMPANY
TRACO CABLE COMPANY LIMITED (TRACO) is one of the Public Sector Undertakings in
the state of Kerala-South India and is an ISO 9001certified Company, established in 1964. The
company has three manufacturing units. The first unit of TRACO is at Irimpanam- Tripunithura
in Ernakulam District and the second one is at Thiruvalla – Chumathra in Pathanamthitta District.
The third Unit is the newest one commissioned in 2011 exclusively for the building wiring cables
at Pinarayi-Thalassery in Kannur District. Presently, the installed capacity of both Irimpanam Unit
and Thiruvalla Unit is 9000 MT of Aluminium Wire Rod conversion.
They have been in the forefront in meeting the needs of major customers
like various Electricity Boards, Railways, BSNL and ESCOMS of other states and to the various
project groups. With an employee strength is 500, our vision to grow in the country as one of the
pioneers in the cable industry catering the needs of all its customers with timely delivered quality
products
VISION
we will be a national player as the deliverer of cables and conductors through continual
improvement on the R&D and Quality
MISSION
To achieve 250 Crore turnover by 2020 Meeting the customer’s requirements with quality products
Continuously adopting the state of the art technology in the Industry Providing the products at
affordable prices.
Unit of Traco at Irimpanam in Ernakulam District
The first unit of TRACO cable Company was established at Irimpanam in the year 1964, in
collaboration with KELSEY Engineering Co. Ltd, Canada. Presently this unit has the product mix
of Overhead Conductors (AAC /ACSR/AAAC), Power Cables, Control Cables and Signaling
Cable
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Products From the house of TRACO
 All Aluminium Conductors (AAC) are manufactured as per IS: 398 (Part1)for power
distribution.
 All Aluminium Alloy Conductors (AAAC) as per IS :398 (Part IV) for power distribution
 Aluminium conductors with Steel Reinforcement (ACSR) as per IS: 398 (Part II) for power
distribution and transmission up to 61 strands.
 Power cables (copper and aluminium) conductors up to 1100 volts and control cables
/signaling cables (copper conductors up to 37 conductors) as per IS: 1554 with PVC
insulation. These cables are used for railways, transmission lines.
 Weather proof cables (aluminium conductor, PVC insulated single / multi core) for power
service connection as per IS: 694 specifications
 LT/HT Aerial Bunched Cables up to the range of 11kv as per IS 14255 and IS 7098Part -
II
 XLPE LT/HT/UG Cables as per IS 7098 PART I and II.up to 11kv .
2.4 REVIEW OF LITERATURE
The review of literature guides the researchers for getting better understanding of
methodology used, limitations of various available estimation procedures and data base and lucid
interpretation and reconciliation of the conflicting results. Besides this, the review of empirical
studies explores the avenues for future and present research efforts related with the subject matter.
In case of conflicting and unexpected results, the researcher can take the advantage of knowledge
of other researchers simply through the medium of their published works. A large number of
research studies have been carried out on different aspects of the working of public and private
sector by the researchers, economists and academicians in India. Different authors have analyzed
financial performance in different perspective.
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CHAPTER 3
THEORITICAL FRAMEWORK
21
3.THEORITICAL BACKGROUND OF THE STUDY
RATIO ANALYSIS
3.1 NATURE OF RATIO ANALYSIS:
Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process
of establishing and interpreting various ratios for helping in making certain decisions. However,
ratio analysis is not an end in itself. It is only a means of better understanding of financial strengths
and weaknesses of a firm. Calculation of mere ratios does not serve any purpose, unless several
appropriate ratios are analyzed and interpreted. There are a number of ratios which can be
calculated from the information given in the financial statements, but the analyst has to select the
appropriate data and calculate only a few appropriate ratios from the same keeping in mind the
objective of analysis. The ratios may be used as a symptom like blood pressure, the pulse rate or
the body temperature and their interpretation depends upon the caliber and competence of the
analyst.
Meaning of Ratio:-
A ratio is simple arithmetical expression of the relationship of one number to another. It may be
defined as the indicated quotient of two mathematical expressions. According to Accountant’s
Handbook by Wixon, Kell and Bedford, “a ratio is an expression of the quantitative relationship
between two numbers”.
Ratio analysis is the process of determining and presenting the relationship of items and group of
items in the statements. According to Batty J. Management Accounting “Ratio can assist
management in its basic functions of forecasting, planning coordination, control and
communication”. It is helpful to know about the liquidity, solvency, capital structure and
profitability of an organization. It is helpful tool to aid in applying judgement, otherwise complex
situations.
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3.2 ADVANTAGE OF RATIO ANALYSIS
1. Helpful in analysis of Financial Statements.
2. Helpful in comparative Study.
3. Helpful in locating the weak spots of the business.
4. Helpful in Forecasting.
5. Estimate about the trend of the business.
6. Fixation of ideal Standards.
7. Effective Control.
8. Study of Financial Soundness
3.3 USE AND SIGNIFICANCE OF RATIO ANALYSIS:-

The ratio is one of the most powerful tools of financial analysis.
It is used as a device to analyze and interpret the financial health of enterprise. Ratio analysis
stands for the process of determining and presenting the relationship of items and groups of items
in the financial statements. It is an important technique of the financial analysis. It is the way by
which financial stability and health of the concern can be judged. Thus ratios have wide
applications and are of immense use today. The following are the main points of importance of
ratio analysis:
a) Managerial uses of ratio analysis:-
1. Helps in decision making:-
Financial statements are prepared primarily for decision-making. Ratio analysis helps in
making decision from the information provided in these financial Statements.
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2. Helps in financial forecasting and planning:-
Ratio analysis is of much help in financial forecasting and planning. Planning is looking
ahead and the ratios calculated for a number of years a work as a guide for the future. Thus, ratio
analysis helps in forecasting and planning.
3. Helps in communicating:-
The financial strength and weakness of a firm are communicated in a more easy and
understandable manner by the use of ratios. Thus, ratios help in communication and enhance the
value of the financial statements.
4. Helps in co-ordination:-
Ratios even help in co-ordination, which is of at most importance in effective business

