Beruflich Dokumente
Kultur Dokumente
PROJECT REPORT
ON
FOR
KALYANI STEELS LTD., PUNE
SUBMITTED TO
UNIVERSITY OF PUNE
IN PARTIAL FULFILMENT OF TWO YEARS FULL TIME COURSE
MASTERS IN BUSINESS ADMINISTRATION(MBA)
SUBMITTED BY
KETAN P. SHETTI
(BATCH 2005-07)
1
To Whomsoever It May Concern
He has worked under our guidance and directions. His work is found to be
good and complete in all respects. During the period we found him hard
working, sincere and loyal. We wish him all the best for his future.
2
ACKNOWLEDGEMENT
I wish to express my sincere thanks to our Director Dr. Sharad Joshi and my
project guide Prof Mahesh Halale for providing me valuable guidance & inputs which
helped me to complete this project in true sense.
I also extend my thanks to all the staff of Finance department of Kalyani Steels
Ltd. for their support, which helped me a lot in completing the project.
Lastly my ingenious thanks to all my colleagues and friends for their kind co-
operation and help.
Ketan Shetti
(MBA-II)
3
CONTENTS
Sr. No. Topic Page No.
1. EXECUTIVE SUMMARY 1
3. COMPANY PROFILE 3
4. THEORETICAL BACKGROUND 14
5. RESEARCH METHODOLOGY 26
7. CONCLUSION 46
8. BIBLIOGRAPHY 47
9. ANNEXURE 1 48
10. ANNEXURE 2 49
4
EXECUTIVE SUMMARY
This project named An Analysis and Comparative Study of Financial Statements was
carried out at Kalyani Steels Ltd to analyze and understand financial feasibility of the
company in terms of liquidity, turnover, solvency, profitability etc. by using Ratio
Analysis technique.
The Ratio Analysis technique is the process of identifying the financial strength and
weakness of the firm by properly establishing relationship between the items of the
balance-sheet and the profit and loss account because the figures recorded in the
financial statements are absolutely incapable of revealing the soundness or otherwise of
a Company s financial position or performance. Thus the technique of Ratio Analysis
has been used which is supposed to be powerful tool for financial statements.
In Ratio Analysis technique a ratio is used as a benchmark for evaluating the financial
position and the performance of the firm.
5
OBJECTIVES
6
COMPANY PROFILE
The Kalyani Group is one of the leading Industrial Houses in India, having core
businesses in Steel and Steel based products, Forgings and Automotive Components.
The Group s Annual Turnover is over USD 1.5 billion and has joint ventures with some
of the world leaders such as Meritor, USA, Carpenter Technology Corporation, USA,
Hayes Lemmerz, Germany, Faw Corporation, China etc.
Bharat Forge Limited, the flagship company of the group is the 2nd largest forging
company in the world and the largest domestic player with a share of 80% in axle
components and engine components.
Bharat Forge Ltd., the flagship company of the US $ 1.5 billion Kalyani Group, is a
'Full Service Supplier' of engine & chassis components. It is the largest exporter of
auto components from India and leading chassis component manufacturer in the world.
With manufacturing facilities spread over 9 locations and 6 countries - two in India,
three in Germany, one in Sweden, one in Scotland, one in North America and one in
China, the company manufactures a wide range of safety and critical components for
passenger cars, commercial vehicles and diesel engines. The company also
manufactures specialized components for the railway, construction equipment, oil &
gas and other industries. It is capable of producing large volume parts in both steel and
aluminium.
Bharat Forge has built up a strong capability in design and engineering, including a full
fledged product testing and validation facility, which gives Bharat Forge a Full Service
Supply Capability - from product conceptualization to designing to manufacturing and
product testing & validation
7
Apart from Bharat Forge Ltd., the other major companies in the group are Kalyani
Steels, Kalyani Carpenter Special Steels, Kalyani Lemmerz, Automotive Axles,
Kalyani Thermal Systems, BFL Utilities, Kalyani Net Ventures, Epicenter and Synise
Technologies.
