FINANCIAL STATEMENT ANALYSIS TABLE OF CONTENTS

SERIAL NO

TITLE

PG.NO

CHAPTER I CHAPTER II CHAPTER III CHAPTER IV CHAPTER V CHAPTER VI CHAPTER VII CHAPTER - VIII CHAPTER-IX

INTRODUCTION AQUACULTURE SHRIMP AND PRAWN CULTURE AQUACULTURE BUSINESS SOUTHERN INDIA AQUACULTURE

2-8 9-19 20-29 30-42 43- 56

FINANCIAL STATEMENT ANALYSIS 57- 94 RATIO ANALYSIS IN SIAC CONCLUSION FINDINGS AND SUGGISTIONS 95-110 111- 118

CHAPTER I INTRODUCTION CONTENTS: Introduction Significance of the Study Objectives of the Study Nature and Importance of Study Methodology Limitations

INTRODUCTION Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the indicated quotient of two or more things. In financial analysis, a ratio is used as an index or yardstick for evaluating the finical position and performance of firm. The absolute accounting figures reported in the financial statements are not providing a meaningful understanding of the performance and financial position of a firm. Accounting figures conveys meaning when it is related to some other relevant information. The relationship between two accounting figures, expressed mathematically is known as financial ratio. A ratio helps the analysis to make qualitative judgment about the firms financial performance. A Ratio analysis is defined as the systematic use of ratio to interpret the finical statement so that the strength and weakness of a firm as well as its historical performance and current financial conditions can be determined. Another Factor responsible for high level of working capital is that the repair and maintenance of work under taken in the off seasons. The present study undertaken with the aspiration of that it would be useful in maintaining us components of ratio analysis management of Southern India Aquaculture Company, Chennai. Aquaculture can be conducted profitably in a wide variety of conditions and environments. The choice of production system and crop product for your project is affected by local conditions, such as water availability and quality, site topography and climate. Aquaculture is a capital-intensive venture. Capital is required for construction of ponds, water system, aeration system, operational equipment, etc. The investment and economic projections are analyzed by APT( Aquaculture Production Technology ) in a Business Plan, which is key to raising project financing.

SIGNIFICANCE OF THE STUDY

In a perfect world there would be no necessity for current liabilities and current assets because there would be no uncertainty no transaction costs information search costs or production and technology constraint. However the world on which we live is not perfect. So organization may be faced with on an uncertainty regarding availability of sufficient quantity of critical inputs in future of reasonable price. This may necessitate the holding of critical inputs in future of reasonable price this may necessitate the holding of critical inputs in future of reasonable price. necessitate i.e., Current Assets. To ensure that each of the Current Assets is efficiently managed to ensure the overalls liquidity of the unite and at the same time not keeping too high a level of any one of the working capital management is must. Working Capital attains a proper balance between the amount of current liabilities in such a way that firm is always able to meet its financial obligation whenever due. Working Capital ensures smooth working of the unit without any production help ups due to the paucity of the funds. This may

OBJECTIVES OF THE STUDY

To determine the trends in Working Capital Components. So as to find the inference of each component on working capital of the firm. To determine the working capital position in the organization by interpreting various ratios like working capital turnover ratio, creditors turnover ratio debtors turnover ratio and liquidity ratio. To stuffy the liquidity solvency and capability position of Southern India Aquaculture Company, Chennai. To offers suggestion for the improvement of financial position of the. Southern India Aquaculture. To indicate the direction of change and reflect whether the firms financial performance has improved deteriorated and or remained constant over time. Provide management with financial information to be able to spot out financial weakness of the firm to take suitable corrective action.

NATURE AND IMPORTANCE OF STUDY

To carry business activity the prime requirement is Capital required for a business can be classified under two categories viz., fixed capital, and working capital. Every business needs funds for two purposes for its establishments and carryout its day- to- day operations. Long term funds are required to create production facilities through Fixed Assets Such as plant, machinery, Land Buildings, Furniture and Fixtures etc., An Investment in these assets represents that past of firm capital which is blocked on a permanent basis is called Fixed Capital. Funds are also needed for short term purposes like purchase of raw materials, payment of wages and other day - to day expenses etc.,

METHODOLOGY

Methodology is a procedure in the project report has been carried out two important sources of methodology. 1. Primary. 2. Secondary. Primary data has been carried out through study specially designed to fulfill the data needs of problem at hand, the data has been collected through direct personal interview and indirect oral interview. During the study opinion and views of the various departmental heads were taken into consideration. Secondary Data has been collected from published sources like post records, Journals, Magazines etc., the main source for analyzing of profitability and financial position of Southern India Aquaculture Company, Chennai.

LIMITATIONS The present study in carried out basing on the financial statements provided by the form for last five years of the firm. Since it is a large organization and the time period is just two months it is very difficult to get clear picture. Analysis is based on ratio and other financial statements calculated and hence the subjective matter of the company must have been ignored. It is the outcome of the accounting concepts and conventions with personal judgments. Lack information and communication there is some defaults will arise while showing the overall profitability of organization. The information is historical in nature. Lack of information and Communication there is some defaults will arise while presenting origin of Southern India Aquaculture. The Limitations of ratio analysis are applicable to the study also. Through the primary data or collected but secondary data plays much role.

 Calculate ratios may not be future indicators.

CHAPTER II AQUACULTURE CONTENTS: Introduction History Definition Production Volume Fish Culture Practice Top Ten Aquaculture Producers Economy of Fish Culture Problems with Fish Culture Fish Culture in Future Department of commerce and NOAA National Aquaculture Policies
9

INTRODUCTION Aquaculture, also known as aqua farming, is the farming of aquatic organisms such as fish, crustaceans, mollusks and aquatic plants. Aquaculture involves cultivating freshwater and saltwater populations under controlled conditions, and can be contrasted with commercial fishing, which is harvesting for wild fish. HISTORY:
1 Aquaculture was operating in china circa 2500 BC. Early aqua culturists fed

their brood using nymphs and silkworm feces, and ate them. 2 Japanese cultivated seaweed by providing bamboo poles and, later, nets and oyster shells to serve as anchoring surfaces for spores. 3 Aquaculture spread in Europe during the Middle Ages, since away from the seacoasts and the big rivers, fish were scarce and expensive.
4 Improvement in transportation during the 19th century made fish easily

available and inexpensive.

5 In 1864 Seth Green had established a commercial fish hatching operation at

Caledonia springs, near New York.

6 In 1866, artificial fish hatcheries were under way in both Canada and United

States. In 1889, Dildo Island fish hatchery opened in New found land, it was
10

the largest and most advance in the world. DEFINITION: Aquaculture is nothing but farming of aquatic organisms including fish, mollusks, crustaceans and aquatic plants. Farming implies individual or corporate ownership of the stock being cultivated. PRODUCTION VOLUME: In 2004, the total world production of fisheries was 140 million tones of which aquaculture contributed 45 million tones, about one third. The growth rate of worldwide aquaculture has been sustained and rapid, averaging about 8 % per annum for over thirty years, while the take from wild fisheries has been essentially flat for the last decade. The Aquaculture market reached $ 86 billion in 2009. Aquaculture is an especially important economic activity in china. Between 1980 and 1997, the Chinese Bureau of Fisheries reports, aquaculture harvests grew at an annual rate of 1.67 %. In 2005, China accounted for 70 % of world production. Aquaculture is also currently one of the faster growing areas of food production in the U.S. Approximately 90% of all U.S shrimp consumption is farmed and imported.

11

FISH CULTURE PRACTICE Fish culture is practiced in less than 30 percent of the total areas available. This has a potential to create huge job opportunities, provided fish cultivation is done on a scientific basis India is a large producer of inland fish, ranking next only to Japan. With an abundance of freshwater resources, India has still not been able to tap even 30% of the potential area for inland fish production. Many entrepreneurs have, however, chosen to take this occupation on commercial scale. This is best manifested in Andhra Pradesh, which with 10, 56,000 tons of inland fish production in 2007-08 ranked next only to West Bengal, which is far more endowed with water resources. Andhra Pradesh has emerged among the ranks encouraging farmers to form cooperatives to take up farming in ponds around Kolleru Lake. Both the central and state governments have come up with schemes to help the cause of the farmers. FISH CULTURE IN PONDS Out of the total inland fish production of over 3.6 million metric tons, more than 60% is contributed by fish culture in ponds and reservoirs. The average productivity from ponds on the national level is around 2,500 kg/ha/year, though in Andhra Pradesh and Haryana it is more than 5,000 kg/ha/year, while in some other states like Bihar and UP it is anywhere between 1,500 and 2,500 kg/ha/year. Fish culture is adopted by all kinds of farmers small and marginal ones, relatively larger farmers and those who do it on commercial scale. Sizes of ponds also depend on how affluent the farmers are. Ponds less than 100 square meters in area prove unsustainable, while those above 1 hectare are expensive for small players. Many farmers in Tamil Nadu, for instance, use ponds of sizes 30 feet by 30 feet to

12

make their living. On the other hand, water spread of anything less than 10 hectares in Andhra Pradesh is treated as a pond. FISH SPECIES BRED IN PONDS: Ponds can be perennial or seasonal. While seasonal ponds can be used for short-term fish culture, provided they retain water for at least four to five months, perennial ponds are suited for fish culture on a larger scale. Since water dries up in a few months, seasonal ponds are easy to harvest fish. Any perennial pond retaining water depth of 2 meters can be used for fish culture. Dr Gopinath Sai, executive director (technical), National Fisheries Development Board (NFDB), says a water level of 3 to 4 feet is preferable, even in summer. Fish farming can be practiced on scientific lines in perennial ponds only, though seasonal ponds can be used to cultivate fry. Though different pond shapes are being adopted by farmers, rectangular ponds are easier to work on, Sai points out. He says freshwater fish culture is a very profitable business provided farmers take up this on scientific lines. Quality of soil, water, and fish seed and fish food needs to be of reasonably good quality to have better yields. The soil for ponds should be able to retain water, and hence clayey soil is preferable. The water should not be acidic in nature, nor should it be highly alkaline. It should be treated with appropriate quantity of lime. Provision for inlets and outlets should be made in ponds, as Sai and C Ratnamachari, joint director, Inland Fisheries, Andhra Pradesh, says. However, Ranjit, a fish farmer from Bihar, now into fish culture and retail trading in Delhi, says, We do not know about any inlets or outlets in our ponds but we manage a good catch despite that. Ponds are not the natural habitat of fish; it is rivers and canals. This makes it imperative for farmers to provide food from outside and also create a desirable environment.

13

Fish food is provided in the form of oil cakes and rice bran. But to create conditions suitable for other organisms to grow inside ponds, fertilizers need to be applied. A combination of organic and inorganic fertilizers is ideal, Ratnamachari says. Their application depends on the soil quality to a great extent.

3.6 million Metric tons Annual produce of inland fish in India, 60 % come from fish culture in ponds and reservoirs, 60 species Cultivated in different parts of India in ponds or reservoirs, 80 % - Contribution of carps from Fish Culture.

MAJOR SPECIES CULTURED IN PONDS: Indian Major Carps Rohu, Catla, and Mrigal Exotic Carps Silver Carp, Grass Carp, Common Carp Cat Fish Magur, Ari, Singhi Tilapia - also known as Kowai. Trout golden mahseer, silver mahseer, silver grey mahseer, and black mahseer

14

TOP TEN AQUACULTURE PRODUCERS IN 2004

Million S.No 1 2 3 4 5 6 7 8 9 10 11 Country China India Veitnam Thailand Indonesia Bangladesh Japan Chile Norway United states Other countries Total tonnes 30.61 2.47 1.2 1.17 1.05 0.91 0.78 0.67 0.64 0.61 5.35 45.46

ECONOMIES OF FISH CULTURE IN PONDS (FOR 1 HA, UP TO 1M EXCAVATION): Economics of Fish Culture in Ponds (for 1ha, up to 1m excavation) Amount (in Items Rs)
15

A. Fixed costs Excavation of one hectare land (10,000 cubic meter land to the depth of one meter @Rs 20/cubic meter Construction of inlet and outlet to ponds Equipment and gears Total fixed costs B. Recurring costs Lime 500 kg @ Rs 7/kg Fingerlings 5,000 in number @ Rs 600 for every 1000 Organic manure (cow dung) 15 tons @ Rs 400/ton Urea 330 kg @ Rs 7/kg Super phosphate 165 kg @ Rs 6/kg Ammonium sulphate 63 kg @ Rs 6/kg Mustard oil cake 1350 kg@Rs 12/kg Rice bran 1350 kg @ Rs 4/kg Insurance cost @ 4% of seed and fertilizers Miscellaneous including harvesting, security of ponds, etc. Total recurring cost Total cost Income Production (from second year onwards ) (in kg) Sale price (per kg) Total Income (from second year onwards) (in Rs) Net income for first seven years Net Income in first year Net Income in second year Net Income in third year Net Income in fourth year Net Income in fifth year

200000 40000 15000 255000 3500 3000 6000 2310 990 378 16200 5400 1200 8000 46978 301978 3000 45 135000 -301978 88022 88022 88022 88022

16

Net Income in sixth year Net Income in seventh year Source: Updated from NABARD

88022 88022

Rajat Sharma of Haryana Fisheries Department has a simple mathematics for fish farming, which he says is followed by most fish farmers in the state. He says what is needed to produce for 1 kilogram of fish is 1 cubic meter water, 1 kilogram of organic manure, 100 grams of inorganic fertilizer, 1 kilogram of supplementary feed and three fish seeds. Farmers, he says, should wait for one year for the fish to mature. According to his calculation, investment needed for 1 kilogram of fish is anywhere between Rs 15 and 25. The sale price of 1 kilogram of fish to wholesalers is anywhere between Rs 40 and 50, ensuring more than double the income. Being a state subject, the fisheries department also helps farmers get the right quality fingerlings. Private hatcheries have also come up in several parts of the country and government schemes are also aiding this process. Fingerlings must be free from disease because one infected fish may cause widespread damage. Polyculture in ponds is the dominant production system in most parts of the country. Carps, both Indian and exotic, contribute to almost 80% of the produce from ponds. Rohu, katla, mrigal and magur are the favorite pond fish varieties. PROBLEMS WITH FISH CULTURE The biggest problem with fish culture is the possibility of diseases, Sai points out. Fish can be infected with fungal, bacterial, ulcer or worm diseases. It is, however, easy to spot infected fish as they become weak and lethargic, and often come to the surface of the water to breathe. In eye diseases, for instance, their eyes

17

become opaque. Infected fish can have open spores on the body, and can also have their scales dropping, something Ranjit says caused him huge losses when he used to cultivate fish. Treatments are available in the form of treating the water with potassium permanganate solution, or with acetic acid and normal salt. Copper sulphate solution and chloromycetin are also used to treat some other diseases. Any unusual feeding behavior of fish should be taken seriously. It is best to prevent diseases, as once infected; the fish population in a pond can be wiped out, causing big losses of both money and time for farmers. Another problem area can be marketing. Fish procured from ponds are perishable goods. To keep the stock fresh and fit enough to be sold in markets, suitable ice containers and cold storages are essential. It is also mandatory to have good transportation links to main wholesale markets. THE FUTURE The central government has come up with schemes in association with state governments from time to time to support fish culture. Development of Inland Fisheries and Aquaculture was one such scheme launched during the 10th Plan. Under the scheme, whose cost is borne by the central and the state governments in the ratio of 75:25, farmers are given assistance for building ponds. A subsidy of 20% is given assuming cost for constructing a pond in plain areas is Rs 200,000 per hectare and at Rs 300,000 per hectare in hilly regions. For people from scheduled castes and scheduled tribes subsidy is a little higher at 25%. If an existing pond is to be renovated, subsidy is given at 20% assuming cost of Rs 60,000 per hectare.

