A PROJECT REPORT ON RATIO ANALYSIS FOR STEELCO GUJARAT LIMITED

SUBMITTED TO C.K.SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE DEGREE OF AWARD FOR MASTER OF BUSINESS ADMINISTRATION UNDER GUJARAT TECHNOLOGICAL UNIVERSITY UNDER THE GUIDENCE OF
FACULTY GUIDE Mrs, Neelu NakraRMAR COMPANY GUIDE Mr, Bhagvat

SUBMITTED BY PARMAR VIPUL ENROLLMENT NO:107050592017

ACKNOWLEGEMENT

I would like to thank Mr. MANISH C. SHAH training officer at learning centre for providing me an opportunity to under go training in STEELCO GUJARAT LTD. I would like to thanks to Mr. BHAGVAT training manager and also Mr. GHANSHYAM and MIRALI UPADHYAY for providing me necessary guidance whenever needed any suggestion and also given me continues encouragement. I am thanking full to Mrs. Neelu Nakra who is my institute guide (Faculty of MBA) and also all staff.

PREFACE

The objective of university education is to teach students learning new things. The facts were release during the industrial training at Steelco Gujarat Ltd. The critical knowledge of any subject is important but without subject it turns out to be useless. Thus an industrial training provides great opportunities for a study to get a practical view of the various subjects in real life situation. Training provides opportunity to know and learn many aspects or facts the real world and co related theoretical know. I have selected Steelco Gujaral Ltd to training which manufactures Cold Rolled Steel coils/sheets and Hor deep galvanized steel coils and plain study various function of a corporate house. The training provides a new platform to management student to prepare some ground work.

DECLARATION I Vipul Parmar here by declared that the report for Summer Training Project entitle RATIO ANALYSIS is a result of my own work and my indebtedness to other work publications, preferences, If any, have been duly acknowledge.

Place: Vadodara Date:

Signature V.N.Parmar

INDEX
Sr. NO 1 2 3 4 PARTICULAR INTRODUCTIN OF COMPANY BOARD OF DIRECTORS COMPANY PROFILE PROCESS OF PRODUCTION ORGANISATIONAL CHART CERTIFICATE OF MARIT USES OF PRODUCT FINANCIAL MANAGEMENT RESEARCH METHODOLOGY RATIO ANANLYSIS ADVANTAGES AN LIMITATION CONCLUSION BIBLIOGRAPHY PAGE NO 6 7 8 12 13 14 15 16 19 21 51 53 54

5 6 7 8 9 10 11 12 13

INTRODUCTION OF COMPANY

Steelco Gujarat Ltd (SGL) is promoted by Chandarias of the comcraft international Business group (a leading NRI group) which is $2Billion conglomerate with more than 200 units in & around 40 countries across the globe. The chandarias have business interests in steel, aluminum, plastics and chemical and electronics in Europe, America, Africa, Australia and south East Asia. The chandarias have set up steel units with annual processing capacity of 1 Million tones in various countries, including Kenya and Nigeria. SGL is one of its kind engineering industries in Gujarat with ISO-9001 and ISO-14001 certification from SGS international certification services India having a strong committed work force of about 350 employees. This 500crore industry located at Palej, dist: Bharuch in Gujarat. The plant is equipped with latest in cold rolling technology i.e. super efficient 6 hi H C combination reversing cold rolling mill from Hitachi Japan with the capacity to produce 200000 mt per annum & 70000 mt per annum installed capacity of Hot dipped Galvanized flat products. The end users of our products are automobile electrical goods engineering bicycle, white goods industry. The products of SGL are exported to over 50 country and enjoyed highest reputation in term of quality and timely deliveries to name few our products is exported to African countries, Nepal, Singapore, Bhutan, China Etc.

Board of Directors

Mr. R.P CHANDARIA

Mr. RASHMI CHANDARIA Mr. VIMAL CHANDARIA DR. R.S. MAMAK Mr. N.M. MOHNOT Mr. M.P. SINGH Mr. S.C SHETH Mr. J. MEHRA Mr. MAHENDRA LODHA Mr. P G R Prasad

Director Director Alternate Director Executive Vice Chairman Dy. Managing Director Director [Operations] Director Director Director Additional Director

REGISTERD OFFICE AND WORKS: Plot no.2 GIDC Estate, N.H. No. 8, Palej- 392220 Dist:Bharuch, Gujarat

Company profile
MISSION OF THE COMPANY

Future Plan of Action To leverage global technology, for serving our customers with superior coating systems built on innovative and superior products and world class solutions.