The Kalyani Group's vertical integration, with upstream steel making and downstream
machining coupled with international competitiveness at every step, benefits our
customers in terms of :
Apart from Kalyani Steels, the 2000 cr. Pune based Kalyani Group encompasses
Bharat Forge - The flagship company of the group was established in 1961.
It is the largest forging company in Asia and one of the three largest and most
technologically advanced commercial forge shops in the world. Bharat Forge
manufactures a wide range of forgings and machined components for automotives,
diesel engines, railways, earthmoving, cement, sugar, steel, coal, ship building and
oilfield industries.
Kalyani Brakes Ltd. - Established in 1982, when the automative revolution in India
was about to take-off, Kalyani Brakes Ltd.(KBX) is today, a leading manufacturer of
brakes in the country. Kalyani Brakes is a joint venture between Robert Bosch,
Germany- a Fortune 500 company, and world leader in brake systems, Nippon Air
Brake Co. Ltd. of Japan and the Kalyani Group.
Kalyani Lemmerz Ltd. - The Kalyani Group had promoted Kalyani Wheels as a part
of its diversification plan. At that time they had a collaboration with Lemmerz Werke,
Germany. Subsequently, Lemmerz Werke became a joint venture partner and the new
company was christened as Kalyani Lemmerz Ltd.(KLL). The company manufactures
wheel rims for utility vehicles, light and heavy commercial workers and tractors.
8
Kalyani Sharp India Ltd. - Was established in 1986 as a joint venture between Sharp
Corporation, Japan and the Kalyani Group. It is a leading manufacturer and exporter of
consumer electronic items from India.
Mr. B. N. Kalyani
Chairman, Kalyani Group
The corporate philosophy of the Chairman of the Kalyani Group, Mr. B.N.
Kalyani is, "To use our specialized skills and innovative technology to contribute to
the welfare of the society. It is our intention to grow with our employees and to aid and
encourage them to participate in our goals in order that they realize their full potential.
Our prosperity is linked to the prosperity of our customers".
Kalyani Steels Ltd. was established in 1973, to fulfill the in-house requirements of
forging quality steel of the Kalyani Group. It's corporate office is in Pune. Over the
years, Kalyani Steels has been continuously upgrading its technology and
infrastructure. The first such technology update was implemented through a technology
tie-up with AICHI Steels of Japan.
9
Although the forging industry in India is the primary market for the company's
products, manufacturers of various components for commercial vehicles, two-wheelers,
diesel engines, bearings, tractors, turbines, railways and seamless tubes (oil sector) also
form a substantial part of the company's clientele.
In 1997, the Kalyani Group entered into product sharing with Mukund Ltd. to set up a
new plant in the Hospet-Bellary region of Karnataka state.
At present the products for the KSL are manufactured at its Hospet plant which
employs a new facility using less power intensive mini-blast furnace route, provided by
Tata Korf-Korf Technology of Brazil. In 1999, the KSL plant in Pune was hived off to
KCSSL (Kalyani Carpenter Special Steels Ltd.).
A company that uses blast furnaces for producing steel has set up the plant for captive
consumption by using blast furnace gas generated by its mini blast furnaces. The virtue
of heat content is utilized to generate electric power.
The projected power requirement of the integrated steel plant is more than 120 Million
units per annum. Setting up our own power plant gives us the advantage to be in a
position to control costs and generate power economically. It will reduce reliance on
the state electricity grid as well as bring down the input cost of steel production and
increase the competitiveness of the end products.
10
The plant has been commissioned at Hospet and will generate power equivalent to
approximately 52 Million units per annum.