18

The National Bank for Agriculture and Rural Development (NABARD) also refinances the banks extending loans to fisheries cooperatives or to entrepreneurs involved in fish culture. The formation of the Fish Farmers Development Agencies (FFDAs) was another major scheme launched by the Ministry of Agriculture in the 1970s. These agencies provide financial, technical and other support to beneficiaries at district level throughout India. Training is also provided through the NFDB. Sai says that the NFDB conducts training for officials from fisheries departments and various NGOs involved with fish farmers. They pass knowledge gained on to the farmers in the field.

India produces in excess of 3.6 million metric tons of freshwater fish, but a lot of potential lies untapped. While the area covered by rivers cannot be added, fish production through ponds can definitely be increased by several notches. Fortunately, the stakeholders in the fish business realize this. India has, therefore, fixed a target of over 5.5 million metric tons of freshwater fish catch by 2020. However, more capital investment and technological knowledge is required. There is a need for better resource management and community intervention in all places where fish culture is practiced or can be practiced. Rain-fed areas should also be utilized to cultivate fish. As far as markets are concerned, communication systems among fishermens cooperatives controlling marketing need to be enhanced. This would be beneficial not only for farmers, but also for consumers.

DEPARTMENT OF COMMERCE AND NOAA NATIONAL AQUACULTURE POLICIES:

19

On June 9, 2011, NOAA and the Department of commerce released final national aquaculture policies. These policies establish a framework to allow sustainable domestic aquaculture to contribute to the U.S. seafood supply, support coastal communities and important commercial and recreation fisheries, and help to restore species and habitat. NOAA sees aquaculture as a critical component to meeting increasing global demand for seafood and maintaining healthy ecosystems.

CHAPTER III SHRIMP AND PRAWN CULTURE CONTENTS:

Introduction History of shrimp culture Economy Hatchery training in India

20

 Feeds Feed ingredients Feeding practices Summary

SHRIMP AND PRAWN CULTURE: INTRODUCTION: A shrimp farm is an aquaculture business for the cultivation of marine shrimp or prawns for human consumption. Commercial shrimp farming began in the 1970s, and production grew steeply, particularly to match the market demands of the United States, Japan and Western Europe. The total global production of farmed shrimp reached more than 1.6 million tonnes in 2003, representing a value of nearly 9 billion U.S. dollars. About 75% of farmed shrimp is produced in Asia, in particular in China and Thailand. The other 25% is produced mainly in Latin America, where Brazil, Ecuador, and Mexico are the largest producers. The largest exporting nation is Thailand.

21

HISTORY OF SHRIMP CULTURE: 1 Indonesians and others have farmed shrimp for centuries, using traditional low-density methods. Indonesian brackish water ponds, called tambaks, can be traced back as far as the 15th century. 2 By the 1960s, a small industry had developed in Japan. Commercial shrimp farming began to grow rapidly in the late 1960s and early 1970s. 3 Taiwan was an early adopter and a major producer in the 1980s; its production collapsed beginning in 1988 due to poor management practices and disease. In Thailand, large-scale production expanded rapidly from 1985
4 In South America, Ecuador pioneered shrimp farming, where it expanded

dramatically from 1978. Today, there are marine shrimp farms in over fifty countries. ECONOMY: The total global production of farmed shrimp reached 2.5 million tonnes in 2005. This accounts for 42% of the total shrimp production that year. The largest single market for shrimp is the United States, importing between 500 600,000 tonnes of shrimp products yearly in the years 2003-2009. About 200,000 tonnes yearly are imported by Japan, while the European Union imported in 2006 another about 500,000 tonnes of tropical shrimps, with the largest importers being Spain and France The import prices for shrimp fluctuate wildly. In 2003, the import price per kilogram shrimp in the United States was US$ 8.80, slightly higher than in Japan at
22

US$8.00. The average import price in the EU was only about US$5.00/kg. About 75% of the world production of farmed shrimp comes from Asian countries; the two leading nations being China and Thailand, closely followed by Vietnam, Indonesia, and India. The other 25% are produced in the western hemisphere. In terms of export, Thailand is by far the leading nation, with a market share of more than 30%, followed by China, Indonesia, and India, accounting each for about 10%. Other major export nations are Vietnam, Bangladesh, and Ecuador. A joint programmed of the World Bank, the Network of Aquaculture Centers in Asia-Pacific (NACA), the WWF, and the FAO was established in August 1999 to study and propose improved practices for shrimp farming. HATCHERY TRAINING IN INDIA: Shrimp hatchery technology development in the Indian private sector has been slow. Inappropriate models and concentration of effort in the public sector were two reasons. It has been recognized that hatchery seed supply will only increase proportionally to the degree of private investment in the industry. Therefore, BOBPs training programmed targeted the small-scale business community. Advertisements placed in local and regional newspapers during November 1991 offered training in shrimp and prawn hatchery technology. Over 300 applications were received. Of these, 22 were interviewed and ten selected, eight of them for shrimp hatchery training and two for freshwater prawn hatchery training. Of the successful applicants, two had some experience in shrimp culture, while the others were small business persons, including one woman. Geographically, most applications were received from Tamil Nadu, followed by
23

Andhra Pradesh, Orissa and West Bengal Of the successful applicants, six were from Tamil Nadu, two from Andhra Pradesh and one each from Orissa and West Bengal. The candidates from Orissa and West Bengal were selected for freshwater training. The National Prawn Fry Production and Research Center (NAPFRE), Pulau Sayak, Malaysia, was selected as the training site for the eight shrimp hatchery participants. NAPFRE regularly conducts international training courses, has a well trained and experienced staff and has good accommodation facilities. The curriculum included all aspects of tiger shrimp hatchery operation. The training period was for 31 days, June 7 - July 7 1992, and included field visits to small scale commercial hatcheries (see Appendix I for curriculum). The participants from Orissa and West Bengal were trained in freshwater prawn hatchery technology for 35 days during 1993. In addition, two biologists from the Department of Fisheries (DOF) hatchery in Cuttack, Orissa, completed a 10-day short course in June 1993 (see Appendix II for curriculum). Asia is the principal producer of farmed shrimp, accounting for 81 percent of the total world production of about 600,000. ASIAN SHRIMP CULTURE PRODUCTION, 1992 % 25.4 23.7 22 7.6 5.9 5.1 No of Farms 14,000 3,000 15,000 1,500 1,000 2,500

Thailand China Indonesia India Viet Nam Taiwan

24

Philipines Bangladesh Malaysia Japan Others Total

4.2 4.2 0.6 0.5 0.8 100

3,000 6,000 350 150 440 46,940

FEEDS: Natural food items: Zooplankton and oligochaete worms play a very important role in the nutrition of freshwater prawns grown in ponds. Even juveniles larger than 2g can utilize live zooplankton. Earthworm and insect larvae are also natural food items for the prawns. Enhancement of macroinvertebrate production in ponds is extremely important in the production of freshwater prawns as it would improve feed efficiency considerably. The use of good quality feeds, however, is important when biomass in the ponds increase as the animals grow. Moreover, more uniform production of large prawns is achieved when feeds are used FEED INGREDIENTS: Prawn head meal, chicken offal, clam meat, silk worm pupae, meat and bone meal, fish meal, crustacean meal, squid meal and mussel meat meal are some of the excellent ingredients used in prawn feed trials. Various cereal grains, oil seed cakes (ground nut oil cake, soybean cake, and sunflower oil cake), rice bran and several other animal husbandry and agro by-products available have also been used

25

as ingredients in test diets. Many of the ingredients are also used in the on-farm and commercial feeds made in India. Better growth, molting frequency and survival occurs by feeding animal proteins sources such as mussel meat meal, squid meal, shrimp meal, fishmeal and earthworm meal than plant protein sources such as various oil seed cakes. Best growth performance with least feed conversion ratio (FCR) and highest protein efficiency ratio can be achieved by feeding prawn meal as source of protein than either mussel meat meal or combination of prawn meal and mussel meat meal in a 1:1 ratio. Meat and bone meal and squilla meal can be used as a replacement of fishmeal for the preparation of efficient practical diets of prawn. Distillers Dried Grains and Soluble (DDGS), an inexpensive ingredient, relatively high in protein (29%), is suitable for use in practical diets at up to 40% of the total formula. Fishmeal can be partially or totally replaced with soybean meal and distillers' byproducts in diets. In addition to the more conventional animal feed ingredients, many other materials (moist pressed brewers' grains, corn silage, beef liver, orange flesh, peeled sweet potatoes, frozen peeled bananas, turnip greens and carrot tops) can suitably be used for inclusion in prawn diet. A feed formula using locally available ingredients such as groundnut oil cake, fish meal, soybean meal, rice bran, and vitamin and mineral premix has been developed at CIFA, Bhubaneswar for commercial grow-out of freshwater prawns in ponds. This formula is helpful for small and marginal farmers who do not use commercial feeds and instead prepare a farm made feeds using mixtures of rice bran, oil cakes and fish or crustacean meal. Chitin supplementation in prawn diet is beneficial for the formation of new shells during molting. Dry sugarcane yeast, Saccharum
26

officinarum, a by-product of alcohol production from sugarcane, could be supplemented up to 20% in a 30% protein diet for grow-out stages. Addition of several chemo attractants such as taurine, betaine, glycine and proline in diets enhances voluntary feed intake and growth of juveniles. Betaine added to the water has been shown to induce a burst of food searching behavior leading to further intake resulting in a 17% increase in prawn growth at juvenile stages. Cadaverine at 0.2 % inclusion was the best attractant when compared to other biogenic amines such as putrescine, pheromones (crab urine and freshwater prawn green gland extracts) and squid extracts. However pheromones exhibited good results only with males indicating that these may be more suitable in all-male culture of prawns. SUMMARY OF NUTRIENTS REQUIREMENTS OF FRESH WATER PRAWN: Nutrients Proteins( % ) Growth Stages Brood Stock Juveniles( 2nd, 4th month) Adult (5th,6th month Carbohydrate Lipid,including Phospholipids ( % ) Highly Unsaturated Faty acids ( % ) Carbohydrate Cholesterol ( % ) Vitamin C (mg /kg ) Calcium / Phosphorous Zn ( mg kg ) Other Minerals ) For all stages For all stages For all stages Grow Out Requirement 38 - 40 35 - 37 28 - 30 25 - 35 3 to 7 > 0.08 0.5 - 0.6 100 1.5 - 2.0:1 90 Quantitative Requirements not yet known

27

Energy

Brood stock Other Stages

3.7 - 4.0 kcal/g feed 2.9 - 3.2 kcal/ g feed

FEEDING PRACTICES Freshwater prawn is omnivorous and coprophagous. They have been shown to utilize natural food in preference to artificial feeds. Fertilization, therefore, plays an important nutritional role in pond culture of freshwater prawn. Generally no exogenous feed is required until the prawn biomass reach 18 g/m2 in the pond. Beyond this point natural productivity can no longer sustain growth and feed supply becomes mandatory as a direct source of nutrients. For grow-out culture of prawns feed are initially given at 5-8% of the body weight/day. The feeding rate declines as the animals grow and reach about 1.5-2% bwd when the animals are about 20 g in size. Brood stocks are fed with balanced artificial formulated pelleted feed at 3-5% of the body weight twice daily during morning and evening. Farmers generally feed the cultured prawn twice daily with feeds that contain protein levels ranging from 20 to 35%. However, the species grows well even with 15 % protein feeds in ponds with sufficient natural food.

28

SUMMARY: The prawn is one of the high value aquaculture products emerging from Asia. At present feed is the largest single cost item, as it constitutes 40-60% of operational cost in prawn production. Hence feed to attain higher growth and more efficient feed conversion ratios needs to be developed. In this context, the use of feeding attractants will have relevance in improving feed intake and feed efficiency and to minimize feed wastage and water pollution.

