A PROJECT REPORT

ON

“RATIO ANALYSIS OF FINANCIAL STATEMENTS”

AT

TAJ HOTELS, RESORTS & PALACES

BBA (2017-2018)

IN PARTIAL FULFILLMENT OF

THIRD YEAR OF BACHELOR OF BUSINESS ADMINISTRATION

[1]
 DECLARATION

I, _____________student of ______________________hereby declare that this

project work titled “Ratio Analysis of Financial Statements of Taj Hotels,
Resorts & Palaces” is the record of authentic work carried out by me during the
academic year 2017-2018

This is my original work and has not been submitted elsewhere for the award of
any degree or diploma either in part time or full time to any other University or
Institute.

DATE :

PLACE :

[2]
 ACKNOWLEDGEMENT

I sincerely thank____________, Principal of _______________and my course

Co-Oridnator _________________for giving me an opportunity to do this
project.

I express my gratitude to_________________, Internal guide for continuously

providing valuable guidance and encouragement that was essential for completion
of the project. It was her support that helped me sail through the project.

Last but not the least, I thank my family and friends for their support and
encouragement which has helped me complete my project.

DATE:

PLACE:

[3]
 INDEX

SR .NO TOPIC PAGE NUMBER

1 Introduction 4

2 Theoretical Background 8
a) Interpretation of Ratios 9
b) Role of Ratios 10
c) Classification Of Ratios 11

3 Company Profile 15

4 Research Methodology 18

5 Data Analysis & Interpretation 20

6 Summary Chart 54

7 Findings/Conclusion 55

8 Bibliography 57

9 Annexure 58

CHAPTER 1: INTRODUCTION
[4]
Financial Statements are essential tools for portraying the summarized picture of
the financial and economic condition of the firm based on the data that a firm has
collected in its books of accounts. They are considered to be the most effective
vehicle of communication between the persons managing the affairs of the
company and the outside world (including the shareholders who are the owners of
the company)

“Financial Statements are the blue prints of the financial affairs of the business
enterprise”

The term financial statement normally refers to two types of statements: Balance
Sheet or Statement of financial position & Income Statement or Profit and Loss
account which are prepared at the end of the accounting year of the business
enterprise.

The following tools and techniques are generally followed for evaluating the
financial performance of an business enterprise:

i. Comparative Financial iii. Trend Analysis

Statements iv. Ratio Analysis
ii. Common Size Financial v. Fund Flow Analysis
Statements vi. Cash Flow Analysis

RATIO ANALYSIS:

[5]
A Ratio is a numerical expression signifying the relation of one figure to another
figure. It is calculated by dividing one figure by another figure; resulting in a
quotient which is called a RATIO. Ratio by itself is an absolute figure and will not
convey any meaningful information unless compared with other figures.

Ratio Analysis is the process of determining and presenting the relationship of

items and group of items in the statements. According to Batty.J. “ Ratio can assist
management in its basic functions of forecasting, planning, co-ordination, control
& communication.” Ratio is the most important device to diagnose the financial
health of the enterprise. It determines the location of the problem and the causes of
which are required to be dealt with accordingly. Ratio analysis is considered to be
a powerful tool of financial analysis through which economic and financial
position of the business can be determined. Ratios provide a coordinated frame of
reference for judging financial performance.

ADVANTAGES DISADVANTAGES
Helpful in Analysis False Data gives False Ratio
Helpful in Comparative Study Ratios alone not adequate for conclusion
Helpful in Forecasting Lack of proper standards
Estimate the Trend of the Business Limited use of single data
Effective Control Ratios may be misleading in the absence
of absolute data.

OBJECTIVES OF THE STUDY

Every student is required to undertake a project related to the management

discipline. This project normally involves data collection, data sorting & data

[6]
analysis, along with making inferences and suggestions/ recommendations, under
the guidance of the institutional guide.

The project helps to understand the workings of the company as well as develops
the analytical skills of the student.

Following are the objectives of the Ratio Analysis of the Company:

 To study the present financial system of Taj Hotels , Resorts and Palaces.
 To examine the financial health of the company through important ratios.
 To provide benefits to various parties who directly or indirectly interact with
the company.
 The investors who are interested in investing in the company’s shares will
also get benefited by going through the study and can easily decide whether
to invest or not to invest in the company’s shares.
 To offer appropriate suggestions for the better performance of the
organization.

CHAPTER 2 : BASIC THEORETICAL CONCEPTS

[7]
CONCEPT OF RATIO :

A ratio is a simple arithmetical expression of the relationship of one number to

another. It may be defines as the indicated quotient of two mathematical
expressions.

According to Kohler

“A ratio is the relation, of the amount, a, to another, b, expressed as the ratio of a to

b [ a: b] ( a is to b); or as simple fraction, integer, decimal fraction or percentage.”

Ratios may be expressed in any one or more ways such as in proportion, in rate or
times or coefficient, in percentage.

MEANING AND DEFINITION 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. Ration Analysis measure the profitability, efficiency and
financial soundness of the business.