11
PRODUCTS
PRODUCTS
GRADES (As per Indian & Various International Standards) :
12
ANY OTHER SPECIAL GRADES OF STEEL
AS PER CUSTOMER'S REQUIREMENTS
SIZE RANGE
AS CAST PRODUCTS
BILLETS : 120 x 120 mm, 160 x 160 mm & 180 x 180 mm Squares
BLOOMS : 240 x 280 mm, 280 x 320 mm Rectangle
AS ROLLED PRODUCTS
STEELS GRADES
13
1045 CK45 EN43B S45C
LOW CARBON
CHROME+NICKEL MOLY 8620 En353,EN354 SNCM420H
STEEL
4320 17CrNiMO6 EN36C,EN
361,362,363
4140 42CrMO4
MEDIUM CARBON
SNCM431,SNCM439
CHROME+NICKEL+MOLY 4340 -- EN24
SNCM447
STEEL
14
SIZES :
15
KALYANI STEELS LTD FACILITIES:
16
- 1 No. x 2 Strand (Pomini Group)
Bloom/Round Italy
- Bloom Caster capable of
Casting Blooms & Rounds
10/18 M radius
- 1 No. x 3 Strand Billet
Caster -9/16 M radius
- Fully Shrouded Casting - Low pick up of N2, O2
- Combi Electro Magnetic - Reduced level of
Stirrer (Mould & Strand) segregation & more
equiaxed grains
- Automatic Mould Level - Avoids entrapment of
Control Mould Flux resulting in
lower macro inclusions
- T-Shape Tundish - Reduction in inclusions
due to improved floatation
17
THEORITICAL BACKGROUND
MEANING OF RATIO: -
A ratio is a simple arithmetical expression of the relationship of one number to
another. According to Accountants Handbook by Wixon Kell and Bedford, a ratio is
an expression of the quantitative relationship between two numbers . In short it can be
defined as the indicated quotient of two mathematical expressions. The ratios can be
expressed in 1) Percentages 2) fraction and 3) Proportion of numbers.
18
INTERPRETATION OF RATIOS: -
1. Intra firm comparison: - Here the ratios of one organization may be compared
with the ratios of the same organization for the various years either the previous
years or the future years.
2. Inter firm comparison: - The ratios of one organization may be compared with
the ratios of the other organization in the same industry and such comparison
will be meaningful as the various organization, in the same industry may be
facing similar kinds of financial problems.
3. The ratios of an organization may be compared with some standards, which
may be supposed to be the thumb-rule for the evaluation of the performance.
CLASIFICATION OF RATIOS: -
The ratios may be classified under various ways, which may use various criterions
to do the same. However for the convenience purpose, the ratios are classified under
following groups.
1. Liquidity group
2. Turnover group
3. Profitability group
4. Solvency group and
5. Miscellaneous group
19
LIQUIDITY GROUP:
The ratios computed under this group indicate the short-term position of the
organization and also indicate the efficiency with which the working capital is being
used. Commercial banks and short-term creditors may be basically interested in the
ratios falling under this group. Two most important ratios may be calculated under this
group.
1) Current Assets: -
It is calculate as, Current Assets
Current Liabilities
Current ratio indicates the backing available to current liabilities in the form of
current assets. In other words, higher current ratio indicates that there are sufficient
assets available with the organization, which can be converted in the form of cash. A
current ratio of 2:1 is supposed to be standard and ideal.
Here liquid assets include all assets except inventory and p/p exps and liquid
liabilities except overdraft or cash credit or o/s exps.
Liquid ratio indicates the backing available to liquid liabilities in the form of
liquid assets. The term liquid assets indicate the assets, which can be converted in the
form of cash without any reduction in the value. Almost immediately whereas the term
liquid liabilities which are required to be paid almost immediately. In other words, a
higher liquid ratio indicates that there are sufficient assets available with the
organization, which can be converted in the form of cash almost immediately to pay off
those liabilities, which are to be paid off almost immediately. As such higher the liquid
ratio better will be the situation. A liquid ratio of 1:1 is supposed to be standard and
ideal.
20
TURNOVER GROUP:
Ratios computed under this group indicate the efficiency of the organization to
use the various kinds of assets by converting them in the form of sales. Under this
group the following classification of ratios are made.
A high fixed assets turnover ratio indicates the capability of the organization to
achieve maximum sales with the minimum investment in fixed assets. It indicates that
the fixed assets are turned over in the form of sales more number of times.
A high current assets turnover ratio indicates the capability of the organization
to achieve maximum sales with the maximum investment in current assets. It indicates
that the current assets are turned over in the form of sales more number of times.
