Financial Analysis and Interpretation of Bell Ceramics

FINANCIAL ANALYSIS AND INTERPRETATION
CHAPTER: 1
INTRODUCTION
Finance:
Finance is something that direct the flow of economic activity and facilities its Smooth
operation. Finance is one of the major elements, which activates the overall growth of the
economy and is the life-blood of economy activity.
Financial Management:
Financial management refers to those specialized managerial activities or efforts which
are concerned with the estimation of the finance, long term as well as short term needed
by a business enterprises, determination of the source suitable under the given
circumstances, the collection and provision of funds in the time and control over the
utilization of funds.
According to Howard and Upton.” Financial Management is the application of the
planning and control functions to the finance functions. Financial management involves
the application of general management principles to a particular financial operation”.
Financial management is a specialized function directly associated with top
management .The significance of this function is not only seen in the ‘line’ but also in the
capacity of ‘staff’ in the overall administration of the company.
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Characteristics of Financial management
• Financial management is regarded as a specialized managerial discipline
concerned with planning, procuring, utilization and controlling of the financial
recourses of the business enterprises.
• The scope as well as the subject –matter of financial management is widened.
• Financial management is highly centralized function.
• Financial management is intimately interwoven into the fabric of management

itself.
• Financial management interacts with other disciplines like economics,

mathematics, system analysis, financial accounting, etc while taking financial
decisions.
• The main objective of financial management is not only profit-extracting but

also maximization of value of the firm.
• Financial management does not handle only the routine day to day problems
or matters. It also handles more complex problem, such as mergers,
reorganizations etc.
• Financial management is applicable to any kind of undertaking or

organization regardless of its aim or constitution.

Objectives of financial management:
The objectives or goals of financial management are broadly classified into two
categories.
A. Basic objectives.
1. Maintenance of adequate liquid assets in a firm:
The Objective of liquidity implies that financial management should ensure
that there are adequate cash funds in the hands of the firm at all times to its obligation and
avoid loss of reputation among the public. And the liquid asset maintained in the firm,
should just adequate, that is neither too low nor too excessive.
2. Maximization of profit or profit maximization:
This objective implies that financial management should ensure that the
profits of the firm are maximized, and financial decisions would be evaluated on the basis
of its overall contribution to the profits of the enterprise. And should ensures maximum
return to the shareholder, prompt payment to creditors, better payment and working
conditions for labour and reasonable price to consumers.
3. Maximization of wealth or wealth maximization.
Maximization of wealth means maximization of wealth of the company
that is net present worth of the company over the long run. The wealth maximized or
created is reflected in the market value of the equity shares of the company.

The net present value or the worth of a company is the difference between the gross
present value or worth of the benefits of the action and the amount of capital investment.
B. Other Objectives
1. Ensuring maximum operational efficiency through planning, directing and controlling
of the utilization of the funds that is through the effective employment of funds.
2. Enforcing financial discipline in the organization in the use of financial resources
through the co-ordination of the operations of the various divisions in the organization.
3. Building up of adequate reserves for financing growth and expansion.
4. Ensuring fair returns to shareholders on their fair investment.
Functions of financial manager
A financial manager is a person who is responsible for, in a significant way, to carry out
the finance functions. The main functions are
• Estimation of the financial management.
• Selection of right source of funds.
• Allocation of funds.
• Analysis and interpretation of financial performance.
• Capital budgeting.

• Profit planning and control.
• Marinating liquidity and wealth maximization
Financial is that managerial activity which is concerned with the planning and controlling
of the firm’s financial resources. The subject of financial management is of immense
interest to both academicians and practicing managers. It is of great interest to
academicians because the subject is still developing and there are still certain areas where
controversies exist for which no unanimous solutions have been reached as yet.
Practicing managers are interested in this subject because among the most crucial
decisions of the firm are those which relate to finance, and an understanding of the theory
of financial management provides them with conceptual and analytical insights to make
those decisions skillfully.
Tools and Techniques of Financial management
Financial statements by themselves do not give the required information both for internal
management and for outsiders. They are passive statements showing the results of the
business i.e. profit or loss and the financial position of the business. They will not
disclose any reasons for dismal performance of the business if it is so. What is wrong
with the business, where it went wrong, why it went wrong, etc. are some of the questions
which no answers will be available in the financial statements.
Similarly no information will be available in the financial statements about the financial
strengths and weaknesses of the concern. Hence to get meaningful information from the

financial statements which would facilitate vital decisions to be taken, financial
statements must be analyzed and interpreted.
Through the analysis and interpretation of financial statements full diagnosis of the
profitability and financial soundness of the business is made possible. The term ‘analysis
of financial statements’ means methodical classification of the data given in the financial
statements. A number of tools are available for the purpose of analyzing and interpreting
the financial statements.
Financial analysis:
It refers to an assessment of the viability, stability and profitability of a business, sub-
business or project.
It is performed by professionals who prepare reports using ratios that make use of
information taken from financial statements and other reports. These reports are usually
presented to top management as one of their bases in making business decisions. Based
on these reports, management may:
• Continue or discontinue its main operation or part of its business;
• Make or purchase certain materials in the manufacture of its product;
• Acquire or rent/lease certain machineries and equipments in the production of its
goods;
• Issue stocks or negotiate for a bank loan to increase its working capital.
• Other decisions that allow management to make an informed selection on various
alternatives in the conduct of its business.

Financial analysts often assess the firm's:
1. Profitability- its ability to earn income and sustain growth in both short-term and long-
term. A company's degree of profitability is usually based on the income statement,
which reports on the company's results of operations;
2. Solvency- its ability to pay its obligation to creditors and other third parties in long-
term
3. Liquidity- its ability to maintain positive cash flow, while satisfying immediate
obligations;
Both 2 and 3 are based on the company's balance sheet, which indicates the financial
condition of a business as of a given point in time.
4. Stability- The firm's ability to remain in business in the long run, without having to
sustain significant losses in the conduct of its business. Assessing a company's stability
requires the use of both the income statement and the balance sheet, as well as other
financial and non-financial indicators.
Financial analysts often compare financial ratios :
• Past Performance: Across historical time periods for the same firm (the last 5
years for example),

• Future Performance: Using historical figures and certain mathematical and
statistical techniques, including present and future values, This extrapolation
method is the main source of errors in financial analysis as past statistics can be
poor predictors of future prospects.
• Comparative Performance: Comparison between similar firms.
These ratios are calculated by dividing a (group of) account balance(s), taken from the
balance sheet and / or the income statement, by another, for example:
Net profit / equity = return on equity
Gross profit / balance sheet total = return on assets
Stock price / earnings per share = P/E-ratio
Comparing financial ratios are merely one way of conducting financial analysis.
Financial ratios face several theoretical challenges:
They say little about the firm's prospects in an absolute sense. Their insights about
relative performance require a reference point from other time periods or similar firms.
One ratio holds little meaning. As indicators, ratios can be logically interpreted in at least
two ways. One can partially overcome this problem by combining several related ratios to
paint a more comprehensive picture of the firm's performance.
Seasonal factors may prevent year-end values from being representative. A ratio's values
may be distorted as account balances change from the beginning to the end of an
accounting period. Use average values for such accounts whenever possible.

Financial ratios are no more objective than the accounting methods employed. Changes
in accounting policies or choices can yield drastically different ratio values.
They fail to account for exogenous factors like investor behavior that are not based upon
economic fundamentals of the firm or the general economy.
Financial Statement
The income (or profit and loss) statement is simply a report card of how much activity
(revenue) was performed in the period, how profitable that activity was (gross
profit/loss), and what it cost the contractor to run the business (overhead). The
underwriter examines these carefully against industry and geographical norms.
Importantly, the underwriter will focus on the trend of these measures over several years.
• For example, if the trend reveals 30% revenue growth every year, the immediate
concern is too fast growth. While revenue growth in a technology company may
make its stock price surge, in construction it creates questions about whether
pricing was sacrificed to create revenue growth, whether the contractor has the
people or systems resources to manage the growth without things “falling through
the cracks,” and whether the contractor has the cash to finance larger receivables
than he or she is accustomed to.
• If overhead seems higher than a contractor’s peers, the underwriter will question
whether the business is being run to maximize profitability and financial strength,
or to finance expensive personal lifestyles. Clearly, some companies are mature
and have built superior financial strength over time, and therefore minimize the

need to retain significant profits going forward. But in general, overhead analysis
can be the underwriter’s window on what the contractor’s true priorities are.
Balance Sheet
The balance sheet simply demonstrates what the contractor has (assets) and what he or
she owes against those assets (liabilities). The difference is the net worth of the business.
Net worth is significant to the surety because it is a measurement of the long-term staying
power of the business. But short-term staying power is very important too. Payroll,
accounts payable, debt payments, etc. all need to be paid regularly—in cash.
Underwriters analyze working capital to assess the contractor’s ability to finance these
requirements. Any interruption of cash coming in: a disputed receivable or change order,
unprofitable projects, etc. can place unbearable pressure on the contractor’s ability to
meet obligations. The underwriter analyzes the balance sheet in the context of “what
if”—could they survive, and for how long if adversity struck. Contractors who maintain
their balance sheet to support only normal circumstances may not be enthusiastically
supported by their surety. Rainy-day capitalization (or risk capital) can be critical to
obtaining the desired level of surety support.
Leverage is an important area of focus as well. As mentioned earlier, the solution is not
necessarily to avoid taking on debt. Taking on debt may be the best thing for the
contractor’s business. But contractors should carefully question whether buying a piece
of equipment, or a building, etc. (and taking on debt to pay for it) is the best move at the
time. Especially if the contractor’s overall financial strength is modest, renting equipment
or putting off other asset purchases until financial strength is better may be the best

course of action. Also, overdependence on an operating line of credit to finance cash flow
may be an indicator of undercapitalization. These are areas where a contractor should
solicit the counsel of trusted advisers.
1.7 IMPORTANCE OF FINANCIAL ANALYSIS
Nature of Financial Analysis:
The focus of financial analysis is on the key figures contained in the financial statements
and the significant relationship that exists between them. “Analyzing financial statements
is a process of evaluating the relationship between the component parts of the financial
statements to obtain a better understanding of a firm’s position and performance”.
The type of relationship to be investigated depends upon the objective and purpose of
evaluation. The purpose of evaluation of financial statements differs among various
groups: creditors, shareholders, potential investors, management and so on. For example,
short term creditors are primarily interested in judging the firm’s ability to pay its
currently-maturing obligations. The relevant information for them is the composition of
the short-term (current) liabilities. The debenture-holders or financial institutions granting
long term loans would be concerned with examining the capital structures, past and
projected earnings and changes in the financial position.
The shareholders as well as potential investors would naturally be interested in the
earnings per share and dividends per share as these factors are likely to have a significant
bearing on the market price of shares. The management of the firms, in contrast, analyses
the financial statements for self-evaluation and decision making.

1.8 TYPES OF FINANCIAL ANALYSIS:
Financial analysis may be classified on the basis of parties who are undertaking the
analysis and on the basis of the parties who are doing the analysis, financial analysis is
classified into external analysis and internal analysis.
External Analysis: When the parties external to the business like creditors, investors,
etc. do analysis, the analysis is known as external analysis. This analysis is done by them
to know the credit-worthiness of the concern, its financial viability, its profitability, etc.
Internal analysis: This analysis is done by persons who have control over the books of
accounts and other information of the concern. Normally this analysis is done by
management people to enable them to get relevant information to take vital business
decision.
On the basis of methodology adopted for analysis, financial analysis may be either
horizontal analysis or vertical analysis.
Horizontal Analysis: When financial statements of a number of years are analyzed, then
the analysis is known as horizontal analysis. In this type of analysis figures of the current
year are compared with the standard or base year. This type of analysis is otherwise
called as dynamic analysis as it extends over a number of years.