management. Better communication of efficiency and weakness of an enterprise result in better
co-ordination in the enterprise
5. Helps in control:-
Ratio analysis even helps in making effective control of business.The weaknesses are
otherwise, if any, come to the knowledge of the managerial, which helps, in effective control of
the business.
6. Utility to shareholders/investors:-
An investor in the company will like to assess the financial position of the concern where
he is going to invest. His first interest will be the security of his investment and then a return in
form of dividend or interest. Ratio analysis will be useful to the investor in making up his mind
whether present financial position of the concern warrants further investment or not.
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3.4 LIMITATIONS:
Ratio analysis is very important in revealing the financial position and soundness of the business.
But, inspite of its advantages, it has some limitations which restrict its use. These limitations
should be kept in mind while making use of ratio analysis for interpreting the financial the financial
statements. The following are the main limitations of ratio analysis:
1. False results:-
Ratios are based upon the financial statement. In case financial statement are in correct or
the data of on which ratios are based is in correct, ratios calculated will all so false and defective.
The accounting system it self suffers from many inherent weaknesses the ratios based upon it
cannot be said to be always reliable.
2. Limited comparability:-
The ratio of the one firm cannot always be compare with the performance of other firm, if
uniform accounting policies are not adopted by them. The difference in the methods of calculation
of stock or the methods used to record the deprecation on assets will not provide identical data, so
they cannot be compared.
3. Absence of standard universally accepted terminology:-
Different meanings are given to a particular term, egg. Some firms take profit before
interest and tax; others may take profit after interest and tax. A bank overdraft is taken as current
liability but some firms may take it as non-current liability. The ratios can be comparable only
when all the firms adapt uniform terminology.
4. Price level changes affect ratios:-
The comparability of ratios suffers, if the prices of the commodities in two different years
are not the same. Change in price effect the cost of production, sale and also the value of assets. It
means that the ratio will be meaningful for comparison, if the prices do not change.
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CHAPTER 4
RESEARCH METHEDOLOGY
26
4.1 DATA ANALYSIS TECHNIQUES
In this study the techniques used for evaluating and analyzing the profitability and liquidity of the
concern in different periods ie, about 5 years from 2012-2013 to 2016-2017. They are
 Ratio analysis
 Trend analysis
 Comparative statements
 Statistical tools
4.1(1) RATIO ANALYSIS
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as “The Indicated Quotient
of Two Mathematical Expressions” and as “The Relationship between Two or More Things”. In
financial analysis, a ratio is used as a benchmark for evaluating the financial position and
performance of firm. The absolute accounting figures reported in the financial statement do not
provide a meaningful understanding of the performance and financial position of a firm. The
relationship between two accounting figures, expressed mathematically is known as a financial
ratio. Ratios help to summaries large quantities of financial data and to make qualitative about the
firm’s financial performance.
For the study the following ratios are used. They are
 Liquidity Ratios
 Leverage Ratios
 Profitability Ratios
 Turnover Ratios
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1. LIQUIDITY RATIOS
The importance of adequate liquidity in the sense of the ability of a firm to meet
current/short-term obligations when they become due for payment can hardly be overstressesTo
measure the liquidity of the concern, the following ratios can be calculated:
i. Current ratio
ii. Quick or acid test or liquid ratio
iii. Absolute liquid ratio or cash position ratio
i. Current Ratio:
Current ratio is a ratio between current assets and current liabilities of a firm for a particular
period. This ratio establishes a relationship between current assets and current liabilities. It
compares the current assets and current liabilities of the firm. This ratio is calculated as under:
𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐀𝐬𝐬𝐞𝐭𝐬
Current Ratio = 𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
Significance
Thus, the ideal current ratio of a company is 2: 1 i.e. to repay current liabilities, there should
be twice current assets.
ii. Quick ratio:
Quick ratio is also known as Acid test or Liquid ratio. This ratio establishes a relationship
between quick assets and current liabilities. The main purpose of this ratio is to measure the ability
of the firm to pay its current liabilities. This ratio is calculated as under:
𝐐𝐮𝐢𝐜𝐤𝐀𝐬𝐬𝐞𝐭𝐬
Quick Ratio = 𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
Where, liquid or quick assets = current assets – (stock + prepaid expenses)
Significance
A quick ratio of 1:1 is considered good/favorable for a company.
28
iii. Absolute Liquidity Ratio:
This ratio is an indication of the firm's ability to pay off its current liabilities if for some
reason immediate payment were demanded.
𝐂𝐚𝐬𝐡 + 𝐌𝐚𝐫𝐤𝐞𝐭𝐚𝐛𝐥𝐞𝐒𝐞𝐜𝐮𝐫𝐢𝐭𝐢𝐞𝐬
Fixed Assets to Net worth = 𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
It excludes all current assets except the most liquid: cash and cash equivalents.
Significance
A ratio of 0.75:1 is recommended to ensure liquidity.
2. LEVERAGE RATIO
Leverage or capital structure ratios are the ratios, which indicate the relative interest of the
owners and the creditors in an enterprise.
i. Debt Equity Ratio:
The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of
shareholders' equity and debt used to finance a company's assets. Closely related to leveraging, the
ratio is also known as Risk, Gearing or Leverage..
𝐓𝐨𝐭𝐚𝐥𝐝𝐞𝐛𝐭
Debt Equity Ratio = 𝐄𝐪𝐮𝐢𝐭𝐲
Significance
An acceptable norm for this ratio is considered to be 2:1
ii. Proprietary Ratio:
The proprietary ratio (also known as the equity ratio) is the proportion of shareholders' equity to
total assets, and as such provides a rough estimate of the amount of capitalization currently used
to support a business. The more restrictive version of the formula is:
𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬𝐅𝐮𝐧𝐝𝐬
Proprietary Ratio = 𝐓𝐨𝐭𝐚𝐥𝐀𝐬𝐬𝐞𝐭𝐬
29
Significance
The acceptable norm of the ratio is 1:3.
iv. Fixed Assets to Net worth:
This ratio shows the relationship between fixed assets and shareholders fund. The purpose
of this ratio is to find out the percentage of owners fund invested in fixed assets.
𝐅𝐢𝐱𝐞𝐝𝐀𝐬𝐬𝐞𝐭𝐬
Fixed Assets to Net worth = 𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬𝐅𝐮𝐧𝐝𝐬
Significance
If the ratio is greater than one, it means that creditor’s funds have been used to acquire a
part of fixed assets.
v. Current Asset to Net worth

Current asset to networthshows the stockholders’ funds invested in current assets. The ratio may
be expressed in proportion or percentage.
𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐀𝐬𝐬𝐞𝐭
Current Asset to Net worth =
𝐍𝐞𝐭𝐰𝐨𝐫𝐭𝐡
vi .Current Laibility to Net worth