21
It is calculated as, Cost of Goods Sold
Avg. Inventory
This ratio indicates the speed at which the sundry debtors are converted in
the form of cash. However the intention is not correctly achieved by making the
calculation in this way. As such this ratio is normally supported by the calculation
period, which is calculated as below.
22
6) Capital Turnover Ratio: -
It is calculated as, Sales
Capital Employed
This ratio indicates the efficiency of the organization with which the capital
employed is being utilized. A high capital turnover ratio indicates the capability of the
organization to achieve maximum sales with minimum amount of capital employed. As
such higher the capital turnover better will be the situation.
SOLVENCY GROUP
Ratios computed under this group indicate the long-term financial prospects
of the company. The shareholders debenture holders and other lenders of long-term
finance/ term loan may be basically under this group. Following ratios may be
computed under this group.
1) Debt-equity Ratio: -
It is calculated as, External Liabilities .
Shareholders Fund
23
2) Proprietary Ratio: -
It is calculated as, Total Assets
Owners Fund
This ratio indicates the extent to which the owner s funds are sunk in
different kinds of assets. If the owner s fund exceeds fixed assets, it indicates that a part
owners fund invested in the current assets also and if owners fund are less than fixed
assets it indicates that the creditors finance a part of fixed assets either by long term or
short term.
This ratio indicates the extent to which the long-term funds are sunk in
fixed assets.
24
PROFITABILITY GROUP
The gross profit ratio indicates the relation between production cost
and sales and efficiency with which the goods are produced or purchased. A high gross
profit ratio may indicate that the organization is able to produce or purchase at a
relatively lower cost.
The net profit ratio indicates that portion of sales available to the owners
after the consideration of all types of expenses and costs either operating or non-
operating or normal or abnormal. A high net profit ratio indicates higher profitability of
the business.
3) Operating Ratio: -
It is calculated as, Mfg COGS + operating exps*100
Net Sales
This ratio indicates the percentage of net sales, which is absorbed by the
operating cost. A high operating ratio indicates that only a small margin of sales is
available to meet the expenses in the form of interest, dividend and operating exps. As
such low operating ratio will always be desirable.
25
OVERALL PROFITABILITY GROUP
1) Return on Assets: -
It is calculated as, Net Profit *100
Assets
26
MISCELLANEOUS GROUP
A high capital-gearing ratio indicates that in the capital structure, fixed income bearing
securities are more in comparison to the equity capital in that case the Company is said
to be highly geared. On the other hand, if fixed income-bearing securities are less as
compared to equity capital the company is said to be lowly geared.
27
ADVANTAGES OF RATIOS
1. Ratios simplify the comprehension of financial statements. They tell the whole
story as a heap of financial data is condensed in them. They indicate the
changes in the financial condition of the business.
2. They act as an index of the efficiency of enterprise. As such they serve as an
instrument of management control. It is an instrument for diagnosis of the
financial health of an enterprise. The efficiency of the various individual units
similarly situated can be judged through inter-firm comparisons.
3. The ratio analysis can be if invaluable aid to management in the discharge of its
basic functions of forecasting, planning, co-ordination, communication and
control. A study of the trend of strategic ratio may help the management in this
respect. Past ratios indicate trends in cost, sales, profit and other relevant facts.
4. The ratio analysis provides data for inter-firm comparison or intra-firm
comparison. Comparison cannot be made with absolute figures. Net profit of
one firm cannot be compared with the net profit of the other firm. But the
percentages of net profits can be compared to evaluate the performance.
Similarly performance and efficiency of different departments in the same firm
can be compared with the help of ratios.
5. Investment decisions can at times be based on the conditions revealed by certain
ratios.
6. They make it possible to estimate the other figure when one figure is known.
28
LIMITITIONS OF RATIO ANALYSIS
Though ratio analysis technique has got number of advantages, it attracts equal
number of disadvantages too. Some of important advantages are as follows:
Thus the ratio analysis points out the financial condition of business whether
it is very strong, good, questionable or poor and enables the management to take
necessary steps.