Vertical Analysis: This type of analysis establishes a quantitative relationship of the
various items in the financial statements on a particular date. For e.g. the ratio of various
expenditure items in terms of sales for a particular year can be calculated. The other name
for this analysis is ‘static analysis’ as it relies upon one year figures only.
TECHNIQUES OF FINANCIAL ANALYSIS:
The following are the important techniques of financial analysis which can be
appropriately used by the financial analysts:
1. Common-size financial statements
2. Comparative financial statements
3. Trend percentages
4. Ratio analysis
5. Fund flow analysis
6. Cash flow analysis
7. Break even Analysis
8. Du – Pont Analysis
Common-size Financial Statements: In this type of statements figures in the
original financial statements are converted into percentages in relation to a common base.
The common base may be sales in the case of income statement, sales of the traditional

financial statement are taken as 100 and every other item in the income statement is
converted into percentages with reference to sales. Similarly in the case of common-size
balance sheet, the total of asset/liability side will be taken as 100 and each individual
asset/liability is converted into relevant percentages.
Comparative Financial Statements: This type of financial statements is ideal for
carrying out horizontal analysis. Comparative financial statements are so designed to give
them perspective to the review and analysis of the various elements of profitability and
financial position displayed in such statements. In these statements figures for two or
more periods are compared to find out the changes both in absolute figures and in
percentages that have taken place in the latest year as compared to the previous year or
years. Comparative financial statements can be prepared both for income statement and
balance sheet.
Trend Percentages: Analysis of one year figures or analysis of even two years figures
will not reveal the real trend of profitability or financial stability or otherwise of any
concern. To get an idea about how consistent is the performance of a concern; figures of
a number of years must be analyzed and compared.
Ratio analysis: It is the most commonly used analysis to judge the financial strength of
a company. A lot of entities like research houses, investment bankers, financial
institutions and investors make use of this analysis to judge the financial strength of any
company.
• A Ratio is an expression of the quantitative relationship between two numbers.

• A ratio is a simple arithmetical expression of the relationship of one number to
another.
Classification of accounting ratios:
On the basis of origin or source of figure placed in relation with each other:
• Balance sheet ratios or financial ratios
• Profit and loss account ratios or operating ratios.
• Mixed, Combined, or Inter-statement ratios.
On the basis of nature and functions of the accounting ratios:
• Liquidity Ratios
• Leverage Ratios
• Turnover Ratios
• Profitability Ratios
Liquidity ratios or short term solvency ratios:

It measures the short-term solvency or short-term financial position of a firm.
These ratios are calculated to comment upon the short-term paying capacity of a concern
or the firm ability to meet its current obligations.
CURRENT RATIO:
It is the ratio, which expresses the relationship between current assets and current
liabilities.

Current Assets
Current Ratio =
Current Liabilities
Current Assets: Includes cash and other assets which can be converted into cash
with in an year such as marketable securities, debtors, inventories, Bills receivables, cash
balance, Bank balance, prepaid expenses, outstanding or accrued incomes, advances to
staff and others, provisions for bad and doubtful debts.
Current Liabilities: All obligations maturing within a year are included in
current liabilities. They include bills payable, creditors, bank overdraft accrued expenses,
short-term bank loans, provision for income tax, dividend payable, incomes received in
advance, outstanding expenses.
Interpretation: As conventional rules, current ratio of 2:1 or more considered
satisfactory. If the actual current ratio is less than 2:1, then the logical conclusion is that
the concern does not enjoy sufficient liquidity and there is shortage of working capital.
QUICK / LIQUIDITY / ACID TEST RATIO
Quick ratio is the ratio, which expresses the relationship between quick or liquid
assets and quick or liquid liabilities.
Quick Assets
Quick Ratio =

Quick Liabilities
Quick Assets: Includes all current assets excluding inventory and prepaid expenses.
Quick Liabilities: Includes all current liabilities excluding bank overdraft and cash
credit.
Interpretation: The ideal quick ratio is 1:1, if the quick ratio is equal or more than the
standard ratio, it is satisfactory and concern is liquid and it can pay off its short – term
liabilities out of its quickly realizable assets.
INVENTORY TO WORKING CAPITAL RATIO:
Inventory to working capital ratio is the ratio of Inventory to working.
This expresses the relationship between Inventories to working capital.
Inventory or stock: It refers to closing stock of raw materials, work in progress and
finished goods.
Working capital: it is excess of current assets over current liabilities.
Inventory
Inventory to working capital ratio =
Working capital
Interpretation: As per the standard or ideal inventory to working capital ratio, the
inventories should not absorb more than 75% of working capital. As such, a low
inventory to working capital ratio indicates understanding, and so a high liquid position,

while a high inventory to working capital ratio indicates overstocking and so a low
liquid position.
DEBT EQUITY RATIO / EXTERNAL – INTERNAL RATIO
This is the ratio of total outsider’s liabilities to total owner’s funds. The ratio
reflects on the relative claims of creditors & shareholders against the assets of the firm.
Total long term Debt

Debt Equity Ratios =
Shareholders Equity
Total Long Term Debt: Includes long-term loan raised.
Share Holders Equity: Includes capital, all accumulated reserves, and profits.
Interpretation: The ideal debt equity ratio is 2:1 as such, if the debt is less than two
times of equity, the logical conclusion is that the financial structure of the firm is sound
and the stake of long-term creditors is relatively less.
PROPRIETARY RATIO
This ratio expresses the relationship between the net worth and equity and total
assets.
Net worth / Shareholders fund
Proprietary Ratio =
Total assets
Net worth: Means owners funds or proprietors funds

Total assets: Sum total of all realizable assets.
Interpretation: Ideal ratio is 0.50:1 higher the proprietary ratio, the stronger is the
financial position of the concern and Vice Versa.
SOLVENCY RATIO:
This ratio expresses the relationship between the total assets and total liabilities.
Total assets
Solvency Ratios =
Total liabilities
Total Assets: Fixed Assets + Current assets + Investment
Total liabilities: Long-term liabilities + Current Liabilities
Interpretation: Higher the solvency ratio of the concern the stronger is the financial
position.
FIXED ASSETS TO NET WORTH
This ratio expresses the relationship between fixed assets and net worth.
Net fixed assets
Fixed assets to Net worth ratios =
Net worth
Net Fixed Assets: Fixed assets – Depreciation
Net worth: Owners funds

Interpretation: Ideal ratio is 2/3 or 67% that the fixed assets should not constitute more
than 2/3 or 67% of the proprietors funds, it indicates that the proprietors funds are mostly
sunk in the fixed assets and the current assets are mostly financial out of loaned funds.
This indicates financial weakness of the concern and greater risks for the creditors.
CURRENT ASSETS TO NET WORTH
A current asset to net worth ratio is the ratio between current assets and net worth.
Current assets
Current assets to net worth ratio =
Net worth
This ratio indicates the proportion of current assets financed by the owners.
Interpretation: there is no standard or ideal current asset to net worth ratio.
If this ratio is high the financial strength of the concern is good, and if this ratio is low,
the financial position of the concern is weak.
CURRENT LIABILITIES TO NET WORTH:
A current liability to net worth ratio is the ratio between current liabilities and net worth.
Current liabilities
Current liabilities to net worth ratio =
Net worth

Interpretation: the desirable level set for this ratio is 1/3 or 33.333 so, if the actual ratio
is very high it would mean that the liability base of the concern will not provide an
adequate cover for long term creditors. That means it would be difficult for the concern to
obtain long-term funds.
FIXED ASSETS RATIOS:
Fixed assets ratio is the ratio between fixed assets and capital employed
Fixed assets
Fixed assets ratio =
Capital Employed
Capital Employed: Sum of owners fund, long-term loan, and debentures

Or
Sum of fixed assets, trade investment, And Net Working Capital
Interpretation: This ratio should not be more than one. The ideal ratio is 0.67; this
would mean that not only all the fixed assets but also a part of working capital is financial
by long-term funds. This is desirable because a part of the working capital, popularly
known as “core working capital”, should be met out of long-term funds.
INVENTORY TURNOVER RATIOS:
This is the ratio, which indicates the number of time stock is turned into sales and
then to cash during the year. This ratio indicates the efficiency of the firm in selling its
products. It is the ratio between stock and cost of goods sold.

Cost of goods sold

Inventory Turnover ratio =
Average inventory
Cost of goods sold: Opening stock of goods + manufacturing expenses – closing stock.
Average Inventory:
Opening stock of finished goods + Closing stock of finished goods.
Interpretation: A stock turnover ratio of 8 times a year considered ideal. The ratio
higher than the ideal ratio indicates the efficient sales of the concern i.e., the business is
expanding. Lower the ratio indicates the inefficient in sales of the products i.e., business
is not prosperous.
DEBTORS TURNOVER RATIO:
It is the ratio, which indicates the relationship between debtors and sales. It is the
ratio, which indicates the number of times debt collected in the year.
Net credit sales

Debtors Turnover ratio =
Average debtors
Opening debtors + Bills payable + Closing Debtors

Average Debtors =
2
Debt collection period

This indicates the average time taken by the firm to collect debt.
Month / days in a year

Debt Collection period =
Debtors Turn over Ratio
Interpretation: If the actual period of credit or ideal period of credit (30 days) the
indication is that credit collection is not efficient. In the adverse case, it is the indication
of efficient credit collection.
CREDITORS TURNOVER RATIO:
This is the ratio, which indicates the relationship between creditors and purchases.
It is the ratio, which indicates the number of times the creditors are paid in a year.
Net Credit purchase

Creditors Turnover Ratio =
Average creditors
Opening creditors + Bills payable + closing creditors

Average Creditors =
2
FIXED ASSETS TURNOVER RATIO:
Fixed assets turnover ratio is the ratio between fixed assets and turnover or sales.

Net sales
Fixed assets turnover ratio =
Fixed assets
Fixed assets mean Net fixed assets i.e., fixed assets less depreciation.
Interpretation: The standard or ideal fixed assets turnover ratio is 5 times. Therefore, a
fixed assets turnover ratio of 5 times or more indicate better utilization of fixed assets. On
the other hand, fixed assets turnover ratio of less than 5 times is an indication of under
utilization of fixed assets.
In this context, it may be noted that a very high fixed assets turnover ratio means over
trading, which is not good for the business.
WORKING CAPITAL TURNOVER RATIO:
This is the ratio between sales and working capital
Net sales
Working capital turnover ratio =
Working capital
Working capital = current assets – current liabilities
Interpretation: Higher the working capital turns over indicates the efficiency and low
ratio indicates the inefficiency of the management in the utilization of working capital.