To strengthen our leadership in Industrial coatings and propel for leadership in Engeenering. & coatings, all to the delight of our stakeholders. .

VISSION OF THE COMPONY

To wish to go which will form a cornerstone of all our further growth.

To the fact that the values based proposition has to be ultimate foundation of our business.

Objectives Customer Satisfaction through:

Supply of consistent Quality Products Timely Deliveries Long Term Relationship

Brief Profile Steelco Gujarat Ltd. , an ISO 9001-2000 & ISO 14001 certified company is the Indian Chapter of the $2.5 billion Comcraft Group having presence in 45 countries across the globe with 250 establishments in Steel, Aluminum, Plastics, Chemicals, Non Ferrous metals, Engineering and Industrial components. Backed by Comcraft's managerial expertise and technological support from Hitachi of Japan, Steelco Gujarat Ltd., makers of paper thin steel stands as a force to reckon within the Indian scenario.

Situated at Palej, Dist. Bharuch, Gujarat, India. 50kms from Vadodara (Baroda) towards Mumbai on National Highway No.8. Commercial Production of Cold Rolled Steel products started in 1994 with capacity of 200,000 MT per annum. Forward integration by installing a Continuous Hot Dip Galvanizing Line in 1997 with capacity of 30,000 MT per annum.

Second Hot Dip Continuous Galvanizing line of capacity 50,000 MT per annum commissioned in March 2004.

Facilities Our Plant is equipped with the latest in Cold Rolling Technology - super efficient 6 Hi High Crown Combination Reversing Cold Rolling Mill from Hitachi, Japan to enable rolling of superior grade finished sheets and coils. Our 6 Hi HC Mill provides and ensures:

Excellent profile control Thermal Crown compensation for removing rolling defects and enhancing profile characteristics. Heavy Reduction Rolling with better grain orientation Reduced Edge Drop

Strengths Wide Product Range : Cold Rolled Sheets and Coils in the thickness range of 0.12mm to 2.5mm and width range of 100 mm to 1300mm. Galvanized Sheets (plain and corrugated) and Coils in the thickness range of 0.12 mm to 0.70 mm and width range of 600 mm to 1000mm. Wide Manufacturing Capability: Designed for today's specialized, diversified and sophisticated applications. Products as per BIS, JIS, ASTM, DIN, BS, EN and to any customer specification.

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Superior Dimensional Accuracy: Ensured by automatic gauge control system. Sophisticated Cut to Length and slitting lines. Excellent Surface Quality: Bright, Matt, Dull and Rough surfaces as per customer requirement. Loading Infrastructure: In house facility to stuff containers and thus ensuring safety of material.

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12

Organization Chart

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Uses of product Cold Rolled Steel products meets the customer specific requirements in wide application areas such as Automobile body and components, Refrigeration, Washing Machines, Electrical and Instrumentation panels, Furniture and Office Equipment, Precision tubes and metal containers, Railway coaches, Defense Components, Bicycle body and components, Coated Sheets, Galvanized Sheets and Roofing applications. Hot Dip Galvanized steel sheets and coils are used for roofing , ducting etc.

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FINANCIAL MANAGEMENT

Financial management means, it is the art and science of managing finance Money is the lifeblood of modern business. Money is required to purchase expensive on raw materials, labor and operational and administrative need of business. A human body with bones, flesh, skin, and different organs but without blood is of no use; similarly an organization or an industry win without finance is also useless. In simple words, financial management is concerned with the financial problems of the organization. In Indian rayone industries is a separate financial department where in all financial decision is taken by the experts, Indian rayone believes in maximum profit at least cost but the finances in such a way that the goal of business say, profit maximization is realized. Taking a commercial business as the most common organizational structure, the key objectives of financial management would be to: Create wealth of the business. Generate cash, and Provide an adequate return on investment.

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There are three key elements to the process of financial management.