29
RESEARCH METHODOLOGY
1) DATA COLLECTION
a) Primary Data: -
Primary data related to the project was collected from the discussion and
interaction with the senior employees and executives in the organization from
Accounts and Finance department.
b) Secondary Data: -
Secondary data was collected from the documents, which were in printed
forms like annual reports, pamphlets, reference books based on Financial
Management and through websites.
The methodology opted for carrying out project was by way of collection of data
from the company s annual reports for the past three years i.e. from 2003-2004 to
2005-2006, for the calculation of ratios. The theory related to ratios was gathered
from various financial management books, which served the purpose of calculation
and analysis of ratios. Further based on the above statements ratios related to
liquidity, turnover, solvency, profitability and over profitability groups and
miscellaneous groups have been calculated and interpreted in an intra firm
comparison method. Similarly the ratios have been presented in graphical format to
have clear understanding of it during three financial years and changes in it.
30
RATIO ANALYSIS
LIQUIDITY GROUP
1) Current Ratio: -
Current Ratio
2 1.82
1.56
1.45
1.5
0.5
0
2003-2004 2004-2005 2005-2006
Financial year
Significance: -
This ratio is calculated for knowing short term solvency of the organization.
This ratio indicates the solvency of the business i.e. ability to meet the liabilities of
the business as and when they fall due. The Current Assets are the sources from
which the current liabilities are to be met. Certain authorities have suggested that in
order to ensure solvency of a concern current assets should be twice the current
liabilities and therefore this ratio is known as 2:1 ratio . However it depends upon
31
the nature of industry. The standard Current Ratio applicable to the Indian
industries is 1.33:1.
Here the Current Ratio of Kalyani Steels Ltd indicates that it has got
sufficient assets to pay off short term liabilities as and when they fall due. The
company has maintained its short term solvency through out the years and it is
improving its short term solvency status which is appreciable.
1.4
1.35
1.35
1.3
1.24
1.25
1.2 1.17
1.15
1.1
1.05
2003-2004 2004-2005 2005-2006
Financial Years
Significance: -
This ratio serves as a realistic guide to the short term solvency of the
company. It is a measure of the extent to which liquid resources are immediately
available to meet current obligation. In so far as it eliminates inventories as part of
32
current ratio, this is a more rigorous test of liquidity than the Current Asset Ratio
and when used in conjunction with it, gives a better picture of the firms ability to
meet its short term debts out of its short term assets. An Acid Test Ratio of 1:1 is
considered to be ideal and standard.
Here the Acid Ratios of Kalyani Steels Ltd through out the years considered
indicates that it has adequate assets which can be converted in the form of cash
almost immediately to pay off those liabilities which are to be paid off immediately.
It must be remembered that the company is improving its Acid Test Ratio year by
year at a constant rate which is appreciable as such higher the liquid ratio better the
situation
TURNOVER GROUP
5
4.31
4
3.12
3 2.65
0
2003-2004 2004-2005 2005-2006
Financial Years
33
Significance:-
This ratio measures the efficiency in the utilization of fixed assets. This ratio
indicates whether the fixed assets are being fully utilized. It is an important measure
of the efficient and profit earning capacity of the business. Normally standard ratio
is taken as five times.
The financial year 2003-04 had not so good fixed asset turnover ratio. The
financial year 2004-05 had an appreciable fixed assets turnover ratio indicating
fixed assets are turned over more number of times. This was due to around 72%
growth in sales. This shows better asset management policy as compared to the past
year. The same ratio came down to 3.12 times in the financial year 2005-06 due to
fall in sales by around 31.48%.
10
8.63 8.48
8
4 3.33
0
2003-2004 2004-2005 2005-2006
Financial Years
34
Significance: -
3.5 3.08
3 2.69
2.5
2
1.5
1.5
1
0.5
0
2003-2004 2004-2005 2005-2006
Financial Years
35
Significance: -
2.5 2.25
2
1.52
1.5 1.29
0.5
0
2003-2004 2004-2005 2005-2006
Financial Years
Significance: -
36
This ratio indicates whether capital employed is turned over in the form of
sales more number of times. As such higher the capital turnover better will be
situation.