PROFITABLITY RATIOS:
Profitability ratios reveal the total effect of the business transaction on the profit
position of the enterprise and indicate how far the enterprise has been successful in its
aim.
GROSS PROFIT RATIO:
Gross profit ratio is the ratio, which expresses the relationship between gross
profit and sales.
Gross profit
Gross profit Ratio = X 100
Sales
Gross profit = Sales - cost of goods sold
Interpretation: The rate of the gross profit must be sufficient to cover all operating
expenses and non – operating expenses and also leave sufficient amount of profit for the
owners.
NET PROFIT RATIO:
Net profit ratio is the ratio, which expresses the relationship between net profit
and sales.
Net profit

Net profit Ratio = X 100

Sales
Net profit: means profit left after meeting all expenses. In other words, it is the excess of
total revenue over total expenses. In short it means the final profit available for the
owners.
Interpretation: A high net profit ratio indicates that the profitability of the concern is
good.
Fund Flow Analysis: The purpose of this analysis is to go beyond and behind the
information contained in the financial statements. Income statement tells the quantum of
profit earned or loss suffered for a particular accounting year. Balance sheet gives the
assets and liabilities position as on a particular date. But in an accounting year a number
of financial transactions take place which have a bearing on the performance of the
concern but which are not revealed by the financial statements.
Cash Flow Analysis: While funds flow analysis studies the reasons for the changes in
working capital by analyzing the sources and application of funds cash flow analysis pays
attention to the changes in cash position that has taken place between two accounting
periods. These reasons are not available in the traditional financial statements. Changes in
the cash position can be analyzed with the help of a statement known as cash flow
statement. A cash flow statement summarizes the change in cash position of the concern.
Transactions which increase the cash position of the concern are labeled as ‘inflows’ of
cash and those which decrease the cash position as ‘outflows’ of cash.

Break Even Analysis: Break-even analysis is a technique widely used by production
management and management accountants. It is based on categorizing production costs
between those which are "variable" (costs that change when the production output
changes) and those that are "fixed" (costs not directly related to the volume of
production). Total variable and fixed costs are compared with sales revenue in order to
determine the level of sales volume, sales value or production at which the business
makes neither a profit nor a loss (the "break-even point").
Du-Point Analysis:
The earning power of the firm may be defined as the overall profitability of an
enterprise. This ratio has two elements
1. profitability on sales reflected in the net profit margin
2. profitability of assets which is revealed by assets / investments turnover

CHAPTER: 2
INDUSTRIAL AND COMPANY PROFILE
2.1. INDUSTRIAL PROFILE
History of tiles can be traced right down to Egypt where glazed decorative
tiles were first know to have been produced and from there the tile marketing art
spread its wings to Persia and across north Africa.
Today glazed tiles commonly called ceramic tiles are infinitely used in
numerous ways through out. The world and one doesn’t have to be amongst the
wealthy to own them.
The history recites that the first decorative files to appear in colonial North
America were imported from northern, Europe, mainly England but the cost
restricted. The uses to utilization purposes on the colonies and were found almost
exclusively in the homes of the wealthy.
The over all improvement in the construction industry has to some extent
helped to over come the problem of excess production capacity in ceramic tile
industry. Competition between the organized v/s unorganized sectors is no more a
major issue in the Indian ceramic tile market. However the major threat is the
competition in the global market has adversely affected export of ceramic tile
from India. This has created a high pressure on selling price of the product
Ceramic tile industry being fuel intensive product Ceramic tile industry being fuel
intensive industry. The steep increase in the international price of crude has
adversely affected the earning of ceramic tile manufacturing Almost 30% like in

the diesel price. Price over a period of last one year has increased the cost of
manufacturing and selling expenses due to increase in fright charges for the
incoming and outgoing materials.
The long awaited introduction of VAT has materialized in most part of the
country and efforts are on for the left out states to implement the same. This will
help the process of rationalization of the tax structure.
SIZE OF INDUSTRY
At present there are 14 units in the organized sector with an installed
capacity of 12 lacks MT, it accounts for about 2.5% of world ceramic tile
production. The ceramic tile industry has grown by about 11% per annum during
the last 3 years. In India the per capita consumption is 0.09sq.m Per annum as
compared to 1.2sq.m Per annum in china and 5 to 6sq.m Per annum in European
countries. Its demand is expected to increase with the growth in the housing
sector. Indian tiles are competitive in the international market.
These are being exported to east and west Asian countries. The export was
about 143 Crores during 2001-02 ever since liberalization process was initiated in
1991, the excise duty for the industry has been on the slide down, for as high in
the industry has been on slide down forms high in 55% 1993-94 it was reduced to
40% in 1994 to 30% in 1995-96 and 25% in the budget of 1997-98. The cuts
reduced the price differential between ceramic and mosaic tiles. This resulted in
short of boom in the industry. The companies expanded their capacity and a few

new players entered in this field. In 1994-95, the industry capacity has continued
to expand by a similar jump in 1997-98.
2.2. COMPANY PROFILE
History of the Company
Bell ceramic limited promoted by JBS investment private limited
Singapore, on overseas body was in corporate on 18th OCT 1985. The main
objective of the company is to manufacture and market ceramic glazed floor and
wall tiles in domestic and international markets. Today Bell ISO-9001 and 14001
companies with a turn over of 1350 million, employing more than 1000 people.
The plant located at Dora near Baroda in Gujarat western India has been
installed production capacity of 1000sq.mtrs per day of monodrama wall tiles and
floor tiles.
The second plant located at Hosakote Bangalore has been installed
capacity of 1000sq.mtrs of floor tiles per day.
The plant makes use of the world renewed multilane dry process
technology. This is an environment friendly and quality product through team
efforts. Form an installed manufacturing capacity of 20000 TPA. It has grown to
117000 TPA (62000 TPA wall tiles and 55000 TPA floor tiles). Today the
company manufactures ceramic tiles according to the guideline laid down by
CMITE EUROPEA DE NORMACISATION (CEN).

Bell ceramics ltd has done good name and fame in the market for its quality and
standard product-gaining top 4th place in the ceramic tile manufacturing
companies in India in zoom.
2.3 PRODUCT PROFILE
The products are available in spectacular range of 100 different shades,
design and different size for floor. Wall tiles are available in 250 different shades
and patterns. Bell tiles are manufactured to the strict comity European
normalization (CEN) standards.
The tiles are tested for size tolerance, water absorption, bending strength,
war page, and acid, alkali resistance, crazing resistance and thermal shock
resistance. The wall tiles are with high glass and exotic. Bell floor tiles are
manufactured using multilane dry process technology resulting in highly
affordable high quality tiles to the end user.

CHAPTER 3
RESEARCH DESIGN
3.1. STATEMENT OF THE PROBLEM
This study has been concentrated on the Financial performance analysis at “Bell
ceramics ltd” This study made in the light of one of the tool of financial management.
The study broadly attempts to determine the over all financial performance of a company
for the last few years. Since finance is an important parameter of every business concern
to determine the growth and profitability, the study of the topic sounds momentous.
Therefore, an attempt has been made to analyze the trend in which the company is
moving and to identify the areas where lapses have occurred and also to suggest
necessary remedial measure to overcome the lapses.
3.2. OBJECTIVES OF THE STUDY
1. To study the soundness of financial position of the company.
2. To study the capital structure of the company
3. To analyze the organizational performance of BELL CERAMICS LIMITED.
4. To give suggestions to the company for attaining favorable financial position.
3.3. SCOPE OF THE STUDY
The study is exclusively conducted at BELL CERAMICS LIMITED. The study is
confined to finance department. The study is limited only to the analysis of financial
statements of past years; even through a brief insight was given to other aspects.The
study includes the trends of BELL CERAMICS LIMITED Performance only for the
last 5 years.

3.4 Data collection Methods
The data sources can be classified in tow categories:
• Primary Data
• Secondary Data
Primary Data:
Having discussions with different department managers and officers of the
company to get general information about the company and its activities.
Secondary Data:
1 .Annual reports
2. Company manuals.
3. Text books
4. News papers.
5. Internet sources.
3.5 KEY CONCEPTS
Financial Statement Analysis
Financial statement analysis is an analysis which highlights important relationship in the
financial statements. It focuses on evaluation of past operations as revealed by the
analysis of basic statements
It is an important means of assessing past performance and in forecasting and
planning the future performance. According Lev

“Financial statement analysis is an information processing system designed to
provide data for decision making models such as the portfolio selection model, bank
lending decision model, and corporate financial management model”.
• Technique or Basics Of Financial Statement Analysis

A study of financial performance comprises of analyzing the company’s
financial position by using 7 different tools of financial management. They are as under
1. Comparative balance sheet technique
2. Common size balance sheet technique
3. Trend analysis
4. Ratio analysis
5. Cash flow Analysis
6. Fund flow Analysis
7. Break even Analysis
8. Du – Pont Analysis
3.6 LIMITATIONS OF THE STUDY
• Time duration for the study was restricted to 6 Weeks.
• The company does not reveal some information related to the financial aspects
and it is kept confidential.

CHAPTER-4
ANALYSIS AND INTERPRETATIONS
COMPARITIVE BALANCE SHEET FOR THE YEAR 2003 AND 2004
TABLE NO 4. 1
Particulars
Amount
2003 2004 Difference %
SOURCE OF FUNDS
Share Capital 3652.14 3652.14 0 0
Reserves & Surplus 2707.67 2850.57 142.9 5.278
Secured Loans 8601.4 8091.32 -510.08 -5.930
Unsecured loans 164.72 534.68 369.96 224.599
APPLICATION OF FUNDS
FIXED ASSETS (net block) 10537.91 12502.98 1965.07 18.648
Capital Work in Progress 83.81 56.12 -27.69 -33.039
net INVESTMENTS 416.56 415.31 -1.25 -0.300
CURRENT ASSETS, LOANS &

ADVANCES
Inventories 2604.85 2501.91 -102.94 -3.952
Sundry Debtors 1120.09 629.63 -490.46 -43.788
Cash and Bank Balances 58.13 50.24 -7.89 -13.573
Loans and Advances 599.69 720.92 121.23 20.215
LESS: CURRENT LIABILITIES &

PROVISIONS
Current Liabilities 2791.36 2858.79 67.43 2.416
Provisions 58.74 110.74 52 88.526
NET CURRENT ASSETS
MISCELLANEOUS EXPENDITURE
(TO THE 1532.66 933.17 -599.49 -39.114
EXTENT NOT WRITTEN OFF OR
ADJUSTED) 723.71 14.22 -709.49 -98.035

GRAPH SHOWING THE INCREASE IN THE SOURCES OF FUNDS

FOR THE YR 2003-2004
600
500
400
300
Sources of funds
200
100
0
2003 2004
Interpretation:
Comparative balance sheet for the year 2003 and 2004 revealed that there is
a Significant increase in the items of balance sheet like reserves and surplus, unsecured
loan, fixed assets, loans and advances, current liabilities and provisions by
5.278%,224.599%, 18.648%, 20.215%, 2.416%& 88.526% . At the same time there is a
decrease in secured loans, capital work in progress, net investments, inventories, debtors
and cash and bank balances, Miscellaneous expenditure by -5.930%, -33.039%, -0.300%,
-3.952%, -43.788%, -13.573%, -39.114% which has resulted in un favorable growth.

TABLE NO 4.2
Particulars
Amount
SOURCE OF FUNDS
Share Capital 3652.14 3652.14 0 0
Reserves & Surplus 2850.57 2341.22 -509.35 -17.87
Secured Loans 8091.32 8477.73 386.41 4.78
Unsecured loans 534.68 558.89 24.21 4.53
Capital Work in Progress 56.12 272.94 216.82 386.35
net INVESTMENTS 415.31 415.31 0 0.00

ADVANCES
Inventories 2501.91 3154.05 652.14 26.07
Sundry Debtors 629.63 677.16 47.53 7.55
Cash and Bank Balances 50.24 88.31 38.07 75.78
Loans and Advances 720.92 1224.95 504.03 69.91

PROVISIONS
Provisions 110.74 317.51 206.77 186.72
NET CURRENT ASSETS

(TO THE 933.17 555.37 -377.8 -40.49
EXTENT NOT WRITTEN OFF OR
ADJUSTED) 14.22 5 -9.22 -64.84


560
555
550
545
540 Sources of
funds
535
530
525
520
2006 2005
Interpretation:
Comparative balance sheet for the year2003- 2004 and 2004-2005 revealed that
there is a drastic increase in the items of balance sheet like secured loans unsecured loan,
fixed assets, loans, capital work in progress, inventories, debtors and cash and bank
balances current liabilities and provisions. by 4.78%, 4.53%,9.95%, 69.91%, 386.35%,
26.07%, 7.55%, 75.78%, 49.42%, 186.78% respectively , At the same time there is a
decrease in reserves and surplus, , which has resulted in favorable growth.

