A STUDY OF FINANCIAL PERFORMANCE

USING RATIO ANALYSIS IN RSPL.

Under the guidance of:-

Mrs. SMITA DRON

Submitted By:-
FAUZIA NASEEM SHAIKH
MBA FINAL YEAR
 SIGNIFICANCE OF STUDY
It is compared with other ratios in the same set of financial
statements.
It is compared with the same ratio in previous financial
statements (trend analysis).
It is compared with a standard of performance (industry
average). Such a standard may be either the ratio which
represents the typical performance of the trade or industry,
or the ratio which represents the target set by management
as desirable for the business.
It is used in comparison to internal benchmarks and goals.
 OBJECTIVES OF THE
STUDY
To check the liquidity of the company RSPL LIMITED whether it is
satisfactory or not.
To check the efficiency of the business operations of the company by
analysing inventory turnover ratio.
To analyses whether the company has the credibility to pay off its debts
with the help of proprietary ratio.
To analyses the profitability of the company with the help of gross profit
ratio and net profit ratio.
To identify the usefulness of ratio analysis in measuring and predicting
the performance and financial position of the firm.
To understand the role of ratio analysis in decision making like working
capital management and balancing the capital structure i.e. amount of
debt and equity.
 RESEARCH METHODOLOGY
RATIO ANALYSIS 2012-2013 2013-2014 2014-2015

1. CURRENT RATIO 1.37:1 1.31:1 1.18:1

2. QUICK RATIO 0.90:1 0.80:1 0.68:1

3. INVENTORY TURNOVER 10.2 9.07 7.35

RATIO
4. PROPRIETORY RATIO 0.54 0.55 0.51

5. GROSS PROFIT RATIO 24.28 26.96 27.93

6. NET PROFIT RATIO 8.80 10.10 8.74

7. DEBT - EQUITY RATIO 0.12 0.07 0.09

8. WORKING CAPITAL 12.81 16.67 25.11

TURNOVER RATIO
 RESEARCH METHODOLOGY

CURRENT RATIO

QUICK RATIO

INVENTORY TURNOVER RATIO

PROPRIETORY RATIO

GROSS PROFIT RATIO

NET PROFIT RATIO

WORKING CAPITAL TURNOVER RATIO

DEBT- EQUITY RATIO

 FINDINGS
The current ratio is satisfactory in the previous three years as 1.33:1 also
considered as a satisfactory ratio. . RSPL has a current ratio in the year 2012-2013
was calculated 1.37:1 and in the year 2013-2014 it was 1.31:1 after in year 2014-
2015 it was decreased to 1.18:1 but still company is in position to pay its
liabilities.
The quick ratio is satisfactory in previous years but in 2014-15 however it was
lower in comparison to previous years. Hence it is depicted that the liquidity
position of the company is sound. . RSPL shows a satisfactory ratio in 2013-14 & in
2012-13 however it was lower in 2014-15 in comparison with earlier years but it
shows a satisfactory condition as RSPL with low quick ratio may have fast moving
inventories and it is good for the company it means that company is getting good
orders and company is supplying fastly and efficiently.
The inventory turnover ratio for the three years indicated a good inventory policy
and efficiency of business operations of the company. The average inventory
turnover ratio of the industry is around 8.5 and RSPL inventory turnover is slightly
lower but it does not mean that company has higher inventory on its hand it shows
that the company is receiving order very frequently and company is producing
more and more good to meet the demand and supply the good at the right time in
the market and it is good for the company growth.
 FINDINGS
The working capital turnover ratio has been increasing during the three
years, which indicates that there is lowest investment of the working
capital and more profit. More profit is in the sense that there is higher
working capital turnover ratio. The higher the working capital ratio is good
for the company because it indicates the rise in sales of the company and
generating more cash and liquidity and it shows decreasing in current
liabilities and it is good for the company growth because the sales are
increasing and the company is generating more profit and liquidity.
The proprietary ratio in all the three years lies in middle the satisfactory
level, that is, 50%. It indicates that the creditors are in a safer side and
there is no pressure of huge interest payments on the company. RSPL in
year 2012-2013 the ratio was 0.54 i.e. 54% and in the year 2013-2014 it
was increased to 0.55i.e. 55%. And finally in year 2014-2015 the ratio was
again decreased to 0.51i.e. 51%.But in all the 3 years the ratio remained
above 50%.
 FINDINGS
The debt to equity ratio is decreasing year after year, which indicates, the
servicing of debt is less burdensome and consequently its credit standing is
not adversely affected. The industry average is around .8 and its signifies that
the company is not bound with the outsider money because the company ratio
is around the industry average and the company is making efficient use of the
debt to earn money and give higher to equity share holder and pay interest at
the right time and pay their debt at the right time it increase goodwill of the
firm and it is good for the company name and its growth in future.
The gross profit and net profit ratio are very high and satisfactory. It may be
because of increase in capital investment. The overall position of the company
is good. .the industry average is about 23% and RSPL gross profit margin ratio
is match with the industry or it is little bit higher than the industry, it shows
that that the company has less direct expenses and cost of holding material is
less when compare with the industry and it shows good management in the
production department because the company is showing better gross profit
margin ratio than the industry.
 SUGGESTIONS
The current ratio of the company has been increasing. The
current ratio is more than the standard level & it has to be
maintained in the future also.
The company can use the credit facilities provided by the
creditors.
The debt capital is not utilized effectively and efficiently. So
the company can extend its debt capital.
The company can increase its sources of funds to make
effective research and development system for more profits
in the years to come.
The company should focus on increasing its profitability.
 CONCLUSION
The study is made on the topic financial performance
using ratio analysis with three years data in ROHIT
SURFACTANTS PRIVATE LIMITED.
The current and liquid ratio indicates the short term
financial position of RSPL Ltd. whereas debt equity and
proprietary ratios shows the long term financial position.
Similarly, activity ratios and profitability ratios are helpful
in evaluating the efficiency of performance in RSPL Ltd.
The financial performance of the company for the three
years is analysed and it is proved that the company is
financially sound.
 LIMITATIONS OF THE
STUDY
Although primary data have been collected through questionnaire this study is
wholly based on secondary data. As the study is based on secondary data, the
inherent limitation of the secondary data would have affected the study.
The time period provided for the study was very short. So it is not possible for
making all the details study of entire topic & give effective suggestion to
overcome the problem.
The figures in a financial statement are likely to be a least several months out of
date, and so might not give a proper indication of the companys current
financial position.
The company was very sensitive regarding its internal data; this proves a
hindrance to my study.
The study is done only on the basis of Balance sheet and profit and Loss A/c. So it
is not relevant to determine the performance of any company.
Some questions remain unanswered. It may be because of lack of time and
knowledge of respondents.
Study is based on information provided by the company.
THANK YOU