29

CHAPTER IV AQUACULTURE BUSINESS CONTENTS: Business Plans of Aquaculture: Successful Expectations Analyze Markets Site Selection: Fixed and Variable Costs Inputs Feed and Nutrition Marketing Management and Record Keeping Financial Protections Cash Flow Statement Structured Analysis The Balance Sheet
30

 Income Statement Conclusions

AQUACULTURE BUSINESS BUSINESS PLANS OF AQUACULTURE: Aquaculture is agriculture this has been said often and for good reason: the hands-on skills needed for successfully farming the land are the skills aquaculturists need for farming the water, among them, woodworking, masonry, wiring, welding, plumbing, and equipment maintenance. Equally important are business management skills, such as finance, record keeping, marketing, and personnel management. More aquaculture businesses fail because of poor management than poor production practices. Like farmers and others who run risky businesses, aquaculturists will have to contend with a number of challenges And pitfalls in developing a well-thought out business plan. Business planning is not easy and can take months of research and assessment. A complete business plan will include important information such as (1) A balance sheet to indicate strengths and weaknesses. (2) An income statement to indicate profitability. (3) A cash flow budget to show when money will be moving into and out of the
31

operation; and (4) A resume of the operator(s) that shows experience in the operational and financial aspects of the business. The complete package provides the information necessary for assessing the potential success or failure of the business. SUCCESSFUL EXPECTATIONS Planning and organizing a business with an expected annual income of $250,000 will differ from one with an expected income of $50,000 a year. Cash flow is a critical factor that can help to choose one species or production system over another. Production cycles may be a few months for a hatchery or nursery operation or as much as three or more years for rearing market-size shellfish or finfish. While extensive pond culture takes longer than recirculation systems to produce fish, expenses to operate the latter are higher and must therefore be offset by higher returns. ANALYZE MARKETS A. DETERMINE AREA Potential markets can be defined in terms of geographic area: Which buyers might want your product? Where are they located, and how can you best reach them? When determining potential consumers, delivery time and distance are important
32

considerations, especially with increasing transportation costs. A large production facility might include trucks and personnel for making deliveries on a regular basis. Smaller operations, where customers could make on-farm purchases, are usually limited to about a ten-mile radius. B. IDENTIFY SEGMENTS There are many types of customers within your marketing area: Direct customers, Local seafood markets, Farmers markets, Supermarkets and chains, Wholesalers Restaurants. Products not destined for food, such as aquatic plants, ornamental fish, and baitfish, may be sold through different outlets. Fee fishing a form of aquaculture depends upon customers coming to the farm and paying for the experience of catching fish. There may be several profit centers here, e.g., in entry fees, fish poundage fees, bait sales, tackle sales and rental, cleaning and packing services, and food sales. Some operations also include camping facilities and boat rentals. It
33

is important to identify and target experiences that potential customers may desire. C. Determine Seasonal and Annual Demand Aquaculture is an ever-changing business, and it is important to track and anticipate trends that can affect production and sales. It is also important to build relationships with dealers since they have knowledge about seasonal demand, prices, delivery, and product forms. Customers may vary depending upon populations that a dealer services. For example, markets servicing urban populations may require different species than those markets servicing populations in rural areas. Some religious holiday seasons may also provide higher demand for seafood products than at other times of the year.

D. Identify Market Potential Census data can provide useful information to gauge the size of prospective markets. Economic development agencies in our state and county can provide information on ethnicity, income, employment, and other factors that may influence purchase decisions. E. Draw Conclusions

34

Gathering information and analyzing market potential is essential for assessing whether our ideas are worth pursuing, whether they need to be modified, or should even be abandoned. Determining the best potential for marketing your product will provide information on the Product form desired. Site Selection: Aquaculture site selection is critically important: Poor sites are often a principal cause for failure. Allocate enough time to search out and verify the attributes of property to make sure that it has the potential for providing maximum benefits to our business.

Fixed and Variable Costs All production incurs costs these are either fixed or variable. Fixed costs do not generally change with the level of production and include such items as depreciation, insurance, licenses, and salaries. Regardless of time expended to get a product to market, fixed costs tend to remain reasonably constant. Variable costs are those that change with the level of production and species; they include costs for shellfish seed or fish fingerlings, feed, daily or hourly wages, electricity, and chemicals. Variable costs are conditioned by management
35

objectives, for example, the number of plants or animals that are to be produced, whether the aim is to grow out animals or sell them at early development stages to another producer. Inputs Just getting an operation underway incurs costs, which are referred to as inputs, among them, utilities, fuel, repairs, and chemicals. It is important that obtain prices for each input for inclusion in extension budgets, so estimate complete costs of operation is must. An important input is of course the stock costs: This may be shellfish larvae or seed, fish fry or fingerlings, or small aquatic plants. Feed and labor costs are input expenses for managing them. Determine all input costs to ensure the accuracy of our business plan. In addition to stocking rates, production can be affected by density, growth rate, survival, and mortality. Correct information can help to determine the profitability based on changes in these rates. Spreadsheet programs are often used to calculate results on profitability when input costs change. Feed and Nutrition With many species, especially finfish, feed is a variable cost that dramatically
36

affects profit. Cost varies by amount purchased, feed quality (i.e., its nutritional components), and the equipment and labor required for delivery. Feed conversion, the amount of weight gained by fish per pound fed, is a major concern in finfish culture. Shellfish mostly use natural phytoplankton for growth and must be reared in areas with good water quality and sufficient water flow to ensure adequate supply. Seasonal variation in species and abundance will affect their growth. There are feed conversion formulas and data on many species, which can be obtained from fact sheets, research reports, and feed suppliers. Because feed prices are based on the quantity purchased, it is less expensive to deliver bulk feed for storage. However, feed deteriorates over time and it may prove more beneficial to get shipments more often than to store large quantities for long periods. Do not neglect the quality of feed, which should always be obtained from reputable suppliers. Marketing Marketing our product has costs do not underestimate them. In the Northeast, many producers are small and deal with niche markets to maximize income. Knowing where our product will be competitive with other producers is crucial for successfully targeting your efforts so they will do the most good. Some oyster producers, for example, have gotten higher prices when targeting upscale restaurants. In servicing this market, the product may have to be delivered as
37

cleanly washed shell stock, with sizes and shapes similar for enhanced customer presentation.

Providing shellfish for this market adds to the production costs since aquaculturists must select, grade, clean, and pack the product in smaller containers than for the bulk oyster market; however, the return is higher. Marketing is hardly a trivial cost; at the same time, it can be exciting for producers who seize opportunities by producing products that match a need.

Management and Record Keeping Aquaculturists must often make quick decisions, especially as crises occur. Having the knowledge and skills to take informed actions are critical. For example, when problems with water quality or disease occur, managers must act promptly to avert potential disaster. Identifying a problem, however, is not the same as acting properly to correct it. Related to personnel management, additional people are required at different times during stocking, maintenance, harvest, and transport. Record keeping may be among the most important daily activities. Get into the habit of regularly recording data on such details as feeding patterns, growth rates, and behavior. It is these data that will help us to learn where mistakes may have
38

been made and how best to correct them in the future or to deal with unexpected problems. Record keeping helps decrease production costs and increase efficiency and profits. Financial Protections It is important to analyze potential financial success: Assessing different production scenarios will help us to judge whether or how to proceed; it will also help us to adjust and fine-tune your business to maximize profits. Cash Flow Statement It is also important to know not only making money, but how much and when it is projected to begin. At start-up, capital will be flowing out as pay for construction and the acquisition of stock, feed, and related items. Plan must account for this time lag and can be done by developing a cash flow statement, which is critically important in seeking investor support or financing. Production costs rarely follow a smooth flow of product and revenue: there are always pulses in the crop. Cash flow projections can identify the need for money at particular periods, how much is being returned, and when it is likely to become available.
39

Some crops may take only a few weeks or months to generate income, while others may take years. The analogy with agriculture would be the difference between farming grain with 90-day seed or setting up a vineyard to produce wine, which might take years before income is generated. Projecting cash flow can help us to decide when to borrow and how much. Structured Analysis Setting up a cash flow projection requires that the plan at least three years ahead, or until your business will operate profitably. Shellfish grown to market size may not be ready for harvest until the third or fourth year, depending upon species, stock size, and location. On the other hand, producing seed in a shellfish hatchery or nursery could be as short as a few months. Finfish projections follow similar time frames. Cash flow statements should start on the day we begin our business. The starting balance takes into account all funds you have on hand. Payments or disbursements are subtracted from the balance and income or receipts are added to get an ending balance. This balance becomes the starting point for the next period of time. Equipment depreciation and inventory are assessed differently and may warrant special consideration in the cash flow statement. The start-up balance will have to be calculated according to the financial need. Calculating cash flow requires to compute the net and cumulative cash flows: net cash flow is the difference between cash receipts and disbursements for a period of time, e.g, monthly or quarterly; cumulative cash flow is the sum of net cash flows
40

from start-up to the present.

Loan repayment is important but estimating it wont be possible until you have researched the amounts required during different periods. Interest charges and repayment amounts for each time period will provide you with knowledge of how much financing you will require at start-up and during operating periods until receipts begin. Banks and financial institutions can provide you with repayment schedules that break down interest and principal over time at different interest rates; these schedules are also available on the web. In making projections, it is important to understand that actual cash flows are the only ones recorded. If you have sales in one period but offer credit to the purchaser so that receipts are not collected until another period, income is not recorded until the money is received. Expenses are recorded in full as they occur, even though they may be spread over two or more periods. An example would be licenses or insurance. Depreciation, while important in overall financial outcome, is a non-cash expense and is not used in computing cash flow, except when calculating tax liability at the end of the year. During the first year cash flow statement, you should use monthly time periods. Afterwards, quarterly calculations should be adequate. There might be a large cash outflow at the time of restocking, with a prolonged period for grow out of your product. In businesses such as hard clam or oyster culture, it may be
41

adequate to use semi-annual periods during grow out and monthly periods for times of high activity. For instance, variability in fish prices occur across seasons and over years, especially when you are competing with natural harvests that may fluctuate wildly.

Feed costs can vary depending on energy costs and prices of components such as grain and animal meal. Projecting these costs 5 years ahead can prove challenging. Underestimating costs and overestimating income is a major cause of business failure inadequate capitalization is another. Expenses for legal fees, bookkeeping services, insurance, payroll taxes, and fringe benefits can be obtained from vendors and government agencies. Equipment suppliers can likewise help provide figures on maintenance and repair of machinery. The Balance Sheet A balance sheet should be calculated that shows how the business will grow during a years interval. It must include assets, or those items of company owns that have value; most of these will be apparent, such as buildings, land, vehicles, equipment, furnishings, and related items. Against these are the liabilities, or those debts that you owe others; these will include short and long-term notes that must be repaid, taxes, and similar debts you have incurred. Projecting the current year as well as the year ahead will enable us to show how
42

our business is progressing. The balance sheet will reflect companys debts and assets. The difference between them is the equity that is in the business.

In a simple example, consider land you have bought: youve made a down payment and borrowed the rest from a lender. The difference between the two amounts at the beginning is your equity. The more you pay on the principal, the more your equity will rise over the year that you pay off the note. If you are fortunate and the real estate market rises, the value of the land will also rise so that your equity may actually increase faster than the note you pay off. The balance sheet is an important part of the business plan, and one that many lenders or investors believe is one of the most important. It enables them to see whether you, as a borrower, will have sufficient assets to take care of any new loan that they make. It allows them to quickly gauge the financial strengths and weaknesses of your business. Income Statement The income or profit and loss statement helps us to project income and expenses over a multiyear period. It should show how you are going to increase sales to generate income from your business, and where production costs will be. There are many expenses in running a business. Putting together an income statement will enable us to think many of them through and generate a plan that takes them into consideration.Once we have projected our expected sales, deduct the costs of running the business as expenses: the difference will be the net profit before taxes. The income statement is important in assessing how the business will do in the
43

marketplace. Admittedly, it is difficult to project some of these expenses several years ahead. Many factors are at work in the world that will make some of them vary widely. Consequently, make sure the assumptions we use for our projections are clearly stated in the business plan they will reveal to lenders how you anticipate dealing with changes. Conclusions: Once you complete your financial projections and compile the information you will need to assess your chances of success, its time to decide whether or not to proceed. If you do, then develop a plan of action that lays out the steps required to build your business. Follow the plan carefully and modify it as you gain experience. The first step is to secure financing. You can do this by taking a loan, which will incur debt to you and your venture, or you can give up a portion of ownership, which will be in the form of equity. Either or both types of financing can be used but should only be decided on after you consult with professionals such as accountants, lawyers, or other financial advisors. Your ability to obtain capital will be affected by the amount of financing you need, your credit history, and the current lending climate.

44

CHAPTER V SOUTHERN INDIA AQUACULTURE Contents:

Business Profile:

Company Profile:

Product Portfolio:

Debtors list of Southern India Aqua Culture

Financial Profile

45

SOUTHERN INDIA AQUACULTURE Business Profile: Southern India Aquaculture (SIAC), incorporated in the year 1998, at Chennai, (Tamil Nadu), are engaged in distributing and supplying broad assortment of Aquarium, Aquarium Filter, Air Pumps, Aquarium Lights, Fish Food (Aquadine Extra Red), Fish Medicines, Prawn Feed , Hatchery Equipments, Dog Food & Cat Food and Adult Dog Food. Southern India Aquaculture has two large Fish Farms in Chennai for selective breeding of quality fresh water aquarium fishes, adhering strict quality control. This includes Goldfish, live bearers, egg layers and some cichlids, to cater to the national market. Southern India Aquaculture offered range is fabricated in compliance with prevailing industry standards by our vendors using premium quality raw material. All the products are rigorously tested on various parameters to ensure their compliance with high quality standards. Their commitment towards quick delivery of consignments and achieving optimal client satisfaction help them in meeting the bulk demands of their clients spread across the nation.

46

Further, they deal with the trustworthy and certified vendors for sourcing their quality assured Fish foods, fish medicines, etc. further, their valuable clients can avail these from them at the most affordable rates.

Southern India Aquaculture Aquarium Supermarket is one of the oldest and largest in India and deals with:
An

entire

range

of

imported

aquariums

accessories

and

decorations for the aquariums. All glass aquarium tanks, cabinet aquarium tanks.
Wide selection of tropical fishes, feng shui variety fishes, like dragon fish,

gold fish and Flower Horn fish, to attract positive energy bring good luck and prosperity to the owners. Fish food of different reputed Brands in South East Asia. Resin ornaments, aquarium plants, decorations.
Aquarium accessories like air pumps, filters, heaters, medications & test

kits, water conditioners, aquarium books, lighting systems, plastic plants, backgrounds, spares, etc., Pet foods and accessories for dogs, cats and birds.