TABLE NO 4.3
Particulars
Amount
SOURCE OF FUNDS
Share Capital 3652.14 3652.14 0 0
Reserves & Surplus 2341.22 2452.66 111.44 4.76
Secured Loans 8477.73 8632.49 154.76 1.83
Unsecured loans 558.89 697.73 138.84 24.84
net INVESTMENTS 415.31 415.31 0 0.00

ADVANCES
Inventories 3154.05 483.95 -2670.1 -84.66
Sundry Debtors 677.16 910.57 233.41 34.47
Cash and Bank Balances 88.31 38.02 -50.29 -56.95
Loans and Advances 1224.95 731.71 -493.24 -40.27

PROVISIONS
Provisions 317.51 242.25 -75.26 -23.70
NET CURRENT ASSETS 555.37 726.92 171.55 30.89

(TO THE
EXTENT NOT WRITTEN OFF OR 5 49.87 44.87 897.40
ADJUSTED)

700
600
500
400
Sources of
300 funds
200
100
0
2005 2006
Interpretation:
Comparative balance sheet for the year2004- 2005 and 2005-2006 revealed that
there is a drastic increase in the items of balance sheet like reserves and surplus, secured
loans, unsecured loan, fixed assets, debtors, current liabilities by 4.76%, 1.83%, 24.84%,
4.11%, 34.47%, 12.26% respectively. At the same time there is a decrease in capital work
in progress, inventories and cash and bank balances and advances, provisions by 79.25%,
84.66%, 56.95%, 40.27%, 23.70% respectively which has resulted in a un favorable
growth.

TABLE NO 4.4
Particulars
Amount
SOURCE OF FUNDS
Share Capital 3652.14 3652.14 0 0
Reserves & Surplus 2452.66 1785.01 -667.65 -27.22
Secured Loans 8632.49 8519.29 -113.02 -1.31
Unsecured loans 697.73 737.27 39.54 5.67
FIXED ASSETS (net block) 14312.28 13744.46 -567.82 -3.97
net INVESTMENTS 415.31 411.71 -3.06 -0.87

ADVANCES
Inventories 483.95 4304.93 3820.98 789.54
Sundry Debtors 910.57 982.83 72.26 7.93
Cash and Bank Balances 38.02 39.72 1.07 4.47
Loans and Advances 731.71 572.58 -159.13 -21.74

PROVISIONS
Provisions 242.25 146.05 -96.02 -39.71
NET CURRENT ASSETS 726.92 584.71 -142.21 -19.56

(TO THE
EXTENT NOT WRITTEN OFF OR 49.87 23.34 -26.53 -53.19
ADJUSTED)


740
730
720
710
Sources of
700 funds
690
680
670
2006 2007
Interpretation:
Comparative balance sheet for the year 2003 and 2004 revealed that there is a
drastic increase in the items of balance sheet like unsecured loan, inventories, debtors and
cash and bank balances, current liabilities by 5.67%, 789.54%, 7.93%, 4.47%, 7.80%
respectively. At the same time there is a decrease in reserves and surplus, secured loans
capital work in progress, net investments, and provisions, loans and advances,
miscellaneous exps by 27.22%, 1.31%, 3.97%, 91.40%, 0.87%, 21.74%, 53.19%
respectively Which has resulted in favorable growth.

TABLE NO-4.5: COMMON SIZE STATEMENT
Particulars 2003 2004 2005 2006 2007

Amount % Amount % Amou % Amount % Amount %
nt
SOURCE OF
FUNDS
Share Capital 3652.14 24.14 3652.14 23.98 3652.14 24.29 3652.14 23.66 3652.14 24.85
Reserves & Surplus 2707.67 17.90 2850.57 18.71 2341.22 15.57 2452.66 15.89 1785.01 12.14
Secured Loans 8601.4 56.86 8091.32 53.13 8477.73 56.40 8632.49 55.92 8519.29 57.98
Unsecured loans 164.72 1.08 534.68 3.51 558.89 3.71 697.73 4.52 737.27 5.02
APPLICATION
OF FUNDS
FIXED ASSETS 13747.3
(net block) 10537.91 69.66 12502.98 82.10 6 91.46 14312.28 92.72 13744.46 93.53
Capital Work in
Progress 83.81 0.55 56.12 0.36 272.94 1.81 56.64 0.39 4.87 0.03
Net
INVESTMENTS 416.56 2.75 415.31 2.72 415.31 2.76 415.31 2.69 411.71 2.80
CURRENT
ASSETS, LOANS
& ADVANCES
Inventories 2604.85 50.81 2501.91 16.43 3154.05 20.98 4083.95 26.45 4304.93 29.30
Sundry Debtors 1120.09 7.40 629.63 4.13 677.16 4.50 910.57 5.90 982.83 66.88
Cash and Bank 0.27
Balances 58.13 0.38 50.24 0.32 88.31 0.58 38.02 0.24 39.72
Loans and Advances 599.69 3.96 720.92 4.73 1224.95 8.15 731.71 4.74 572.58 3.90
LESS: CURRENT
LIABILITIES &
PROVISIONS
Current Liabilities - - - -
2791.36 18.45 2858.79 -18.77 4271.59 28.71 4795.08 31.06 5169.30 35.18
Provisions 58.74 0.39 110.74 -0.73 317.51 -2.11 242.25 -1.57 146.05 -0.99
NET CURRENT
ASSETS 1532.66 10.13 933.17 6.12 555.37 3.69 726.92 4.70 584.71 3.97
MISCELLANEOUS
EXPENDITURE 0.15
723.71 4.78 14.22 0.093 5 0.03 49.87 0.32 23.34
(TO THE
EXTENT NOT
WRITTEN OFF OR
ADJUSTED)
GRAPH SHOWING THE FLUCTUATIONS IN THE CURRENT ASSETS

FROM THE YEAR 2003-2007
12
10
6 Net current
assets
4
0
2003 2004 2005 2006 2007
Interpretation:
Common size statement revealed that there is a greater fluctuation in the net
current assets position against the total of balance sheet by 10.13%, 6.12%, 3.69%,
4.70%, and 3.97% respectively in the year starting from 2003 to 2007 due to increase and
decrease of current liabilities position and provisions.

TABLE NO – 4.6 TREND ANALYSIS
Particulars 2003 2004 2005 2006 2007

Amount % Amount % Amount % Amount % Amount %
SOURCE OF
FUNDS
Share Capital 10
3652.14 0 3652.14 100 3652.14 100 3652.14 100 3652.14 100
Reserves & Surplus 10 105.2 65.93
2707.67 0 2850.57 8 2341.22 86.47 2452.66 90.59 1785.01
Secured Loans 10 100.3 99.04
8601.4 0 8091.32 94.06 8477.73 98.56 8632.49 6 8519.29
Unsecured loans 10 324.5 339.2 423.5 447.59
164.72 0 534.68 9 558.89 9 697.73 8 737.27
APPLICATION
OF FUNDS
FIXED ASSETS 10 118.6 130.3 135.8
(net block) 130.42
10537.91 0 12502.98 4 13747.36 6 14312.28 2 13744.46
Capital Work in 10 325.6
Progress 5.81
83.81 0 56.12 66.94 272.94 6 56.64 67.58 4.87
Net 10
INVESTMENTS 416.56 0 415.31 99.69 415.31 99.69 415.31 99.69 411.71 98.83
CURRENT
ASSETS, LOANS
& ADVANCES
Inventories 10 121.0 165.26
2604.85 0 2501.91 96.04 3154.05 8 483.95 18.57 4304.93
Sundry Debtors 10 87.74
1120.09 0 629.63 56.21 677.16 60.45 910.57 81.29 982.83
Cash and Bank 10 151.9
Balances 68.32
58.13 0 50.24 86.42 88.31 1 38.02 65.40 39.72
Loans and Advances 10 120.2 204.1 122.0 95.47
599.69 0 720.92 1 1224.95 4 731.71 1 572.58
LESS: CURRENT
LIABILITIES &
PROVISIONS
Current Liabilities 10 102.4 153.0 171.7 185.18

2791.36 0 2858.79 1 4271.59 2 4795.08 8 5169.30
Provisions 10 188.5 540.5 412.4 248.63
58.74 0 110.74 2 317.51 3 242.25 1 146.05
NET CURRENT
ASSETS
MISCELLANEOUS
EXPENDITURE 38.15
(TO THE 10
EXTENT NOT 1532.66 0 933.17 60.88 555.37 36.23 726.92 47.42 584.71
WRITTEN OFF OR 23.34
ADJUSTED) 10 Christ College Pondicherry University Twinning Program 45
723.71 0 14.22 1.96 5 0.690 49.87 6.89 3.22
Interpretation:
The trend analysis of all the 5 years has been done by taking the year 2002-03 as
a base year. The study revealed that there are fluctuations in the form of decrease in
sources of funds and current assets position and increase in current liability position and
in provisions. There is an increase in the reserves and surplus in the year 2004 to
105.28% and decrease in the year 2005, 2006, 2007, to 86.47% , 90.59%, 65.93%
respectively secured loans have decreased drastically to 94.065, 98.56%, 99.04% in the
year from 2004,2005,2007 and in the year 2006 it has attained the positive position to
100.36%, unsecured loans have increased to unpredictable extent of 324.59%, 339.29%,
423.58% and 447.59% in the year from 2004 to 2007 respectively.
In the other hand fixed assets have increased to 118.64%, 130.36%, 135.82%, and
130.42% respectively from the year 2004 to 2007. Net investments have decreased to
99.69% from the year 2004 to 2006 and 98.83% in the year 2007. In the current assets
inventories have decreased in all the years except in the year 2005 to 95.23%, 91.47%,
17.69% and 29.30% respectively. Debtors have decreased to 57.30%, 32.21%, 34.64%,
46.58%, and 6.69% respectively in the years from 2003 to 2007.
Current liabilities have decreased in the years 2003, 2004,and in the year 2007 to
87.94%, 90.06% and to 35.185 respectively but it has increased to 134.57%, 151.06% in
the years 2005 and 2006. Provisions have increased to 110.74%, 54.53%, and 412.41%
and to 248.63% respectively.