Financial Planning. Management to need to ensure that enough funding is available at the right time to meet the need of the business. In the short term, funding may be needed to invest in equipment and stock, pay employees a fund sales made on credit. Financial Control: Financial control is a critically important activity to the help the business ensures that the business is meeting its objectives. Financial Decision- Making: A key financing decision is weather profits earned by the business should be retained rather than distributed to shareholders via dividends. If dividends are too high, the business may be starved of funding to reinvest in growing revenues and profit further.

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 There Are Three Major Decisions:

(1) Investment Decision:

Investment decision related to the selection of assets in which funds will be invested by the firm. The assets that can be acquired fall in two category (I) Long term assets, which yield return over period of time in future (II) Short term assets, which are convertible into cash within a year. This includes, (1) Capital budgeting (2) Working capital Management.

(2)

Finance Decision:

Finance decision is generally concerned with financing mix or capital structure or leverage. It is generally a decision made on the composition of capital with reference to equity share and debt.

(3)

Dividend Decision:

Dividend decision is generally related to distribution of dividend. Two alternatives are available in dealing with the profits of a firm. They can be distributed to the share holders as dividend as they can be retained in business itself. The decision as to which course should be followed depends largely on a significant element in dividend decision i.e. decide the dividend payout ratio (D/P ratio).

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RESERCH METHODOLOGY There are various research methods. Out of various research methodsours was descriptive research DESCRIPTIVE RESERCH Descriptive research studies are those studies which are concerned with describing the characteristics of a particular individual,or a group or a firm. In descriptive studies,the researcher must be able to define clearly,what he wants to mesure and must find accurate methods for measuringit along with a clear cut definition of population he wants In steelco.co.we discussed various aspects of ratio analysis with various employees of the organization so that we can understand how financial transaction are managed in steelco.co.And also we wanted to relate it with the theory we have studied up to now.For us here the more important aspect was the practical implication of the different ratios.How important they are in a firm.so from that perspective our research methodology was a descriptive one.

DATA COLLECTION The data which we have collected for making this project is combination of both primary and secondary data

PRIMARY DATA This data had been collected through meetings and discussion with various managers and employees of the finance department located at the administrative building. At the same time we had visited various departments for collection of data. The departments that had been visited are as follows: -buget department -main cash department -billing and operation department

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SECONDARY DATA Apart from primary data certain secondary data were required for this project .Following are sources of secondary data : -annual reports -cost and budget report -Debtors report -cash report -sales report The project titled RATI ANALYSIS OF STEELCO GUJARAT.LTD.required a comparative analysis of ratio analysis in the organization . The study will assist to evaluate the efficiency of the firm.

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RATIO ANALYSIS

A) PROFITABILITY RATIO:
1. Gross Profit Ratio: It is a ratio expressing the relationship between gross profits earned to net sales. It is a useful indication of profitability of business. This ratio is expressed in percentage.

Formula: GROSS PROFIT RATIO = Gross Profit / Sales 100

Calculation: Year 2009-10 2008-09 2007-08 Gross Profit 33.75 24.26 15.52 Sales 471.83 425.38 361.53 Ratio 7.15% 5.70% 4.29%

Chart: 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 7.15% 5.70% 4.29% 2009-10 2008-09 2007-08

Ratio

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Working Notes: (a)Gross profit = Net Sales + Closing Stock. (b)Net Sales = Sales Other Income.

Interpretation: -

Gross profit ratio of the company for the three years has decreased. 2009-2010 it was 7.15%, but in the 2008-2009 it was decreased by 5.70% and it was decreased by 4.29 % in the year 2007-2008 so, it is bed for the company.

2. Net Profit Ratio: Net profit is obtained interest and taxes are subtracting from the gross profit. The net profit margin ratio is measured by dividing profit after tax by sales. Net profit margin ratio establishes a relationship between net profit and sales and indicates management efficiency in manufacturing administering and selling the products. This ratio is over all measured of the firms liability to tern each profit margin may decline due to fall in sales price or increase in the cost of production.