The financial year 2004-05 had acceptable ratio because it had better sales as
compared to other two years. Due to addition or purchase of fixed assets and heavy
investments in working capital due to rise in activity, the capital turnover ratio for
2005-06 came down as compared previous years.
16 13.99
14
12
10
7.45
8
6
4 1.82
2
0
2003-2004 2004-2005 2005-2006
Financial Years
Significance: -
37
A low inventory turnover may reflect dull business, overinvestment in
inventory or accumulation of absolute and unsaleable goods. A high inventory
turnover indicates relatively lower amount of working capital locked in inventories.
The financial year 2003-04 had excellent inventory turnover ratio locking up
smaller part of funds in inventory. The company had low inventory turnover ratio
for the year 2004-05 thus indicating over investment in inventory but it has
improved in the financial year 2006 indicating less investment in inventory.
SOLVENCY GROUP
1) Debt-Equity Ratio: -
Debt-Equity Ratio
1.6 1.39
1.4 1.24
1.2 1.07
1
0.8
0.6
0.4
0.2
0
2003-2004 2004-2005 2005-2006
Financial Years
38
Significance: -
2) Proprietary Ratio: -
39
Propriotary Ratio
70 61.38
56.93
60 51
50
Percentage
40
30
20
10
0
2003-2004 2004-2005 2005-2006
Financial Years
Significance: -
40
3) Capital Employed Ratio:-
70
57.54
60 52.27
50 41.39
Percentage
40
30
20
10
0
2003-2004 2004-2005 2005-2006
Financial Ratio
Significance: -
Normally a proprietor should provide all the funds required to purchase fixed
assets. If the capital employed ratio exceeds 100%, it indicates that the company
has used short-term funds for acquiring fixed assets, which policy is not desirable.
When the amount of proprietor funds exceeds the value of fixed assets i.e when the
percentage is less that 100, a part of the net working capital is supplied by the
shareholders, provided that there are no other non-current assets. Though it is not
possible to lay down a rigid standard as regards the percentage of capital which
should be invested in fixed assets in each industry there always is a maxim which
should not be exceeded so that the harmony among the fixed assets, debtors and
stock is not disturbed. The ratio should generally be 65%.
41
It should be remembered that all of the financial years studied had cap
employed ratio below 65% which also suggest that the company had equally funded
for working capital for current assets through long term funds which has been
accepted principle of financial management.
PROFITABILITY RATIOS
40 36.06
35
30 27
24.41
Percentage
25
20
15
10
5
0
2003-2004 2004-2005 2005-2006
Financial Years
Significance: -
This ratio indicates the degree to which selling prices of goods per unit may
decline without resulting in losses on operations for the firm.
42
A high gross profit ratio as compared with that of the other firm in the same
industry implied that the firm in question produces its products at lower cost. It is a
sign of good management.
A low gross profit ratio may indicate unfavorable purchasing and make-up
policies, the inability of management to develop sales volume, theft, damage, bad
maintenance, market reduction in selling prices not accompanied by proportionate
decrease in the cost of goods etc.
The company is growing at a constant rate as far as gross profit is concerned
which is appreciable indicating efficiency in production of goods at relatively lower
costs.
18 17.07
16
14
Percentage
12
10
8
6 4.98
4 2.38
2
0
2003-2004 2004-2005 2005-2006
Financial Years
43
Significance: -
This ratio differs from the ratio of operating profits to net sales in as much as it
is calculated after adding non-operating incomes, like interest, dividends on
investments etc to operating profits and deducting non-operating expenses such as
loss on sale of old assets, provisions for legal damage etc. from such profits.
The ratio is widely used as a measure of over-all profitability and is very
useful to the proprietors. Reading along with the operating ratio it gives an idea of
the efficiency as well as profitability of the business to a limited extent.
The company has improved its net profits by 6.17 times in the year 2005-06
from the 2003-04 which is appreciable which shows considerable proportion of net
sales to the owners and shareholders after all costs, charges and expenses including
income tax, have been deducted.