Indicates reliance on the equity for payment of debt. This ratio expresses the relationship
between capital contributed by current obligation creditors and capital contributed by owners.
CURRENT LAIBILITY TO NET WORTH = Current laibility
Net worth
3. PROFITABILITY RATIOS
Profitability ratios are calculated to measure the overall efficiency of the business. The
various profitability ratios are:-
30
 Operating Profit Ratio
 Net Profit Ratio
 Operating Ratio
 Return on Shareholders’ Investment
 Return on Capital Employed
i. Operating Profit Ratio:
The operating profit ratio indicates how much profit a company makes after paying for
variable costs of production such as wages, raw materials, etc.
𝐎𝐩𝐞𝐫𝐚𝐭𝐢𝐧𝐠𝐏𝐫𝐨𝐟𝐢𝐭
Operating Profit Ratio = 𝐍𝐞𝐭𝐒𝐚𝐥𝐞𝐬
ii. Return on Net Capital Employed Ratio:
This ratio is also known as Return on Investment. The primary objective of making
investment in any business is to obtain satisfactory return on capital invested.
Return on Capital Employed = × 𝟏𝟎𝟎
𝐍𝐞𝐭𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐄𝐦𝐩𝐥𝐨𝐲𝐞𝐝
Significance
The higher the ratio more efficient use of the capital employed.
iii. Return on Shareholders Fund Ratio:
This ratio shows the rate of profit on shareholder’s fund. It relates the profit available for
the shareholders to their investments. It is also known as ‘Profit on net worth’ ratio.
𝐍𝐞𝐭𝐏𝐫𝐨𝐟𝐢𝐭𝐚𝐟𝐭𝐞𝐫𝐢𝐧𝐭𝐞𝐫𝐞𝐬𝐭𝐚𝐧𝐝𝐭𝐚𝐱𝐞𝐬
Return on Shareholders Fund = 𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫 ′ 𝐬𝐟𝐮𝐧𝐝
iv. Operating ratio
Operating ratio (also known as operating cost ratio or operating expense ratio) is computed
by dividing operating expenses of a particular period by net sales made during that period.
31
𝑂𝑝𝑒𝑟𝑎𝑡𝑖𝑛𝑔𝐸𝑥𝑝𝑒𝑛𝑠𝑒
Operating ratio= ∗ 100
𝑁𝑒𝑡𝑆𝑎𝑙𝑒𝑠
4. ACTIVITY RATIOS (TURNOVER RATIOS)
Activity ratios measure the efficiency or effectiveness with which a firm manages its
resources. These ratios are also called turnover ratios because they indicate the speed at which
assets are converted or turned over in sales.
i. Inventory Turnover Ratio:
Stock turnover ratio is a ratio between cost of goods sold and the average stock or
inventory. Every firm has to maintain a certain level of inventory of finished goods.
If cost of goods sold is not given, the ratio is calculated from the sales. If only closing stock is
given, then that may be treated as average stock.
𝐂𝐨𝐬𝐭𝐨𝐟𝐠𝐨𝐨𝐝𝐬𝐬𝐨𝐥𝐝
Inventory Turnover Ratio = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐒𝐭𝐨𝐜𝐤
Or
𝐍𝐞𝐭𝐒𝐚𝐥𝐞𝐬
Inventory Turnover Ratio = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐒𝐭𝐨𝐜𝐤
Significance
The inventory turnover ratio signifies the liquidity of the inventory. A high ratio indicates
brisk sales. The ratio is a measure to discover the possible trouble in the form of over stocking.
A low inventory turnover ratio results in blocking of funds in inventory. There is no standard ratio
for the inventory turnover. Each field and kind of business has its own standard.
ii. Fixed Assets Turnover Ratio:
A financial ratio of net sales to fixed assets.. This ratio measures the efficiency and profit
earning capacity of the concern.
Fixed Assets Turnover Ratio = 𝐅𝐢𝐱𝐞𝐝𝐀𝐬𝐬𝐞𝐭𝐬
Significance
32
Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means
under-utilization of fixed assets.
iii. Working Capital Turnover Ratio:
Working capital of a concern is directly related to sales. The current assets like debtors,
bill receivables, cash, stock etc, change with the increase or decrease in sales
Working Capital Turnover Ratio = 𝐍𝐞𝐭𝐖𝐨𝐫𝐤𝐢𝐧𝐠𝐂𝐚𝐩𝐢𝐭𝐚𝐥
Significance
higher ratio indicates efficient utilization of working capital and a low ratio indicates the working
capital is not properly utilized.
iv. Debtors Turnover Ratio:
This ratio establishes a relationship between net credit sales and average account
receivables i.e. average trade debtors and bill receivables
𝐍𝐞𝐭𝐂𝐫𝐞𝐝𝐢𝐭𝐒𝐚𝐥𝐞𝐬
Debtors Turnover Ratio = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐑𝐞𝐜𝐞𝐢𝐯𝐚𝐛𝐥𝐞𝐬
Significance
Debtors turnover ratio is an indication of the speed with which a company collects its debts.
The higher the ratio, the better it is because it indicates that debts are being collected quickly. and
a low ratio indicates a longer collection period which implies delayed payment for debtors.
Average Debt Collection Period:
This period refers to an average period for which the credit sales remain unpaid and
measures the quality of debtors. Quality of debtors means payment made by debtors within the
permissible credit period.
𝐃𝐞𝐛𝐭𝐨𝐫𝐬+𝐁𝐢𝐥𝐥𝐬𝐑𝐞𝐜𝐢𝐞𝐯𝐚𝐛𝐥𝐞𝐬∗𝟑𝟔𝟓𝐨𝐫𝟏𝟐
Average Debt Collection Period = 𝐍𝐞𝐭𝐂𝐫𝐞𝐝𝐢𝐭𝐒𝐚𝐥𝐞𝐬
Or
𝐍𝐮𝐦𝐛𝐞𝐫𝐨𝐟𝐃𝐚𝐲𝐬
Average Debt Collection Period = 𝐃𝐞𝐛𝐭𝐨𝐫𝐬𝐓𝐮𝐫𝐧𝐨𝐯𝐞𝐫𝐑𝐚𝐭𝐢𝐨
33
v. Creditors Turnover Ratio:
It is a ratio between net credit purchases and average account payables (i.e creditors and
Bill payables).
𝐍𝐞𝐭𝐂𝐫𝐞𝐝𝐢𝐭𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞
Creditors Turnover Ratio = 𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐏𝐚𝐲𝐚𝐛𝐥𝐞𝐬
Significance
A high ratio indicates the shorter payment period and a low ratio indicates a longer payment
period
Average Payment Period:
This period shows an average period for which the credit purchases remain unpaid or the
average credit period actually availed of:
𝐂𝐫𝐞𝐝𝐢𝐭𝐨𝐫𝐬+𝐁𝐢𝐥𝐥𝐬𝐏𝐚𝐲𝐚𝐛𝐥𝐞𝐬∗𝟑𝟔𝟓𝐨𝐫𝟏𝟐
Average Debt Payment Period = 𝐍𝐞𝐭𝐂𝐫𝐞𝐝𝐢𝐭𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞
Or
𝐍𝐮𝐦𝐛𝐞𝐫𝐨𝐟𝐃𝐚𝐲𝐬
Average Debt Payment Period = 𝐂𝐫𝐞𝐝𝐢𝐭𝐨𝐫𝐬𝐓𝐮𝐫𝐧𝐨𝐯𝐞𝐫𝐑𝐚𝐭𝐢𝐨
34
CHAPTER 5
DATA ANALYSIS
35
5 .1 LIQUIDITY RATIOS
1. CURRENT RATIO
The current ratio is a measure of the firm’s short-term solvency. It indicates a company's ability to
satisfy its current liabilities with its current assets.
Current Ratio = 𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
Year Current Assets Current Ratio

Liabilities
2012-2013 10821.44 9449.70 1.14
2013-2014 7538.82 14125.85 0.53
2014-2015 9231.01 13413.44 0.68
2015-2016 5765.29 19814.72 0.29
2016-2017 7461.27 28039.44 0.26
Table 5.1(1) table showing calculation on current ratio
1.2
0.8
0.6
0.4
0.2
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.1(.1) figure showing current ratio
36
Interpretation
Generally current ratio of 2:1 is considered ideal for a concern, I.e., current asset should be twice
of the current liability. The higher current ratio ,the more capable the company is of paying its
obligations. From the above chart in the year 2013 the current ratio is 1.14, which is a healthy ratio
but afterwards the current ratio has decreased substantially because of the central government
policy of reducing the import duty and thereby increasing competition from abroad. Thus reducing
the demand of the products in the market.
2 .QUICK RATIO
It indicates a company's ability to satisfy current liabilities with its most liquid assets.
𝐐𝐮𝐢𝐜𝐤𝐀𝐬𝐬𝐞𝐭𝐬
Quick Ratio = 𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
Year Quick Assets Current Liabilities Ratio

2012-2013 10821.44 4956.18 0.62
2013-2014 2748.79 14125.85 0.19
2014-2015 4398.12 13413.44 0.32
2015-2016 2895 19814.72 0.15
2016-2017 3262.08 28039.44 0.11
Table 5.1(2) table showing calculation on quick ratio
37
0.7
0.6
0.5
0.4
0.3
Series 1
0.2
0.1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.1(2) figure showing quick ratio
Interpretation
The ideal quick ratio is 1:1 and while observing the above table and chart, they have very low
quick asset which directly affects their quick ratio and as the demand for the products have declined
in the market due to foreign competition the plant was forced to stop production and their quick
ratio has declined.
38
3. ABSOLUTE LIQUIDITY RATIO
It indicates a company's ability to satisfy current liabilities with its cash in hand and bank
and marketable securities.
𝐂𝐚𝐬𝐡+𝐁𝐚𝐧𝐤𝐛𝐚𝐥𝐚𝐧𝐜𝐞
Absolute Liquidity Ratio =
𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐋𝐢𝐚𝐛𝐢𝐥𝐢𝐭𝐢𝐞𝐬
Table 5.1(3) table showing calculation on absolute liquidity ratio
Year Absolute Liquid Current Liabilities Ratio

Assets (cash and
bank balance)
2012-2013 80.74 9449.70 0.0085
2013-2014 31.42 14125.85 0.0022
2014-2015 67.65 13413.44 0.0050
2015-2016 40.17 19814.72 0.0020
2016-2017 161.609 28039.44 0.0057
39
0.01
0.008
0.006
0.004 Series…
0.002
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.1(3) figure showing absolute liquidity ratio
INTERPRETATION
The ideal absolute liquidity ratio is 0.5:1 and from the above table and chart, we can observe that
TRACO CABLE COMPANT has a very low cash and bank balance because there is no production
happening as the demand for the products has declined in the market.
5.2 LEVERAGE RATIO.
5.2(1) DEBT EQUITY RATIO
Debt-equity ratio expresses the relationship between debt and equity. Debt equity ratio is
directly computed by dividing total debt by net worth.
𝐓𝐨𝐭𝐚𝐥𝐋𝐚𝐢𝐛𝐢𝐥𝐢𝐭𝐲
Debt Equity Ratio =
𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬𝐅𝐮𝐧𝐝
40
Table 5.2(1) table showing calculation on debt equity ratio
Year Total Laibility Shareholders Ratio