47

Company Profile: Business type: Importer Supplier Distributor Wholesaler Retailer Trader

Mrs. Anitha shaikumar is Managing Director of Southern India Aquaculture established in the year 1998, at Chennai. Legal Status of firm: Sole Proprietorship (Individual) Team & Staff:

48

Total no.of Employees No.of QC/Research staff No.of skilled Staff No.of Unskilled Staff

100 people 5 people 25-50 people 25 - 50 people

Major Markets: Major markets are Indian Subcontinent, East Asia, Central America, Middle East, South America, South East Asia and North America. Turn Over: Rs.1- 10 million Product Portfolio: Southern India Aquaculture have become leading distributor and supplier of superior quality range of Aquarium, Aquarium filter, Air Pumps, Aquarium Lights, Fish Food (Aqua dine Extra Red), Fish Medicines, Prawn feed, Hatchery Equipments, Dog Food & Cat Food and Adult Dog Food. The Products are delivered to the customer after being proper testing. Further they are offering their products in customized packages as per clients requirements.

49

Product Category: Aquarium Product Glass Aquarium Aquarium Filter Air Pumps Aquarium Lights Fish Food (Aqua dine Extra Red) Fish Medicines Aquaculture Product Artemia Cysts Hatchery Equipments

50

Dog & Cat Product

Animal Products Adult Dog Food

Team Experts: Southern India Aquaculture established dexterous team of professionals, who help in sourcing and supplying wide range of Aquarium, Aquarium Filter, Air pumps, Aquarium Lights, Fish Food, Fish Medicines, Prawn feed, Hatchery Equipments, Dog & Cat food Products. They are aware of the existing industry norms and ensure that the offered products are in sync with the same. Right from the procurement to final dispatch, all the processes are conducted by them with utmost ease. They also strive hard to attain complete client satisfaction. Quality: Southern India Aquaculture ensure that the Aquarium, Aquarium Filter, Air Pumps, Aquarium Lights, etc. offered are in compliance with consistent quality standards. For that purpose, they have established an in-house quality testing unit that is
51

facilitated with requisite machinery and equipment required for the quality testing process. Quality has always been the major concern of any organization. Therefore, they have employed total quality management system in order to meet the qualityoriented requirements of food and cosmetic industries.

Client Satisfaction: The success of any organization is determined by the satisfaction level of its clients. Complete client satisfaction is one of the major goals for the successful business. With timely delivery, competitive prices, ethical business practices, customized packaging solutions and easy payment modes; they further enhance the satisfaction level of their customers. Further, their valuable clients can avail these products from them at the most affordable rates. Vendor Base: Southern India Aquaculture teams of experts helps them to understand the requirements of their clients that in turn help those procuring agents in selecting the best suitable products that are perfectly matched with raised industry standards. By the good worth of their vendors acumen, they are able to meet the bulk demands of their esteemed clients within the specified time structure.
52

They procure their products from most dependable and trusted vendors of the industry, which are recognized for consistent supply within the promised time frame at the most affordable rates.

Warehousing and Packaging: Bestowed with vast warehousing facility, this unit is well lit, free from rain, dust and sunlight. Warehousing personnel ensure that no damage is occurring to these components. Huge enough to store large quantities of procured components, the temperature and moisture controlled are carefully monitored by their supervisors. They take all possible care in packaging of their products to make certain that products are delivered safely at the final destination.

Southern India Aquaculture are the Authorized Distributors for Aquarium Pharmaceuticals, USA. Ocean Star International(OSI),USA. Hong Tai Aquarium Products, Singapore. Water life, UK.

53

Perfect Companion ( CP pet food products ), Thailand. Argent Chemicals Laboratories, USA.

Market: The human consumption of the proteinous items are increasing day by day indigenously as well as in export markets. The demand for feed from fish and prawn culture segment is growing. The new units are advised to supply the feed to the growers of fish and prawn directly for better profit margins and are also advised for a distribution system through retailers.

Manufacturing Process:

The raw materials namely de oiled rice bran, de oiled groundnut cake, maize or Soya bean, BHT and dry fish meal are grounded and pulverized. And it is blended with binning materials. The mixture is palletized for making pellets and the product is packed.

54

DEBTORS LIST OF SOUTHERN INDIA AQUACULTURE Southern India Aquaculture has most of their hatchery customers are in the state of Andhra Pradesh and Pondicherry. Some of the Debtors lists are mentioned below: SIAC HATCHERY DEBTORS IN ANDHRA PRADESH: S.NO 1 2 3 4 5 6 7 8 9 10 11 12 NAME Alpha Hatchery APR Hatchery Bhusan Rao Hatchery NSR Traders Sunrise Marketers Bindu Hatchery Bmr Marine Products Pvt Ltd CH Rambabu Hatchery D.S.Hatchery Gayathri Hatcheries Jay Jay Marine Mahitha Shrimp Hatcheries
55

PLACE Nellore Nellore Ongole Kakinada Ongole Ongole Nellore Nellore Nellore Gudur Nellore Nellore

13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34

Mr.P.N.V.Prasad Neelakhanda Hatchery Nellore Hatchery Nvk Hatchery Ravi Hatchery Sai Bhargavi Hatchery Sai Lalitha Hatchery Sea Park Hatchery Seven Hills Hatchery Siddhu Hatchery Sripa Hatchery Standard Hatchery Varun Hatchery Venkat Sai Hatchery Vijaya Hatchery Yuvaraj Hatcehry Sharat Industries Marine Aqua World Blue Gold Prawn Hatchery BMR Industries Ltd BMR Marine Products P.Ltd Vaishaki Bio Resources

Vishakapatnam Nellore Nellore Nellore Nellore Nellore Nellore Nellore Nellore Nellore Nellore Nellore Nellore Nellore Ongole Nellore Nellore Vijayawada Kavali Nellore Vishakapatnam Vishakapatnam

Hatchery Government Debtors of SIAC:

S.NO

NAME

PLACE

56

Agency for Development of Aquaculture 1 2 3 4 5 6 (ADAK) CMFRI RGCA C.P.Aquaculture India Pvt.Ltd. National Institute of Ocean TechnologyNIOT CMFRI Chennai Mandapam Sirkali Ongole Chennai Cochin

SIAC Hatchery Debtors in Pondicherry: S.NO 1 2 3 4 5 6 7 NAME Rosen Fisheries Royal Plaza Hatchery A.A.Biotech Pvt. Ltd Calypso Aquatech Golden Marine Jay Jay Aqua Tech KKP Aqua PLACE Pondy Pondy Pondy Pondy Pondy Pondy Pondy

SIAC Aquarium Customers: Southern India Aquaculture has approximately 1000 customers for their Aquaculture product. Some of the customers lists are mentioned below: S.NO 1 2 3 4 5 NAME Aashish Aquarium Adi Shakthi Aquairum Akshara Aquarium Alankar Aquarium Allwin Aqurium
57

PLACE Baroda Kadr Ahmedabad Kottayam Tanjore

6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30

Amazon Aquarium Amit Aquarium Angel Aquarium Anki Aquarium A.S.Aquarium Blue Ocean Aquarium Blue Star Aquarium Chatterjee Aquarium Deeps Aquarium Dolphin Aquarium Dwarka Sea World Fintas Aquarium Fishers India Fish House Fish O Fish Howrah Aquarium India Gold Fish Indian Aquarium Krishna Aquarium Lovely Aquarium Lucky Aquarium Manasi Aquarium Neeraj Aquarium Neon Aquarium Ocean Blue Aquarium

Belgum Howrah Belgum Sagar Chennai Hyderabad Baroda Delhi Baroda Baroda Delhi Chidambaram Vishakapatnam Kohlapur Mumbai Howrah Baroda Surat Bilaspur Surat Shimoga Surat patna Ahmedabad Ahmedabad

SIAC Dog & Cat food Distributors List: S.No 1 2 3 4 5 6 7 8 9 NAME Anugraha Enterprises B.R.Distributors Fins Aquariums & Pets Glenand India Mahima Enterprise Riddhi Siddhi Industry Safa Pet Centre Shake Hands Dogmatix Kennel
58

PLACE Trichur Aurangabad Ahmedabad Bangalore Ahmedabad Jaipur Calicut Mumbai Goa

10 11

Mark Pet shop Kdc Enterprises

Mumbai Delhi

SIAC Dog & Cat Food Debtors List in Tamil nadu: S.No 1 2 3 4 5 6 7 8 9 10 11 12 13 14 NAME Adayar Pet Shop Arun Pet Shop Ballo Multi Speciality Pet Clinic Jaggs Pet Shop K.K.Medicals & Pet Shop Lovely Pet Shop Lucky Pet World & Pet Clinic Pet's Choice Scooby Pet Clinic Crazy Pets Zone C R Trading Corporation Balu Medicals Padma Medicals Golden Aquarium & Pets PLACE Chennai coimbatore Chennai Salem Chennai Chennai Chennai Chennai Madurai Chennai coimbatore namakkal Trichy Trichy

Financial Profile: The achievements of the company can be judged from its financial performance. The company with an equity capital of 7lakhs in 1998 has grown today to have its share capital of Rs.8547 lakhs. The profit of the company to the exchequer by way of central and state excise duties collected on sugar cement alcohol machinery etc., The Companys return share holder is also remarkable. Dividends are maintained at a level of 15% for the post ten years. The capital of the company stood at Rs.1146 lakhs and reserves stood at Rs.3304 lakhs in the year 1992-93. In the year 1994-95 the capital increases to
59

Rs.2578 lakhs and reserves to Rs.5969 lakhs. In 1996-97 net profit of the company was Rs.498 lakhs which fell to an abnormally low figure of Rs.210 lakhs in 199899 and again those to the great height of Rs. 3369 lakhs in 1999-2000. The growth of the company is marked from the year 1992-93. In 1994-95 the board of directors of the company announced the payment of dividend on equity shares at 25% and the founders centenary bounds dividend of 10%. FINANCIAL POSITION OF THE FIRM:YEAR SHARE CAPTIAL 1999-00 2000-01 2001-02 2002-03 2003-04 2004-05 2005-06 2006-07 2007-08 2008-09 2009-10 1289.3 1289.3 1289.3 1289.3 1133.85 1133.85 1133.85 1133.85 1133.85 1133.85 1133.85 RESERVES SURPULS 3875.85 4986.3 5515.34 6105.68 6772.84 5384.93 4962.81 6554.82 12784.19 14475.97 14342.19 PROFIT BEFORE TAX 973.47 2014.92 1246.83 1183.57 1668.16 536.16 577.63 1023.43 9391.26 3647.49 761.44 PROFIT AFTER TAX 673.47 1614.92 946.83 983.57 1368.16 340.18 422.13 1911.79 5711.04 2355.05 710.97 DIVIDEN DS ON EQUITY 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 25.00 50.00 50.00

CHAPTER VI

60

FINANCIAL STATEMENT OF ANALYSIS Contents:

Ratio analysis. Interpretation of Accounting Ratios.

Significance and Usefulness of Ratio Analysis.

Important Factors For Understanding Ratios Analysis. Analysis of Short Term Financial Position.

Analysis of Long Term Financial position.

Limitations of Ratios Analysis. Nature of Ratio Analysis. Usefulness of Ratio Analysis.

RATIO ANALYSIS

61

RATIO: A Ratio is a sample arithmetical expression of the relationship of one number to another. It may be defined as the Indicated Quotient of two mathematical expressions. According to Accountants Hand book by Wixon , kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers.

According to J. Batty, "The term accounting ratios is used to describe significant relationships which exist between figures shown in a balance sheet, in a profit and loss account, in a budgetary control system or in any other part of the accounting organization"

In simple words, "Ratio" is the numerical relationship between two variables which are connected with each other in some way or the other. For Example:

As a percentage the relationship between 100 and 500 may be expressed as 20% of the latter (100/500 x 100) = 20%.

As a proportion the relationship between 100 and 500 may be expressed as 1 : 5. Ratio analysis facilitates the presentation of information of financial statements in simplified, concise and summarized form. RATIO ANALYSIS:

62

Ratio analysis is the process of determining and presenting the relationship of items and group of in the statements. According to Batty J. Management accounting Ratio can assist management in its basic functions of forecasting, planning, coordination, control and communication. It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying Judgment, Otherwise complex situations.

Nature of Ratio Analysis: Ratios, by themselves, are not an end but only one of the means of understanding the financial health of a business entity. Ratio analysis is not capable of providing precise answers to all the problems faced by any business unit. Ratio analysis is basically a technique of:
1. Establishing meaningful relationship between significant variables of

financial statements and 2. Interpreting the relationships to form judgment regarding the financial affairs of the unit.

Usefulness of Ratio Analysis:

63

Usefulness of ratio analysis depends upon identifying: 1. Objective of analysis 2. Selection of relevant data 3. Deciding appropriate ratios to be calculated 4. Comparing the calculated ratios with norms or standards or forecasts; and 5. Interpretation of the ratios. Interpretation of Accounting Ratios: Calculation of ratios is comparatively simple, routine clerical in nature but interpretation of ratios is highly sophisticated and intricate phenomenon. The benefit of ratio analysis depends a great deal upon the correct interpretation. It needs skill, intelligence, training, farsightedness and intuition of high order on the part of the analyst. The following are different ways in which ratios may be interpreted:

Individual Ratio: Individual ratio may have significance of its own. For example, if the current ratio unit continuously falls, it may indicate probable insolvency. But generally single ratio may not convey any sense. However single ratio may be studied with reference to certain popular rules of thumb which can only give approximations. Care must be exercised because such comparison may be erroneous or unrealistic.

64

Group Ratios: Ratios may be interpreted by considering group of several related ratios. Such interpretation may be more meaningful. For example, current ratio may be studied along with liquid ratio. Similarly profitability ratios may be studied along with return on investment.

Comparison with Past: Ratios may be interpreted by making comparison over a period of time i.e. the same ratio be studied over a period of years of the same unit. It will highlight the significant trend revealing use, decline or stability of the phenomenon. Average value of the ratio for the past number of years can serve as a standard against which current performance may be measured. While interpreting ratios from comparison over a period of time one should be careful about the changes which might have taken place during the time. For example, price index; changes in managerial policies or changes in accounting practices etc. Comparison with Projections: In a business unit where system of budgetary control and forecast is in existence, projected financial statements are usually drawn. Ratios calculated based on such projected financial statements shall act as the standards with which the ratios calculated from the present financial statements shall be compared. Variances shall be calculated and analyzed by reasons and persons. It shall enable to take corrective action wherever required.

65

Inter-firm or Inter-Industry Comparison:

Ratios of one unit may be compared with the ratios of another identical unit or with the industry average at the same point of time. Such comparison is useful for evaluating relative financial position of the unit vis--vis other units or industry. While making such comparison, care must be taken regarding the difference of accounting methods, policies, procedures and terminology being followed by different units.