Formula: NET PROFIT = Net Profit / Sales 100

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Calculation: -

Year 2009-10 2008-09 2007-08

Net profit (Rs. In Lakhs) 35.06 25.60 16.87

Net sales (Rs. In Lakhs) 471.83 452.38 361.53

Ratio 7.42% 6.02% 4.67%

Chart: 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 7.42% 6.02% 4.67% 2009-10 2008-09 2007-08

Ratio

Working Notes: (A) Net profit = Gross profit (Deprecation financial expenses + expenses + interest + tax + administration expenses + selling & distribution expenses.) (B)Net sales = Sales Other income.

Interpretation: Net profit ratio of the company was for the year 2009-10 it was 7.42%, which was decreased by 6.02% in year 2007-08, & in 2007-0 it was decreased by 6.73%, which is good for the company.
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3. Return on capital employed: It is an index of profitability of business and obtained by comparing net profit with capital employed. The ratio is normally expressed in the percentage. The turn capital employed includes share capital, reserves and long learns such as debentures.
Formula: -

RETURN ON CAPITAL-EMPLOYED = Profit / Capital employed Calculation: -

Year

P.B.I.T (Rs. In Lakhs) 35.06 25.60 16.87

2009-10 2008-09 2007-08

Capital Employed (Rs. In Lakhs) 221.80 204.88 198.94

Ratio

15.81% 12.50% 8.48%

Chart: 16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 15.81% 12.50% 8.48% 2009-10 2008-09 2007-08

Ratio

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Working Notes: (a) Profit = Profit Before Interest and Tax (PBIT). (b) Capital Employed = Fixed Assets+ Current Assets

Interpretation: -

Return on capital employed of the company was for the year 2007-08it was 8.48%, & which was increase to 12.50% in 2008-09- & in 2009-10it was increased to 15.81%, which is good for the company.

4. Return On Share Holders Fund: In order to judge the efficiency with which the proprietors funds are employed in the business, this ratio is ascertained. Proprietors equity or proprietors funds include share capital and reserves. It is of great practical importance to the prospective investors, as it enables the profitability of the company to be compared with that of the other company. It also indicates whether the return on proprietors funds is enough in relation to the risk that they undertake. This ratio shows what amount of dividend is likely to be received on shares. Naturally when return on shareholders fund is to be calculated, the profit should be after interest and tax i.e. PAT Profit After Tax.

Formula: 25

RETURN ON SHARE HOLDERS FUND = Profit/ Shareholders Fund 100

Calculation: -

Year

2009-10 2008-09 2007-08

Profit Share Ratio (Rs. In Lakhs) Holders Fund (Rs. In lakhs) 2.31 29.92 112.80% (10.09) 25.08 96.73% (13.87) 0.34 4564.71%

Chart: -

5000 4000 3000 2000 1000 0 RATIO 2009-10 2008-09 2007-08

5. Return on Equity

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shareholders fund : This ratio measures a relationship between net profit after interest & tax &preference dividend and equity share holders fund. The objective of computing this ratio is to find out how efficiently the funds supplied by the equity share holders have been used.

Formula: RETURN ON EQUITY SHARE HOLDERS FUND = Profit- Preference dividend/ Shareholders Fund 100

Calculation: Year Profit (Rs. In Lakhs) 1.14 (1.90) (2.50) SHARE HOLDERS FUND (Rs. In crores) 29.92 25.08 0.34 Ratio

2009-10 2008-09 2007-08

3.81% 7.57% 735.29%

Working Notes: -

(a) Profit = Profit After Tax (PAT). (b) Share Holders Fund = Share Capital + Reserves.

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Interpretation: Return on shareholders fund of the company was for the year 2005-06 it was 30.02%, which was increased to 36.56% in year 2006-07, & in 2007-08 it was increased to 40.41%, which is good for the company.

Chart: -

200.00% 0.00% -200.00% -400.00% -600.00% -800.00% Ratio -735.29% 3.81% -7.75% 2009-10 2008-09 2007-08

Working Notes: -

(A) Profit = Profit After Tax (PAT). (B) Share Holders Fund = Share Capital + Reserves.

Interpretation: Return on equity shareholders fund of the company was for the year 2007-08 it was -735.29%, which was Decreased to -7.57% in year 2008-09, & in 2009-10 it was increased to 3.81%, which is good for the company.

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6. Operating Ratio: It is a ratio showing relationship between cost goods sold plus operating expenses and net sales. It shows the efficiency the management. The higher the ratio, the less will be the margin available to proprietary. The ratio is also usually expressed as a percentage.