According to Myers

“Ratio Analysis is the study of relationship among the various financial factors in a
business”.

INTERPRETATION OF THE RATIOS

A. Trend Ratio: Trend ratios involve a comparison of the ratios of a firm over
time, i.e., present ratios are compared with past ratios for the same firm.
[8]
 Trend ratios indicate the direction of change in the performance,
improvement, deterioration or constancy over the years.

B. Inter-firm Comparison: Inter- firm comparisons may claim the comparison

of similar ratios for a number of different firms in the same industry. This
helps in the comparative study of financial position and performance of the
firms in the industry.

C. Comparison with Standards: Under this method, the interpretation of the

ratio is made by comparing it with the standard set for this purpose. Such a
standard ratio, based upon well proven conventions serves as measuring
scale for the evaluation of the ratios. { 1:1 ratio is considered as a good ratio
for analyzing acid – test ratio}

ROLE OF RATIOS

A. Measuring the Profitability: The profitability of the business can be

measured by calculating gross profit, net profit, expense ratio and other.
[9]
 B. Judging the Operational Efficiency of Business: The Operational
efficiency of the business can be ascertained by calculating operating ratio.
C. Assessing the Solvency of the Business: It can be known whether the firm
is solvent or not by calculating solvency ratio. Solvency ratios show
relationship between total liabilities and total assets. If total assets are lesser
than the total liabilities it shows unsound financial position of the business.
D. Measuring Short and Long Term Financial Position of the Company:
Ratio analysis help in knowing the short term and long term financial
position of the business by calculating various ratios. Current and Liquid
ratio indicates short- term financial position, whereas debt equity ratio, fixed
asset ratio and proprietary ratio shows long term financial positions.
E. Facilitating Comparative Analysis of the Performance: Every firm has to
compare its present performance with the previous and discover the
difference in them. These differences can be found out with the help of
Ratios and the comparison with performance of other competitive firms can
also be made using this information.

CLASSIFICATION OF RATIOS

[10]
Ratio Analysis is not only used by the finance manager alone but also by different
parties interested in the ratio analysis for knowing the financial position of a firm
for different purposes.

Various accounting ratios can be classified as follows:

CLASSIFICATION OF RATIOS

Traditional Functional Significance

Classification Classification Ratios

Balance Sheet Primary

Ratios Liquidity Ratios Ratios

Profit & Loss Secondary

Solvency/
Account Ratios Ratios
Leverage Ratios

Composite
/Mixed ratios Turnover/
Activity Ratios

Profitability
Ratios

FUNCTIONAL CLASSIFICATION OR RATIOS ACCORDING TO

TESTS/OBJECTS

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 Functional classification or Ratios according to Tests/Objects

Liquidity Ratios Turnover Ratios Solvency/Leverage Profitability

Ratios Ratios

Current Ratio Fixed Asset Gross Profit

Turnover Ratio Debt to Equity
Ratio Ratio

Working
Liquid Ratio
Capital Operating
Proprietary/ Profit Ratio
Turnover Ratio
Equity Ratio

Absolute Liquid
Inventroy /
Ratio
Stock Turnover Net Profit
Ratio Capital Gearing Ratio
Ratio

Debtors/
Recievables
Turnover Ratio Operating
Profit ratio
Creditors/
Payables
Turnover Ratio Return on
Capital
Employed

Earnings Per
Share

Price- Earning
Ratio

LIQUIDITY RATIO: These ratios measure the short-term solvency or financial

position of the firm. Liquidity ratios help in establishing a relationship between the
current assets obligations to current liabilities obligations to provide a quick

[12]
measure of liquidity. A firm is expected to meet its obligations as and when they
become due. The firm should ensure that it does not suffer from lack of liquidity
nor does it have excess liquidity. Liquidity Ratios can be divided into 3 types

a. Current Ratio
b. Liquid ratio
c. Absolute Liquid Ratio

LEVERAGE RATIO: Leverage Ratios are the financial statement ratios which
show the degree to which the business is investing itself through the use of its
borrowed money. Leverage ratios are calculated to measure the financial risk and
the firms ability of using Debt to Shareholder’s advantage.
Types of Leverage Ratios-

a. Debt to Equity Ratio

b. Proprietary/ Equity Ratio
c. Capital Gearing Ratio

TURNOVER RATIO: These ratios are also called “activity ratios” because they
indicate the speed with which assets are being turned over into sales. These ratios
are based on the relationship between the level of activity represented by sale or

[13]
cost of goods sold and level of various assets. A proper balance between sales and
assets generally reflects proper asset utilization. Types of activity ratios are-

a. Fixed Asset Turnover Ratio c. Debtors Turnover Ratio

b. Working capital Turnover d. Creditors Turnover Ratio
Ratio e. Inventory Turnover Ratio

PROFITABILITY RATIO: A company should earn profits to survive and grow

over a long period of time. Profit is the ultimate output of the company and it will
have no future if it fails to earn sufficient profits. These ratios measure the result of
business operations or overall performance and effectiveness of the firm. Types of
Profitability ratios are-

a. Gross Profit Ratio d. Return on Capital Employed

b. Net Profit Ratio e. Earnings – Per share
c. Operating Profit Ratio f. Price Earning Ratio

CHAPTER 3 : COMPANY PROFILE

[14]
The Indian Hotels Company Limited (IHCL) branded as Taj Hotels Palaces,
Resorts and Safaris , is an international chain of hotels and resorts headquartered at
Express Towers,Nariman Point in Mumbai. It was incorporated by the Tata Group,
Jamsetji Tata, 1903.The company is a part of the Tata Group, one of India’s largest
business conglomerates.