RATIO ANALYSIS
LIQUIDITY RATIOS
TABLE NO –4.7
TABLE SHOWING CURRENT RATIO OF THE COMPANY
(Rs. In Lakhs)
2006-07
Particulars 2005-06 2004-05 2003-04 2002-03
Current 5900.06
5764.25 5144.47 3902.270 4382.76
assets
Current 5315.35
5037.33 4589.10 2969.53 2850.10
liabilities
Current 1.110
1.144 1.121 1.314 1.537
Ratio
The current ratio of the company is fluctuating. In, 2002 – 2003 it was 1.537, in
the year 2003 – 2004 it was 1.314, In the year 2004 – 2005 it was 1.121 and in the year
2005 – 2006 it is 1.144. ,in the year 2006-07 it is 1.110
The current ratio is ascertained with the help of relevant financial figures. It has to
be compared with the standard ratio of 2:1. From 2002 – 2003 to 2006 – 2007 the current
ratio is less than the ideal ratio. This is not a good sign for the company’s liquidity
solvency position.
CHART NO – 1
GRAPH SHOWING CURRENT RATIO FROM 2002 – 2003 TO 2006 – 2007

Current Ratio
1.537
1.6 1.314
1.4 1.144 1.121
1.11
1.2
1
RATIO 0.8
0.6 Current Ratio
0.4
0.2
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS
TABLE NO –4.8
TABLE SHOWING QUICK RATIO OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Quick assets 1595.13 1680.30 1990.42 1391.70 1777.91
Quick
5315.35 5037.33 4589.10 2969.53 2850.10
liabilities
Quick Ratio 0.300 0.333 0.434 0.468 0.623

The Quick Ratio of the company is fluctuating. In 2002 – 2003 it was 0.623, in
2005 – 2006 it is 0.333. In the year 2006-07 it is 0.300
The actual quick ratio has to be compared with the ideal quick ratio is 1:1. The
quick ratio of the company is less than the ideal ratio of 1:1, so the company’s liquidity
position is not satisfied.
CHART NO – 2
GRAPH SHOWING QUICK RATIO FROM 2002 – 2003 TO 2006 – 2007
Quick Ratio
0.7 0.623
0.6 0.468
0.434
0.5
0.333
0.4 0.3
RATIO
0.3 Quick Ratio
0.2
0.1
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS

TABLE NO –4.9
TABLE SHOWING INVENTORY TO WORKING CAPITAL RATIO OF THE

COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Inventory
2922.03 2784.42 1917.57 1479.41 1647.86
Working
584.71 726.92 555.37 933.17 1532.66
capital
Inventory to
working 499.74% 383.04% 345.27% 158.53% 107.51%
capital ratio
The Inventory to working capital ratio of the company is increasing In 2002 –
2003 it was 107.51%, in the year 2003 – 2004 it was 158.53%, In the year 2004 – 2005 it
was 345.27% and in the year 2005 – 2006 it is 383.04%. . In the year 2006-07 it
is499.74%
The inventory to working capital ratio more than 75% of working capital it
indicates over stocking, and so a low liquid position of the company

CHART NO –.3
GRAPH SHOWING INVENTORY TO WORKING CAPITAL RATIO FROM

2002 – 2003 TO 2006 – 2007
I n v e n to r y to w o r k i n g c a p i ta l r a ti o
4 99.7 4%
5 00.00 %
4 50.00 % 3 83.0 4%
4 00.00 % 3 4 5 .2 7 %
3 50.00 %
3 00.00 %
R A T I O2 5 0 . 0 0 % 1 5 8 .5 3 %
2 00.00 % In ve n t o ry t o w o rk in g c a p it
1 50.00 % 1 0 7 . 5 1 %
1 00.00 %
50.00%
0.00 %
2 0 0 6 -0270 0 5 -0260 0 4 -0250 0 3 -0240 0 2 -0 3
YEARS

TABLE NO – 4.10
TABLE SHOWING DEBT EQUITY RATIO OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Long-term Debt 9256.56 9330.22 9036.62 8626.00 8766.12
Equity 5437.15 6104.80 5993.36 6502.71 6359.81
Debt Equity
1.702 1.528 1.507 1.326 1.378
Ratio
The Debt Equity Ratio of the company is fluctuating. in 2002 – 2003 it was 1.378,
in the year 2003 – 2004 it was 1.326, In the year 2004 – 2005 it was 1.507 and in the year
2005 – 2006 it is 1.528. . In the year 2006-07 it is1.702
The ideal debt equity ratio is 2:1, as such if the debt is less than 2 times the equity,
the logical conclusion is that the financial structure of the concern is sound and so the risk
of long term creditors is relatively less. On the other hand, if the debt is more than 2 times
the equity, the conclusion is that the financial structure of the company is weak. So the
risk of long – term creditors is relatively more.
On the whole the debt equity ratio is satisfactory.
CHART NO – 4

GRAPH SHOWING DEBT EQUITY RATIO

FROM 2002 – 2003 TO 2006 – 2007
D e b t E q u i ty R a ti o
1.702
1 .8 1.528 1.507 1.326
1 .6 1.378
1 .4
1 .2
1
R A T IO
0 .8
D e b t E q u it y R a t io
0 .6
0 .4
0 .2
0
2 0 0 6 -0 72 0 0 5 -0 62 0 0 4 -0 52 0 0 3 -0 42 0 0 2 -0 3
YEAR S

TABLE NO –4.11
TABLE SHOWING SOLVENCY RATIO OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Total Assets 19985.7 20422.48 19614.08 16877.11 15421.04
Total
14571.91 14367.55 13625.72 11595.53 11616.22
Liabilities
Solvency
1.371 1.421 1.349 1.455 1.327
Ratio
There is a steady increase in the ratio from the year 2002 – 2003 to 2003-2004 the
ratio where 1.327, 1.445 respectively. Where as it is decreased in the year 2004 – 2005
the ratio where 1.349 and increase 2005-2006 the ratio where1.421. and decrease in the
year2006-07 the ratio is 1.371
Though there is no standard or ideal solvency ratio has established. One can say
that the higher the solvency ratio of the concern, the stronger is the financial position of
the concern and vise versa. There is a steady decreased in the ratio, which indicates low
efficiency of total assets to meet the total liabilities of the company.
CHART NO – 5

GRAPH SHOWING SOLVENCY RATIO

FROM 2002 – 2003 TO 2006 – 2007
S o l v e n c y R a ti o
1.455
1.46
1.44 1.421
1.42
1 .4 1.371
1.38 1.349
R A T I O1 . 3 6 1.327
1.34 S o lve n c y R a t io
1.32
1 .3
1.28
1.26
2 0 0 6 -0 7 2 0 0 5 -0 6 2 0 0 4 -0 5 2 0 0 3 -0 4 2 0 0 2 -0 3
YEA RS
TABLE NO – 4.12

TABLE SHOWING FIXED ASSET TO NETWORTH OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Net Fixed
13744.46 14312.28 13747.36 12502.98 10621.72
Assets
Net Worth 5437.15 6104.80 5993.36 6502.71 6359.81
Fixed
Assets Net 2.527 2.344 2.293 1.922 1.670
worth Ratio
There is a steady increase in the ratio. In the year 2002 – 2003 the ratio will
decrease it was 1.670 and in the year 2003 – 2004 to 2006-2007 it has increased 1.922 to
2.527.
The ideal ratio is 0.67 times, of the proprietor’s funds the indication is that the
proprietors funds are mostly sunk in the fixed assets and current asset are financed out of
loaned funds.
So such an indication means financial weakness of the concern and greater risks
for the creditor
CHART NO – .6

GRAPH SHOWING FIXED ASSET TO NETWORTH FROM 2002 – 2003 TO

2006 – 2007
F i x e d A sse ts N e t w o r th R a tio
3 2.527 2 .34 4 2.293

2 .5 1.922
1 .6 7
2
R A T I O1 .5
F ix e d A s s e t s N e t w o rt h R a t io
1
0 .5
0
2 0 0 6 -0 72 0 0 5 -0 62 0 0 4 -0 52 0 0 3 -0 42 0 0 2 -0 3
YEA R S
TABLE NO – 4.13

TABLE SHOWING CURRENT ASSET TO NETWORTH RATIO OF THE

COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Current
5900.06 5764.25 5144.47 3902.270 4382.76
Assets
Net Worth 5437.15 6104.80 5993.36 6502.71 6359.81
Current
Assets Net 1.085 0.944 0.858 0.600 0.689
worth Ratio
The current asset to net worth Ratio of the company is fluctuating. In 2002 – 2003
it was 0.689, in the year 2003 – 2004 it was 0.600, In the year 2004 – 2005 it was 0.858
and in the year 2005 – 2006 it is 0.944. . In the year 2006-07 it is1.085
. Though there is no standard current asset to net worth. One can say that is this ratio is
high the financial strength of the concern is good and if this ratio is low the financial
position of the company is weak.
CHART NO –7
GRAPH SHOWING CURRENT ASSET TO NETWORTH FROM

2002 – 2003 TO 2006 – 2007
Curre nt Asse ts Ne t w orth Ra tio
1.2 1.085
0.944
1 0.858
0.8 0.689
0.6
RATIO 0.6
Current Assets Net worth Ratio
0.4
0.2
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS
TABLE NO – 4.14
TABLE SHOWING CURRENT LIABILITIES TO NETWORTH OF THE

COMPANY

(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Current
5315.35 5037.33 4589.10 2969.53 2850.10
liabilities
Net Worth 5437.15 6104.80 5993.36 6502.71 6359.81
Current
liabilities
0.977 0.825 0.765 0.456 0.448
Net worth
Ratio
The current liabilities to net worth Ratio of the company are fluctuating in 2002 –
2003 it was 0.448, in the year 2003 – 2004 it was 0.456, in the year 2004 – 2005 it was
0.765 and in the year 2005 – 2006 it is 0.825. . In the year 2006-07 it is 0.977
The desirable level set for this ratio is 0.33 or 33.1/3%. So if the actual ratio were
very high it would mean that the liability base of the concern would not provide an
adequate cover for long-term creditors. That means it would be difficult for the concern
to obtain long-term funds.
CHART NO – 8
GRAPH SHOWING CURRENT LIABILITIES TO NETWORTH FROM 2002
2003 TO 2006 – 2007

Current liabilities Net w orth Ratio
0.977
1
0.825
0.9 0.765
0.8
0.7
0.6 0.456 0.448
RATIO 0.5
0.4 Current liabilities Net worth
0.3 Ratio
0.2
0.1
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS
TABLE NO – 4.15
TABLE SHOWING FIXED ASSET RATIO OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Fixed Assets 13749.33 14368.92 14020.30 12559.10 10621.72
Capital
14693.71 15385.15 15024.98 15214.48 14402.22
Employed
Fixed Assets
0.935 0.934 0.933 0.825 0.737
Ratio
The fixed asset ratio of the company is increasing. In 2002 – 2003 it was 0.737, in
2005 – 2006 it is 0.934. . In the year 2006-07 it is 0.935

The fixed asset ratio should not be more than 1. It should be less than1. The ideal
ratio is 0.67 times. This would mean that not only all the fixed assets but also a part of
working capital are financed by the long-term funds, which is not a good sign towards the
efficiency of the company.
CHART NO – 9
GRAPH SHOWING FIXED ASSET RATIO FROM 2002 – 2003 TO 2006 – 2007
Fixed Assets Ratio
0.935 0.934 0.933

1 0.825 0.737
0.8
0.6
RATIO
0.4 Fixed Assets Ratio
0.2
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS

ACTIVITY RATIOS
TABLE NO – 4.16
TABLE SHOWING INVENTORY TURNOVER RATIO OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Cost of Goods
15362.53 13535.94 11983.59 9445.15 7904.94
Sold
Average Stock 2853.22 2350.99 1698.49 1563.63 1776.06
Stock Turnover
5.38 5.75 7.05 6.04 4.45
Ratio
The Inventory turnover ratio of the company is fluctuating. in 2002 – 2003 it was
4.45, in the year 2003 – 2004 it was 6.04, in the year 2004 – 2005 it was 7.05 and in the
year 2005 – 2006 it is 5.75. . In the year 2006-07 it is 5.38
A stock turnover of 8 times a year is considered ideal, as such a stock turnover of less
than 8 times it means that the concern has accumulated on saleable goods.
There is inefficient and so it is not able to sell away its goods quickly.