Formula: OPERATING RATIO = Cost of Goods Sold + Operating Expenses / Sales 100

Calculation: -

Year

2009-10 2008-09 2007-08

Cost Of Goods Sold (Rs. In Lakhs) -

Operating Expenses (Rs. In Lakhs) 66.07 59.74 30.37

Sales (Rs. In Lakhs)

Ratio

471.83 425.38 361.53

14% 14% 8%

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Chart: 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% Ratio 8.00% 2009-10 2008-09 2007-08 14.00%14.00%

Working Notes: -

(A) Cost of goods sold = Manufacturing expenses + Purchases of trading goods + Selling & distribution- Exp. (B) Operating Expenses = Financial Exp. + Administration Exp. + Selling Exp. (C) Net Sales = Sales Other income.

Interpretation: -

Operating ratio of the company was for the year 2007-08 it was 8%, which was incresed 14% in year 2008-09, & in 2009-10 it was same as to 14%, which is good for the company

7. Earning Per Share Ratio: This ratio shows the profitability available to the equity shareholders on per share. This is the most important ratio from point of view of outsiders. This ratio measures the net profit earned on per share.

Formula: EARNING PER SHARE RATIO = PAT Pref. Share Dividend / No. Of Equity Share
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Calculation: YEAR PAT (Rs. In Lakhs) NO. OF Equity Shares (Rs. Lakhs) 425.62 425.62 425.62 Ratio 1.13 1.89 2.50

2009-10 2008-09 2007-08

4.84 -8.08 -10.63

Chart: 1.5 1 0.5 0 -0.5 -1 -1.5 -2 -2.5 1.13 2009-10 2008-09 2007-08 -1.89 -2.5 RATIO

Working Notes: -

A) Profit after interest and tax preference share dividend B) No. of equity share

Interpretation: -

Earning per share ratio of the company was for the year 2007-08 it was- 2.50, which was decreased to in year 2008-09 -1.89 , & in 200910 it was increased to 1.13, which is good for the company.
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(B). LIQUIDITY RATIO

3. Current ratio:
Current ratio indicates the current position. Current ratio obtained by dividing current assets by the current liabilities. Current assets includes cash and those assets which can be converted in to cash with in a year such as marketable securities, debtors and inventories, short term bank loans, income tax liability and long debt maturing in the current year. The current ratio is a measure of the firms short-term solvency.

Formula: CURRENT RATIO = Current Assets / Current Liabilities

Calculation: Current Assets (Rs. Current Liabilities In Lakhs) (Rs. In Lakhs) 152.68 117.12 2007-08 136.36 107.74 2006-07 Year Ratio 1.30 1.27 0.99

2005-06

120.46

121.98

Chart: -

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1.4 1.2 1 0.8 0.6 0.4 0.2 0

1.3

1.27 0.99 2009-10 2008-09 2007-08

RATIO

Working notes: (A) Current assets = Cash & Bank balance, stock + Debtors + Bills receivable + Short term investment + Prepaid expenses + Loan & Advances. (B) Current Liabilities = Liabilities & Provision.

Interpretation: Liquidity ratio of the company was for the year 2007-08 it was 0.99 which was increased to in year 2008-09. 1.27& in 2009-10 it was increased to 130, which is good for the company.

2. Liquid ratio: A variant of current ratio is the liquid ratio, which is designed to show the amount of cash available to meet immediate payments. It is obtained by dividing liquid assets by liquid liabilities. Sometimes accountants do not prefer to include bank overdraft in current liabilities on the argument that it is generally a permanent way of conservation it is always good to include bank overdraft. Stock is excluded from the list of quick current assets because they are not expected to be converted into cash. In the liquid ratio the absolute figures of the three year.

Formula: 33

LIQUID RATIO= Liquid Assets / Liquid Liabilities

Calculation: Year Liquid Assets (Rs.In Lakhs) 42.03 61.38 42.71

0.59

2009-10 2008-09 2007-08

Liquid Liabilities (Rs. In Lakhs) 113.08 104.39 119.11

Ratio 0.37 0.59 0.36

Chart: 0.6 0.5 0.4 0.3 0.2 0.1 0 Ratio 0.37 0.36 2009-10 2008-09 2007-08

Working notes: (A) Liquid Assets = Current Assets Stock. (B) Liquid Liabilities = Current Liabilities Bank Overdraft.