As of 2017, the company operates a total of 99 hotels and hotel- resorts, with 83
across India and 16 in other countries, such as Bhutan, Malaysia , Maldives, Nepal,
South Africa, Sri Lanka, UAE, UK, USA and Zambia.

Jamsetji Nusserwanji Tata (1839-1904) is the founder of the Tata Group. He

opened the Taj Mahal Palace, a hotel in Mumbai overlooking the Arabian Sea on
16 December 1903. It was the first Taj Property and the first Taj Hotel. There are
several anecdotal stories about why Tata opened the Taj Hotel. According to a
story, he decided to open the hotel after an accident involving racial discrimination
at the Watson’s Hotel in Mumbai, where he was refused entry as the hotel
permitted only Europeans. It is said that Jamsetji Tata had travelled to places like
London, Paris, Berlin etc. to arrange for materials and pieces of art, furniture,and
interior artefacts for his hotel. The Taj group has since then developed and
flourished, under the Tata Group.

In 1974, the group opened it’s first as well as India’s first International five star
deluxe beach resort, the Fort Aguada Beach Resort in Goa. In 1970’s the Taj
Group also began its business in metropolitan hotels, opening the five- star deluxe
hotel, Taj Coromandel in Chennai.

The Taj Mahal Palace Hotel is a “Heritage Grand” class five star hotel in Colaba
region of Mumbai, Maharashtra, India situated next to the Gateway of India.
Historically it was known as the Taj Mahal Hotel or the Taj Palace Hotel or simply

[15]
the Taj. Part of the Taj Hotels Resorts and Palaces, this hotel is considered the
flagship property of the group and contains 560 rooms and 44 suites. There are
some 1600, staff including 35 butlers. From a historical and architectural point of
view, the two buildings that make up the hotel and the tower are two distinct
buildings, built at different times and in different architectural designs.

IHCL, incorporated on April 1, 1902, is today listed on the BSE and the NSE. The
widely held company with a current market capital of 13,000 crores, has a total of
98,92,74,015 equity share outstanding, 21% of which is held by retail shareholders
and 40% by domestic and international institutional investors.

On receiving the ‘Best All India Investor Award 2017’ Mr. Rakesh Sarna,
Managing Director and CEO, The Indian Hotels Company said, “ This award is a
recognition for IHCL’s deep commitment to imbibing and adopting best practices
in engaging every stakeholder, including our valued retail & institutional
shareholders. Transparency, full disclosure and following the highest norms of
corporate governance are the cornerstones of our investor relations strategy, which
have enabled us to win this prestigious honor.

ACHIEVEMENTS AND MILESTONES

[16]
 In 2017, the Taj Mahal Palace Hotel has acquired an image Trademark. It is
the first building in the country to get Intellectual Property Rights protection
for its architectural design.
 On the 7th of June 2017, The Indian Hotels Company Limited (Taj Hotels
Palaces Resorts Safaris) won the ‘Best All India Investor Award 2017’ in the
category of large-cap companies at the recently held Investor Relations
Awards ceremony in Mumbai.
 Wine Spectator Award of Excellence 2016 awarded to Wasabi in May 2016.
 Times Food Guide Award- Mumbai 2016.
 Voted No 36 on the San Pellegrino List of world’s Top 100 restaurants.
 The Taj mahal Palace was voted Best Hotel in Mumbai at the DestinAsian
Reader’s choice awards in 2014.
 It was voted the 6th Best Business Hotel and was featured as a Hot
25Conference Hotel in Asia at the Smart Travel Asia Awards in 2014.
 And Many more…..

CHAPTER 4 : RESEARCH METHODOLOGY

[17]
The procedure adopted for conducting the research requires a lot of attention as it
has direct bearing on accuracy, reliability and adequacy of results obtained. It is
due to this reason that research methodology, which we use at the time of
conducting the research, needs to be elaborated upon. “Research Methodology is
a way to systematically study and solve the research problems”. If a researcher
wants to claim his study as a good study, he must clearly state the methodology
adapted in conducting the research so that it may be judged by the reader whether
the methodology of work done is sound or not.

Research Design

A research design is framework or blueprint for conducting the research project. It

specifies the details of the procedures necessary for obtaining the information
needed to structure and/ or solve the research problems. A good research design
will ensure that the research project is conducted effectively. In view of the
objectives of the study listed above the research design adopted for the “Ratio
Analysis of Financial Statements of Taj Hotels, Resorts, Palaces and Safaris.” is a
Quantitative Research Design. It is a research which largely interprets already
available information and lays particular emphasis on analysis and interpretation of
the existing information.