CHART NO – 10
GRAPH SHOWING STOCK TURNOVER RATIO FROM

2002 – 2003 TO 2006 – 2007
Stock Turnover Ratio
8 7.05
7 5.75 6.04
5.38
6 4.45
5
RATIO 4
3 Stock Turnover Ratio
2
1
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS
TABLE NO – 4.17
TABLE SHOWING DEBTORS TURNOVER RATIO OF THE COMPANY

(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Net sales 16923.35 15885.62 14812.23 12679.09 10026.52
Average Debtors Credit 982.83 910.57 677.16 629.63 1120.09
Debtor Turnover Ratio 17.21 17.44 21.87 20.13 8.95
Days 21.20 20.6 16.45 17.87 40.21

There is an increasing trend in the debtors turn over ratio from 2002-2003 to
2004-2005. It has decreased in the year 2005 – 2006. and increased in the year 2006-07
The actual period of credit allowed is less than the normal period of credit or the ideal
period of credit i.e., 30 days; the indication is that credit collection is efficient.
In case of BELL CERAMICS LTD, the collection period less than the standard
(i.e. 30 days) so the company’s performance is good.
CHART NO –11
GRAPH SHOWING DEBTORS TURNOVER RATIO FROM

2002 – 2003 TO 2006 – 2007
Debtor Turnover Ratio
25 21.87 20.13
17.21 17.44
20
15 8.95
RATIO
10 Debtor Turnover Ratio
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS

TABLE NO – 4.18
TABLE SHOWING CREDITORS TURNOVER RATIO OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
15500.1
Net Credit Purchase 14402.79 12421.75 9276.70 7648.53
4
Average Creditors 3251.21 2792.75 2711.64 1421.25 1243.08
Creditors Turnover
4.76 5.15 4.58 6.52 6.15
Ratio
Days 76.68 69.80 78.58 55.15 58.50
The creditor’s turnover ratio of the company is fluctuating. In 2002 – 2003 it was
58.50, in the year 2003 – 2004 it was 55.15, In the year 2004 – 2005 it was 78.58 and in
the year 2005 – 2006 it is 69.80. . In the year 2006-07 it is 76.68
The standard or ideal debt payment period is 30 days. If the actual period of credit
received from creditors is less than 30 days. Then it indicates that average period from
the creditor is not sufficient, other wise (i.e. more than 30 days) is sufficient.
In case of BELL CERAMICS LTD, we can see that the average period of credit
received is more than the ideal so concern has sufficient time period of credit.

CHART NO – 12
GRAPH SHOWING CREDITORS TURNOVER RATIO FROM 2002- 2003 TO
2006 – 2007
C r e d i to r s T u r n o v e r R a ti o
6 .52 6.1 5
7
6 5 .15
4 .7 6 4 .5 8
5
4
R A T IO
3
C re d it o rs T u rn o ve r R a t io
2
1
0
2 0 0 6 -0 72 0 0 5 -0 62 0 0 4 -0 52 0 0 3 -0 42 0 0 2 -0 3
YEA RS

TABLE NO – 4.19
TABLE SHOWING THE FIXED ASSET TURNOVER RATIO OF THE

COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Net Sales 16923.35 15885.62 14812.23 12679.09 10026.52
Net Fixed Assets 13744.46 14312.28 13747.36 12502.98 10621.72
Fixed Asset Turnover

1.231 1.10 1.077 1.01 0.94
Ratio
The fixed assets turnover ratio of the company is increasing. In in 2002 –
2003 it was 0.94, in the year 2003 – 2004 it was 1.010, in the year 2004 – 2005 it was
1.09 and in the year 2005 – 2006 it is 1.10. . In the year 2006-07 it is 1.231

The standard or ideal fixed assets turnover ratio is 5 times. So, fixed assets turnover ratio
of 5 times or more indicates better utilization of fixed assets. On the other hand a fixed
assets turnover ratio of less than 5 times is an indication of under utilization of fixed
assets.
The fixed assets turnover ratio is showing an increasing trend which indicates the
efficient utilization of fixed assets of the company.
CHART NO – 13
GRAPH SHOWING FIXED ASSET TURNOVER RATIO

FROM 2002 – 2003 TO 2006 – 2007
F ix e d A sse t T u rn o ve r R a tio
1.4 1.23 1
1 .1 1.077
1.2 1.01 0.94
1
0.8
R A T IO
0.6
F ix ed A s s et Tu rnover R atio
0.4
0.2
0
2006-072005 -062004-052003 -042002-03
YEA R S

TABLE NO – 4.20
TABLE SHOWING WORKING CAPITAL TURNOVER RATIO OF THE

COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Sales 16923.35 15885.62 14812.23 12679.09 10026.52
Working capital 584.71 726.92 555.37 933.17 1532.66
Working capital
28.94 21.85 26.67 13.58 6.54
Turnover Ratio
The working capital turnover ratio of the company is showing increasing trend
from 6.54 in the year 2002 – 2003 to 27.21 in the year 2004 – 2005. Where decrease in
the year 2005 – 2006 it is 21.85.
Though there is no ideal working capital turnover ratio one can say that a high
working capital turn over ratio indicates the efficiency and a lower working capital

turnover ratio indicates the inefficient of the management in utilization of working
capital.
In the case of BELL CERAMICS LTD, is ratio is not very high or not too low, but it is
satisfactorily indicates the efficiency of the organization.
CHART NO – 14
GRAPH SHOWING WORKING CAPITAL TURNOVER RATIO FROM 2002 –

2003 TO 2006 – 2007

W o r k i n g c a p i ta l T u r n o v e r R a ti o
2 8.9 4
30 2 6.6 7
21 .85
25
20 13 .58
R A T I O1 5
10 6.54 W o rk in g c a p it a l Tu rn o ve r R a
5
0
2 0 0 6 -0 27 0 0 5 -0 26 0 0 4 -0 25 0 0 3 -0 24 0 0 2 -0 3
YEAR S

PROFITABILITY RATIOS
TABLE NO – 4.21
TABLE SHOWING GROSS PROFIT RATIO OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Gross Profit 1560.82 2349.68 2828.64 3233.94 2121.58
Sales 16923.35 15885.62 14812.23 12679.09 10026.52
Gross Profit Ratio 9.22% 14.79% 19.09% 25.50% 21.15%
The gross profit of the company fluctuating in the year 2002 – 2003 it was
21.15%, in the year 2003 – 2004 it was 25.50%, in the year 2004 – 2005 it was 20.70%
and in the year 2005 – 2006 it is 14.79%. . In the year 2006-07 it is 9.22%
The actual gross profit ratio is compared with the gross profit ratio of the previous years
and those of other concerns carrying on similar business. If the actual grass profit ratio is
high, it is an indication of good result; on the other hand if the actual gross profit ratio is
low it is an indication of poor results. The gross profit has decreased in the year 2004-
2005 & 2005-2006, which is not good sign of the company.

CHART NO – 15
GRAPH SHOWING GROSS PROFIT RATIO
FROM 2002 – 2003 TO 2006 – 2007
G r o ss P r o fi t R a ti o
30 .00 % 25 .5 0%
25 .00 % 1 9 .0 9 % 21.15%
20 .00 % 14 .79 %
R A T I O1 5 . 0 0 % 9 . 2 2 %
G ro s s P ro fit R a t io
10 .00 %
5.00%
0.00%
2 0 0 6 -0 72 0 0 5 -0 62 0 0 4 -0 52 0 0 3 -0 42 0 0 2 -0 3
TABLE NO – 3.22
YEARS
TABLE SHOWING NET PROFIT RATIO OF THE COMPANY

(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Net Profit after

(667.67) 111.44 213.13 142.90 228.15
Tax
16923.3 15885.6
Sales 14812.23 12679.09 10026.52
5 2
Net Profit Ratio (0.039) 0.70% 1.43% 1.12% 2.27%
The net profit ratio is fluctuating. 2.27% in the year 2002 – 2003, 1.12% in the
year 2003 – 2004, 6.16% in the year 2004 – 2005 and 0.70% in the year 2005 – 2006. . In
the year 2006-07 it is(0.039)
There is no ideal net profit ratio, higher the net profit indicates that profitability of
a concern is good and vice versa.
Net profit has decreased in the year 2005 – 2006, which is not a good sign of the
company.

CHART NO – 16
GRAPH SHOWING NET PROFIT RATIO FROM 2002– 2003 TO 2006 – 2007
N e t P ro fi t R a ti o
2 .2 7 %
0 .0 3
1.43% 1 .1 2 %
0 .0 2 0.70%
0 .0 1
0
R A T IO
-0 . 0 1 N e t P ro fit R a t io
-0 . 0 2
-0 . 0 3
-0 . 0 4 -0 . 0 3 9
2 0 0 6 -0 7 2 0 0 5 -0 6 2 0 0 4 -0 5 2 0 0 3 -0 4 2 0 0 2 -0 3
YEARS

TABLE NO – 4.23
TABLE SHOWING EARNINGS PER SHARE OF THE COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
Profit after Tax (667.67) 111.44 213.13 142.90 228.15
No. of Equity
250 250 250 250 250
Shares
Earnings per
-2.67 0.44 0.85 0.57 0.91
share
Earnings per share of the company are fluctuating. in the year 2002 – 2003 it was
0.91, in the year 2003 – 2004 it was 0.57, in the year 2004 – 2005 it was 0.85, in the year
2005 – 2006 it is 0.44. In the year 2006-07 it is 2.67
There is no standard for the earning per share. Higher the earning per share the
financial position of the company is considered as position as good.

Higher earning per share suggests the possibility of more cash dividend or bonus shares
and a raise in the market price of the share.
CHART NO –17
GRAPH SHOWING EARNING PER SHARE FROM
2002–2003 TO 2006 – 2007
E a rn in g s p e r s h a re
0.85 0.91
1 0.44 0.57
0.5
0
-0 . 5
v a l u e -1
-1 . 5 E a rn in g s p e r s h a re
-2
-2 . 5 -2 . 6 7
-3
2 0 0 6 -0 27 0 0 5 -0 26 0 0 4 -0 25 0 0 3 -0 42 0 0 2 -0 3
y e a rs

TABLE NO – 4.24
TABLE SHOWING RETURN ON INVESTMENT (ROI) OF THE COMPANY

(BEFORE TAX)
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
EBIT 667.67 267.65 511.11 835.76 97.07
TOTAL ASSETS 250 20422.48 19614.08 16877.11 15421.04
ROI -2.67% 1.31% 2.60% 4.95% 0.62%
Return on investment of the company is fluctuating. in the year 2002 – 2003 it
was 0.63%, in the year 2003 – 2004 it was 4.95%, in the year 2004 – 2005 it was 4.90%,
in the year 2005 – 2006 it is 1.31%. . In the year 2006-07 it is 1.31%
The ideal return on capital employed ratio is about 15% so if the actual ratio is
equal or more than 15%. It is an indication of higher productivity of the capital

employed. On the other hand if the actual ratio is less than 15% it is an indication of
lower productivity of the capital employed.
CHART NO – 18
GRAPH SHOWING RETURN ON INVESTMENT (ROI) FROM
2002 – 2003 TO 2006 – 2007
ROI
4.95%
5.00%
4.00% 2.67% 2.60%

3.00%
RATIO 1.31%
2.00% 0.62% ROI
1.00%
0.00%
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS

TABLE NO – 4.25
TABLE SHOWING NET PROFIT TO NET WORTH RATIO OF THE
COMPANY
(Rs. In Lakhs)
Particulars 2006-07 2005-06 2004-05 2003-04 2002-03
PROFIT AFTER TAX (667.67) 111.44 213.13 142.90 228.15
NET WORTH 5437.15 6104.80 5993.36 6502.71 6359.81
NET PROFIT TO NET

12.27% 1.82% 3.55% 2.19% 3.58%
WORTH RATIO
Net profit to net worth ratio of the company is fluctuating. in the year 2002 – 2003 it was
3.58%, in the year 2003 – 2004 it was 2.19%, in the year 2004 – 2005 it was 15.53%, in
the year 2005 – 2006 it is 1.83%. . In the year 2006-07 it is 12.27 %
The ideal net profit to net worth ratio is about 13% as such if the actual net profit
to net worth ratio is 13% or more it is an indication of good return on the shareholder’s

funds. On the other hand if the actual ratio is less than 13% the conclusion as to be that
the return on the shareholder’s funds is not adequate.
CHART NO – 19
GRAPH SHOWING RETURN ON EQUITY (ROE) FROM

2002 – 2003 TO 2006 – 2007
N E T P R O F IT T O N ET W O R T H R A T IO
1 4 .0 0 % 12 .2 7 %
1 2 .0 0 %
1 0 .0 0 %
8 .0 0 %
R A T IO
6 .0 0 % 3 .5 5 % 3 .5 8 % N E T P R O F IT T O N E T W O R T H
R A T IO
4 .0 0 % 1 .8 2 % 2 .19%
2 .0 0 %
0 .0 0 %
2 0 0 6 -0 27 0 0 5 -0 26 0 0 4 -0 25 0 0 3 -0 24 0 0 2 -0 3
YEAR S

TABLE NO – 4.26
CASH FLOW STATEMENT
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2006
Previous
Current Year Year
(Rs.in Lakhs) (Rs.in Lakhs)
A. CASH FLOW FROM OPERATING ACTIVITIES

Net (loss)/Profit before tax but after exceptional/extraordinary items 329.75 870.33
Adjustment for:
Depreciation 1073.08 1058.55
Depreciation Written back -50.95 -
Interest Expense 1121.16 1171.8
Interest Income -1.29 -2.21
Income from Investment-Dividends -0.09 -0.18
(profit)/Loss on Fixed Assets sold 10.07 100.42
Deferred revenue expenditure Written off 25.14 9.22
Debts/Advances Written off 7.81 29.8
Provision for Gratuity & Leave Encashment -4.46 18.72
Prior Period Expenses/(income)(Net)-excluding depreciation written back -6.93 -6.88
Exceptional/Extraordinary items Expenses/(Income) -50.95 99.21
OPERATING PROFIT BEFORE WORKING CAPTIAL CHANGES 2450.9 3351.71
Adjustments for changes in working capital :

(INCREASE)/DECREASE in Sundry Debtors -236.76 -96.05
(INCREASE)/DECREASE in Other Receivables 500.92 -454.34
(INCREASE)/DECREASE in Inventories -929.9 -643.05
INCREASE/(DECREASE)in Trade and Other Payables 514.94 1323.33
CASH GENERATED FROM OPERATIONS 2300.1 3481.6
Taxes (Paid)/ Received (Net of withholding taxes- TDS) -7.86 -58.33

Priro Period (Expenses)/Income (Net) 11.15 8.43
Extraordinary/ exceptional Item (Expenses)/Income 50.95 -99.21
NET CASH FROM OPERATING ACTIVITIES 2354.34 3332.49

B. CASH FLOW FROM INVESTING ACTIVITES
Purchase of fixed assets
Additions during the period -1681.23 -2330.19
Capital Work in Progress
Additions during the period 216.3 -216.82
Proceeds from Sales of fixed assets 4.5 78.55
Interest Received(Revenue) 1.47 1.77
Dividend Received 0.09 0.18
Any other item - Deferred Revenue Expenditure capitalized -70.01 -
NET CASH USED IN INVESTING ACTIVITIES -1528.88 -2466.51

C. CASH FLOW FROM FINANCING ACTIVITIES

Proceeds from long term borrowings
RECEIPTS 534.88 647.5
PAYMENTS -863.46 -507.15
Proceeds from long term borrowings 164.57 51.83
RECEIPTS
TABLE NO – 4 .27
BELL CERAMICS LIMITED
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH 31, 2004
Previous
Current Year Year
(rs.in
(Rs.in Lakhs) Lakhs)
CASH FLOW FROM OPERATING ACTIVITIES
Net Profit before interest, tax, prior period and extra ordinary items 2169.59 1556.71
Adjustments for:
(0.45 (0
Dividend received ) .28)
(1.27 (2
Interest received on ICD, Investments & Others ) .01)
Amoritization of expenses 240.39 124.04
Investments writtens off 1.25 0
(3
Loss /(Profit) on sale os assets 1.31 .82)
OPERATING PROFIT BEFORE WORKING CAPTIAL CHANGES 3331.79 2286.79

Adjustments for:
(112.14
Decrease /(Increse) in Loans & Advances ) 211.13
(INCREASE)/DECREASE in Other Receivables 490.46 834.76
(INCREASE)/DECREASE in Inventories 93.85 130.44
(38
INCREASE/(DECREASE)in Trade and Other Payables 119.43 2.90)
591.6 793.43
CASH GENERATED FROM OPERATIONS 3923.39 3080.22

Interest Paid (1333.83) (1250.03)
Income Tax (Payment)/ refund (52.00) (0.00)
CASH FLOW BEFORE EXTRAORDINARY ITEMS 2537.56 1830.19

Extra Ordinary item/Prior Period Adjustment (excluding prior period depreciation (16.49) (26.03)
deffered tax advustment) 2521.07 1804.16
CASH FLOW FROM INVESTING ACTIVITIES

Miscellaneous expenditure incurred (56.98) 115.99

Purschase of fixed assets (2388.73) (651.83)

Sale of fixed asstes 55.15 79.49
Dividend received 0.45 0.28
Interest received 1.27 2.01
Sale of investments 0.00 0.22
NET CASH USED IN INVESTING ACTIVITIES (2388.84) (453.84)
TABLE NO – 4.28
BELL CERAMICS LIMITED
CASH FLOW STATEMENT FOR THE YEAR ENDED MARCH
31,2005
A. CASH FLOW FROM OPERATING ACTIVITIES

Net (loss)/profit before tax but after exceptional / extraordinary items 870.33 6060.55
Adjustment For:
Interest Expense 1171.80 1333.83
Interest income -2.21 -1.27
Income From Investment – Dividends -0.18 -0.45
(Profit)/Loss on Fixed Assets Sold 100.42 1.31
Deferred revenue expenditure written off 9.22 240.39
Debts/Advances written off 29.80 91.95
Provision for Bad & Doubtful Debts/Advances 18.72 54.21
Liability no longer required written back -6.88 -21.18
Provision for Gratuity & Leave Encashment 11.36 11.34
Provision for diminution in value of investments 0.00 1.25
prior period expenses (income) (Net)-excluding depreciation written back -8.43 229.21
exceptional/Extraordinary item expenses/ (income) 99.21 0.00
OPERATING PROFIT BEFORE WORKING CAPITAL CHANGES 3351.71 3468.11

Adjustments for changes in working capital:
- (increase)/Decrease in sundry Debtors -96.05 344.30
- (increase)/Decrease in Other Receivables -454.34 -111.89
- (Increase)/Decrease in Inventories -643.05 93.85
- (Increase)/Decrease in Trade and other Payables 1323.33 80.86
3481.60 3875.24
CASH GENERATED FROM OPERATIONS
- Taxes (paid) / Received (net of withholding taxes (TDS) -58.33 -0.26
- Prior Period (Expenses) /Income (Net) 8.43 -16.49
- Extraordinary / Exceptional Item ( Expense) / Income -99.21 0.00
NET CASH FROM OPERATING ACTIVITIES 3332.49 3858.49
B. Cash flow from Investing Activities:

Purchase of Fixed assets:
Additions during the period -2330.19 -2473.40
Capital Work in Progress:
Additions during the period -216.82 27.69
Proceeds from Sale of fixed assets 78.55 55.15
Interest Received (Revenue) 1.77 1.27
Dividend Received 0.18 0.45
Net cash used in investing activities -2466.51 -2388.84

C. Cash flow from financing activities:

Proceeds from long term borrowings:
RECEIPTS 647.50 753.08
PAYMENTS -507.15 -1106.29
Proceeds from short term borrowings:
RECEIPTS 51.83 421.80
GRAPH NO - 20
GRAPH SHOWING THE OUTFLOW OF CASH
3500
3000
2500
2000
1500 CASH OUTFLOW
1000
500
0
2004 2005 2006
Interpretation:
The analysis of cash flow statement revealed that there is an excess of cash out
flow in the years 2004, 2005 and in 2006 for the investment activities. So there is no
proper management of cash out flows. The cash generated from operations are gradually
decreasing in nature. In the year 2004 it was 2537.49, in the year 2005 it was increased to
3332.49 and in the year 2006 it has decreased to 2300.10

GRAPH NO – .21
GRAPH SHOWING CASH FLOW FROM OPERATIONS
3500
3000
2500
2000 CASH OUTFLOW
1500 FROM
OPERATIONS
1000
500
0
2003 2004 2005 2006
Interpretation

In the year 2004 cash flow from operations have increased from 2286.79 to 3331.79
when compared with the year 2003 and in the year 2005 it has increased to 3351.71 and
in the year 2006 it has decreased to 2450.9 it shows the firm has excess of cash outflows.
GRAPH NO – 3.22
GRAPH SHOWING CASH USED IN INVESTING ACTIVITIES
2500
2000
1500
1000
500
0 CASH USED IN
-500 INVESTING ACTIVITIES
-1000
-1500
-2000
-2500
2003 2004 2005 2006
Interpretation

Net cash used in the investing activities have increased from 453.84 to 2388.84 in
the year 2004 when compared with the year 2003. Further it has shown the negative
balance in the year 2005 and 2006 by -2466.51 and by -1528.88
This clearly shows that the company has fallen short of enough liquid cash to use
in the investing activities.
TABLE NO – 4.29
FUND FLOW STATEMENT FOR THE YEAR 2005 - 06
Sources of funds (Rs in lakhs)

Reserves and Surplus 111.44
secured loan 154.76
Unsecured loan 138.84
Funds from operation 741.46
Decrease in work in progress 216.3
Furnitures and fixtures sold 25.07
Plant and machinery sold 21.37
Computer sold 0.5
vehicles sold 16.07
Increase in General reserve 30
Miscellaneous income 65.31
Depreciation 1073.08
Tax paid 58.31
2652.51
Application of Funds
Debentures redeemed 100
Furnitures and Fixtures Purchased 9.18
Net block purchased 564.92
Office equipment purchased 3.89
Computer purchased 9.69
Land purchased 19.89
Building purchased 111.01
Plant and machinery purchased 1385.93

vehicles purchased 62.03

Increase in working capital 385.97
2652.97
TABLE NO – 4.30
FUND FLOW STATEMENT FOR THE YEAR 2006 - 07
Sources of funds (Rs In lakhs)