66

Significance and Usefulness of Ratio Analysis:

Ratios as a tool of financial analysis provide symptoms with the help of which any analyst is in a position to diagnose the financial health of the unit. Financial analysis may be compared with biopsy conducted by the doctor on the patient in order to diagnose the causes of illness so that treatment may be prescribed to the patient to help him recover. As, already hinted different groups of persons are interested in the affairs of any business entity, therefore, significance of ratio analysis for various groups is different and may be discussed as follows:

Usefulness to the Management: 1. Decision Making: Mass of information contained in the financial statements may be unintelligible a confusing. Ratios help in highlighting the areas deserving attention and corrective action facilitating decision making.

2. Financial Forecasting and Planning: Planning and forecasting can be done only by knowing the past and the present. Ratio helps the management in understanding the past and the present of the unit. These also provide useful idea about the existing strength and weaknesses of the unit. This knowledge is vital for the management to plan and forecast the future of the unit. 3. Communication:

67

Ratios have the capability of communicating the desired information to the relevant persons in a manner easily understood by them to enable them to take stock of the existing situation. 4. Co-ordination is facilitated: Being precise, brief and pointing to the specific areas the ratios are likely to attract immediate grasping and attention of all concerned and is likely to result in improved coordination from all quarters of management. 5. Control is more effective: System of planning and forecasting establishes budgets, develops forecast statements and lays down standards. Ratios provide actual basis. Actual can be compared with the standards. Variances to be computed an analyzed by reasons and individuals. So it is great help in administering an effective system of control. Usefulness to the Owners/Shareholders: Existing as well as prospective owners or shareholders are fundamentally interested in the (a) long-term solvency and (b) profitability of the unit. Ratio analysis can help them by analyzing and interpreting both the aspects of their unit. Usefulness to the Creditors Creditors may broadly be classified into short-term and long term. Short-term creditors are trade creditors, bills payables, creditors for expenses etc., they are interested in analyzing the liquidity of the unit. Long-term creditors are financial institutions, debenture holders, mortgage creditors etc., they are interested in analyzing the capacity of the unit to repay periodical interest and repayment of

68

loans on schedule. Ratio analysis provides, both type of creditors, answers to their questions. Usefulness to Employees: Employees are interested in fair wages: adequate fringe benefits and bonus linked with productivity/profitability. Ratio analysis provides them adequate information regarding efficiency and profitability of the unit. This knowledge helps them to bargain with the management regarding their demands for improved wages, bonus etc. Usefulness to the Government: Govt. is interested in the financial information of the units both at macro as well as micro levels. Individual unit's information regarding production, sales and profit is required for excise duty, sales tax and income tax purposes. Group information for the industry is required for formulating national policies and planning. In the absence of dependable information, Govt. plans and policies may not achieve desired results.

69

IMPORTANT FACTORS FOR UNDERSTANDING RATIOS ANALYSIS: Quality of Financial Statements: The reliability of ratios is linked with the quality of financial statements. Financial statements which have been prepared by faithful adherence to generally accepted accounting principles (GAAP). Generally accepted accounting principles are likely to contain reliable data. Calculation of ratios from such financial statements is bound to be more useful and trustworthy. Purpose of Analysis: Users of accounting information are different such as short-term and long-term creditors; owners and would be investors; trade unions; tax authorities; competitors etc., object of each group of interested parties is also different such as liquidity or solvency or profitability, etc. So, before undertaking the analysis, one should be clear about the object of analysis. It is the object of analysis which determines the area (liquidity, solvency, profitability, leverage, activity etc.) to be studied, analyzed and interpreted. Selection of Ratios: There is no end to the number of ratios which can be calculated. In 1919, Alexander Wall developed an elaborated system of ratio analysis. The same has been extended and modified over the period of time. So the ratios to be calculated should be selected judiciously taking into consideration the object of analysis. The ratios selected should serve the purpose of analysis. For example, short term creditors 'purpose is liquidity whereas owners' purpose may be served by solvency.

70

Standards to be Applied: Any ratio in itself i.e. in isolation is meaningless. It must be compared with some standard to arrive at any logical conclusion. The analyst can choose the comparing standard from (a) Rule of thumb (b) past ratios (c) projected standards or (d) industry standards. Selection of standards for the purpose of interpretation will also depend upon the object of the analysis and the capacity of the analyst. For example, management (being the insider) can opt. for project standards whereas any outsider's choice shall be limited to the published information of the unit. Capability of the Analyst:

Analysis is a tool in the hands of the analyst. Knife (as a tool) in the hands of a criminal may take the life but the knife (as a tool) in the hands of a surgeon may give new life to a patient.

Interpretation depends on the educational background; professional skill; experience and intuition of the professional conducting it. Ratios to be used only as Guide: Ratios can provide, at the best, the starting point. The analyst, before arriving at the conclusion, should take into consideration all other relevant factors financial and non-financial; macro and micro. For example, general condition of economy; values of society; priorities of the government etc., are the important factors.

71

Analysis of Short Term Financial Position or Test of Liquidity:

Ratio Analysis

Liquidity Ratio Efficiency Ratio

Profitability Ratio

Trade creditors; creditors for expenses; commercial banks; short-terms lenders are concerned with the short-term financial position or liquidity of the unit. Management is also interested in knowing how efficiently working capital is being utilized by the business. Shareholders and long-term creditors are also interested in studying the prospectus of dividend and interest payment. Such ratios provide answer to questions like: (a) Is the unit capable to meet short-term obligation? (b) Is working capital being properly utilized? (c) is the current financial position improving? Two types of ratios are calculated for testing short-term financial position of the business, these are liquidity ratios and current assets movement or efficiency ratios:

72

Liquidity Ratio:

Liquidity ratios are ratios that come off the balance sheet and hence measure the liquidity of the company as on a particular day i.e., the day that the balance sheet was prepared. Liquidity ratios measure the ability of the unit to meet its short-term (generally one year) obligations and reveal the short-term financial strength or weakness. Liquidity Ratio

Current Ratio Quick Ratio Liquidity ratios usually consist of: (i) Current ratio (ii) Acid test or quick or liquid ratio and (iii) Absolute liquid ratio or cash position ratio.

Cash Position Ratio

73

Current Ratio: Definition and Explanation: This ratio is obtained by dividing the Total current Assets of a company by its Total current liabilities. The ratio is regarded as a test of liquidity for a company. It expresses the working capital relationship of current assets available to meet the companys current obligations. Current ratio is also known as working capital ratio or 2 : 1 ratio. It is the ratio of total current assets to total current liabilities. Current assets are those which are usually converted into cash or consumed with in short period (say one year). Current liabilities are required to be paid in short period (say one year). Examples of current assets and current liabilities are as follows: Current Assets Cash Bank Stock: Raw materials Work-in-progress Finished goods Short-term investments Sundry debtors (less provision) Bills receivable Recoverable advances, Prepaid Expenses Current Liabilities Sundry creditors Bills payable Outstanding expenses Bank overdraft Taxes etc., payable Dividend payable Short-term advances

74

In case where bank overdraft is permanent feature and minimum investment in stock cannot be en-cashed the same should not be treated as current items. But normally these are including under the current items. Formula of Current Ratio: Current ratios are calculated by using the following formula: Current ratio = Current assets / current liabilities

Interpretation of Current Ratio: Current ratio indicates the liquidity of current assets or the ability of the business to meet its maturing current liabilities. High current ratio finds favor with short-term creditors whereas low ratio causes concern to them. An increase in the current ratio reflects improvement in the liquidity position of the business while the decrease signals that there has been deterioration in the liquidity position of the business. As a convention 2 :1 is regarded as satisfactory level i.e. current assets should be almost double than the current liabilities. The idea is to provide for loss in the value of current assets due to probable decrease in the market value and too offered for any possible delay in the realization of current assets. However there is no scientific reasoning behind 2 : 1 norm. Current ratio compares only the quantity of current assets rather than the quality of assets. A high current ratio though considered to be desirable may prove to be otherwise due to following reasons: 1. In case of slow moving stocks, these will pile up and will lead to higher ratio.
75

2. In case of slow collection of trade debts it will also lead to higher ratio. 3. Cash and bank balance may be more then necessary consequently significant portion may remain idle which is not at all desirable: 4. On the other hand if the current ratio is low due to following reasons it is again undesirable: 5. Lack of sufficient funds to meet current obligations and 6. Trading level beyond the capacity of the business. Before arriving at any conclusion based on the interpretation of current ratio the following factors should be considered: Nature of Business: Public utility undertakings like electricity boards, transport corporations, municipal committees have the legal force to collect their dues in time so even a low current ratio need not cause any worry but normal trading business must have satisfactory current ratio. Nature of Product: A business dealing in consumer goods will require better current ratio as compared to a business which is dealing in durable or capital goods.

Reputation of the Business also Influences the Requirement of Liquidity:

76

A business having better reputation can do with small cash and bank balance as compared to comparatively unknown business house. It is so because well-known business shall enjoy favorable terms of credit. Seasonal Influence: In a business where raw material is a seasonal commodity like wheat or sugarcane, it will require the purchase of annual consumption in the season itself, thus, requiring higher investment in stock as compared to the business where purchases can be spread over evenly throughout the year. Quick Ratio: Definition and Explanation:

This ratio is obtained by dividing the Total Quick Assets of a company by its Total Current Liabilities. Sometimes a company could be carrying heavy inventory as part of its current assets, which might be obsolete or slow moving. Thus eliminating inventory from current assets and then doing the liquidity test is measured by this ratio. The ratio is regarded as an acid test of liquidity for a company. It expresses the true Working Capital relationship of its cash accounts receivables, prepaid and notes receivables available to meet the company s current obligations.

Quick ratio is also known as liquid ratio or acid test ratio. Current ratio provides a rough idea of the liquidity of a firm so subsequently a second testing device was developed named as acid test ratio or quick ratio. It establishes relationship between
77

liquid assets and current liabilities. In many businesses a significant proportion of current assets may comprise of inventory. Inventory, by nature, cannot be converted into ready cash abruptly. The term liquid assets does not include inventory.

Formula: Following formula is used to calculate quick ratio: Quick ratio = Liquid (quick) assets / Current Liabilities The term liquid or quick assets includes all the current assets minus inventory at prepaid expenses. Interpretation of Quick Ratio: As quick ratio eliminates inventory and prepaid expenses for matching against current liabilities therefore it is a more rigorous test of liquidity as compared to Current ratio. When used along with Current ratio it gives a clearer picture of business's liquidity position. Rule of thumb for acid test ratio is 1 : 1 i.e., if business liquid assets are 100 percent of its current liabilities it is considered to be having fairly good current financial position. However care must be exercised in depending upon too much on rule of thumb stated above. Just like any other ratio the interpretation of acid test ratio also depends on circumstances discussed under Current ratio. Interpretation of this ration is also subject to the same factors and conditions as the Current ratio.

78

Absolute Liquid Ratio: Definition and Explanation: Absolute liquid ratio extends the logic further and eliminates accounts receivable (sundry debtors and bills receivables) also. Though receivables are more liquid as comparable to inventory but still there may be doubts considering their time and amount of realization. Therefore, absolute liquidity ratio relates cash, bank and marketable securities to the current liabilities. Since absolute liquidity ratio lays down very strict and exacting standard of liquidity, therefore, acceptable norm of this ratio is 50 percent. It means absolute liquid assets worth one half of the value of current liabilities are sufficient for satisfactory liquid position of a business. However, this ratio is not as popular as the previous two ratios discussed. Formula: Absolute liquid ratio is calculated by using the following formula: Absolute liquid ratio = Absolute liquid assets / Current liabilities Where absolute liquid assets = Cash + Bank + marketable securities.

79

Efficiency Ratios:

Efficiency ratio are ratios that come off the balance sheet and the Income statement and therefore Incorporate one dynamic statement, the income statement and one static statement, the balance sheet. These ratios are important in measuring the efficiency of a company in either turning their inventory, sales, assets, accounts receivables or payables. It also ties into the ability of a company to meet both its short term and long term obligations. This is because if they do not get paid on time how will you get paid on time. You may have perhaps heard the excuse I wick pay you when I get paid or My customers have not paid me!

Efficiency Ratio

Inventory Ratio

Debtors Turn over Ratio

Creditors Turn over Ratio

Working Capital Turn over Ratio

Activity/efficiency ratios usually consist of: (i) Inventory/Stock Turnover Ratio (ii) Debtors / Receivable Turnover Ratio (iii) Creditors / Payables Turnover Ratio (iv) Working Capital Turnover Ratio
80

Inventory / Stock Turnover Ratio: Definition and Explanation: Inventory turnover ratio or Stock turnover ratio indicates the velocity with which stock of finished goods is sold i.e. replaced. Generally it is expressed as number of times the average stock has been turned over or rotates of during the year. A slow inventory movement has the following disadvantages: 1. Blocking of scarce funds which could be gainfully employed elsewhere; 2. Requiring more strong space resulting in higher maintenance and handling costs; 3. Chances of product being outdated or out of fashion especially in case of consumer goods; 4. During storage for excessive period quality may deteriorate due to inherent factors like rusting loss of potency etc. 5. Similarly insufficient level of inventory is also dangerous because it may be responsible for the loss of business opportunity. Thus for each item of stock minimum average and maximum levels should be fixed carefully.