 To know the financial status of the company.

 To know the credit worthiness of the company.
 To offer suggestions based on research finding.

DATA COLLECTION METHODS

[18]
Primary Data: Primary data is also called as Raw Data because it is obtained
from the internal guide or the finance manager itself. Primary data is the first hand
information. The collection of primary data may be expensive as well as time
consuming.

Secondary Data: Secondary Data refers to the data that is collected for the
purpose other than the problem on hand. This data can be located easily and
quickly. It is inexpensive as compared to primary data. The secondary data defines
the information in a proper manner. It helps to identify the problems easily as well
as develops an approach towards the problem.

The information is collected through Secondary Data during the project. The
information obtained through this is utilized for calculating performance evaluation
and based on it, interpretations are made. The study is based on the information
obtained from the Annual Reports of the company for the year 2012-2013 to 2016-
2017.

LIMITATIONS

 The study was limited to only 5 years of Financial data.

 The study is purely based on secondary data which was taken from the
Annual Reports of Taj Hotels, Resorts, Palaces & Safaris.
 There is no set Industry standard and hence the interpretations are made on
General standards.
 The Ratios are calculated from past financial statements and hence they are
not indicators of the future.

[19]
 CHAPTER 5 :DATA ANALYSIS AND
INTERPRETATION

1. CURRENT RATIO: A liquidity ratio that measures a company’s ability to

pay short-term obligations is called as Current Ratio Or Working Capital
Ratio. It establishes the relationship between current assets and current
liabilities of a business. The standard form of Current Ratio is 2:1.
However the current ratio groups all current assets together on the
assumption that all of them can be converted into cash within a year. The
higher the current ratio, the more capable the company is of paying its
obligations.

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES

YEAR Current Assets Current Liabilities Current Ratio

2012-13 338 805 0.42
2013-14 31602 115343 0.27
2014-15 88129 105575 0.83
2015-16 1130 1282 0.88
2016-17 50623 139259 0.36

[20]
 CURRENT RATIO
1
0.9
0.8 0.88
0.83
0.7
0.6 CURRENT RATIO
0.5
0.4 0.42
0.3 0.36
0.2 0.27
0.1
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION

The current ratio of the company has been fluctuating, ranging from 0.27 in 2013-
14 to 0.36 in 2016-17. This is because of the changes in the current liabilities to the
current assets which have taken place over the years. The ratio above was therefore
satisfactory.

[21]
2. QUICK RATIO: It is also known as Acid Test Ratio. Quick ratio is an
indicator of short- term solvency of a company. It is a ratio which expresses
the relationship between quick assets and current liabilities. This gives a
more immediate measure of liquidity, since the needs to make sales is not
relevant. It is used as a complimentary ratio to the current ratio. The quick
ratio is calculated taking in consideration only the quick assets to the current
liabilities.

Quick assets = Current Assets – (Stock + Prepaid Expenses)

QUICK RATIO = QUICK ASSETS

CURRENT LIABILITIES

YEAR Quick Assets Current Liabilities Quick Ratio

2012- 13 300 805 0.372

2013- 14 27584 115343 0.239
2104- 15 83813 105575 0.793
2015- 16 1085 1282 0.846
2016-17 45867 139259 0.329

[22]
 QUICK RATIO
0.9

0.8 0.85
0.79
0.7

0.6

0.5 Quick Ratio

0.4
0.37
0.3 0.33
0.2 0.24

0.1

0
2012- 13 2013- 14 2104- 15 2015- 16 2016-17

INTERPRETATION

As a general rule, quick ratio of 1:1 is considered to be satisfactory since for every
rupee of current liabilities, there is a rupee of quick assets. From the above graph it
can be interpreted that during 2015-16 the company had the highest quick ratio of
0.846 and has declined over the years to 0.329.

[23]
3. ABSOLUTE LIQUID RATIO : The objective of computing this ratio is to
calculate (absolute liquid ratio) together with current ratio and acid test ratio
so as to exclude even receivables from the current assets and find out the
absolute liquid assets. The absolute liquid assets include cash in hand and at
bank and marketable securities or temporary investments. The standard form
of absolute liquid ratio is 0.5.

ABSOLUTE LIQUID RATIO = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITIES

YEAR Absolute Liquid Current Liabilities Absolute Liquid

Assets Ratio
2012- 13 48.96 805 0.06
2013- 14 4317 115343 0.04
2014- 15 78765 105575 0.75
2015- 16 158.17 1282 0.12
2016-17 7480 139259 0.05

[24]
 ABSOLUTE LIQUID RATIO
0.8

0.7 0.75

0.6

0.5
Absolute Liquid Ratio
0.4

0.3

0.2
0.12
0.1 0.06 0.05
0.04
0
2012- 13 2013- 14 2014- 15 2015- 16 2016-17

INTERPRETATION

The above ratio is calculated on the basis of absolute liquid assets to current
liabilities. It can therefore be drawn that the ratio has been unstable and not
following a certain pattern of either increase or decrease in solvency of the
company. The ratio has been the maximum in 2014-15 as compared to others.