44
Return on Asset Ratio
20
17.33
15
Percentage
10 8.95
5 3.19
0
2003-2004 2004-2005 2005-2006
Financial Years
Significance:-
The ratio is a measure of the return on the total resources of the business
enterprise. It shows how efficiently management has used the funds provided be the
creditors and the owners.
It can be referred that the financial year 2003-04 had not so good ratio because
of high operating expenses. However the company is improving year by year at a
constant rate. The financial year 2005-06 had 17.33% as returns on its various
resources which is appreciable.
45
Return on Capital Employed
30
23.86
Percentage 25
20
13.7
15
10
3.65
5
0
2003-2004 2004-2005 2005-2006
Financial years
Significance: -
46
Return on shareholders Fund
20 17.54
14.22
15
Percentage
10
5.2
5
0
2003-2004 2004-2005 2005-2006
Financial Years
Significance:-
The ratio shows how well the firm used the resources of the owner. This ratio
is a measure of the profitableness of an enterprise. The realization of a satisfactory
net income is the major objective is being achieved.
The financial year 2003-04 had low returns on shareholders fund as compared
to next financial years. However the management of the company is improving in
utilizing the resources of the owner in efficient way.
MISCELLANEOUS GROUP
47
Capital Gearing Ratio
4 3.52
3.5 3.29
3
2.5 2.04
2
1.5
1
0.5
0
2003-2004 2004-2005 2005-2006
Financial Years
Significance: -
48
NOTES FORMING PART OF THE PROJECT REPORT
1. Debtors for sale of assets has not been considered which has been duly
mentioned in the schedules.
2. While considering long term loans for capital gearing ratio interest accrued on
loans has not been considered.
3. While considering net sales, returns from sales has been deducted from gross
sales.
4. Gross profit is calculated by deducting manufacturing expenses from Net Sales.
49
CONCLUSION
The company has strong short term liquidity position as both the liquidity ratios
are favorable and appreciable which concludes that company has got sufficient
assets to pay off short term debts as and when they fall due.
The company had excellent turnover of various assets in the year 2004-2005 as
the sales rose by 72% indicating better assets management policy. The assets
were efficiently employed to generate maximum sales. However for the year
2005-2006 the turnover ratios suffered because of fall in sales by 31.48% and
also there was rise in activity as compared to past years. For inventory turnover
the year 2004-2005 was crucial as it had minimum investment in different
inventories avoiding thus blockage of funds.
The company has strong solvency position as all the solvency ratios are
favorable. Debt-equity ratio is favorable indicating equal share of owners and
creditors. The working capital ratio indicates the company has funded for
working capital through long term funds which represents accepted finance
policy. The proprietary ratio indicates around 60% of assets are financed by
owners fund which indicates reasonable creditworthiness to the company.
The company has got excellent gross profit ratio and the trend is rising which is
appreciable indicating efficiency in production cost. The net profit for the year
2005-2006 is excellent and it is 6.17 times past year indicating reduction in
operating expenses and large proportion of net sales available to the
shareholders of company.
The company has excellent overall profitability ratios indicating effective use of
funds provided be shareholders and creditors.
According to the capital gearing ratio the company is geared by including fixed
income bearing securities with an intention to increase the income of
shareholders.
50
BIBLIOGRAPHY
www.kalyanisteels.com
www.bharatforge.com
www.google.com
51
PROFIT & LOSS ACCOUNT FOR THE LAST 3 YEARS
INCOME
Divestment of interest:
EXPENDITURE
Depn & Write Offs 181608637 4718683795 194931431 7067137890 152545583 4536946161
52
CONSOLIDATED BALANCE SHEET FOR THE LAST 3 YEARS
Less: Current
Liabilities &
Provisions
a) Liabilities 1833921502 1627367457 1244441874
b) Provisions 323728010 158229081 32183149
2157649512 1785596538 1276625023
Net Current Assets 1830979528 1181815262 769717345
Total 4734748069 4093831680 3869855713
53
54
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