81

Formula: Following formula is used to calculate this ratio: Cost of goods sold / Average inventory at cost Where Cost of goods sold = Sales - Gross profit (or) + Gross loss (or) Opening stock + Net purchases + Direct Expenses - Closing stock And Average inventory = (Opening stock + Closing stock) / 2 However in the absence of required information any one of the following formula may be substituted as: Inventory turnover ratio = Net sales / Average inventory at cost (or) Net sales / Average inventory at selling price (or) Net sales / Inventory

82

Interpretation: High turnover suggests efficient inventory control, sound sales policies, trading in quality goods, reputation in the market, better competitive capacity and so on. Low turnover suggests the possibility of stock comprising of obsolete items, slow moving products, poor selling policy, over investment in stock etc. Inventory Conversion Period: For better understanding it is of interest to know that on an average how many days were taken to dispose off average inventory? It is known as inventory conversion period and is calculated as: Inventory conversion period = Days in the year/Inventory turnover ratio (or) No of days in the year x Average inventory at cost/Cost of goods sold

83

Debtors Turnover Ratio or Receivable Turnover Ratio: Definition and Explanation: Ratio of net credit sales to average trade debtors is called debtors turnover ratio. It is also known as receivables turnover ratio. This ratio is expressed in times. Accounts receivables are the term which includes trade debtors and bills receivables. It is a component of current assets and as such has direct influence on working capital position (liquidity) of the business. Perhaps, no business can afford to make cash sales only thus extending credit to the customers is a necessary evil. But care must be taken to collect book debts quickly and within the period of credit allowed. Otherwise chances of debts becoming bad and unrealizable will increase. How effective or efficient is the credit collection? To provide answer debtors turnover ratio or receivable turnover ratio is calculated. Formula:

Following formula is used to calculate debtors turnover ratio: Receivables turnover ratio = Annual net credit sales / Average accounts receivables Where accounts receivables = Trade debtors + Bills receivables

84

Interpretation: Normally higher the debtors turnover ratio better it is. Higher turnover signifies speedy and effective collection. Lower turnover indicates sluggish and inefficient collection leading to the doubts that receivables might contain significant doubtful debts. Receivables collection period is expressed in number of days. It should be compared with the period of credit allowed by the management to the customers as a matter of policy. Such comparison will help to decide whether receivables collection management is efficient or inefficient. Creditors Turnover Ratio or Payables Turnover Ratio: Definition and Explanation: It is a ratio of net credit purchases to average trade creditors. Creditors turnover ratio is also know as payables turnover ratio. It is on the pattern of debtors turnover ratio. It indicates the speed with which the payments are made to the trade creditors. It establishes relationship between net credit annual purchases and average accounts payables. Accounts payables include trade creditors and bills payables. Average means opening plus closing balance divided by two. In this case also accounts payables' figure should be considered at gross value i.e. before deducting provision for discount on creditors. Payable turnover ratio = Annual net credit purchases / Average accounts payable Accounts payable = Trade creditors + Bills payable

85

Interpretation: Shorter average payment period or higher payable turnover ratio may indicate less period of credit enjoyed by the business it may be due to the fact that either business has better liquidity position; believe in availing cash discount and consequently enjoys better credit standing in the market or business credit rating among suppliers is not good and therefore they do not allow reasonable period of credit. The above two alternative conclusions are contradictory of each other therefore the ratio should be interpreted with caution. Working Capital Turnover Ratio: Definition and Explanation: Working capital turnover ratio establishes relationship between cost of sales and net working capital. As working capital has direct and close relationship with cost of goods sold, therefore, the ratio provides useful idea of how efficiently or actively working capital is being used Interpretation of this ratio should be done when inter-firm or inter-period comparison is being done. Increasing ratio indicates that working capital is more active; it is supporting, comparatively, higher level of production and sales; it is being used more intensively. Formula: Working capital turnover ratio = Cost of sales / Average net working capital Where, cost of sales = Opening stock + Net purchases + Direct expends - Closing stock Net working capital = Current assets - Current liabilities

86

Average of networking capital is calculated, as usual, opening + closing dividing by 2. However, if the information regarding cost of sales and opening balance of networking capital is not available then the formulae should be substituted as: Net sales / Net working capital Profitability Ratio: The main object of a business concern is to earn profits. In general terms, efficiency in business is measured by profitability. A low profitability may arise due to lack of control over the expenses. Bankers financial institutions and other creditors look at the profitability ratios as an indicator whether or not the firm earns substantially more than it pays interest for the use of borrowed funds and whether the ultimate repayment of their debt appears reasonably certain. Owners are also interested to know the profitability as it indicates the return which they can get on their investments.

Following are some of the most important profitability ratios: (1) Gross Profit Ratio: Gross profit ratio is the ratio of gross profit to net sales i.e. sales less sales returns. (2) Operating Profit Ratio: Operating net profit ratio is calculated by dividing the operating net profit by sales. (3) Net Profit Ratio: Net profit ratio expresses the relationship between net profit after taxes and sale.
87

(4) Operating Ratio: This ratio is determined by comparing the cost of the goods sold and other operating expenses with net sales (5) Expense Ratios: Expense ratios are calculated to ascertain the relationship that exists between operating expenses and volume of sales: Expense ratios are calculated by dividing each item of expense or group of expenses with the net sales so analyse the cause of variation of the operating ratio. Gross Profit Ratio (GP Ratio): Definition and Explanation: Gross profit ratio is the ratio of gross profit to net sales i.e. sales less sales returns. The ratio thus reflects the margin of profit that a concern is able to earn on its trading and manufacturing activity. It is the most commonly calculated ratio. It is employed for inter-firm and inter-firm comparison of trading results. Formula: Following formula is used to calculated gross profit ratio (GP Ratio): Gross profit / (Net sales 100) Where Gross profit = Net sales - Cost of goods sold Cost of goods sold = Opening stock + Net purchases + Direct expenses - Closing stock Net sales = Sales - Returns inwards

88

Gross profit is what is revealed by the trading account. It results from the difference between net sales and cost of goods sold without taking into account expenses generally charged to the profit and loss account. The larger the gap, the greater is the scope for absorbing various expenses on administration, maintenance, arranging finance, selling and distribution and yet leaving net profit for the proprietors or shareholders.

In case, there is increase in the percentage of gross profit as compared to the previous year, it is indicator of one or more of the following factors.

The selling price of the goods has gone up without corresponding increase in the cost of goods sold.

The cost of goods sold has gone down without corresponding decrease in the selling price of the goods.

Purchases might have been omitted or sales figures might have been inflated.

The valuation of the opening stock is lower than what it should be or the valuation of the closing stock is higher than what it should be.

In case, there a decrease in the rate of gross profit, it may be due to one or more of the following reasons.

There may be decrease in the selling rate of the goods sold without corresponding decrease in the cost of goods sold.

There may be increase in the cost of goods sold without corresponding increase in the selling price of the goods sold.
89

Operating Profit Ratio: Definition: Operating net profit ratio is calculated by dividing the operating net profit by sales. This ratio helps in determining the ability of the management in running the business. Formula: Operating profit / (Net sales 100) Operating profit = Gross profit - Operating Exp. OR Operating profit = Net sales - Operating cost OR = Net sales - (Cost of goods sold + Administrative and office expenses + Selling and distribution exp.) OR (Net profit + Non-operating expenses) - (Non-operating incomes) Higher the ratio, better it is

90

Net Profit Ratio (NP Ratio): Net profit ratio (NP ratio) expresses the relationship between net profit after taxes and sales. This ratio is a measure of the overall profitability net profit is arrived at after taking into accounts both the operating and non-operating items of incomes and expenses. The ratio indicates what portion of the net sales is left for the owners after all expenses have been met. Formula: Following formula is used to calculate net profit ratio: Net profit ratio = (Net profit after tax / Net sales) 100 It is expressed in percentage. Higher the net profit ratio, higher is the profitability of the business. Significance: Net profit ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. This ratio also indicates the firm's capacity to face adverse economic conditions such as price competition, low demand, etc. Obviously, higher the ratio the better is the profitability. But while interpreting the ratio it should be kept in mind that the performance of profits also be seen in relation to investments or capital of the firm and not only in relation to sales.

91

Operating Ratio: The operating ratio is determined by comparing the cost of the goods sold and other operating expenses with net sales.

Formula: Following formula is used to calculate operating ratio: [(Cost of goods sold + Operating expenses / Net sates)] 100 Here cost of goods sold = Operating stock + Net purchases + Manufacturing expenses - Closing stock OR = Net sales - Gross profit Operating expenses = Office and administrative expenses + Selling and distribution expenses Interpretation: This ratio is a test of the efficiency of the management in their business operation. It is a means of operating efficiency. In normal conditions, the operating ratio should be low enough so as to leave portion of the sales sufficient to give a fair return to the investors. Operating ratio plus operating profit ratio is 100. The two ratios are obviously interrelated. For example, if the operating profit ratio is 20%, it means that the operating ratio is 80%. A rise in the operating ratio indicates a decline in the efficiency.
92

Lower the operating ratio, the better is the position because greater is the profitability and management efficiency of the concern. The higher the ratio, the less favorable is the situation, because there will be smaller margin of profit available for the purpose of payment of dividend and creation of reserves. Expense Ratios: Definition and Explanation: Expense ratios are calculated to ascertain the relationship that exists between operating expenses and volume of sales. Expense ratios are calculated by dividing each item of expense or group of expenses with the net sales so analyse the cause of variation of the operating ratio. It indicates the portion of sales which is consumed by various operating expenses. Formula:

Ratio of material used to sales: (Direct material cost / Net sales) 100 Ratio of labour to sales: (Direct labour cost / Net sales) 100 Ratio of factory overheads to sales: (Factory expenses / Net sales) 100 Ratio of office and administration expenses to sales: (Office and administration expenses / Net sales) 100

Ratio of selling and distribution expenses to sales: (Selling and distribution expenses / Net sales) 100

These ratios are expressed in terms of percentage. The total of the above ratios will be equal to the operating ratio.

93

Solvency Ratios - Test of Long Term Solvency: The long-term financial soundness of any business can be judged by its long-term creditors by testing its ability to pay interest charges regularly and its ability to repay the principal as per schedule. Solvency Ratio Debt Equity Ratio

Debt Service Ratio

Fixed Asset Ratio

Debts to total funds

Reserves to capital ratio

Capital Gearing Ratio

Proprietary Ratio Following are the most important solvency ratios:

94

1. Debt-Equity ratio: (also known as debt to net worth ratio). The relationship

between borrowed funds and internal owner's funds is measured by DebtEquity ratio.
2. Debt Service or Interest Coverage Ratio: The ratio measures debts

servicing capacity of a business so far as interest on long-term loans is concerned. The ratio is calculated with formula.
3. Debts to Total Funds or Solvency Ratio: Solvency is the term which is

used to describe the financial position of any business which is capable to meet outside obligations in full out of its own assets. So this ratio establishes relationship between total liabilities and total assets.
4. Reserves to Capital Ratio: This ratio establishes relationship between

reserves and capital.

5. Capital Gearing Ratio: It is the ratio between the capital plus reserves i.e.

equity and fixed cost bearing securities. Fixed cost bearing securities include debentures, long-term mortgage loans etc.
6. Proprietary Ratio: Proprietary ratio (also known as Equity Ratio or Net

worth to total assets or shareholder equity to total equity).

95

Debt-Equity Ratio: Definition:

The relationship between borrowed funds and internal owner's funds is measured by Debt-Equity ratio. This ratio is also known as debt to net worth ratio.

Formula: The following formulas are used to calculate debt equity ratio:

Debt Equity Ratio = Total long term debts / shareholder' funds

where long-term debts total excludes current liabilities. Shareholder's funds include (i) Ordinary share capital, (ii) Credit balance of profit and loss account and free reserves etc., but deduction should be made for fictitious assets if any in the balance sheet. Shareholders funds or net worth = Owner's equity - Fictitious assets Debt-equity ratio with above concept is also known as Debt to Net worth ratio.

Another version of Debt-Equity ratio (known as external-internal equity ratio) is where relationship is established between borrowed funds and owner's equity.

Debt-equity ratio = External equity ratio / Internal Equity ratio or Total debs / Shareholders equity Where Total debts = (Short-term debts + Long-term debts).

96

The difference between this and the first approach is m respect of current liabilities. In the first approach current liabilities are excluded where as in the second approach the same are included.

Still another version of Debt-Equity ratio known as debts vs. funds ratio is when long-term loans are related to total long-term funds. Debt-Equity ratio = Long term loans / Total long term funds where long-term funds = Long-term loans + Equity

Debt Service Ratio or Interest Coverage Ratio: Definition: The ratio measures debts servicing capacity of a business so far as interest on longterm loans is concerned. This ratio shows how many times the interest charges are covered by the earnings. Debt service ratios are also known as interest coverage ratio. Formula: The ratio is calculated with following formula: Debt service ratio = Earnings before interest and taxes (EBIT) / Fixed interest charges

97

Fixed Assets Ratio: Definition: This ratio establishes the relationship between long term funds (equity plus longterm loans) and fixed assets. Since financial management advocates that fixed assets should be purchased out of long term funds only.

Formula: Following formula or equation is used to calculate fixed assets ratio: Fixed Assets ratio = Net fixed assets / Long term funds

Debts to Total Funds or Solvency Ratio:

Definition: Solvency is the term which is used to describe the financial position of any business which is capable to meet outside obligations in full out of its own assets. So this ratio establishes relationship between total liabilities and total assets. Formula: Debts to Total Funds or Solvency Ratio = Total liabilities / Total assets

98

Reserves to Capital Ratio: Definition: This ratio establishes relationship between reserves and capital. Higher proportion of reserves shows financial soundness because:

Unit shall be able to meet future losses as and when suffered. Unit can grow, expand, diversify as it may desire.

Formula: The ratio is calculated with the help of following formula: Reserves to capital ratio = Reserves / Capital Proprietary Ratio: Definition and Explanation: Proprietary ratio (also known as Equity Ratio or Net worth to total assets or shareholder equity to total equity). Establishes relationship between proprietor's funds to total resources of the unit. Where proprietor's funds refer to Equity share capital and Reserves, surpluses and Tot resources refer to total assets. Formula: Following formula is used to calculate proprietary ratio: Proprietary ratio = Proprietor's funds / Total assets

99

This relationship highlights the fact as to what is the proportion of Proprietors and outsiders in financing the total business. Suppose, in a business total assets amount of $4, 00,000 and Proprietors equity is $3, 00,000 then Proprietary ratio = 3, 00,000 / 4, 00,000 = 0.75 times. Or 75% meaning hereby that 25% of the funds have been supplied by the outside Definition creditors. Capital Gearing Ratio: and Explanation: It is the ratio between the capitals plus reserves i.e. equity and fixed cost bearing securities. Fixed cost bearing securities include debentures, long term mortgage loans etc. In a company form of organization, real risk is borne by equity shareholders because they are entitled to whatever residue is left after all others have been paid at the contracted rate. This ratio measures the extent of capitalization by the funds raised by the issue of fixed cost securities. This ratio is interpreted by the use of two terms. Highly geared means lower proportion of equity. Low geared means high proportion of equity as compared to fixed cost bearing capital. Formula: The formula/equation for the calculation of capital gearing ratio is as follows: Capital gearing ratio = Equity / Fixed cost bearings securities

100

Where, Equity = Equity share capital + Free reserves + Profits and loss account credit balance Fixed cost bearing securities = Debentures + Long term loans Significance: Capital gearing must be carefully planned. Financial management gives us a concept of "Trading on Equity". It means as long as rate of earnings of business is higher than cost of fixed interest/dividend bearings securities the equity shareholders gain on the strength of their equity. Reverse follows in alternative situations. Limitations of Ratios Analysis: Ratio analysis is a widely used and useful technique to evaluate the financial position and performance of any business unit but it suffers from a number of limitations. These limitations must be kept in mind by the analyst while using this technique. Reliability is linked with Accounting Data: Ratios are calculated on the basis of accounting information. Accounting system has certain in built limitations like historical cost, going concern value, stable monetary value, etc. So, limitations of accounting data affect the quality of ratios also. After, all ratios can't be more reliable than the reliability of data itself.