[25]
4. FIXED ASSET TURNOVER RATIO: Fixed asset turnover ratio
compares the sales revenue of a company to its fixed assets. This ratio tells
how effectively and efficiently a company is using its fixed assets to
generate revenue. It indicates how many rupees of sales are supported by
one rupee of fixed assets. If a company has high fixed asset turnover ratio, it
shows that the company is efficient at managing its fixed assets.

FIXED ASSET TURNOVER RATIO = NET SALES

NET FIXED ASSETS

YEAR Net Sales Net Fixed Assets Fixed Asset Turnover

Ratio
2012- 13 1875.86 1941 0.97
2013- 14 192951 200703 0.96
2014- 15 202438 2013581 0.10
2015- 16 2273.7 2084 1.09
2016-17 1875.86 214328 1.12

[26]
 FIXED ASSET TURNOVER RATIO
1.2

1.09 1.12
1
0.97 0.96
0.8
FIXED ASSET TURNOVER RATIO
0.6

0.4

0.2

0.1
0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION
Fixed assets are important because they usually represent the largest
component of total assets. The fixed asset turnover ratio thus obtained from
the above graphs indicates that the company is using its fixed assets very
well in order to generate revenue. The ratio has been the least in the year
2014-15 and the highest in the year 2016-17.

[27]
5. STOCK TURNOVER RATIO: This ratio is also known as “inventory
turnover ratio” or “stock velocity ratio”. It establishes the relationship
between average stock at cost and cost of goods sold. This measures the
speed with which stock is turned over, hence the efficiency of the company’s
operations and whether capital is licked up unnecessarily in large stocks.
This may provide a vital warning sign.

Cost of Goods Sold = Sales – Gross Profit

STOCK TURNOVER RATIO = COST OF GOODS SOLD

AVERAGE STOCK

Year Cost Of Goods Sold Average Stock Stock Turnover

Ratio
2012- 13 11515 3928 2.93
2013- 14 48827 3928 12.43
2014- 15 48454 4167 11.63
2015- 16 1007 4412 0.23
2016-17 16613 4632 3.59

[28]
 STOCK TURNOVER RATIO
14

12 12.43
11.63
10

8 STOCK TURNOVER RATIO

4
3.59
2 2.93

0 0.23
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION

This ratio is employed to measure how quickly stock is converted into sales. From
the above it can be found that in the year 2013-14 the ratio has been the highest
thus indicating that more sales have taken place in the same year. Therefore, only a
proper inventory turnover ratio enables the business to earn a reasonable margin of
profits.

[29]
 6. DEBTORS TURNOVER RATIO : This ratio is also known as
“Receivables Turnover Ratio”. It expresses the relationship between net
credit sales and average accounts receivable. It measures the number of
times the receivables are rotated in a year in terms of sales. It also indicates
the efficiency of credit collection and efficiency of credit policy.

DEBTORS TURNOVER RATIO = TOTAL SALES

AVERAGE DEBTORS

Year Total Sales Average Debtors Debtors Turnover

Ratio
2012- 13 1925 125.22 15.37
2013- 14 192951 6283 30.71
2014- 15 202438 13165 15.38
2015- 16 238232 7025 33.91
2016-17 244511 8938 27.36

[30]
 DEBTORS TURNOVER RATIO
40

35
33.91
30 30.71
25 27.36
DEBTORS TURNOVER RATIO
20

15
15.37 15.38
10

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION

It indicates the number of times the debtors are turned over during a year. It can be
interpreted from the above graphs that the accounts receivables are the highest in
the year 2015-16 thus indicating that company is more efficient in the management
of debtors/sales or more liquid are the debtors.

[31]
7. WORKING CAPITAL TURNOVER RATIO: The working capital
turnover ratio is also referred to as net sales to working capital. It indicates a
company’s effectiveness in using its working capital. It is used to analyze
the relationship between the money that funds operations and the sales
generated from these operations. Basically working capital turnover ratio
measures how well a company is utilizing its working capital for supporting
a given level of sales.

WORKING CAPITAL TURNOVER RATIO = COST OF GOODS SOLD

NET WORKING CAPITAL

YEAR Cost Of Goods Sold Net Working Working Capital

Capital Turnover Ratio
2012- 13 11515 (46776) (0.25)
2013- 14 48827 (83741) (0.58)
2014- 15 48454 (17446) (2.78)
2015- 16 1007 (15192) (0.07)
2016-17 16613 (88636) (0.19)

[32]
 WORKING CAPITAL TURNOVER RATIO
-0.25 -0.58 -0.07 -0.19
0
2012-13 2013-14 2014-15 2015-16 2016-1

-0.5

-1
WORKING CAPITAL TURNOVER
RATIO
-1.5

-2

-2.5
-2.78

-3

INTERPRETATION

From the above it is determined that in the year 2014-15 the ratio has been the
least. Because working capital is current assets minus current liabilities, a low ratio
shows a business is investing in too many accounts receivables and inventory
assets for its sales. This may lead to an excessive amount of bad debts and obsolete
inventory.