Fund
2012-2013 10537.78 76735.16 0.13
2013-2014 17708.84 69820.03 0.25
2014-2015 16289.48 62386.16 0.26
2015-2016 21672.32 54142.97 0.40
2016-2017 30650.67 46356.95 0.66
0.7
0.6
0.5
0.4
0.3
Seri…
0.2
0.1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.2(1) figure showing debt equity ratio

Interpretation
A low debt and equity ratio indicate that intrest of outsiders are safe and a firm need
not worry about their payment.A high debt and equity ratio indicate that the claims
of outsiders are more than the shareholders. The intrest are not safe and they have
to bear probable future losses.
41
5.2.(2) FIXED ASSET TO NET WORTH RATIO
This ratio shows the relationship between fixed assets and shareholders fund. The purpose
of this ratio is to find out the percentage of owners fund invested in fixed assets
Fixed Assets to Net worth =
𝐍𝐞𝐭𝐖𝐨𝐫𝐭𝐡
Year Fixed Asset Net Worth Ratio

2012-2013 5936.89 76735.16 0.07
2013-2014 5485.64 69820.03 0.07
2014-2015 4717.21 62386.16 0.07
2015-2016 4118.57 54142.97 0.07
2016-2017 3600.50 46356.95 0.07
Table 5.2(2) table showing calculation on fixed asset to net worth
0.08
0.07
0.06
0.05
0.04
0.03 Seri…
0.02
0.01
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.2(2) figure showing fixed asset to net worth
Interpretation
If the ratio is less than 1, it is good for the concern. The ideal ratio is 0.67. From this figure
the fixed asset to shareholder is stable ie,0.07 from the year 2012-2013 to 2016-2017.This
shows that it is good for the concern.
42
5.2(3). PROPRIETARY RATIO
The proprietary ratio is the proportion of shareholders' equity to total assets, and as such
provides a rough estimate of the amount of capitalization currently used to support a
business.
𝐒𝐡𝐚𝐫𝐞𝐡𝐨𝐥𝐝𝐞𝐫𝐬𝐅𝐮𝐧𝐝𝐬
Proprietary Ratio =
𝐓𝐨𝐭𝐚𝐥𝐓𝐚𝐧𝐠𝐢𝐛𝐥𝐞𝐀𝐬𝐬𝐞𝐭𝐬
Year Share holders Total Tangible Ratio

Fund Assets
2012-2013 76735.16 87272.95 0.87
2013-2014 69820.03 87528.88 0.79

2014-2015 62386.16 78675.65 0.79
2015-2016 54142.97 75815.30 0.71
2016-2017 46356.95 77007.63 0.60
Table 5.2 (3) table showing calculation on proprietary ratio
1
0.8
0.6
0.4 Ser…
0.2
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.2(3) figure showingproprietary ratio
43
Interpretation
The proprietary ratio of the company shows an decreasing trend from the first two years
and then it fluctuates to increasing and decreasing trend from the year 2014-2015 to 2016-
2017. Higher ratio indicates a secured position to creditors and a low ratio indicates greater risk
to creditors.In this figure the ratio shows the greater risk to creditors ie,below 1:3.
5.2(4).CURRENT ASSET TO NET WORTH
Current asset to Networthshows the stockholders’ funds invested in current assets. The ratio may be
expressed in proportion or percentage.
Current Assets to Net worth =
𝐍𝐞𝐭𝐖𝐨𝐫𝐭𝐡
Year Current Asset Net Worth Ratio

2012-2013 10821.44 76735.16 0.14
2013-2014 7538.82 69820.03 0.10
2014-2015 9231.01 62386.16 0.14
2015-2016 5765.29 54142.97 0.10
2016-2017 7461.27 46356.95 0.16
Table 5.2(4) table showing calculation on CA to net worth
0.2
0.15
0.1
0.05 Serie…
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.2(4) figure showing CA to net worth
44
Interpretation
In this figure the current asset to the shareholders fund is being increasing and decreasing
from the year 2012-2013 to 2016-2017.
5.2(5).CURRENT LAIBILITY TO NET WORTH
This ratio expresses the relationship between capital contributed by current obligation
creditors and capital contributed by owners.
CURRENT LAIBILITY TO NET WORTH = Current laibility
Net worth
Year Current Laibility Net Worth Ratio

2012-2013 9449.70 76735.16 0.12
2013-2014 14125.88 69820.03 0.20
2014-2015 13413.44 62386.16 0.21
2015-2016 19814.72 54142.97 0.36
2016-2017 28039.44 46356.95 0.60
Table 5.2(5)table showing calculation of CL to net worth
0.7
0.6
0.5
0.4
0.3
0.2 Series 1
0.1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.2.(5) figure showingCL to net worth

45
Interpretation
From this figure we can observe that the current laibility to the shareholders is increasing
from the year 2012-2013 to 2016-2017.
5.3 PROFITABILITY RATIOS
5.3(1)OPERATING RATIO
This ratio indicates the proportion that the cost of sales bears to sales. Cost of sales
include direct cost of goods sold as well as other operating expense, which have
matching relationship with sales.
Year Cost of Goods Sold+ Net Sales Ratio

Operating Expense
2012-2013 6544.93 44220.25 14
2013-2014 7558.15 22289.48 33
2014-2015 7417.67 15402.66 48
2015-2016 8058.09 9714.10 82
2016-2017 9288.89 12050.71 77
Table 5.3(1) table showing calculation of operating ratio
46
90
80
70
60
50
40 Serie…
30 Serie…
20
10
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.3(1) figure showing operating ratio
Interpretation
Lower the ratio, the better it is. Higher the ratio, the less favourable it is because it would
have a smaller margin of operating profit for the payment of dividends and the creation of
reserves. Here, the table shows that the operating ratio for the 5 years has an increasing
trend. In the year 2015-2016, it is very high. The operating cost is very high and fluctuates
in these years.
5.3(2) OPERATING PROFIT RATIO
It shows the relation between operating profit and net sales.
Operating Profit Ratio = × 𝟏𝟎𝟎
47
Year Operating Profit Net Sales Ratio
2012-2013 37675.32 44220.25 85
2013-2014 14731.33 22289.48 66
2014-2015 7984.99 15402.66 51
2015-2016 1656.01 9714.10 0.17
2016-2017 2761.82 12050.71 22
Table 5.3(2) table showing calculation on Operating Profit Ratio
90
80
70
60
50
40
Seri…
30
20
10
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.3(2) figure showing operating profit ratio
Interpretation
Higher the operating profit ratio, the better it is. The above table shows that the ratio was
increased in the first two years and then it decreasing because the company had an
operating loss for the last three years. Hence it is not satisfactory.
48
5.3(3) RETURN ON CAPITAL EMPLOYED
It indicates the return on capital employed in the business and it can be used to show the
efficiency on the business as a whole.
Return on Capital Employed = × 𝟏𝟎𝟎
𝐍𝐞𝐭𝐂𝐚𝐩𝐢𝐭𝐚𝐥𝐄𝐦𝐩𝐥𝐨𝐲𝐞𝐝
Year Operating Profit Capital Employed Ratio

2012-2013 37675.32 3342 1127.3
2013-2014 14731.33 3342 440.7
2014-2015 7984.99 3342 238.9

2015-2016 1656.01 3342 49.55
2016-2017 2761.82 3342 82.6
Table 5.3(3) table showing calculation return on capital employed
1200
1000
800
600
400 Seri…
200
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.3 (3) figure showing return on capital employed
Interpretation
Return on capital employed ratio shows a fluctuating positive trend. Since the company is
having operating profit for the first two years. But, it having operating loss for the last 3
years. Higher return is good for the company. The company has to try for increase their
returns. The ratio of return on capital employed of the company is not satisfactory
49
5.4 ACTIVITY TURNOVER RATIOS
5.4(1) STOCK (INVENTORY) TURNOVER RATIO
Stock turnover ratio is a ratio between cost of goods sold and the average stock or
inventory.
𝐂𝐨𝐬𝐭𝐨𝐟𝐠𝐨𝐨𝐝𝐬𝐬𝐨𝐥𝐝
Inventory Turnover Ratio =
𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐒𝐭𝐨𝐜𝐤
Year Cost of Goods Sold Average Stock Ratio