101

Qualitative Factors are ignored: Ratio analysis is only a quantitative analysis. Sometimes qualitative factors may be important. For example, management may be justified in making huge purchases of raw material in anticipation of large demand of its product for the coming period. But ratios are not capable of considering qualitative factors. Isolated Ratios is Meaningless: Ratios assume significance only when studied in proper context and if compared with norms or over a period. Ratio in itself does not convey any sense. Ratio Analysis is Historical: Ratios are based on the facts contained in financial statements. These statements contain past records. Past may be less important or irrelevant for the management than present and future.

Different Accounting Practice Render Ratios Incomparable: Accounting permits alternative treatment of many items like depreciation, valuation of tock, deferred expenses etc. Ratios based on statements prepared by following different practices are not comparable.

102

Price Level Changes Affect the Utility of Ratio Analysis: Comparison of ratios over a period of time relating to same unit may be misleading. For example, sales may be static in quantity but higher in dollar value due to inflation. Incompetence or Bias of Analyst: Much depends upon the skill, integrity and competence of the analyst to use ratios judiciously. Lack of Adequate Standards: There are no well-accepted standards or rule of thumb for all ratios which might be expected as norms for comparison. It renders interpretation of ratios difficult and to some extent arbitrary.

Window Dressing: Financial statements can easily be "window dressed" to depict better than real picture of the enterprise. Moreover the analyst depending only upon published financial statements will not be in a position to get inside information.

103

CHAPTER VII RATIO ANALYSIS IN SIAC Contents: Analytical Frame Work Liquidity Ratio Leverage Ratio Activity or Turnover Ratio Profitability Ratio

104

ANALYTICAL FRAME WORK LIQUIDITY RATIO:1. CURRENT RATIO: Current Ratio = current assets/ current liabilities. TABLE NO:-1 YEAR CURRENT ASSETS 2003 2004 2005 2006 2007 2008 2009 2010 1,66,42,92,550 1,73,51,35,178 1,86,98,53,982 1,59,42,59,102 1,98,52,25,857 2,00,35,49,011 1,76,18,14,461 1,79,18,02,606 CURRENT LIABILITES 54,61,25,626 62,99,49,407 91,44,32,890 67,27,82,794 1,35,19,50,925 1,31,17,17,583 1,25,07,21,521 84,69,14,549 RATIO % 3.05 2.75 2.04 2.36 1.47 1.53 1.41 2.05

EXHIBIT:-1 CURRENT RATIO

3.5 3 2.5 2 1.5 1 0.5 0 2003 2004 2005

CURRENT RATIO RATIO%

RATIOS

2006

2007

2008

2009

2010

YEARS

INTERPETATION:-

105

Current ratio is used to measure the liability position of the concern and thus it reflects the short term solvency of the concern. In other word it shows the ability of the concern to meet its entire current obligations as and when there are due during short term period. As a convention the minimum of 2:1 ratio is referred to as Bankers thumb rule. The company current ratio position is far better 2006. In the year 2010 the current ratio relatively high then bankers rule. 2. THE QUICK ASSET RATIO OR ACID TEST RATIO:Quick Ratio = Current Assets Stock Prepaid Exp Current liabilities TABLE:-2 YEAR QUICK ASSETS 2003 2004 2005 2006 2007 2008 2009 2010 29,63,24,158 29,34,25,625 32,87,11,729 23,62,61,740 54,74,64,021 63,80,26,240 42,72,54,380 46,92,59,679 CURRENT LIABILITES 54,61,25,626 62,99,49,407 91,44,32,890 82,27,82,794 1,35,19,50,925 1,31,17,17,583 1,25,07,21,521 84,69,14,549 RATIO % 0.54 0.47 0.36 0.29 0.40 0.49 0.34 0.55

EXHIBIT:-2 QUICK RATIO

106

QUICK RATIO
RATIOS
0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2008 2009 2010

RATIO

YEARS

INTERPRETITION:From above table shows the quick ratio of the company. As conventional rule 1:1 is satisfactory level. The company quick ratio in 2005 0.35 and in the year 2007 increased to 0.41 and increased 0.49 in the year 2008 and decreased to 0.35 in the year 2009 and increased to 0.55 in the year 2010

107

1. ABSOLUTE LIQUID RATIO: - (CASH RATIO) Absolute Liquid Ratio = Cash + Bank balances/Current liabilities (Cash + Marketable securities) TABLE NO:-3 YEAR QUICK ASSETS 2003 2,82,13,254 2004 3,45,07,202 2005 5,30,91,438 2006 5,52,57,959 2007 5,02,62,789 2008 6,81,47,393 2009 17,67,30,095 2010 20,84,05,389 EXHIBIT:-3 CASH RATIO CURRENT LIABILITES 54,61,25,626 62,99,49,407 91,44,32,890 67,27,82,794 1,35,19,50,925 1,31,17,17,583 1,25,07,21,521 84,69,14,549 RATIO % 0.051 0.054 0.058 0.082 0.037 0.051 0.141 0.246

CASH RATIO
RATIOS
0.3 0.2 0.1 0 2003 2004 2005 2006 2007 2008 2009 2010 RATIO

YEARS

INTERPRETATION:The cash is the most liquid asset a financial analysis may examine in the year 2006 the cash ratio is 0.082. In the current year 2006-07 the cash ratios of the

108

company is 0.037. If the advisable that the company maintain high cash ratio. In the year 2008 the company cash ratio is 0.051 and increased to 0.141 in the year 2009 and increased to 0.246 in the year 2010. 1. NETWORKING CAPITAL RATIO:Networking Capital Ratio = Networking capital/ Net asset TABLE NO:-4 YEAR N.W.C NET ASSETS RATIO % 2003 2004 2005 2006 2007 2008 2009 2010 1,11,81,66,924 1,10,51,85,771 95,54,21,092 92,14,76,308 63,32,74,932 69,18,31,428 51,10,92,940 89,48,88,057 2,07,71,03,857 2,11,66,74,882 1,96,95,34,529 1,88,63,97,240 1,67,81,51,868 2,08,88,97,722 2,19,18,10,084 2,42,43,69,621 0.53 0.52 0.48 0.48 0.38 0.33 0.23 0.36

EXHIBIT:-4 NET WORKING CAPITAL RATIO

109

NET WORKING CAPITAL RATIO

RATIOS
0.5 2 0.3 1 0.1 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIO

INTERPRETATION:The networking capital ratio is 0.55 in 2000 and decreased to 0.53 in 2001 and decreased to 0.52 in the year 2002 and decreased to 0.48 which remains same in 2003-04. In the year 2005 the ratio is decreased to 0.38 and decreased to 0.33 in the year 2006 in the year 2000 the ratio is more that is 0.55 due to the increase of networking capital and decreased to 0.23 in the year 2007 5. TOTAL DEBT RATIO:TABLE NO:-5 YEAR 2003 2004 2005 2006 2007 2008 2009 2010 DEBT RS. 1,29,78,67,757 1,31,66,68,400 1,22,72,91,034 1,01,55,61,433 51,11,87,947 50,11,72,102 37,35,99,300 62,28,86,979 ASSETS RS. 2,07,71,03,857 2,11,66,74,882 1,96,95,34,529 1,88,63,97,240 1,67,81,51,868 2,08,88,97,722 2,19,18,10,084 2,42,43,69,621 RATIO % 0.624 0.622 0.623 0.538 0.322 0.239 0.170 0.256 .

Total Debt ratio = Total debt / Capital employed.

EXHIBIT:-5 DEBT RATIO

110

TOTAL DEBT RATIO

RATIOS
0.8 0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIO

INTERPRETATION:Debt ratio used to analyze long term solvency of the firm. There are no major changes in debt ratio from 2002-05 and decreased 0.53 in the year 2006 and decreased to 0.322 in the year 2007 and decreased 0.239 in the year 2008 this is due to decreased in net assets and decreased to 0.170 in 2009 and increased to 0.256 in 2010.

6. DEBT EQUITY RATIO:Debt equity ratio = debt (both short term & long term) / net worth. TABLE NO:-6

111

YEAR 2003 2004 2005 2006 2007 2008 2009 2010

DEBT RS. 1,29,78,67,757 1,31,66,68,400 1,22,72,91,034 1,01,55,61,433 51,11,87,947 50,11,72,102 37,35,99,300 62,28,86,979

NET WORTH 79,06,68,876 65,18,78,551 60,96,66,023 76,88,66,587 1,01,46,29,997 1,39,18,03,766 1,56,09,82,000 1,54,76,04,000

RATIO % 1.64 2.01 2.01 1.32 0.53 0.36 0.24 0.40 EXHIBIT:-6 DEBT EQUITY RATIO

DEBT EQUITY RATIO

RATIOS
2.5 2 1.5 1 0.5 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIO

INTERPRETATION:Debt equity ratio says the relationship describing the lenders contribution for each Rupee of owner contribution. The debt equity ratio is 1.74 in 2002 and decreased to 1.64 in the year 2003 and increased to 2.01 in the year 2004 and it remains same in 2005 this is because of increase in the debt, and it is decreased to

112

1.32 in the year 2006 and increased to 0.53 in the year 2007 and decreased to 0.36 in the year 2008 and decreased to 0.24 in the year 2009 and increased to 0.40 in the year 2010. 7. INVENTORY TURNOVER RATIO:Inventory Turnover ratio = Net sales / average inventory. TABLE NO:-7 YEAR NET SALES RS. 2003 2004 2005 2006 2007 2008 2009 2010 2,20,42,39,579 1,32,90,33,413 1,62,54,08,635 2,21,66,96,005 3,10,49,48,667 4,07,14,44,781 3,97,24,59,539 3,09,97,71,437 AVERAGE INVENTORY 1,36,24,00,236 1,43,85,65,711 1,53,82,60,271 1,35,29,84,499 1,43,18,24,825 1,35,93,30,982 1,32,75,07,945 1,26,77,78,839 RATIO % 1.61 0.92 1.05 1.63 2.17 2.99 2.99 2.44

EXHIBIT:-7 INVENTORY TURNOVER RATIO

INVENTORY TURNOVERRATIO
3.5 3 2.5 2 1.5 1 0.5 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIOS

RATIO

INTERPRETATION:Inventory turnover ratio show how rapidly the inventory is turning into receivables through sales.
113

The ratio is 1.23 in 2004 and to 1.36 in 2005 and increased to 2.14 in 2006 and increased to 2.51 and 2.51 in the years 2007 and 2008 respectively. The ratio decreased to 2.36 in the year 2009 and decreased to 1.85 in the year 2010.

8. DEBTORS TURNOVER RATIO:Debtors Turnover Ratio = Sales/Debtors TABLE NO:-8 YEAR 2003 2004 2005 2006 2007 2008 2009 2010 SALES 2,20,42,39,579 1,32,90,33,413 1,62,54,08,635 2,21,66,96,005 3,10,49,48,667 4,07,14,44,781 3,97,24,59,539 3,09,97,71,437 DEBTORS 6,45,65,339 4,80,26,504 7,31,85,488 12,48,86,536 11,21,33,122 10,80,11,642 11,45,09,441 6,09,19,428 RATIO % 34.13 27.67 22.20 17.74 27.69 37.69 34.69 51.13

114

EXHIBIT:-8 DEBTORS TURN OVER RATIO

RATIOS

DEBTORS TURN OVER RATIO

RATIO

60 45 30 15 0 2003 2004 2005 2006 2007 2008 2009 2010

YEARS

INTERPRETATION:The higher the value of debtors turnover ratio is more efficient is the management of the credit. The Debtors turnover ratio is 26.35 in the year 2002 and increased to 34.13 in 2003 and decreased 27.67 in the year 2004 and decreased to 22.20 in 2005 and in the year 2006 it is decreased to 17.74 because of simultaneous increased in the sales and debtors in the year 2007 it is increased to 27.69 and increased to 37.69 in the year 2008 and decreased to 34.69 in the year 2009, and increased to 51.13 in the year 2010. 9. TOTAL ASSETS TURNOVER RATIO:Total assets turnover ratio = Sales/ Total asset TABLE NO:-9 YEAR SALES RS. (Lakhs) 2003 2004 2005 2006 2007 2008 2009 2010 2,20,42,39,579 1,32,90,33,413 1,62,54,08,635 2,21,66,96,005 3,10,49,48,667 4,07,14,44,781 3,97,24,59,539 3,09,97,71,437 TOTAL ASSETSRS. (Lakhs) 2,26,32,29,483 2,74,66,24,289 2,88,39,67,419 2,55,91,80,034 3,03,01,02,793 115 3,40,06,15,305 2,19,18,10,084 2,42,43,69,621 RATIO % 0.97 0.48 0.56 0.86 1.02 1.20 1.81 1.27

EXHIBIT:-9 TOTAL ASSETS TURN OVER RATIO

TOTAL ASSETS TURNOVER RATIO

RATIOS
2 1.5 1 0.5 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIO

INTERPRETATION:Total assets turnover ratio shows the firm ability in generating sales from all financial resources committed to total assets. The ratio in 2002 was 0.69 and increased to 0.84 in the year 2003 and decreased to 0.48 in 2004 and decreased to 0.56 and 0.86 in the year 2006-07 and increased to 1.02 in the year 2007 and increased 1.20 in the year 2008. The ratio is 0.48 which is very less when compared to other years because of decrease in sales in 2004 and increased to 1.81 in the year 2009, and reduced to 1.27 in the year 2010.