[33]
 8. DEBT EQUITY RATIO: This ratio is also called “External- Internal
Equity Ratio”. It is mainly calculated to assess the soundness of long- term
financial policies and to determine the relative stake of outsiders and owners
( shareholders). It determines the relationship between debt and equity. This
ratio indicates the capacity of the concerns to raise the loans.

DEBT EQUITY RATIO = TOTAL LONG TERM DEBT

SHAREHOLDERS EQUITY/FUNDS

YEAR Long Term Debt Shareholder’s Equity Debt Equity Ratio

2012- 13 2268.13 33017.65 0.69
2013- 14 215351 269384 0.80
2014- 15 289810 261515 1.11
2015- 16 1558.06 3885.6 0.40
2016-17 149454 261590 0.57

[34]
 DEBT EQUITY RATIO
1.2

1.11
1

0.8
0.8
DEBT EQUITY RATIO
0.69
0.6
0.57
0.4
0.4

0.2

0
2012-13 2013-14 2014-15 2015-16 2016-17

INTERPRETATION

From the above graphs it can be stated that in the year 2014-15 the company has
made use of its debts to finance its assets thus indicating an exposure to risks. High
proportion of debts increases the risk of insolvency since the fixed burden of
interest expenses are to be paid for even in the periods of low profitability or
losses.

[35]
9. PROPRIETARY RATIO: It is the ratio of the shareholders funds to total
tangible assets. It indicates to what extent the total tangible assets have been
financed from shareholders funds. The objective of computing this ratio is to
find out how the proprietors have financed the assets.

PROPRIETARY RATIO = PROPRIETORS FUNDS

TOTAL ASSETS

YEAR Proprietors Funds Total Assets Proprietary Ratio

2012- 13 33017.65 7226.22 0.46
2013- 14 2698384 676637 3.99
2014- 15 261515 719838 0.36
2015- 16 38856 756212 0.05
2016-17 261590 609359 0.43

[36]
 PROPRIETARY RATIO
4.5

4
3.99
3.5

2.5 Proprietary Ratio

1.5

0.5 0.36
0.46 0.43
0
0.05
2012- 13 2013- 14 2014- 15 2015- 16 2016-17

INTERPRETATION

As equity ratio represents the relationship of owner’s funds to total assets, higher
the ratio or share of the shareholders in the total capital of the company, better is
the long term solvency position of the company which can be seen in the year
2013-14 from the above graph.

[37]
 10.NET PROFIT RATIO : This ratio is also known as “net profit margin
ratio”. It measures the rate of the net profit per unit of sales. It is a yardstick
which measures the performance of the management. It is the guiding ratio
for determining the dividend payout per share. It also helps to determine the
market price per share.

NET PROFIT RATIO = NET PROFIT (after taxes) X 100

NET SALES

YEAR Net Profit Net Sales Net Profit Ratio

2012- 13 (276.61) 1875.86 (14.7)
2013- 14 (59049) 192951 (30.6)
2014- 15 (8202) 202438 (4)
2015- 16 (201.04) 2382.32 (8.4)
2016-17 14194 239125 5.9

[38]
 NET PROFIT RATIO
10
5.9
5
-4 -8.4
0
2012- 13 2013- 14 2014- 15 2015- 16 2016-17
-5
Net Profit Ratio
-10
-14.7
-15

-20

-25
-30.6
-30

-35

INTERPRETATION

The net profit margin measures the profit that is available from each rupee of sales
after all expenses have been paid, including COGS, selling & administration
expenses, depreciation and taxes.

A high ratio indicates the efficient management of the affairs of business. In the
year 2016-17 the net profit ratio was high thus indicating that the business was
efficient in managing the various business affairs in the particular year.

[39]
11.GROSS PROFIT RATIO: This ratio is also known as “ Gross Margin
Ratio”. It shows the relationship between the gross profit to net sales and is
generally expressed in percentage. In other words we can say that it
expresses the gross margin as a percentage of sales. This ratio is computed
in order to know whether the business is in a position to meet operating
expenses or not and what amount the shareholders can get after meeting
such expenses.

GROSS PROFIT RATIO = GROSS PROFIT

X 100
NET SALES

YEAR Gross Profit Net Sales Gross Profit Ratio

2012- 13 176071 187586 93.86
2013- 14 146124 192951 75.73
2014- 15 153984 202438 76.06
2015- 16 2173 2273.7 95.57
2016-17 222512 239125 93.05

[40]
 GROSS PROFIT RATIO
120

100
93.86 95.57 93.05
80
75.73 76.06 Gross Profit Ratio
60

40

20

0
2012- 13 2013- 14 2014- 15 2015- 16 2016-17

INTERPRETATION

This ratio serves as an indicator of general profitability of the business concern. A

high gross profit ratio implies better profitability of the products sold by the
business. We can observe the gross profit to be the highest in the year 2015-16 and
the least in the year 2013-14.