Interpretation: Liquid ratio of the company was for the year 2007-08 it was 036, which was increased to in year 2008-09 0.59, & in 2009-10 it was decreased to 037, which is good for the company. The company should try to get more profit.

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(C). LEVERAGE RATIO

. Debt-equity Ratio: This ratio expresses the relationship of long-term liabilities to net worth. Long-term debts are those, which are repayable after one year and this are other that those appearing under Current Liabilities include debentures and other secured and unsecured loans which are repayable after one year on the other hand, if the debt is at lower level improvement in the earning on net worth is possible, provided the growth plans are to be funded from untapped borrowings. The other expect of high debt is that case of a full in sales.

Formula: DEBT-EQUITY RATIO = Long term fund / proprietors Fund 100

Calculation: Year 2009-10 2008-09 2007-08 Long Term Debt

(Rs.In crores)

Proprietors Fund
(Rs.In crores)

Ratio 252.24 300.96 22535.29

75.47 75.48 76.62

29.92 25.08 0.34

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Chart: 25000.00 20000.00 15000.00 10000.00 5000.00 0.00 252.24 300.96 Ratio 2009-10 2008-09 2007-08 22535.29

Working Notes: (A) Long Term Funds = Loans and Advances. (B) Proprietors Funds = Share capital + Reserves.

Interpretation: Debt equity ratio of the company was for the year 2007-08 it was 0.44, which was decreased in year 2008-09 0.25 & in 2009-10 it was increased to 0.28 which is good for the company. The company should try to get more profit.

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2. Proprietary ratio: The ratio shows the proportion of proprietors funds to the total assets employed in the business.The proprietors fund or share-holders equity surplus. The ratio indicates the amount of capital contributed by the proprietors .The higher the ratio, the higher proprietors & the financial position of business.

Formula: PROPRIETORY RATIO = Proprietors Funds / Total Assets 100

Calculation: Proprietors Funds Total Assets (Rs.In Lakhs) (Rs.In Lakhs) 105.38 2007-08 29.92 100.56 2006-07 25.08 Year Ratio 28% 25% 44%

2005-06

0.34

76.96

Chart: 50.00% 40.00% 30.00% 20.00% 10.00% 0.00% Ratio 28.00% 25.00% 2007-08 2006-07 2005-06 44.00%

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Working Notes: (A) Proprietors Fund = Share Capital + Reserves. (B) Total Assets = Fixed Assets + Current Assets.

Interpretation: -

Proprietors ratio of the company was for the year 2007-08 it was 44%, which was decreased to in year 2008-09 25%, & in 2007-08 it was increased to 28%, which is not good for the company.

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3. Long Term Funds To Fixed Assets : The fixed assets should always be acquired out of long-term funds meaning there by that this ratio should not be less then 100.

Formula: Long term fund to fixed assets ratio = Long Term Fund / Fixed assets

Calculation: Year 2009-10 2008-09 2007-08 Long Term Fund

(Rs.Lakhs)

Fixed assets
(Rs.In Lakhs)

Ratio 1.52 1.47 0.98

105.38 100.56 76.96

69.12 68.52 78.48

Chart: 1.60 1.40 1.20 1.00 0.80 0.60 0.40 0.20 0.00 0.98 2009-10 2008-09 2007-08 1.52 1.47

Ratio

(A) long term funds = Eq. Share capital + Reserve surplus + Secured loans + Unsecured Loans (B) fixed asset
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Interpretation: Long term funds to fixed asset ratio of the company was for the year 2007-08 it was 0.98, which was increased to in year 2008-09 1.47, & in 2009-10 it was increased to 1.52, which is good for the company.

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(D) ACTIVITY / EFFICIENCY RATIO

1. STOCK TURNOVER RATIO: The number of times the average stock is turn over during the year is known as stock turn over. It is computed by dividing the cost of goods sold by the average stock. The objective of computing this ratio is to determine the efficiency with which the inventory is utilized.