Funds from operations 471.19
Unsecured Loans 39.54
Net block sold 567.82
Work in progress decreased 51.77
Building sold 23.03
Plant and machinery sold 177.58
Furniture and Equipment sold 0.71
Office equipment sold 0.23
Computer sold 0.45
Vehicles sold 16.76
Decrease in Working capital 143.39
1522.47
Application of funds
Redemption of Reserves and surplus 667.65
Redemption of secured Loans 114.38
Building Purchased 59.94
Plant and Machinery Purchased 527.05
Furniture and Fixtures Purchased 2.04
Office Equipment Purchased 3.19
Computer
Purchased 5
Vehicles Purchased 24.86
Redemption of Debenture reserve 100
1522.47

Interpretation: Schedule of changes in working capital clearly expresses the impact of
increase and decrease in the current assets and current liability position on working
capital. In the above table the two years such as 2005-06 and 2006-07 are taken and
analyzed to study the changes in working capital and study revealed that there is a
decreased in the working capital by 143.49
BREAK EVEN ANALYSIS
The Break-Even Chart
A breakeven analysis shows the relationship between the costs and profit with
sales volume. The point at which neither profit nor loss is made is known as the "break-
even point" and is represented on the chart below by the intersection of the two lines:
FIGURE NO 1

In the diagram above, the line OA represents the variation of income at varying
levels of production activity ("output"). OB represents the total fixed costs in the
business. As output increases, variable costs are incurred, meaning that total costs (fixed
+ variable) also increase. At low levels of output, Costs are greater than Income. At the
point of intersection, P, costs are exactly equal to income, and hence neither profit nor
loss is made.
Fixed cost
BEP in units =
Contribution per unit
Fixed cost
BEP in volume =
PV Ratio
TABLE NO -4- 31
TABLE SHOWING BEP IN UNITS
( In lakhs )
SL NO YEARS BEP in UNITS
1 2002 – 2003 0.23 Units
2 2003 – 2004 0.25 Units
3 2004 – 2005 0.33 Units
4 2005 – 2006 0.82 Units
5 2006 – 2007 0.84 Units
Interpretation:

The breakeven analysis revealed that the there is a gradual increase in units to reach
break even point in the years 2003, 2004 and in 2005 by 0.23, 0.25, 0.33. From then
there is a sudden increase in the units to break even in the years 2006 and 2007 to 0.82
and 0.84 which shows that the difference to meet the total revenue by total expenditure is
increasing
GRAPH SHOWING BEP IN UNITS

Graph NO - 23
BEP IN UNITS
0.82 0.84
0.9
0.8
0.7
0.6
0.5 0.33
BEP IN UNITS 0.25
0.4 0.23
BEP IN UN
0.3
0.2
0.1
0
2006-07 2005-06 2004-05 2003-04 2002-03
YEARS
Du Pont Analysis

The earning power of the firm may be defined as the overall profitability of an enterprise.
This ratio has two elements
3. profitability on sales reflected in the net profit margin
4. profitability of assets which is revealed by assets / investments turnover
TABLE SHOWING THE CALCULATIONS OF DU PONT ANALYSIS
TABLE NO – 4.32
FORMULA 2003 2004 2005 2006 2007

Gross profit 2121.58 3233.94 2828.64 2349.68 1560.82
Less: exps of selling
administrative with
interest
Less : Tax 1078.71 1236.82 799.76 872.37 1156.82
Earnings after tax 814.72 1854.22 1097.75 1365.87 1071.11
EAT / sales
EAT as a 228.15 142.90 213.13 111.44 (667.67)
percentage of sales 0.02 0.011 0.061 0.007 (0.03)
2.27% 1.12% 6.11% 0.70% -3.94%
18000 GRAPH NO –.24

16000
GRAPH SHOWING INCREASE IN THE GROSS PROFIT OF
14000
THE COMPANY
12000
10000
8000 GROSS PROFIT
6000
4000
2000
0 Christ College Pondicherry University Twinning Program 94
2003 2003 2004 2005 2006 2007
Interpretation
The Du Pont analysis for the years 2003 to 2007 revealed the fact that though the
gross profit of the company has increased by 9941.43, 12607.65, 15740.78, 16889.82 and
by 17153.63
GRAPH NO – .25
GRAPH SHOWING EARNINGS AFTER TAX
-2
-4
2003 2004 2005 2006 2007
Interpretation

Earnings after tax has decreased in the years 2004, 2006, and in the year 2007
the company has negative earnings or it has suffered loss of (667.67). the percentage of
EAT to sales have subjected to the fluctuations of 2.27%,1.12%,6.11%,0.70% and finally
by -3.94% respectively from the years 2003 to 2007.
CHAPTER - 5
SUMMARY AND FINDINGS
Findings:
After the detailed analysis of the financial statement of Bell Ceramics Limited for
the period of five years from 2002 – 2003 to 2006 – 2007 by financial analysis it is found
that
• It is clearly understood through the comparative balance sheet, common size
balance sheet and in trend analysis of all 5 years that the company’s financial
position is not favorable there is a drastic decrease in the sources of funds and
increase in the Application of funds.
• It is evidentiary through financial analysis that the current ratio of the company is
not in favor of the company. There has been a drastic decrease in the ratio through
the year. But it has increased during the year but still it not beyond the ideal ratio.
• Quick ratio of the company is not in favor of the company. However, steps have
to be taken to decrease in quick assets position and increase in the quick liability.
• The investment in fixed asset has shown the increasing trend from 2003 – 2004 to
2005 – 2006. But it has decreased in the year 2002 – 2003.

• The trend in current assets has been fluctuating from year to year.
• Long-term loan funds have increased in the year 2004 – 2005 to 2005-2006 but
decreased in the year 2002-2003.
• The current liability has decreased in the year 2002-03 it is a good sign to the
company.
• The sales have increased tremendously through the year, which concludes that the
products produced by the company are finding a good market in the industry. The
overall income level of the company shows an increase trend, which shows
company’s progress.
• Depreciation shows a decreasing trend, which is a good sign, which shows the
effective maintenance of assets by the company.
• The company’s share capital remains unchanged in the previous year.
• The company has created deferred tax assets on the unabsorbed depreciation and
carries forward losses as calculated under the provisions of the income tax Act
1961.
• The Company follows the mercantile system of accounting and recognizes
income and expenditure on accrual basis.
• Fixed assets are valued at cost of acquisition inclusive of inward freight, duties
and taxes and direct expenses related to acquisition.
• Depreciation is charged on straight-line basis at the rate specified in scheduled
XIV of the Companies Act 1956.

• It is observed that the units to reach the break even have increased to gradually as
the expenses of production increased.
• There is an excess of out flow funds from business by way of purchase of fixed
assets.
CHAPTER-6
SUGGESTIONS
By the analysis and interpretation of financial statement of Bell Ceramics
Limited, the following suggestions can be put forth:
• Enough Reserves and surplus position should be maintained to face the
uncertainty of the business position. The loans borrowed should be efficiently
utilized to invest on assets.
• The investment in current assets should be managed at optimum level of
production. Surplus current assets can be deployed as long-term investment to
have continuous profit growth. The current liability position should be maintained
to cope with efficient management of the outside liabilities.
• The company should strive to manage the cost of goods sold, though it increases
with the increase in production and due to changes in price levels of input the
company should try to minimize the cost to have efficient control over costs.

• The company should use the shareholder’s funds efficiently, instead of going for
loans.
• The operating expenses should be minimized to the possible extent with efficient
budgetary control.
• Through reduction on cost of production, company can gain huge profit The
company should go for economic purchasing to reduce the cost of production and
sold goods
CHAPTER – 7
CONCLUSION
Various Techniques are used in analysis of the financial data to emphasis. The
comparative and relative importance’s of the data presented and evaluates the position of
company. The Techniques of financial analysis are intended to show the performance
analysis of the BELL CERAMICS Ltd.
The company should maintain some reserves to meet the uncertainty position,
should manage its investment in current assets and current liability position should be
maintained. The company should efficiently manage the cost of goods and manage
operating expenses through budgetary control.
Company should increase its source of funds and allocate the available resources
effectively among the different activities. The current ratio of the company is not in favor

of the company in order to maintain stability in the current ratio the company must
implement necessary steps to revive the company current ratio.
The company is increasing its investment in fixed assets from year to year and its current
assets trend is also fluctuating from time to time, hence the company should make
efficient investment in both the fixed assets and current assets and monitor them
effectively to ensure the good and favorable increase in the returns.
As the company sales are increasing tremendously the company has to take all the
necessary steps to maintain its increasing sales by adapting the sales strategy, proper
advertisement, services to customers and satisfying varying needs of the customers.
Company is maintaining the assets in a proper way leading to the decrease in the amount
of depreciation which is positive sign for the progress in the asset management of the
company. The company has to increase its efficiency in the maintenance and the proper
usage. And The Company follows the mercantile system of accounting and recognizes
income and expenditure on accrual basis.
There is an excess of outflow of funds in the purchase of fixed assets, the company has to
control its cash flow in the fixed assets in a proper way and should maintain proper cash
balance. As the sales of the company are increasing it is showing the increase in the break
even point of the company. This trend of the company shows that there is a drastic
increase in the progress of the company performance.


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FINANCIAL ANALYSIS AND INTERPRETATION

economy and is the life-blood of economy activity.

Financial management refers to those specialized managerial activities or efforts which

by a business enterprises, determination of the source suitable under the given

According to Howard and Upton.” Financial Management is the application of the

the application of general management principles to a particular financial operation”.

Financial management is a specialized function directly associated with top

capacity of ‘staff’ in the overall administration of the company.

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Characteristics of Financial management

• Financial management is regarded as a specialized managerial discipline

concerned with planning, procuring, utilization and controlling of the financial

recourses of the business enterprises.

• The scope as well as the subject –matter of financial management is widened.

• Financial management is highly centralized function.

• Financial management is intimately interwoven into the fabric of management

• Financial management interacts with other disciplines like economics,

• The main objective of financial management is not only profit-extracting but

• Financial management is applicable to any kind of undertaking or

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Objectives of financial management:

1. Maintenance of adequate liquid assets in a firm:

The Objective of liquidity implies that financial management should ensure

2. Maximization of profit or profit maximization:

conditions for labour and reasonable price to consumers.

3. Maximization of wealth or wealth maximization.

Maximization of wealth means maximization of wealth of the company

Christ College Pondicherry University Twinning Program 3

1. Ensuring maximum operational efficiency through planning, directing and controlling

2. Enforcing financial discipline in the organization in the use of financial resources

3. Building up of adequate reserves for financing growth and expansion.

4. Ensuring fair returns to shareholders on their fair investment.

Functions of financial manager

the finance functions. The main functions are

• Estimation of the financial management.

• Selection of right source of funds.

• Analysis and interpretation of financial performance.

Christ College Pondicherry University Twinning Program 4

• Profit planning and control.

• Marinating liquidity and wealth maximization

of the firm’s financial resources. The subject of financial management is of immense

interest to both academicians and practicing managers. It is of great interest to

those decisions skillfully.

Tools and Techniques of Financial management

which no answers will be available in the financial statements.

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financial statements which would facilitate vital decisions to be taken, financial

statements must be analyzed and interpreted.

the financial statements.

It refers to an assessment of the viability, stability and profitability of a business, sub-

on these reports, management may:

• Continue or discontinue its main operation or part of its business;

• Make or purchase certain materials in the manufacture of its product;

• Acquire or rent/lease certain machineries and equipments in the production of its

• Other decisions that allow management to make an informed selection on various

alternatives in the conduct of its business.

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Financial analysts often assess the firm's:

term. A company's degree of profitability is usually based on the income statement,

which reports on the company's results of operations;

condition of a business as of a given point in time.

financial and non-financial indicators.