[41]
 12. SALES TO CURRENT ASSETS RATIO : The sales to current assets
ratio is a financial calculation that can help one determine how efficiently a
company is making use of its current assets to generate revenue. The sales to
current assets gives ratio gives one the most meaningful measure of liquidity
when it’s used to analyze the business that hold a significant amount of
stock.

SALES TO CURRENT ASSETS RATIO = NET SALES

CURRENT ASSETS

YEAR Net Sales Current Assets Sales to Current Assets Ratio

2012- 13 1875.86 338 5.54
2013- 14 192951 31602 6.10
2014- 15 202438 88129 2.29
2015- 16 2273.7 1130 2.01
2016-17 239125 50623 4.72

SALES TO CURRENT ASSETS RATIO

7

6
6.1
5.54
5
4.72
4 Sales to Current Assets Ratio

2 2.29
2.01
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1

0
2012- 13 2013- 14 2014- 15 2015- 16 2016-17
INTERPRETATION

A high sales to current assets ratio often means that a business is running with
insufficient working capital to fund its day- to- day operations. This in itself
doesn’t make for a very sustainable, long term financial environment. Hence it can
be said that the company is at present not having a favorable financial environment
as there has been an increase in the sales to current assets ratio from 2015-16 to
2016-17.

13. RETURN ON EQUITY RATIO: The return on equity ratio is a

profitability ratio that measures the ability of a firm to generate profits from
the shareholders investments in the company. This is an important ratio from
the investor’s point of view as this indicates how efficiently a company will
use their money to generate income.

RETURN ON EQUITY RATIO = NET PROFIT (after tax)

SHAREHOLDER’S EQUITY

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 YEAR Net Profit (A.T) Shareholder’s Equity Return On Equity
2012- 13 (276.61) 33017.65 (0.0083)
2013- 14 (59049) 269384 (0.219)
2014- 15 (8202) 261515 (0.031)
2015- 16 (201.04) 3885.6 (0.051)
2016-17 8415 261590 0.032

Return On Equity
0.05
0.03
-0.01 -0.03 -0.05
0
2012- 13 2013- 14 2014- 15 2015- 16 2016-17

-0.05
Return On Equity
-0.1

-0.15

-0.2 -0.22

-0.25

INTERPRETATION

Investors want to see a high return on equity ratio because this indicates that the
company is using its investor’s funds effectively. However from the above it can
be interpreted that the company had a positive ratio only in the last year thus
stating that investing in it would not gain much profits to the investors in future.

[44]
14. CAPITAL TURNOVER RATIO: Capital turnover compares the annual
sales of a business to the total amount of its stockholder’s equity. The
purpose is to measure the proportion of revenue that a business can generate
with a given amount of equity. Capital Turnover ratio is also called as
Equity Turnover Ratio.

CAPITAL TURNOVER RATIO = SALES TURNOVER

SHARE CAPITAL

YEAR Total Sales Share Capital Capital Turnover Ratio

2012- 13 192479 8075 23.83
2013- 14 192951 8075 23.89
2014- 15 202438 8075 25.06
2015- 16 238232 9893 24.08
2016-17 244511 9893 24.71

[45]
 Capital Turnover Ratio
25.2
25 25.06
24.8
24.6 24.71

24.4
Capital Turnover Ratio
24.2
24 24.08
23.8 23.89
23.83
23.6
23.4
23.2
2012- 13 2013- 14 2014- 15 2015- 16 2016-17

INTERPRETATION

It is said that the capital turnover ratio is higher in the services industry as
compared to the oil refining industry. This can be found out from the above as
well, which is stating that the ratio was the highest in the year 2014-15.

[46]
 15. EARNING PER SHARE: This ratio is calculated to assess the availability
of total profits per share. It is calculated by dividing the net profit after tax
by number or equity shares. This ratio should be used carefully as a measure
of profitability since it does not recognize the effect of increase in equity
capital as a result retention of earnings.

EARNING PER SHARE = NET PROFIT (after tax)

NUMBER OF EQUITY SHARES

YEAR Net Profit Number Of Equity Shares Earning Per Share

2012- 13 (276.61) 80.75 3.42
2013- 14 (59049) 8075 7.31
2014- 15 (8202) 8075 1.02
2015- 16 (201.04) 98.93 2.03
2016-17 14194 9893 1.43

[47]
 Earning Per Share
8

7 7.31

5
Earning Per Share
4

3 3.42

2
2.03
1 1.43
1.02
0
2012- 13 2013- 14 2014- 15 2015- 16 2016-17

INTERPRETATION

The EPS has been the maximum in the year 2013-14 as compared to the last 5
years. The company has seen a decline in the earning per share thus indicating
unfavorable investment conditions.

[48]
 16.CASH POSITION RATIO: This ratio tells us about the holding of cash
and cash equivalents in relation to total assets. Here cash equivalent means
short term marketable securities which were acquired out of surplus cash.
The norm of this ratio varies from industry to industry.