Formula: STOCK TURNOVER RATIO = Cost of goods sold / Average stock

Calculation: -

Year 2009-10 2008-09 2007-08

C.O.G.S. 436.77 400.00 345

Average Stock 27.67 18.75 19.44

Ratio 15.78 21.33 17.75

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Chart: 25.00 20.00 15.00 10.00 5.00 0.00 Ratio 15.78 21.33 17.75 2009-10 2008-09 2007-08

Working notes: (A) cost of goods sold = sales gross profit (B) average stock = opening stock +closing stock/2

Interpretation: Stock turnover ratio of the company was for the year 2005-06 it was 4.07, which was increased to in year 2006-07 4.52, & in 2007-08 it was decreased to 4.20, which is not good for the company.

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2. TOTAL ASSETS TURNOVER RATIO: The amount invested in business is invested in all assets jointly and sales are affected through them to earn profits. so in order to find out relation between total assets to sales.

Formula: -

TOTAL ASSETS TURNOVER RATIO = SALES / TOTAL ASSETS

Calculation: -

Year 2009-10 2008-09 2007-08

Sales
(Rs in Lakhs)

Total Assets
(Rs.In Lakhs)

Ratio 4.48 4.23 4.70

471.83 425.38 361.53

105.38 100.56 76.96

Chart: 4.70 4.60 4.50 4.40 4.30 4.20 4.10 4.00 3.90 4.48 2009-10 4.23 2008-09 2007-08 4.70

Ratio

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Working notes: (A) sales (B) total assets

Interpretation: -

Total assets turn over ratio in year 2007-08 it was 4.70 & it is decreasing in 2008-09 2.23 it was also increasing in 2009-10 4.48 so it is good for the company.

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3. DEBTORS RATIO: The debtors turnover suggest the number of times the amount of credit sales is collected during the year, while debtor ratio indicates the number of days during which the dues for credit sales are collected. Suppose the debtors ratio is sixty days, it means that debtors pay their dues for credit sales after sixty days of making the sales.

Formula: -

DEBTORS TURN OVER RATIO = Debtors + Bill receivable / Credit Sales 365

Calculation: -

Year 2009-10 2008-09 2007-08

Chart:-

Debtors +B.R. Credit Sales

(Rs.In Lakhs) (Rs.In Lakhs)

Ratio 43 32 39

55.33 37.49 38.88

471.83 425.38 361.53

50 40 30 20 10 0

43 32

39 2009-10 2008-09 2007-08

Ratio

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Working notes: (A) debtors +bills receivable (B) credit sales

Interpretation: -

The credit receivable period during 2007 was-08 39 days which decrease to 32 days in 2008-09.and increased to 43 days in 2009-10. More credit facility is not good for the company.

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4. CREDITORS RATIO: -

The creditors turnover suggest the number of times the amount of credit purchase is collected during the year, while creditors ratio indicates the number of days during which the dues for credit purchases are collected. Suppose the creditors ratio is sixty days, it means that creditors pay their dues for credit purchases after sixty days of making the purchase.

Formula: -

CREDITORS TURN OVER RATIO = creditors + Bill Payable / Credit Sales 365

Calculation: -

Year 2007-08 2006-07 2005-06

Creditors +B/P.
(Rs.Lakhs)

Credit purchase
(Rs.In Lakhs)

Ratio 111 112 150

113.08 104.39 119.11

372.02 341.38 291.79

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Chart: 160 140 120 100 80 60 40 20 0 111 112 2009-10 2008-09 2007-08 150

Ratio

Working notes: (A) sundry creditors+ bills payable (B) credit purchase

Interpretation: -

The credit payment period during 2007-08 was 150 days which decreased to 112days in 2008-09.and also decreased to 111 days in 2009=10. more credit facility is goods for the company.

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5. Working Capital Turnover Ratio: This ratio establishes a relationship between net sales and working capital. The objective of computing this ratio is to determine the efficiency with which working capital is utilized.