2012-2013 27704.43 6792.37 4.07
2013-2014 12805.48 4873.10 2.63
2014-2015 8877.79 4811.46 1.8
2015-2016 5226.39 3851.34 1.4
2016-2017 9461.51 1549.93 6.10
Table 5.4 (1) table showing calculation on Inventory Turnover Ratio
7
6
5
4
3
Series 1
2
1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
figure 5.4 (1) figure showing on Inventory Turnover Ratio
Interpretation:
Higher the ratio, the better it is because it shows that finished stock is rapidly turned over.
A low stock turnover ratio is not desirable because it reveals the accumulation of obsolete
stock, over the carrying of too much stock. In the year 2016-17, the ratio is hig
50
5.4(2) CURRENT ASSET TURNOVER RATIO
It depicts the relationship between the total assets and current assets of the company
Current Asset Turnover Ratio =
Year Net Sales Current Assets Ratio

2012-2013 44220.25 10821.44 4.08
2013-2014 22289.48 7538.82 2.95
2014-2015 15402.66 9231.01 1.66
2015-2016 9714.10 5765.29 1.68
2016-2017 12050.71 7461.27 1.61
Table 5.4(2) table showing calculation on CA turnover ratio
4.5
4
3.5
3
2.5
2 Series 1
1.5 Series 2
1
0.5
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4(2) figure showing CA turnover ratio
Interpretation:
Current asset turnover ratio depicts the relationship between the sales and current asset of
the company. It shows how the utilization of current asset affects cash. In the year 2012-
13and 2013-14, the current asset turnover ratio is high. But from the year 2014-15, the ratio
gets decreased. But in the year 2015-16, the ratio again increases slightly.
51
5.4(3) FIXED ASSET TURNOVER RATIO
This ratio is an indication of management’s ability to effectively utilize fixed assets.
Fixed Assets Turnover Ratio =
Year Net Sales Fixed Assets Ratio

2012-2013 44220.25 5936.89 7.44
2013-2014 22289.48 5485.64 4.06
2014-2015 15402.66 4717.21 3.26
2015-2016 9714.10 4118.5 2.35
2016-2017 12050.71 3600.5 3.34
Table 5.4(3) table showing calculation on FA Turnover Ratio
4
Series 1
2
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4(3) figure showing calculation on FA turnover ratio
Interpretation:
The ratio shows how well the fixed assets are being used to generate sales in the business.
The higher is the ratio, the better is the performance, a low ratio indicates that fixed assets
are not being efficiently utilized. Here the fixed asset turnover ratio shows an increased
trend in the first 2 years, but it get decreased then increase during the last 3 years.
52
5.4(4) TOTAL ASSET TURNOVER RATIO
Measure efficiency of total assets for the company as a whole or for a division of the firm.
TOTAL ASSET TURNOVER RATIO =
𝐓𝐨𝐭𝐚𝐥𝐀𝐬𝐬𝐞𝐭𝐬
Year Net Sales Total Assets Ratio

2012-2013 44220.25 87272.95 0.50
2013-2014 22289.48 87528.88 0.25
2014-2015 15402.66 78675.65 0.19
2015-2016 9714.10 75815.30 0.12
2016-2017 12050.71 77007.63 0.15
Table 5.4(4) table showing total asset turnover ratio
0.6
0.5
0.4
0.3
0.2 Serie…
0.1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4 (4) figure showing total asset turnover ratio
Interpretation:
Total asset turnover ratio indicates the performance of the company to generate revenue
through deploying its total asset.In this figure the total asset turnover ratio increases till
2012-2013 and decreases from 2013-2014 to 20155-2016, and then increase 2016-2017.
53
5.4(5) INVENTORY TO CURRENT ASSET RATIO
The ratio indicate the amount of investment in inventory per rupee of current assets
investment.The ratio indicate the state of liqudity position of concern.
𝐈𝐧𝐯𝐞𝐧𝐭𝐨𝐫𝐲
Inventory to Current Asset Ratio =
𝐂𝐮𝐫𝐫𝐞𝐧𝐭𝐚𝐬𝐬𝐞𝐭
Year Inventory Current Assets Ratio

2012-2013 4956.18 10821.44 0.45
2013-2014 4790.03 7538.82 0.63
2014-2015 4832.89 9231.01 0.52
2015-2016 2869.80 5765.29 0.49
2016-2017 4199.19 7461.27 0.56
Table 5.4(5) table showing inventory to CA ratio
0.7
0.6
0.5
0.4
0.3
Series 1
0.2
0.1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4 (5) figure showing inventory to current asset ratio
Interpretation:
The inventory to current asset ratio had a fluctuating trend.In 2012-2013 it was 0.45
then it increased to 0.63 in 2013-2014.The ratio is then decreased to 0.52 in 2014-2015,and
then it will fluctuates respectively.The ratio may also indicates the state of liqudity position
of concern.
54
5.4(6) WORKING CAPITAL TURNOVER RATIO
Working capital turnover ratio indicates the speed at which the working capital is
utilized for business operations.
Working Capital Turnover Ratio =
𝐍𝐞𝐭𝐖𝐨𝐫𝐤𝐢𝐧𝐠𝐂𝐚𝐩𝐢𝐭𝐚𝐥
Year Net Sales Working Capital Ratio

2012-2013 44220.25 1371.74 3.22
2013-2014 22289.48 6587.03 3.38
2014-2015 15402.66 4182.43 3.68
2015-2016 9714.10 1404.94 6.91
2016-2017 12050.71 2057.81 5.85
Table 5.4(6) table showing calculation on Working Capital Turnover Ratio
4
Serie…
2
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4 (6) figure showing working capital turnover ratio
Interpretation:
The higher is the ratio, the lower is the investment in working capital and the greater are
the profits. A low working capital turnover ratio indicates that working capital is not
efficiently utilized. From the year 2012-2013 the working capital ratios get increased till
2015-2016,then it decreased,.
55
5.4(7) DEBTORS TURNOVER RATIO
Debtors turnover indicates the number of times debtors turnover each year. Debtors
turnover can be calculated by dividing total sales by the year-end balance of debtors.
𝐍𝐞𝐭𝐂𝐫𝐞𝐝𝐢𝐭𝐒𝐚𝐥𝐞𝐬
Debtors Turnover Ratio =
𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐓𝐫𝐚𝐝𝐞𝐃𝐞𝐛𝐭𝐨𝐫𝐬
Year Net Credit Sales Average Trade Ratio

Debtors
2012-2013 44220.25 5730.59 7.71
2013-2014 22289.48 3691.25 6.03
2014-2015 15402.66 3043.18 5.06
2015-2016 9714.10 2690.01 3.61
2016-2017 1205.07 264.22 4.56
Table 5.4 (7) table showing calculation on Debtors Turnover Ratio
10
8
6
4
2 Series 1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4(7) figure showing Debtors Turnover Ratio
Interpretation:
Higher the ratio, more the chances of bad debt, and lower the ratio, less the chance of bad
debts. During 2012-13, 2013-14 financial year, debtors turnover ratio is high, which shows
that the debts are collected promptly in these years. But in 2014-15, 2015-16 reduced and
2016-17 ratios increased.
56
5.4(7).a DEBTORS COLLECTION PERIOD
The average number of days for which debtors remain outstanding is called the average
collection period.
𝐃𝐚𝐲𝐬𝐢𝐧𝐚𝐘𝐞𝐚𝐫
Average Debt Collection Period =
𝐃𝐞𝐛𝐭𝐨𝐫𝐬𝐓𝐮𝐫𝐧𝐨𝐯𝐞𝐫𝐑𝐚𝐭𝐢𝐨
Year Days in a Year Debtors Turnover Collection Period