CASH POSITION RATIO = CASH + CASH EQUIVALENTS

TOTAL ASSETS

YEAR Cash Cash Equivalents Total Assets Cash Position

Ratio
2012- 13 4896 9296 7226.22 1.96
2013- 14 4317 6767 676637 1.64
2014- 15 35583 5324 105575 3.874
2015- 16 2230 71686 7562.12 9.774
2016-17 1407 147 6093.59 0.255

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 Cash Position Ratio
12

10
9.77
8
Cash Position Ratio
6

4
3.87

2
1.96 1.64
0 0.26
2012- 13 2013- 14 2014- 15 2015- 16 2016-17

INTERPRETATION

From the above graph it can be stated that the company had enough cash and cash
equivalents to total assets in the year 2015-16. This indicates that excess of surplus
cash is invested into this type of assets i.e in case of need these assets can
immediately be converted into cash.

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 17. PRE TAX MARGIN RATIO: This ratio indicates that how much rupee of
sales are left after paying all expenses ( including interest but before the
payment of Income Tax).

PRE TAX MARGIN RATIO = EARNING BEFORE TAX (EBT)

SALES

YEAR EBT Sales Pre Tax Margin Ratio

2012- 13 223..12 1875.86 0.118
2013- 14 (52090) 192951 0.269
2014- 15 188 202438 0.00092
2015- 16 311.68 2273.70 0.137
2016-17 22534 239125 0.0094

[51]
 PRE TAX MARGIN RATIO
0.3

0.25 0.27

0.2
Pre Tax Margin Ratio
0.15
0.14
0.1 0.12

0.05

0 0.01
2012- 13 2013- 14 0 15
2014- 2015- 16 2016-17

INTERPRETATION

This is a type of profitability ratio which is used to measure the profit before tax.
Hence it can be determined that the pre tax margin ratio has been the highest in the
year 2013-14.

[52]
 CHAPTER 6 :SUMMARY CHART

RATIO 2012-13 2013-14 2014-15 2015-16 2016-17

Current Ratio 0.42 0.27 0.83 0.88 0.36
Quick Ratio 0.372 0.239 0.793 0.846 0.329
Absolute Liquid Ratio 0.06 0.04 0.75 0.12 0.05
Fixed Asset Turnover Ratio 0.97 0.96 0.10 1.09 1.12
Stock Turnover Ratio 2.93 12.43 11.63 0.23 3.59
Debtors Turnover Ratio 15.37 30.71 15.38 33.91 27.36
Working Capital Turnover
(0.25) (0.58) (2.78) (0.07) (0.19)
Ratio
Debt Equity Ratio 0.69 0.80 1.11 0.40 0.57
Proprietary Ratio 0.46 3.99 0.36 0.05 0.43
Net Profit Ratio (14.75) (30.60) (4.05) 8.44 (5.94)
Gross Profit Ratio 93.86 75.73 76.06 95.57 93.05
Sales to Current Assets
5.54 6.10 2.29 2.01 4.72
Ratio
Return on Equity Ratio (0.0083) (0.219) (0.031) (0.051) 0.032
Capital Turnover Ratio 23.83 23.89 25.06 24.08 24.71
Earnings Per share 3.42 7.31 1.02 2.03 1.43
Cash Position Margin Ratio 1.96 1.64 3.874 9.774 0.255
Pre Tax Margin Ratio 0.118 0.269 0.0092 0.137 0.094

CHAPTER 7: FINDINGS /CONCLUSIONS

[53]
 A higher current ratio indicates that the company has more capacity to pay
off short- term debts/loans. Hence in the year 2015-16 0.88 can be
considered as an optimum current ratio for the company.
 An absolute liquid ratio of 0.5:1 is considered ideal for most of the
companies. The reason for calculating absolute liquid ratio is to eliminate
accounts receivables from the list of liquid assets because there may be some
doubt about their collection. However, the ratio for Taj Hotels has been
fluctuating thus indicating unstable nature of solvency.

 Inventory turnover ratio indicates how many times a company’s stock is sold
and replaced over a period of time. For the year 2013-14 the ratio has been
the highest i.e 12.43 times a year. So, 360/12.43 = 29 days a year will be
required by the company to sell the average inventory.

 The Net sales/ Income from Operations for the year ended 31st March 2014,
improved by 3% over the previous year in what still continued to be a
challenging environment for the sector.

 In the case of net profits, a higher ratio is indicative of higher net profits
before tax. Thus, the year 2015-16 is considered more favorable as it
indicating higher profits.
 The company’s percentage of long term borrowings has increased over the
years, which shows that the company is now borrowing for a longer period
rather than short term requirements.

[54]
 The EPS of the company has decreased, thus signifying that the company
has not performed well and is not able to give a good return on investment to
its equity shareholders.

 The company’s Debt Equity Ratio has decreased over the years, thus
signifying that the company has not been able to finance its debts
aggressively. This ratio is significant to access soundness of long term
financial position of the company.

CHAPTER 8 : BIBLIOGRAPHY

[55]
1. www.investopedia.com
2. www.google.com
3. Analysis of Financial Statements- Thakur Publication
4. Financial Statement Analysis- PAUL
5. www.tajhotels.com
6. Fundamentals of Financial Management – P.V Rao

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