116

10.FIXED ASSETS TURN OVER RATIO:Fixed Assets Turnover Ratio = Net Sales/Net fixed Assets. TABLE NO:-10 YEAR SALES RS (Lakhs). 2003 2004 2005 2006 2007 2008 2009 2010 2,20,42,39,579 1,32,90,33,413 1,62,54,08,635 2,21,66,96,005 3,10,49,48,667 4,07,14,44,781 3,97,24,59,539 3,09,97,71,437 NET FIXED ASSETS RS. (Lakhs) 95,89,36,993 1,01,14,89,111 1,01,41,13,437 96,49,20,932 1,04,48,76,936 1,39,70,66,294 1,55,41,25,127 1,47,58,28,430 RATIO % 2.29 1.31 1.60 2.29 2.97 2.91 2.56 2.10

EXHIBIT:-10 FIXED ASSETS TURNOVER RATIO

FIXED ASSETS TURNOVER RATIO

RATIOS
4 3 2 1 0

RATIO

2003

2004

2005

2006

2007

2008

2009

2010

YEARS

INTERPRETATION:-

117

The fixed assets turnover ratio is 2.07 and increased to 2.29 in the year 2003 and decreased 1.31 in the year 2004 and increased to 1.06 and 2.29 in 2005-06. And it is increased to 2.97 in the year 2007 the decreased 2.91 in the year 2008 and decreased to 2.56 in the year 2009 and again decreased to 2.10 in the 2010. 11.CURRENT ASSETS TURNOVER RATIO:Current Assets Turnover Ratio = Sales/Current Assets. TABLE NO:-11 YEAR SALES RS. (Lakhs) 2003 2004 2005 2006 2007 2008 2009 2010 2,20,42,39,579 1,32,90,33,413 1,62,54,08,635 2,21,66,96,005 3,10,49,48,667 4,07,14,44,781 3,97,24,59,539 3,09,97,71,437 CURRENT ASSETS RS. (Lakhs) 1,66,42,92,550 1,73,51,35,178 1,86,98,53,982 1,59,42,59,102 1,98,52,25,857 2,00,35,49,011 1,76,18,14,461 1,79,18,02,606 RATIO % 1.32 0.76 0.82 1.39 1.56 2.03 2.25 1.72

EXHIBIT:-11 CURRENT ASSETS RATIO

118

CURRENT ASSETS RATIO

RATOS

2 1.5 1
0.5 0 2003 2004 2005 2006 2007 2008 2009 2010

RATIO

YEARS

INTERPRETATION:The current assets turnover ratio is 1.04 in 2002 and increased 1.32 in the year 2003 and decreased to 0.76 in the year 2004 and increased to 0.86 and 1.39 in the year 2005-06 due to increased in sales. In the year 2007 it is increased to 1.56 to 2.03 in the year 2008 and increased to 2.25 in the year 2009 and decreased to 1.72 in 2010.

12.WORKING CAPITAL TURNOVER RATIO:119

Working Capital Turnover Ratio = Sales/ Net Current Assets. TABLE NO:-12 YEAR SALES RS. (Lakhs) 2003 2004 2005 2006 2007 2008 2009 2010 2,20,42,39,579 1,32,90,33,413 1,62,54,08,635 2,21,66,96,005 3,10,49,48,667 4,07,14,44,781 3,97,24,59,539 3,09,97,71,437 NET CURRENT ASSETS (Lakhs) 1,11,81,66,294 1,10,51,85,771 95,54,21,092 92,14,76,308 63,32,74,932 69,18,31,428 51,10,92,940 89,48,88,057 RATIO % 1.97 1.20 1.70 2.40 4.90 5.88 7.77 3.46

EXHIBIT:-12 WORKING CAPITAL TURNOVER RATIO

WORKING CAPITAL RATIO

RATIOS
10 8 6 4 2 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIO

INTERPRETATION:-

120

Working capital turnover ratio is 1.66 in the year 2002 and increased 1.97 in 2003 and decreased 1.20 in the year 2004 and increased to fr1.70 to 2.40 in the years 2005-06. In the year 2007 it is increased to 4.90 and increased into 5.88 in the year 2008. T he ratio increased to 7.77 in the year 2009 and decreased to 3.46 in the year 2010. 13.GROSS PROFIT RATIO:Gross Profit Ratio = Gross profit/ Net sales 100 Where Gross Profit Ratio = Sales Cost of goods sold. TABLE NO:-13 YEAR GROSS PROFIT (Lakhs) 2003 2004 2005 2006 2007 2008 2009 2010 3,720.16 2,542.94 1,535.38 3,022.50 8,033.82 10,493.99 5,000.54 2,280.74 22,042.39 13,290.33 16,254.08 22,166.96 31,049.86 40,714.78 39,724.39 30,997.71 0.16 0.19 0.09 0.13 0.26 0.26 0.13 0.07 NET SALES (Lakhs) RATIO %

EXHIBIT:-13 GROSS PROFIT RATIO

121

GROSS PROFIT RATIO

RATIOS
0.3 0.2 0.1 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIO

INTERPRETATION:Gross profit ratio reflects the efficiency with which management produces each unit of product. The ratio is 0.15 in the year 2002 and increased to 0.16 and 0.19 in years 2002-03 and decreased to 0.09 in the year 2004 and increased 0.13 in the year 2005 and increased to 0.26 in the year 2007-08, and decreased to 0.13 in the year 2009 and decreased to 0.07 in the year 2010.

14. NET PROFIT RATIO:Net Profit Ratio = Profit after tax/Sales

122

TABLE NO:-14 YEAR PROFIT (Lakhs) 1,368.16 340.19 422.13 1,911.79 4,065.21 5,711.05 2,355.05 710.97 NET SALES RATIO % 0.06 0.02 0.02 0.08 0.13 0.14 0.06 0.02

AFTER TAX (Lakhs) 2003 2004 2005 2006 2007 2008 2009 2010 22,042.39 13,290.33 16,254.08 22,166.96 31,049.86 40,714.78 39,724.39 30,997.71

EXHIBIT:-14 NET PROFIT RATIO

NET PROFIT RATIO
RATIOS
0.15 0.1

RATIO

0.05 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

INTERPETATION:The net profit margins is 0.05 in 2002 and increased to 0.06 in the year 2003 and decreased to 0.02 in 2004 and remains same in 2005 also and increased to 0.08 in the year 2006 due to increase in profit after tax. In the year 2007 it is increased

123

to 0.13 and increased to 0.14 in the year 2008 and decreased to 0.06 in the year 2009 and decreased to 0.02 in the year 2010. 15. RATIO ON EQUITY:Ratio on equity = Profit after tax / net worth TABLE NO:-15 YEAR P.A.T (Lakhs) 2003 2004 2005 2006 2007 2008 2009 2010 1,368.16 340.19 422.13 1,911.79 4,065.21 5,711.05 2,355.05 710.97 NET WORTH (Lakhs) 7,906.69 6,518.79 6,096.66 7,688.67 10,146.29 13,918.03 15,609.82 15,476.04 RATIO % 0.17 0.05 0.06 0.24 0.40 0.41 0.15 0.05

EXHIBIT:-15 RETURN ON EQUITY RATIO

RETURN ON EQUITY RATIO

RATIOS
0.6 0.4 0.2 0 2003 2004 2005 2006 2007 2008 2009 2010 YEARS

RATIO

INTERPERTATION:124

Return on equity indicates how the firm will use the resources of owners. The ratio is 0.13 in 2002 and increased to 0.17 in the year 2003 and decreased to 0.05. In the year 2004 it increased to 0.06 and 0.24 in the years 2005 and 2006. In the year 2007 the ratio increased to 0.40 and increased to 0.41 in the year 2008. In the year 2004 the ratio is decreased due to decrease in profit after tax and decreased to 0.15 in the year 2009 and decreased to 0.05 in the year 2010.

CHAPTER VIII CONCLUSIONS

Contents:

Findings

125

 Suggestions

Conclusions

Reference

FINDING 1. The company is having good technology and efficient employees in the organization. 2. The company is managing to gain profits in spite of the stiff competition. 3. The networking capital ratio is increasing form year to year which is good sign of the company. 4. Time is not effectively utilized by the company with regard to the production. 5. The firm is good financial position. It is in a position to meet its daily obligation.

126

6. Current ratio and quick ratio of the company is satisfactory. 7. The facilities provided by the company were good most of the employees for satisfied. 8. The company is spending much amount on administration selling, distribution and expenses.

SUGGESTIONS

1. The company can create awareness among the distributors about the

varieties existing and this will lead to increase in the Culturing of Fishes and Prawns and it leads to better financial performance. 2. The Ratio analysis offers suggestions to improve the viability through expense reduction, rescheduling loan payments, and adjusting income flow.

127

3. Annual reports provide Statistical analysis of Commercial Fishing Industry.

4. Reports Produce in-depth industry analysis and a five year industry growth forecast, with Special focus on the underlying structure and external forces and relationship that affect an industry and its performance.

5. This ratio analysis highlights areas that need to be improved, or areas that

offer the most promising future potential.

CONCLUSION The success of companys financial plans are based on the financial analysis which is the starting point for making plans before using sophisticated forecasting and budgeting procedures. In order to analyze the financial performance generally used tolls are ratio analysis. In general, small-scale shrimp and prawn hatchery technology appears to be viable in India and Bangladesh. The most effective approach will be direct assistance to
128

the private sector, rather than government operated, centralized facilities. However, Departments of Fisheries have a role to play in demonstration and training, but they must ensure that facilities and staff are adequately funded and supported. Unfortunately, bureaucratic procedures, controls and staffing policies militate against the successful operation of such facilities. India is the second-largest aquaculture producer in the world. Like the largest producer, China, India's aquaculture is dominated by carp production: about 80% of India's aquaculture production is composed of carps of Indian and Chinese origin. Most carp production occurs in extensive, poly culture systems throughout India. But, in the last 20 years, carp production has intensified in several parts of India. The traditional poly culture has given way to the dominance of one or two species: catla and rohu. These fishes fetch high market prices. Typical pond yields range from three to eight tonnes per hectare per year. The ponds are fertilized, but not aerated. Farm mixed feed comprising of rice bran and a plant protein source such as peanut oil cake or cottonseed oil cake is given to the fish. As farming operations have intensified, the limitations of farm-mixed feeds have become more apparent. Procuring and storing larger lots of raw materials, and preparing and administering larger quantities of feeds, stretch the logistic capabilities of farmers. More importantly, much of farm-mixed feeds is not eaten by the fish and only fertilizes the pond. Excess organic loading pollutes pond bottom and causes a wide variety of production problems. The profitability and long-term sustainability of intensive carp farming are threatened by continuing the existing feed use practices. Several years ago,
129

Chinese carp farmers fertilized and fed their culture systems the same way Indian carp farmers do now. Through field trials and demonstrations, the ASA-IM aquaculture program in China demonstrated that intensive carp farming can be sustained through the use of manufactured feeds. Fish farming has become an increasingly popular form of regulating and cultivating fish stocks in both freshwater and saltwater locations. While fast becoming a popular way to produce fish for the ever growing demand, there have been questions raised about the sustainability of the practice and whether fish farming is an ecologically-friendly method of cultivating food sources. As populations increase worldwide, the demand for fish products has also risen. Fish provide low-fat, nutritious food sources and essential oils for people of all ages. According to Environmental Expert.com, fish farming is already producing 50% of the fish used for human consumption and people will continue to depend on it for food sources as populations increase.

The advantage of fish farming is that it can be installed almost anywhere there is a clean source of water and also can be combined with irrigation practices. According to the website Aquaculture Production Technology, combining fish farming with irrigation reduces costs for businesses while providing water and fish as a food source for the surrounding area. This makes fish farming an attractive option for areas with both water and food shortage problems. One of the disadvantages of fish farming is that most farms are put into natural lakes or saltwater coastal regions where local fish exist. The problem occurs when

130

these farmed fish negatively impact the area by introducing toxic micro organisms which then infect local fish and put them at risk of being killed off. It is not widely known among scientists or fish farmers what the true impact of these fish farms will be on the local ecosystem, especially when the fish being introduced are not native to the area. An increasing concern with fish farming practices has been the food source used to feed the farmed fish. Food for fish farms often consist of fish products derived from small ocean fish. This feeding method has not yet been determined to be a sustainable practice, according to EnvironmentalExpert.com. Scientists and individuals within the fish farming community are not sure whether this will also strain wild fish stocks and alter the food chain in the wild.

As demand for fish increases, it only makes since that the amount of fish in our waterways begins to decrease. Aquaculture is a way to keep up with this demand while maintaining safe and natural levels of fish stock in oceans, lakes and rivers. According to AquaSol, Inc., an aquaculture consulting company, "Aquaculture's contribution to global supplies of fish, crustaceans and mollusks continues to grow, increasing from 3.9 percent of total production by weight in 1970 to 27.3 percent in 2000." As new technology and procedures develop, the environmental impact of fish farming will decrease as natural levels of fish increase. With demand for seafood increasing, there is little doubt that aquaculture is a profitable industry. Many nations use fish farming not only as a way to help feed their masses, but as a major source of income. Seafood makes a great export for many countries and also provides job opportunities for its citizens. The relative low

131

cost and ease of starting a small-scale fish farm also makes it easier for entrepreneurs to get into the growing business of aquaculture.

REFERENCES PROMOTION OF SMALL SCALE SHRIMP AND PRAWN HATCHERIES IN INDIA AND BANGLADESH published by BOBP. AQUACULTURE by Robert R. Stickney

132

 PLANNING FOR AQUACULTURE BUSINESS published by NRAC, University of Maryland. FEED BASED CARP CULTURE IN INDIA by Vijay Anand, Lukas Manomaitis & G. Ramesh. FINANCIAL STATEMENT ANALYSIS published by Professor Philip Russel, Philadelpia University. FINANCIAL RATIO ANALYSIS published by Charles K. Vandyck RATIO ANALYSIS by M.F. Morley

133