Ratio
2012-2013 365 7.71 47.34
2013-2014 365 6.03 60.53
2014-2015 365 5.06 72.13
2015-2016 365 3.61 101.10
2016-2017 365 4.56 80.04
Table 5.4(7).a table showing calculation on debtors turnover ratio
120
100
80
60
40
20 Seri…
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4(7).a figure showing debtors turnover ratio
Interpretation:
During the above table, it is clear that collection period was very high during the year 2015-
16. It implies inefficient credit collection performance of the company. During the next
years, the company took only one day for collecting the debt. It is very good for the
concern.
57
5.4(8) CREDITORS TURNOVER RATIO
It is a ratio between net credit purchases and average account payables. This ratio
establishes a relationship between credit purchases and average trade creditors and bill
payables.
𝐍𝐞𝐭𝐂𝐫𝐞𝐝𝐢𝐭𝐏𝐮𝐫𝐜𝐡𝐚𝐬𝐞
Creditors Turnover Ratio =
𝐀𝐯𝐞𝐫𝐚𝐠𝐞𝐀𝐜𝐜𝐨𝐮𝐧𝐭𝐏𝐚𝐲𝐚𝐛𝐥𝐞𝐬
Year Net Credit Purchase Average Trade Ratio

Purchase
2012-2013 24032.05 4394.60 5.46
2013-2014 12639.33 7842.57 1.61
2014-2015 8920.65 8411.86 1.06
2015-2016 3263.30 9494.48 0.34
2016-2017 5557.57 7904.05 0.70
Table 5.4(8) table showing calculation on Creditors Turnover Ratio
6
5
4
3
2 Seri…
1
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4(8) figure showing Creditors Turnover Ratio
Interpretation
From the figure we can see that the creditors turnover ratio has decreased because the firm
is in the loss and is not able to pay his creditors as the demand of the firms products
decreased due to foreign competition.
58
5.4(8)a. AVERAGE PAYMENT PERIOD OF CREDITORS
This period shows an average period for which the credit purchases remain unpaid
or the average credit period actually availed of.
𝐌𝐨𝐧𝐭𝐡𝐬𝐢𝐧𝐚𝐘𝐞𝐚𝐫
Average Debt Payment Period =
𝐂𝐫𝐞𝐝𝐢𝐭𝐨𝐫𝐬𝐓𝐮𝐫𝐧𝐨𝐯𝐞𝐫𝐑𝐚𝐭𝐢𝐨
Year Months in a Year Creditors Average Payment

Turnover Ratio Period
2012-2013 12 5.46 2.19
2013-2014 12 1.61 7.45
2014-2015 12 1.06 11.32
2015-2016 12 0.34 35.29
2016-2017 12 0.70 17.14
Table 5.4 (8)a table showing calculation onAverage Debt Payment Period
40
35
30
25
20
15 Seri…
10
5
0
2012-2013 2013-2014 2014-2015 2015-2016 2016-2017
Figure 5.4 (8)a figure showing Average Debt Payment Period
Interpretation
From the abovetable and chart, it indicates that the creditors payment period has increased
over the years as the firm is in loss and does not have cash to pay its creditors.
59
5.5TREND ANALYSIS
It is an important tool of horizontal analysis. Under this analysis, ratios of different items of the
financial statements for various periods are calculated and the comparison is made accordingly.
The analysis over the prior year’s indicates the trend or direction. Trend analysis is a useful tool
to know whether the financial health of a business entity is improving in the course of time or it is
deteriorating trend analysis to help improve your business by:
o identifying areas where your business is performing well so you can duplicate
success
o identifying areas where your business is underperforming
o providing evidence to inform your decision making.
This guide explains how you can use historical data to analyses trends and improve your business.
To calculate the percentage change between two periods:
Calculate the amount of the increase/(decrease) for the period by subtracting the earlier year from
the later year. If the difference is negative, the change is a decrease and if the difference is positive,
it is an increase.
Divide the change by the earlier year's balance. The result is the percentage change.
Trend percentage of two variables are calculated as follows
 TREND PERCENTAGE OF NET SALES

 TREND PERCENTAGE OF NET WORKING CAPITAL
60
a) TREND PERCENTAGE OF NET SALES
YEAR net sales trend percentage
2012-2013 44220.25 100
2013-2014 22289.48 50.40559472
2014-2015 15402.66 34.8316891
2015-2016 9714.1 21.9675375
2016-2017 12050.71 27.25156461

Table 5.5(a) table showing calculation trend percentage on net sales
trend percentage
100
90
80
70
60
50
40 trend percentage
30
20
10
0
Figure 5.5(a) figure showing trend percentage on net sales
Interpretation
Here the trend percentage of net sale of the year 2012-2013 is high ie, 100. Then it get
decreased from 2103-2014 to 2016-2017.
.
61
b)TREND PERCENTAGE OF NET WORKING CAPITAL
net working
YEAR capital trend percentage
2012-2013 1371.74 100
2013-2014 6587.03 480.1952265
2014-2015 4182.43 304.8996165
2015-2016 1404.94 102.4202837
2016-2017 2057.81 150.01458

Table 5.5(b) table showing calculation trend percentage on net working capital
trend percentage
500
450
400
350
300
250
200 trend percentage
150
100
50
0
Figure 5.5(b) figure showing trend percentage on net working capital
Interpretation
Here the trend percentage of net working capital of the year 2013-2014 is high ie 480 .
Then it get decreased from 2014-2015 to 2016-2017.
62
c)TREND PERCENTAGE OF CURRENT ASSET
YEAR Current Asset trend percentage

2012-2013 10821.44 100
2013-2014 7538.82 69.66558979
2014-2015 9231.01 85.30297262
2015-2016 5765.29 53.276551
2016-2017 7461.27 68.94895689
Table 5.5(c) table showing calculation trend percentage on current asset
trend percentage
100
80
60
40 trend percentage
20
Figure 5.5(c) figure showing trend percentage on net current asset
Interpretation
Here the trend percentage of Current asset of the year 2012-2013is high ie 100 . Then it
gets fluctuates ie,decreased and increased from 2013-2014 to 2016-2017.
63
d)TREND PERCENTAGE OF CURRENT LAIBILITY
YEAR Current laibility trend percentage

2012-2013 6449.7 100
2013-2014 14125.85 219.0156131
2014-2015 13413.44 207.9699831
2015-2016 19814.72 307.2192505
2016-2017 28039.44 434.7402205
Table 5.5(d) table showing calculation trend percentage on current laibility
trend percentage
100
80
60
40
trend percentage
20
0
Figure 5.5(d) figure showing trend percentage on net current laibility
Interpretation
Here the trend percentage of Current Laibility of the year 2012-2013is very low . Then
it gets increased from 2013-2014 to 2016-2017.In 2016-2017 the trend percentage of
current laibility is very high ie,434.7
64
e)TREND PERCENTAGE OF FIXED ASSET
YEAR Fixed Asset trend percentage

2012-2013 5936.89 100
2013-2014 5485.64 92.39921912
2014-2015 4717.21 79.45591042
2015-2016 4118.5 69.37133752
2016-2017 3600.5 60.6462306
Table 5.5(e) table showing calculation trend percentage on FA
trend percentage
100
80
60
40
trend percentage
20
0
Figure 5.5(e) figure showing trend percentage on net FA
Interpretation
Here the trend percentage of Fixed asset of the year 2012-2013is high ie, 100. Then it
gets decreased from 2013-2014 to 2016-2017.
65
a) TRACO CABLE COMPANY comparative balance sheet of the year 2016 and 2017
Table 5.6(a) table showing calculation on comparative balance sheet of the year 2016 and 2017
Particulars Previous Current Absolute Percentage

Year Year Increase/ Increase/
Decrease Decrease
2016 2017
A B C = B-A D= C /A x 100
I. Equity and Liabilities:-
1.Shareholder’s Funds :
(a) Share Capital 3342 3342 0 0%
(b) Reserve & Surplus 50800.97 43014.95 -7786.02 -15%
2.Non-Current Liabilities:
(a) Long Term Borrowings 900 0 -900 -100%
(b) Long Term Provisions 957.6 2611.23 1653.63 173%
(c) Other Long Term Liabilities 0 0 0 0%
3.Current Liabilities:
(a) Short Term Borrowings 1307.29 1215.52 -91.77 -7%
(b) Trade Payables 11716.7 15808.11 4091.41 35%
(c) Short Term Provisions 265.7 241.26 -24.44 -9%
(d) Other Current Liabilities 6525.02 10774.54 4249.52 65%
Total 75815.3 77007.63 1192.33 2%