Formula: WORKING CAPITAL TURNOVER RATIO =Net Sales / Working Capital

Calculation: Year 2009-10 2008-09 2007-08 Sales

(Rs. In Crores)

Working Capital
(Rs. In Crores)

Ratio 248 124 145

471.83 425.38 361.53

1.90 3.43 2.50

Chart: 250 200 150 100 50 0 Ratio 124 145 2009-10 2008-09 2007-08 248

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Working notes: (A) Net sales (B) Working capital

Interpretation:-

Working capital turnover ratio of the company was for the year 2007-08 it was 145 which was decreased to in year 2008-09 124, & in 2009-10 it was increased to 248s, which is good for the company.

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ADVANTAGE & LIMITATION Advantages and Uses of Ratio Analysis

There are various groups of people who are interested in analysis of financial position of a company. They use the ratio analysis to workout a particular financial characteristic of the company in which they are interested. Ratio analysis helps the various groups in the following manner: To workout the profitability: Accounting ratio help to measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern. In this way profitability ratios show the actual performance of the business. To workout the solvency: With the help of solvency ratios, solvency of the company can be measured. These ratios show the relationship between the liabilities and assets. In case external liabilities are more than that of the assets of the company, it shows the unsound position of the business. In this case the business has to make it possible to repay its loans. Helpful in analysis of financial statement: Ratio analysis help the outsiders just like creditors, shareholders, debenture-holders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc. Helpful in comparative analysis of the performance: With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them. To simplify the accounting information: Accounting ratios are very useful as they briefly summaries the result of detailed and complicated computations. To workout the operating efficiency: Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilizing the resources.

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Limitations of Ratio Analysis

In spite of many advantages, there are certain limitations of the ratio analysis techniques and they should be kept in mind while using them in interpreting financial statements. The following are the main limitations of accounting ratios: Limited Comparability: Different firms apply different accounting policies. Therefore the ratio of one firm can not always be compared with the ratio of other firm. Some firms may value the closing stock on LIFO basis while some other firms may value on FIFO basis. Similarly there may be difference in providing depreciation of fixed assets or certain of provision for doubtful debts etc. False Results: Accounting ratios are based on data drawn from accounting records. In case that data is correct, then only the ratios will be correct. For example, valuation of stock is based on very high price, the profits of the concern will be inflated and it will indicate a wrong financial position. The data therefore must be absolutely correct. Effect of Price Level Changes: Price level changes often make the comparison of figures difficult over a period of time. Changes in price affects the cost of production, sales and also the value of assets. Therefore, it is necessary to make proper adjustment for price-level changes before any comparison. Qualitative factors are ignored: Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision making. For example, average collection period may be equal to standard credit period, but some debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis. Effect of window-dressing: In order to cover up their bad financial position some companies resort to window dressing. They may record the accounting data according to the convenience to show the financial position of the company in a better way. Costly Technique: Ratio analysis is a costly technique and can be used by big business houses. Small business units are not able to afford it.

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CONCLUSION
After going through the six week long training program, functioning of the organization which I observed from that it can be concluded that STEELCO GUJARAT Ltd. is the large scale manufacturing organization and successful player in the market. The company has the strong financial structure and has a good reputation in the market. All the departments are functioning very well in the company. Which is I can said on the basis of various findings and summery of each department. In HR Department Company is focusing more on training and development of employee for that company is inviting foreigners in the company for good development, the company is providing good welfare to the employees to motivate them. In production department the company is more focusing on in the R&D, and also they are using advanced technology, the company is importing most of the raw materials from outside of the India still company is providing all the product with very cheaper price then their competitor . In marketing department company is more focusing in exporting, it has vast market for its product, they are more focusing on R&D company is giving more priority to the customers than any other objective. On the basis of finance department i can say that company is more focusing on investment and expanding the business, they are giving good dividend to their shareholders but company are facing the problem to stabilize the EPS. During my summer training I have done some finding my own way that given as below. STEELCO GUJARAT Ltd. is having latest technology and highly skilled workers so that it can produce better quality product in desire firm. It is having coordination facility in organization so that the work can be done in very less time. The Company is well known in its quality and also its market share is rising now days so the future is very bright for the company. The workers are happy with the welfare facilities which the company provides. IThe organization provides training like physical and psychological so that workers give desire result

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BIBLIOGRAPHY Web References:

www.steelcogujrat.com www.moneycontrol.com

Book: FINANCE MANAGEMENT ( I.M.PANDEY) Annual report of Steelco.co Secondary data from Steelco.co

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