II. Assets:-
1.Non-Current Assets:
(a) Fixed Assets:
i] Tangible Assets 4107.36 3594.86 -512.5 -12%
ii] Intangible Assets 5.57 0 -5.57 -100%
iii] Capital work in progress 5.64 5.64 0 0%
(b) Non-Current Investments 50 50 0 0%
(c) Long Term Loans & Advances 40.65 37.86 -2.79 -7%
2. Current Assets:
66
(a)Inventories 2869.8 4199.19 1329.39 46%
(b)Trade Receivables 528.45 400.38 -128.07 -24%
(c)Cash and Cash equivalents 40.17 161.6 121.43 302%
(d)Short term loans and advances 2219.3 2605.93 386.63 17%
(e)Other current asset 107.55 94.15 -13.4 -12%
3.Head office current account
(a) HO a/c-Rasayani 70291.21 70165.64 -125.57 0%
(b) HO a/c – Corporate 4405.44 4262.65 -142.79 -3%
TOTAL 75815.3 77007.6 1192.3 2%
5.6 COMPARATIVE BALANCE SHEET
In order to have a comprehensive analysis the comparative balance sheet of TRACO CABLE
COMPANY was done and resultant variation is noted in this section of the study
Interpretation
The above comparative balance sheet shows the comparison of the financial position of the
company between the financial years 2012-2013. The comparative statement shows that there is a
decreasing in the reserves and surplus by -15% .
It is also seen that the current assets and current liabilities has shown an increase in 2%
respectively.
67
b) TRACO CABLE COMPANY comparative balance sheet of the year 2015 and 2016
Table 5.6(b) ) table showing calculation on comparative balance sheet of the year 2015 and 2016

Decrease Decrease
2015 2016
A B C = B-A D= C /A x 100
(a) Share Capital 3342 3342 0 0.0%
(b) Reserve & Surplus 59044.16 50800.97 -8243.19 -14.0%
(a) Long Term Borrowings 1800 900 -900 -50.0%
(b) Long Term Provisions 1076.04 957.6 -118.44 -11.0%
(c) Other Long Term Liabilities 0 0 0 0.0%
(a) Short Term Borrowings 2186.07 1307.29 -878.78 -40.2%
(b) Trade Payables 7272.27 11716.7 4444.43 61.1%
(c) Short Term Provisions 242.22 265.7 23.48 9.7%
(d) Other Current Liabilities 3712.86 6525.02 2812.16 75.7%
Total 78675.65 75815.3 -2860.35 -3.6%
II. Assets:-
(a) Fixed Assets:
i] Tangible Assets 4625.58 4107.36 -518.22 -11.2%
ii] Intangible Assets 85.99 5.57 -80.42 -93.5%
iii] Capital work in progress 5.64 5.64 0 0.0%
(b) Non-Current Investments 50 50 0 0.0%
(c) Long Term Loans & Advances 45.01 40.65 -4.36 -9.7%
2. Current Assets:
68
(a)Inventories 4832.89 2869.8 -1963.09 -40.6%
(b)Trade Receivables 2161.56 528.45 -1633.11 -75.6%
(c)Cash and Cash equivalents 67.65 40.17 -27.48 -40.6%
(d)Short term loans and advances 2034.24 2219.3 185.06 9.1%
(e)Other current asset 134.65 107.55 -27.1 -20.1%
(a) HO a/c-Rasayani 69588.37 70291.21 702.84 1.0%
(b) HO a/c – Corporate 78675.65 4405.44 -74270.21 -94.4%
TOTAL 78675.65 75815.3 -2860.35 -3.6%
Interpretation
decreasing in the reserves and surplus by -14%.It is also seen that the total current assets and total
current liabilities has shown a decreased by -3.6% respectively.
69
c) TRACO CABLE COMPANY comparative balance sheet of the year 2014 and 2015
Table 5.6(c) table showing calculation on comparative balance sheet of the year 2014 and 2015
TRACO CABLE COMPANY comparative balance sheet of the year 2014 and 2015
Decrease Decrease
2014 2015
A B C=B-A D= C /A x 100
(a) Share Capital 3342 3342 0 0
(a) Long Term Borrowings 2500 1800 -700 -28.0%
(c) Other Long Term Liabilities - - 0 0.0%
(a) Short Term Borrowings 1827.61 2186.07 358.46 19.6%
(b) Trade Payables 9551.44 7272.27 -2279.17 -23.9%
Total 87528.88 78675.65 -8853.23 -10.1%

II. Assets:-
(a) Fixed Assets:
70
iii] Capital work in progress 7.8 5.64 -2.16 -27.69%
2. Current Assets:
(a)Inventories 4790.03 4832.89 42.86 0.89%
(b)Trade Receivables 881.61 2161.56 1279.95 145.18%
(c)Cash and Cash equivalents 31.42 67.65 36.23 115.31%
(d)Short term loans and advances 1674.41 2034.24 359.83 21.49%
(a) HO a/c-Rasayani 73331.11 69588.37 -3742.74 -5.10%
(b) HO a/c - Corporate 1112.32 -4910.96 -6023.28 -541.51%
TOTAL 87528.88 78675.65 -8853.23 -10.11%
Interpretation
decreasing in the reserves and surplus by -11.2%
It is also seen that the total current assets and total current liabilities has shown a decreased by -
10.11% respectively.
71
d) TRACO CABLE COMPANY comparative balance sheet of the year 2013 and 2014
Table 5.6 (d) table showing calculation on comparative balance sheet of the year 2013 and 2014
TRACO CABLE COMPANY comparative balance sheet of the year 2013 and 2014
Decrease Decrease
2013 2014
A B C = B-A D= C /A x 100
(a) Share Capital 3342 3342 0 0.0%
(a) Long Term Borrowings 0 2500 2500 0.0%
(c) Other Long Term Liabilities 0 0 0 0.0%
(a) Short Term Borrowings 2065.13 1827.61 -237.52 -1150.1%
(b) Trade Payables 6133.7 9551.44 3417.74 5572.1%
Total 87272.95 87528.88 255.93 29.3%
II. Assets:-
(a) Fixed Assets:
72
iii] Capital work in progress 54.81 7.8 -47.01 -8576.9%
2. Current Assets:
(a)Inventories 4956.18 4790.03 -166.15 -335.2%
(b)Trade Receivables 2809.63 881.61 -1928.02 -6862.2%
(c)Cash and Cash equivalents 80.74 31.42 -49.32 -6108.5%
(d)Short term loans and advances 2790.3 1674.41 -1115.89 -3999.2%
(a) HO a/c-Rasayani 69315.6 73331.11 4015.51 579.3%
(b) HO a/c – Corporate 1122.72 1112.32 -10.4 -92.6%
TOTAL 87272.95 87528.88 255.93 29.3%
Interpretation
decreasing in the reserves and surplus by -942.2%.
It is also seen that the total current assets and total current liabilities has shown an increase
of 29.3%. Hence it understood that the company has used its cash balane to pay off its liabilities.
73
e) TRACO CABLE COMPANY comparative balance sheet of the year 2012 and 2013
Table 5.6 (e) table showing calculation on comparative balance sheet of the year 2012 and 2013

Decrease Decrease
2012 2013
A B C = B- A D= C /A x 100
0.0%
(a) Share Capital 3342 3342 0
-4.68
(b) Reserve & Surplus 76998.34 73393.16 -3605.18
0.0%
(a) Long Term Borrowings 0 0 0
4.4%
(b) Long Term Provisions 1041.74 1088.08 46.34
(c) Other Long Term Liabilities 0 0 0
40.80%
(a) Short Term Borrowings 1466.68 2065.13 598.45
1.31%
(b) Trade Payables 2655.5 6133.7 3478.2
-7.39%
(c) Short Term Provisions 196.18 181.69 -14.49
-0.20%
(d) Other Current Liabilities 1331.8 1069.16 -262.64
27.7%
Total 87032.27 87272.95 240.68
74
II. Assets:-
(a) Fixed Assets:

4.2%
i] Tangible Assets 5409.97 5635.19 225.22
-24.4%
ii] Intangible Assets 326.62 246.89 -79.73
iii] Capital work in progress 0 54.81 54.81
(b) Non-Current Investments 0 50 50

-19.4%
(c) Long Term Loans & Advances 88.39 71.28 -17.11
2. Current Assets:
-42.5%
(a)Inventories 8628.56 4956.18 -3672.38
-3.8%
(b)Trade Receivables 2920.95 2809.63 -111.32
-72.6%
(c)Cash and Cash equivalents 294.4 80.74 -213.66
69.1%
(d)Short term loans and advances 1650.49 2790.3 1139.81
-11.2%
(e)Other current asset 207.88 184.57 -23.31

5.8%
(a) HO a/c-Rasayani 65486.03 69315.6 3829.57
10.40%
(b) HO a/c – Corporate 1016.94 1122.72 105.78
27.7%
TOTAL 87032.27 87272.95 240.68
Interpretation
75
decreasing in the reserves and surplus by -4.06%.It is also seen that the total current assets and
total current liabilities has shown an increase of 27.7% respectively.
CHAPTER 6
FINDINGS
76
FINDINGS
 TRACO CABLE COMPANY Limited has been continuously making loss over the past few
years.
 The overall profitability of the company is not found to be satisfactory.
 The quick ratio of the company s declining for the past few years. This is a bad sign of
improvement for the company.
 Absolute ratio shows a fluctuating trend, which means that company is facing cash shortage.
 Operating profit is low for the company.
 The reasons for net loss are time lag or high competitors , high cost of production etc.
 In order to improve the turnover and profitability, the company is concentrating also on
marketing of traded products.
 Return on total asset indicated decline due to net loss.
 Earnings per share showed a decreasing trend due to net loss of the firm.
 The value of the net block and capital work in progress is fluctuating over the year.
 Proprietary ratio reveals fluctuating and decreasing trend for the last five years. This means
that lower the ratio indicates lower the financial strength of business.
 The trend of working capital results that in the year 2013-2014 to 2014-2015 the company has
higher working capital.It indicates the company has efficient utilisation of working capital.
77
CHAPTER 7
RECOMMENDATIONS
78
RECOMMENDATIONS
 The company must give importance to the working capital management, because the current
laibilities are much higher than the current assets.
 The company should take necessary steps to improve the profits by reducing the operating
expenses.
 Manufacturing and other expenses should be taken into consideration. Then only the company
can increase its profitability.
 Company should take suitable measures to reduce its current liabilities.
 The company should study the reason for loss and must take necessary steps to overcome the
loss.
 Proper inventory control measures should be taken to reduce the unnecessary stock and to
maintain appropriate lead time.
 The company should try to take steps for modernization and diversification. So the company
can compete with their rival firms.
 Cost of production can be reduced by using modern methods and modify the plant to become
more efficient.
 The company can plan for investing more amounts on research and development so that
innovative and modern products and works designed can be developed and adopted in the
coming year.
 The company should maintain a steady makeup on sales by controlling the operations and
manufacturing.
79
CHAPTER 8
CONCLUSION
80
CONCLUSION
The study was conducted for a period of 5 years from 2012-2013 to 2016-2017 is to evaluate the
financial performance analysis of TRACO CABLE COMPANY , Irumpanam and the secondary
data was obtained from the published annual report of the company. . It helps to explore the
strength and weakness of the company.
Financial analysis of TRACO CABLE COMPANY reveals the truth that the company has been
suffering a loss for the past few years, but these were not due to the result of the managerial
inefficiency.The analysis of five years reveals that the various factors affect the overall
performance and their positive and negative involvement in financial and non financial aspects of
the company. In the nearby future the government will take necessary steps to strengthen the
performance of the organization.
The company should use consistent techniques and financial policies to reduce cost of goods sold,
would lead to more returns on earnings after taxes. Further, it tries to acquire new technology for
cutting the cost of production.
81
CHAPTER 9
REFERENCE
82
BIBLIOGRAPHY
Company source
 Annual reports of TRACO CABLE COMPANY

 Financial reports of TRACO CABLE COMPANY
Books
 Foster G (1986), ‘Financial Statement Analysis’, Prentice Hall, PP.27.

 SP Jain, K.L Narrang, ‘Financial Management & Accounting’, Kalyani Publication, New
Delhi.
 Agarwal N.P., “Analysis of Financial Statements”- National Publishing House, 23 Darya
Ganj, New Delhi , 1981.
 Homgren, Charles T. : Cost Accounting - A Managerial Emphasis, New Delhi: Prentice
Hall ofIndia, (1977).
 Altman, Edward I (Sep. 1968). “Financial Ratios, Discriminant Analysis and the prediction
of corporate Bankruptcy”. The journal ofFinance, Vol. XXIII, No.4, pp. 589-609.
Website
 www.traco.co.in
 www.hoclkochi.com
 www.investoedia.com
 www.ibef.org
www.thebalancesmb.com
83

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A STUDY ON RATIO ANALYSIS AT TRACO CABLE

Under the guidance of

in partial fulﬁlment of the requirements

MASTER OF BUSINESS ADMINISTRATION

SREE NARAYANA GURUKULAM COLLEGE OF ENGINEERING

This is to certify that the report titled “A STUDY ON RATIO ANALYSIS AT

PROF. RAJANI SUNNY T PROF. MADHUSOODHANAN

ASSISTANT PROFESSOR HEAD OF THE DEPARTMENT

With deep sense of gratitude I express my

With the great respect, I express my sincere gratitude towards

I am very much indebted to my supervising faculty

Sl. No. Title Page No.

Sl. No. Title Page No.

Chapter Content Page No.

5.1 Financial Analysis

5.2 Statistical Analysis

Ratio analysis is a powerful tool of financial

 Financial forecasting and planning.

 It is beneficial to management of the company by providing crystal clear picture regarding

1.3 STATEMENT OF PROBLEM

 The title of the project is “STUDY ON RATIO ANALYSIS IN TRACO CABLE

Following are the related objectives of the study;

2.To analyze the liquidity position of the TRACO CABLE COMPANY

5.To know the return on investment

6.To make a comparison of profit of last five years

7.To suggest measures for improving the efficiency and profitability

1.5 SCOPE OF THE STUDY

TRACO CABLE COMPANY

Unit of Traco at Irimpanam in Ernakulam District

 XLPE LT/HT/UG Cables as per IS 7098 PART I and II.up to 11kv .

2.4 REVIEW OF LITERATURE

3.1 NATURE OF RATIO ANALYSIS:

1. Helpful in analysis of Financial Statements.

2. Helpful in comparative Study.

3. Helpful in locating the weak spots of the business.

5. Estimate about the trend of the business.

6. Fixation of ideal Standards.

8. Study of Financial Soundness

3.3 USE AND SIGNIFICANCE OF RATIO ANALYSIS:-

a) Managerial uses of ratio analysis:-

1. Helps in decision making:-

Ratios even help in co-ordination, which is of at most importance in effective business

3. Absence of standard universally accepted terminology:-

4. Price level changes affect ratios:-

4.1(1) RATIO ANALYSIS

ii. Quick ratio:

Where, liquid or quick assets = current assets – (stock + prepaid expenses)

A quick ratio of 1:1 is considered good/favorable for a company.

A ratio of 0.75:1 is recommended to ensure liquidity.

i. Debt Equity Ratio:

ii. Proprietary Ratio:

The acceptable norm of the ratio is 1:3.

iv. Fixed Assets to Net worth:

v. Current Asset to Net worth

vi .Current Laibility to Net worth

CURRENT LAIBILITY TO NET WORTH = Current laibility

i. Operating Profit Ratio:

ii. Return on Net Capital Employed Ratio:

iv. Operating ratio

4. ACTIVITY RATIOS (TURNOVER RATIOS)

i. Inventory Turnover Ratio:

ii. Fixed Assets Turnover Ratio:

iii. Working Capital Turnover Ratio: