Savit Final-1

“A STUDY ON RATIO ANALYSIS OF CHANNAMMA
MOTORS, HAVERI”
Project Report submitted to
Karnataka State Open University in partial fulfillment for the award of the degree of
MASTER OF COMMERCE
Submitted By
Name of the Student: SAVITA ASHOK NAYAKA
Reg. No.: 08P221091600611
M.Com 4th Semester
Under the Guidance of

Name of the Guide : Rohini R
Designation : Assistant Professor & HOD & HOD
Official Address : Dept. of Commerce, Govt. first Grade College,

Shikaripur
Department of Studies and Research in Commerce

KARNATAKA STATE OPEN UNIVERSITY
Mukthagangothri, Mysuru, Karnataka.
2024-25
Page|1
ANNEXURE – 1 (Student Copy)
MUKTHAGANGOTHRI, MYSURU-570 006
DEPARTMENT OF STUDIES AND RESEARCH IN COMMERCE
PROFORMA FOR PROJECT APPROVAL LETTER
Reg. No. : 08P221091600611
Name of the Student : SAVITA ASHOK NAYAKA
Address of the Student : W/o Rameshkumar, RNR Road Rattihalli, Tq: Rattihalli,
Dist.: Haveri 581116
Mobile No. : 7483941252
Area of Specialization : Accounting & Finance
Name of the Guide : Rohini R
Designation : Assistant Professor & HOD
Official Address : Dept. of Commerce, Govt. first Grade College, Shikaripur
Mobile No. : 9916239974
Proposed Title of the Project : 1. A Study on Investment Pattern of Women’s Investor
2. Organization Study AHP Apparel Private Ltd.
3. A Study on Ratio Analysis of Channamma Motors, Haveri
.
Signature of the Student Signature of the Guide
Date: Date:
(For Office Use only)
Project Topic
APPROVED APPROVED
NOT APPROVED NOT APPROVED
Comments / Suggestions:
Page|2
ANNEXURE – 6

GUIDE CERTIFICATE
This is to certify that the project report entitled “A Study on A Study on Ratio
Analysis of Channamma Motors, Haveri” Submitted by Mrs. Savita Ashok
Nayaka bearing Reg. No. 08P221091600611, to the Department of Studies and
Research in Commerce, Karnataka State Open University, Mysuru. The work done
under my guidance has been satisfactory and is recommended for the consideration
towards partial fulfilment for the award of the degree of Master of Commerce
(M.Com).
Place: Mysuru
Date:
Name and Signature of

the Guide with seal
Page|3
ANNEXURE – 5

CHAIRPERSON’S CERTIFICATE
This is to certify that Mrs. Savita Ashok Nayaka, bearing the Reg. No.
08P221091600611, has successfully completed the project work on “A STUDY ON
RATIO ANALYSIS OF CHANNAMMA MOTORS, HAVERI” under the guidance
of Rohini R Asst. Prof. & HOD, Govt. First Grade College, Shikaripur. The
project report is submitted to the Department of Studies and Research in Commerce,
Karnataka State Open University, Mysuru in partial fulfilment of the requirement for
the award of Master of Commerce (M.Com) during the academic year 2024-25.
Place: Mysuru
Date:
Chairperson
DOS & R in Commerce
Page|4
ANNEXURE – 3
CHANNAMMA MOTORS, HAVERI

P. B., Road, Haveri 581 110
Date: 30-08-2024
To,
The Chairperson,
DOS & R in Commerce,
Karnataka State Open University,
Mukthagangothri, Mysuru, Karnataka.
LETTER OF ACCEPTANCE
This is to inform you that, we have accepted and granted permission to Mrs. Savita
Ashok Nayaka, bearing Reg. No.08P221091600611 for doing project work on the topic
entitled “A STUDY ON RATIO ANALYSIS OF CHANNAMMA MOTORS, HAVERI” for
the partial fulfilment of the award of the degree of M.Com at Karnataka State Open
University, Mysuru, Karnataka.
Place: Haveri
Date:
Signature of the Officer with Seal
Page|5
ANNEXURE – 8

DECLARATION
I hereby declare that the Project Report entitled “A STUDY ON RATIO

ANALYSIS OF CHANNAMMA MOTORS, HAVERI” is submitted to the
Department of Studies and Research in Commerce, Karnataka State Open University,
Mysuru, in partial fulfilment for the award of the degree of Master of Commerce
(M.Com) is an original research work carried out by me under the guidance of Rohini
R, Asst. Prof. & HOD, Govt. First Grade College, Shikaripur. I also declare that
the report was neither submitted to any other University or Institution for the award of
any Degree/Diploma/Certificate nor published elsewhere any time earlier.
Place: Mysuru
Date:
Name and Signature of the Student

Name: Savita Ashok Nayaka
Reg. No. 08P221091600611
Fourth Semester,
Master of Commerce
Department of Studies and Research in Commerce
Mysuru.
Page|6
ACKNOWLEDGEMENT
First of all, I express my sense of gratitude and heartfelt thanks to, the almighty for
the grace and blessings given to me to have the strengths and knowledge to complete all
my project work successfully.
Motivation causing people to act in a certain direction is very necessary for the
success of any task. "Behind every successful student, there is a teacher". I feel happy and
proud to mention those who motivated me and contributed directly or indirectly in making
this project successful.
I take this opportunity to express my sincere thanks to Department of Studies and

Research in Commerce, Karnataka State Open University, Mukthagangothri, Mysuru.
I express my sincere thanks to Rohini R, Asst. Prof. Govt. First Grade

College, Shikaripur. My project guide for her valuable guidance and constant
encouragement throughout the project study.
I would like to offer my wholehearted gratitude to all Faculty Members and Non-
teaching Staff, Department of Studies and Research in Commerce, Karnataka State Open
University, Mukthagangothri, Mysuru and other friends for being so encouraging,
supportive, and forbearing throughout the study.
I would like to offer my sincere thanks and gratitude towards all those people who
helped me for successful completion of my project study, without timely co- operation of
them my endeavor would not have been a success.
I am pleased to place my profound etiquette to my beloved parents for their

encouragement, affection, and love throughout my career. I thank all my friends who
directly or indirectly helped me in the completion of this work.
Date: (Savita Ashok Nayaka)
Place: Mysuru Reg.no: 08P221091600611
Page|7
TABLE OF CONTENTS
Sl. No. Particulars Page No.
1. Certificates 1-5
2. Declaration 6
3. Acknowledgement 7
4. List of Contents 8
5. List of Tables 9
6. List of Graphs 10
7. Chapter 1 : Introduction 11-14
8. Chapter 2: Coneptual Framework 15-32
9. Chapter 3: Company Profile 33-40
10. Chapter 4: Data Analysis and Interpretation 41-51
Chapter 5: Summary of Findings, Suggestions,

11. 52-57
Conclusions, and Bibliography
Page|8
LIST OF TABLES
Sl. No. Table Name Page No.
1. Current Ratio 42
2. Quick Ratio 44
3 Operating Profit Ratio 45
4 Return on Equity Ratio 46
5 Return on Investment Ratio 47
6 Debt- Equity Ratio 48
7 Proprietary Ratio 49
8 Assets Turnover ratio 50
Page|9
LIST OF GRAPHS
Sl. No. Graph Name Page No.
1. Current Ratio 43
2. Quick Ratio 44
3 Operating Profit Ratio 45
4 Return on Equity Ratio 46
5 Return on Investment Ratio 47
6 Debt- Equity Ratio 48
7 Proprietary Ratio 49
8 Assets Turnover ratio 51
P a g e | 10
A Study on Ratio Analysis of Channamma Motors, Haveri
CHAPTER 1
INTRODUCTION
K. S. O. U., Department of Commerce, Mysuru. Page| 11

Chapter 1
1.1 Introduction
Ratio analysis is a powerful tool of financial analysis. In financial

analysis, a ratio is used as a benchmark for evaluation the financial position
and performance of a firm. The absolute accounting figures reported in the
financial statements do not provide a meaningful understanding of the
performance and financial position of a firm. An accounting figure conveys
meaning when it is related to some other relevant information. Ratios help to
summarize large quantities of financial data and to make qualitative judgment
about the firm's financial performance. For example, consider current ratio. It
is calculated by dividing current assets by current liabilities'; the ratio indicates
a relationship a quantified relationship between current assents and current
liabilities. This relationship is an index or yardstick, which permits a
quantitative judgment to be note is that a ratio reflecting a quantitative
relationship helps to form a qualitative judgment. Such is the nature of all
financial ratios.
The traditional or basic monetary statements are balance sheet and

profit and loss accounts. These statements provide the information about the
financial position and operating activities. The information contained in the
financial statements help the creditor, the management and the public to
evaluate the performance of the companies.
1.2 NEEDS FOR THE STUDY
The study of ratio analysis is needed as a supportive base for the

business operations. It is one of the area of financial decision making. The
study is needed because the management must see that excessive investment
in current assets should be minimized and at the same time it should protect

the company from the problem of stock out. Ratio analysis is the heart beat of
the company.
1.3 OBEJECTIVE OF THE STUDY
 To study the financial position of the company.

 To study the how ratio analysis help in taking financial decisions.
 To study the growth and development of the company.
 To study the company efficiency in utilizing its assets.
 To know the profitability and liquidity position of the company.
1.4 REASEARCH METHODOLOGY
Data collection method
The data for the study was collected from secondary source.
This data is collected through
 Company balance sheet

 Company profit and loss account
1.5 LIMITATIONS OF THE STUDY
 The study is carried out for only 5 years data i.e. born 2010-2014
 The study of ratio analysis is limited to limited to single organization &
the is no.
 The study based on only secondary data.
 Comparison with another company.
 Only tools of ratios have been used.
 Study covers only few aspects of the balance sheet.

1.6 CHAPTER SCHEME
The whole research work is divided in to 5 chapters, which are arranged

in Sequential order.
Chapter 1: This chapter includes interdiction "Executive summary for the

study Objectives, research methodology, limitations of the study chapter
scheme.
Chapter II: The second chapter discusses on the "Conceptual frame work".
Class of ratio It includes interdiction, meaning, defn, adv, limitations
Chapter III: The third chapter focuses on the "Profile of the Company". It
includes deals profile, company profile & product profile.
Chapter IV: The fourth chapter discusses on the "Data analysis &
interpretation"
Chapter V: The fifth chapter discusses on the "Findings, suggestions &

conclusion".

CHAPTER 2
CONEPTUAL
FRAMEWORK

2.1 INTRODUCTION OF RATIO ANAYSIS
The traditional or basic monetary statements are balance sheet and

profit and loss accounts. These statements provide the information about the
financial position and operating activities. The information contained in the
financial statements help the creditor, the management and the public to
evaluate the performance of companies.
An analysis of financial statements with the help of 'ratio' is called

'Ratio Analysis' The Analysis of financial statement is an important aid to
financial analysis. Various methods are adopted for financial statement
analysis. Ratio analysis is one the methods used.
2.2 MEANING OF RATIO ANALYSIS
The ratio refers to numerical or Quantitative relationship between two

items. in otherwise, a ratio arithmetic expression of the relationship of one
number in terms of another. It is calculated by dividing one item of relationship
with the other.
The relationship of one item to another expressed in a simple

mathematical is known as the ratio.
2.3 DEFINITION OF RATIO ANALYSIS
According to Accountant's Handbook by Wixon, Kell and Bedford, "a

ratio is an expression of the quantitative relationship between two numbers".
Ratio analysis is the process of determining and presenting the

relationship of items and group of items 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 a organization. It is helpful tool to aid in applying judgment,
otherwise complex situations.
2.4 ADVANTAGES OF RATIO ANALYSIS
1. Helps in decision making:-
Financial statements are prepared primarily for decision-making, Ratio

analysis helps in making decision from the information provided in these
financial statements.
2. Helps in financial forecasting and planning:-
Ratio analysis is of much help in financial forecasting and planning.

Planning is looking ahead and the ratios calculated for a number of years a
work as a guide for the future. Thus, ratio analysis helps in forecasting and
planning.
3. Helps in communicating:-
The financial strength and weakness of a firm are communicated in a

more easy and understandable manner by the use of ratios. Thus, ratios help
in communication and enhance the value of the financial statements.

4. Helps in co-ordination:-
Ratios even help in co-ordination, which is of at most importance in

effective business management. Better communication of efficiency and
weakness of an enterprise result in better co-ordination in the enterprise.
5. Helps in control:-
Ratio analysis even helps in making effective control of business. The

weakness are otherwise, if any, come to the knowledge managerial, which
helps, in effective control of the business.
2.5 LIMITATIONS OF RATIO ANALYSIS
Ratio analysis is very important in revealing the financial position and

soundness of the business. But in spite of its advantages, it has some
limitations which restrict its use. These limitations should be kept in mind
while making use of ratio analysis for interpreting the financial the financial
statements. The following are the main limitations of ratios analysis
1. False results:-
Ratio are based upon the financial statement. In case financial statement
are in correct or the date of on which ratios are based is in correct, ratios
calculated will all so false and defective. The accounting system itself suffers
from many inherent weakness the ratios based upon it cannot be said to be
always reliable.

2 Limited comparability:-
The ratio of the one firm cannot always be compare with the
performance of other firm, if uniform accounting policies are not adopted by
them. The difference in the methods of calculation of stock or the methods
used to record the deprecation on assets will not provide identical data, so they
cannot be compared.
3. Absence of standard universally accepted terminology:-
Different meanings are given to a particular term, ex. Some fires take
profit before interest and tax; others may take profit after interest and tax. A
bank overdraft is taken as current liability but some firms may take it as non-
current liability. The ratios can be comparable only when all the firms adapt
uniform terminology
4. Price level changes affect ratios:-
The comparability of ratios suffers, if the prices of the commodities in

two different years are not the same. Change in price effect the cost of
production, sale and also the valve of assists. It means that the ratios will be
meaningful for comparison, if the prices do not change.
5. Ignoring qualitative factors:-
Ratio analysis is the quantitative measurement of the measurement of

the performance of the business. It ignores qualitative aspect of the firm, how
so ever important it may be. It shoes that ratio is only a one sided approach to
measure the efficiency of the business.

6. Personal bias:-
Ratios are only means of financial analysis and an end in itself. The
ratio has to be interpreted and different people may interpret the same ratio in
different ways.
7. Window dressing:-
Financial statements can easily be window dressed to present a better

picture of its financial and profitability position to outsiders. Hence, one has
to be very carefully in making a decision from ratios calculated from such
financial statements.
8. Absolute figure distortive:-
Ratio devoid of absolute figures may prove distortive, as ratio analysis

is primarily a quantitative analysis and not a qualitative analysis.
2.6 CLASSIFICATION OF RATIOS:-
Ratio may be classified in a number of ways in the particular purpose

ratios indicating profitability are calculated on the basis of the statement of
profit & loss: those indicating financial position are computed on the basis of
the balance sheet & those which show operating efficiency or productivity or
effective use of resources in the statement of profit & loss & balance sheet.
This classification is rather crude and unsuitable to determine the profitability
7 financial position of the business. To achieve this purpose effectively, ratios
may be classified as:

I. Profitability ratio
II. Market test ratio
III. Coverage ratio
IV. Turnover ratio
V. Financial ratio
VI. Leverage ratio
I. PROFITABILITY RATIO:
A Company should earn profits to survive and grow over a long period
of time. Profits are essential, but it would be wrong to assume that every action
indicated by management of a company should be aimed at maximizing
Profits, irrespective of a concerns for customers, employees, suppliers or
social consequences. It is unfortunate that word profit is looked upon as a term
of abuse since some firms always want to maximize Profits ate the cost of
employees, customers and society. Except such infrequent cases, it is fact that
sufficient must be able to obtain funds from investors for expansion and
growth and to contribute towards the social overheads for welfare of the
society.
Profits are the difference between revenues and expenses over a period
of time (usually one year). A profit is the ultimate output of a company, and it
will have no future if it fails to make sufficient Profits. Therefore, the financial
manager should continuously evaluate the efficiency of the company in terms
of profit. The Profitability ratios are calculated to measure the operating
efficiency of the company. Besides management of the firm. Creditors want to
get interest and repayment of principal regularly. Owners want to get a
required rate of return on their investment. Thus is possible only when the
company earns enough Profits.

It includes
a) Gross profit ratio:
It is calculated by dividing gross profit by the net sales. It is also known

as gross margin ratio, trading margin ratio etc. it is expressed in percentage.
Gross profit Net sales

Gross profit ratio =
𝑁𝑒𝑡 𝑆𝑎𝑙𝑒𝑠
a) Operating profit ratio:
It is calculated by dividing the cost of goods sold and operating

expenses by the net sales. This ratio expresses the relationship between total
operating expenses and sales.
Cost of goods sold+ operating expenses

Operating profit ratio =
net sales
a) Net profit ratio:
It is calculated by dividing the net profit by the net sales. Net profit after
tax helps this ratio, the efficiency of the management in manufacturing,
selling, administration and other activities of the firm can be assessed.
Net profit after tax Net sales

Net profit ratio=
𝑛𝑒𝑡 𝑠𝑎𝑙𝑒𝑠
b) Return on equity capital ratio:
It is also called net profit to equity capital ratio. It ascertained dividing

profit by the equity capital.
Net profit available to equity shares

Return on equity capital ratio=
Equity capital

c) Operating Expense ratio:
The operating expense ratio explains the changes in the profit margin
(EBIT to sales) ratio. This ratio is computed by dividing operating expenses
viz., cost of goods sold plus selling expense and general and administrative
expenses (excluding interest) by sales.
operating expenses Sales

Operating expenses ratio =
𝑠𝑎𝑙𝑒𝑠
The ratio may be calculated as

material consumed ∗100
i) Material consumed ratio =
Net Sales
direct labor cost ∗100

ii) Direct labor cost ratio =
administrative expenses ∗100

iii) Administrative expenses =
selling and distribution expanses ∗100

iv) Selling and distribution expenses ratio =
b) Return on total assets:
This ratio is calculated to measure the profit after tax against the amount
Invested in total assets to ascertain whether assets being utilized properly or
not. Calculated as under.
net profit after tax

Return on total assets = ∗ 100
total assets

II) MARKET TEST RATIO:
These ratios are calculated in respect of those companies whose shares

are treated on the stock exchanges. Shareholders are not only interested in the
profits of the company but also in the appreciation after value of their stock
market. The valve of shares depends upon dividend declared earning per share,
the payout policy etc. of the company besides other factors. Following ratios
reflect the effect of those factors in market value of the share.
a) Earnings per share;
The profitability of the shareholders investment can also be measured

in many other ways. One such measure is to calculate the earnings per share.
Rhe earnings per share (EPS) are calculated by dividing the profit and taxes
by total number of equity shares.
net profit after tax

Earnings per shares =
Number of equity shares
b) Price earnings ratio:
This ratio indicates the market valve of every rupee earning in the firm
and is compared with industry average. High ratio indicates the share is
overvalued and low ratio that share is undervalued.
market price per equity share

Price earnings ratio =
Earnings per share
c) Payout ratio:
This ratio is indicates as to what proportion of earning per share has

been used for paying dividend and what has been retained fo ploughing back.
It is very form shareholder point of view.

dividend per equity share

Payout ratio =
Earnings per share
d) Dividend yield ratio;
This ratio is important for those investors who are interest in the
dividend Income, Calculated by dividend per share by diving the rate of
dividend by paid up value of shares. Then calculates yield by dividing
dividend per share by the market price of share.
Dividend yield ratio = market price per share dividend per share
III) COVERAGE RATIO:
These ratios indicate the extent to which the interests of the persons
entitled to get a fixed return or a scheduled repayment as per agreed terms are
safe. The higher the cover better it is. Under this category the following ratios
are calculated:
a) Fixed interest cover:
It is really measures the ability of the concern to service the debt. This
ratio is very important from lender's point of view and indicates whether the
business would earn sufficient profits to pay periodically the interest charges.
It is calculated as under.
net profit before interest and tax ∗100

Fixed interest cover =
Interest charges

b) Fixed dividend cover:
This ratio is important for preference shareholders entitled to get

dividend at fixed rate in priority to other shareholders. It is calculated as
follows.
net profit before interest and tax

Preference dividend
IV) ACTIVITY OR TURNOVER RATIO
Funds of creditors and owners are interested in various assets to

generate sales and profits. The better management of assets, and the larger the
amount of sales. Activity ratios are employed to evaluate the efficiency with
which the firm manages and utilizes its assets. These ratios are called turnover
ratios because they indicate the speed with which assets are being converted
or turned over into sales. A proper balance between sales and assets generally
reflects that assets are managed well. Several activity ratios are calculated to
judge the effectiveness of asset utilization. Following are the important
turnover ratios usually calculated by a concern.
a) Stock turnover ratio:
It is calculated by dividing the cost of goods sold by the average

inventory. This is also known as inventory turnover ratio.
cost of goods sold

Stock turnover ratio =
Average stock
opening stock + closing stock

2

b) Debtor's turnover ratio;
This ratio measures the accounts receivable in terms of the number of

credit sales during particular period.
net credit sales

debtorsturn over ratio =
Average debtors
c) Creditors turnover ratio:
This ratio gives the average credit period enjoyed from the creditors.
credit sales
creditorsturn over ratio = B
averageaccountpayable (creditor + )
P
d) Fixed Assets Turnover:
The firm to know its efficiency of utilizing fixed assets separately. This
ratio measures sales in rupee of investment in fixed assets. A high ratio
indicates a high degree of utilization in assets and low ratio reflects the
inefficient use of assets.
sales
Fixed assets turnover ratio =
net fixed assets
e) Working Capital Turnover Ratio:
This ratio shows the number of times working capital is turned over in
a stated period.
Working capital = current assets- current liabilities

This ratio indicates the velocity of the utilization of net working capital.
This Ratio indicates the number of times the working capital is turned over in
the Course of a year. The ratio measures the efficiency with which the working
capital is being used by firm. A higher ratio indicates inefficient utilization of
working capital.
sales
working capital turnover ratio =
working capital
f) Total assets ratio
This calculated by dividing the net sales by the value of total assets. A
high ratio is an indicator of overtrading of total assets while a low ratio reveals
idle capacity. The traditional standard for the ratio is times.
net sales
total assets turnover ratio =
total assets
g) Capital employed turnover ratio:
This ratio shows the efficiency of capital employed in the business by

computing how many times capital employed is turnover in a started period.
sales
working capital turnover ratio =
capital employed
V. Financial Ratio:
These ratios are calculated to judge the financial position of the concern
from long term as well as short term solvency point of view. Creditors,
debenture holders and other stakeholders are interested to know the rate of
their investment in the firm. For this purpose they assert the loan repayment

capacity of the firm with the help of analysis of solvency ratios. These ratios
can be divided into two categories.
1) Liquidity ratio
2) Stability ratio
1) Liquidity ratios:
a) Current ratios:
This is the most widely used ratio. It is the ratio of current assets
to current liabilities. It shows a firm's ability to cover its current
liabilities with its current assets.
current assets
current ratio =
current liabilities
b) Liquid ratio:
It is calculated by diving the total of the quick assets and total of

current liabilities. It expresses the relationship between quick assets or
quick liabilities.
liquid assets
liquid ratio =
current liabilities
c) Cash ratio:
Since is the most liquid asset, it may be examined cash ratio and
its equivalent to current liabilles. Trade investment or marketable

securities are equivalent cash; therefore, they may be included in the

computation of cash ratio.
cash in hand & at bank + short term marketable securities

cash ratio =
current liabilities
d) Ratio of inventory to working capital:
In order ascertain that there is no overstocking, the ratio of

Inventory to working capital should be calculated.
inventory
Ratio of inventory to working capital =
working capital
2) Stability ratios:
a) Fixed assets ratio:
This ratio explains whether the has raised adequate long term
funds to meet its fixed assets requirement.
fixed assets
Fixed assets ratio =
Capital employed
b) Ratio of current assets to fixed assets:
This ratio is differing from Industry to Industry a decrease in the

ratio mean that trading is slack or mare mechanization has been put
through. An increase in the ratio, accompanied by increase in profit,
Indicates the business is expanding.
current assets
Ratio of current assets to fixed assets =
fixed assets

c) Proprietary ratio:
A variant of debt to equity ratio is the proprietary ratio which

shows the relationship between shareholders’ funds and total tangible
assets.
shareholders funds
Proprietary ratio =
total tangible assets
d) Capital gearing ratio:
This ratio establishes the relationship between the fixed interst

bearing securities and equity shares of a company.
fixed interest bearing securities

Capital gearing ratio =
Equity shareholder fund
VI. LEVERAGE RATIO:
The leverage ratio explains the extent to which the debt is employed in
the capital structure of the concerns. All concerns use debt funds along with
equity funds. In order to maximize the after tax profits, there by optimizing
earning available to equity shareholder.
a) Operating leverage:
It occurs when with fixed costs to percentage change in profits due to

change in sales volume is grater than the percentage change in sales volume.
It is calculated by:
marginal contribution
operating leverage =
earning before interest & tax

b) Financial leverage:
When a firm procures debt capital to finance its needs, it is said to have
financial leverage. It tells the extent of the change in before tax due to change
in operating income.
earning before interest & tax

Financial leverage =
earning before tax

Chapter 3
COMPANY
PROFILE

 Instruction of Company
 Introductions
 History of Company
 Profile of Company
 Financial Performance of Company
INTRODUCTION
The Bajaj Group is amongst the top 10 business in India. Its footprint
stitches over a wide range of industries, spanning automobiles (two-wheelers
and three-wheelers), home appliances, lighting, iron and steel, insurance,
travel and finance. The group's flagship company, Bajaj Auto, is ranked as the
world's fourth largest two-and three- wheeler manufacturer and the Bajaj
brand is well-known across several countries in latin America, Africa, Middle
East, South and South East Asia, Founded in 1926, at the height of India's
movement for independence form the British, the group has an illustrious
history. The integrity dedication of resourcefulness and determination to
successes which are characteristic of the group today, are often traced back to
its birth during those days of relentless devotion to a common cause, Jamnager
Bajaj, founder of the group, was a close confidant and disciple of Mahatma
Gandhi. In fact, Gandhiji had adopted him as son. This close relationship and
his deep involvement in the independence movement did not leave Jamnagar
Bajaj with much time to spend on his newly launched business venture.
His son, Kamalnayan Bajaj. Then 27 took over the reigns of business in
1942, He too was close to Gandhiji and it was only after Independence in 1947,
that he was able to give his full attention to the business. Kamalnayan Bajaj
not only consolidated the group, but also diversified in to various
manufacturing activity. The present Chairman the group. Rahul Bajaj, took
charge of the business in 1965. Under his leadership, the turnover. He is one

of India's most distinguished business leaders and internationally respected for

his business acumen and entrepreneurial spirit.
Global Bajaj
Bajaj is present in over 50 countries all over the globe Dominant

presence in Africa, Latin America and South Asia with increasing market share
every year.
Market leader in Colombia, Central America, Sri Lanka, Bangladesh,

Philippines, Nigeria, Uganda and Kenya,
891,002 units exported in 2010-11, an increase of over 15% over the

previous year
Total motorcycle exports of 726,115 in 2010-11, growth of 15% over

2009-10 Largest exporter of three wheeled commercial vehicles in the world:
164,887 units exported in 2010-11, a rise of 19% over 2009-10
Bajaj is loved not only in India but 70 countries around the world.
From motorcycles to three-wheelers and now quadricycles, from

Mumbai to Mexico City and Bogota to Bengaluru, there’s a Bajaj for
everyone.
With more than 18 million motorcycles sold in over 70 countries, the

Bajaj brand is truly ‘The World’s Favourite Indian’. It is India’s No.1
motorcycle exporter with two out of three bikes sold internationally carrying
a Bajaj badge. The company is also the world’s largest manufacturer of three-
wheelers. Bajaj Auto is the first two-wheeler and three-wheeler company in
the world to have reached a market capitalisation of INR one trillion and
continues to be the world’s most valuable two and three-wheeler company.

ACHIEVEMENTS
2000 The Bajaj Saffire is introduces
2001 November Bajaj Auto launches its latest offering in the
premium bike segment pulsar
January The Eliminator is Launched.
2003 October Bajaj Pulsar DTS-1 is lunched.
October 107,115 Motorcycles sold in a mouth,
July Bajaj Wind 125, The world Bike, is launched

in
India.
February Bajaj Auto launched its Caliber 115
"Hoobidabaa!" in the executive motorcycle

segment.
2004 October Bajaj Discover DTS-I launched
August New Bajaj Chetek 4 stoke with wonder Gear

launched
May Bajaj CT100 Launched
January Bajaj unveils new brand identity, dons new

symbol, logo and brand line

2005 December Bajaj Discover launched
June Bajaj Avenger DTS-I launched
February Bajaj Wave-DTS-I launched
2006 April Bajaj Platina launched
2007 December RE GDi auto rickshaw launched
September Bajaj XCD 125 DTS-Si launched
August DTS-Si engine launched
July Revamping Organizational structure
June Bajaj Pulsar 220 DTS-Fi launched
April New Bajaj Auto Plant at Pant agar,

Uttarakhand
February 200 cc Pulsar DTS-I launched
January Bajaj Kristal DTS-i launched
2008 September Bajaj Platina 125 DTS-Si launched
August Bajaj XCD 125 DTS-Si is largest selling 125

cc motorcycle
July Bajaj Discover 135 DTS-Si Upgrade

Launched.
June Bajaj Pulsar 220 bags IMOTY award

2009 April Bajaj Pulsar 150 &180 Upgrade Launched.
January Bajaj XCD 135 DTS-Si Launched.
Awards and Accolades 2010-2011
Product Award Award Body

Bajaj Pulsar Bike of the year 2010 BBC-Top Gear
135 LS
Bajaj Pulsar Hall of Pride Awards CNBC Overdrive
Bajaj Pulsar Bike of the year Bike India
135 LS
Bajaj Pulsar Bike India up to Bike India
135 LS 150cc
Bajaj Avenger 2011 Mc of the up to NDTV Car &
220 250cc Bike year Awards
Bajaj Pulsar "Golden Steering Auto Build
135 LS Wheel” for Executive
Motorcycle
Discover 150 Best Value ET Zig Wheels
DTS-I

• Board of Directors
• Bankers
• Central Bank of India
• State Bank of India
• Citibank N. A
• Standard Chartered Bank
• Bank of America
• ICICI Bank
• HDFC Bank
• Registered under the Indian Companies Act,
1956

The Important things not to stop questioning - Albert Einstein
This aptly sums up what we practice at Bajaj Auto, Learning is a daily

activity, well argument by experienced colleagues who make it all the more
enjoyable.

Chapter 4
DATA ANALYSIS &
INTERPRETATION

4.1 Data Analysis and Interpretation
1. Liquidity ratio:
The liquidity ratio is used to measure the liquidity position of any

organization. It means whether the financial organization is able to pay its
short-term obligations.
1.1 Current Ratio:
The current ratio is one of the important ratios to measure liquidity position.
The ideal ratio of the current ratio was 2:1. The result will come to two and
more than two means it short- term liquidity position is strong.
Current Assets
The formula for calculating the current ratio was =
Current Liabilities
Current Assets included cash balance in hand, bank account balance, bills
receivable, inventories, and prepaid expenses.
Current liabilities included bills payable, outstanding expenses, and other

short-term obligations.
Table 1 : Current Ratio
Year Current assets (Rs.) Current liabilities (Rs.) Ratio (Times)

2021 9,235.63 4111.29 2.25
2022 7,062.66 4,873.68 1.45
2023 6,596.96 4,253.21 1.55
2023 14,175.13 5,643.21 2.51
2023 9,994.47 4,689.44 2.13

16000
14000
12000
10000
8000
6000
4000
2000
0
1 2 3 4 5 6
Current Ratio Year Current assets

Current liabilities (Rs.) Ratio (Times)
Table 3:1 shows the Current ratio of Bajaj auto ltd. The current ratio of that
firm shows a fluctuating trend. The current ratio decreased from 2.25 times in
the year 2020 to 1.45 times in the year 2022. Due to this reason, current assets
decreased from Rs.9,235.63 in the year 2020 to Rs. 7,062.66 in the year 2022.
From the overall analysis, the current ratio results are more than the standard
norm of 2:1 except in the years 2022 and 2023. Due to the impacts of Covid -
19 lockdown in India.
1.2 Quick Ratio
The quick ratio helps to measure the Company‟s ability to pay its immediate
liabilities without the sale of its stocks. It is a more conservative measure when
compared to the current ratio. The ideal norm of the quick ratio was 1:1.
The formula for calculating the quick ratio was = Quick Assets/ Quick
Liabilities
Quick assets include all current assets except inventories and prepaid
expenses, Quick liabilities include all current liabilities except bank over draft.

Table 2 Quick Ratio
Year Quick assets (Rs.) Quick liabilities (Rs.) Ratio (Times)

2019 8,493.05 4,111.29 2.06
2020 6,101.15 4,873.68 1.25
2021 5,333.46 4253.21 1.30
2022 12,681.24 5,643.21 2.25
2023 8,763.96 4,689.44 1.87
20,000.00
18,000.00
16,000.00
14,000.00
12,000.00
10,000.00
8,000.00
6,000.00
4,000.00
2,000.00
0.00
2019 2020 2021 2022 2023
Quick assets (Rs.) Quick liabilities (Rs.)

Ratio (Times)
2. Profitability Ratio
Earning profit is the first and foremost objective of any business. And it is a
major source of internal funds by the way of retained earnings and reserve and
surplus. The dividend paid to the equity shareholders depends upon the
company‟s profitability.
2.1 Operating Profit Ratio
The operating profit ratio helps to measure the operating efficiency of the
business. Operating profit comes from the company‟s regular courses of
business. And it is the major source of income.
The formula for calculating operating profit ratio = Operating profit/ Net Sales

Table 3 Operating Profit Ratio
Year Operating Profit (Rs.) Total revenue (Rs.) Ratio (%)

2019 25,218.92 26512.17 95.12
2020 30,357.57 31899.27 96.48
2021 29,918.65 31652.21 95.16
2022 27,741.08 29017.54 94.52
2023 33,144.71 34353.95 95.60
40,000.00
35,000.00
30,000.00
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00
2019 2020 2021 2022 2023
Operating Profit (Rs.) Total revenue (Rs.) Ratio (%)
2.2 Return on Equity Ratio
The return on equity ratio indicates the profitability of any business in relation
to the equity shareholders' funds. We can calculate the shareholder's equity by
deducting all liabilities from all assets.
The formula for calculating Return on equity = Net Income/Shareholders'

equity

Table 4 Return on Equity Ratio
Year Net income (Rs.) Shareholder equity (Rs.) Ratio %

2019 2,646.70 16,518.29 21.29
2020 3,890.34 19,563.63 21.46
2021 5,099.98 19,925.49 25.59
2022 4,554.59 25,202.26 18.07
2023 5018.17 26,668.80 18.82
Return on Equity Ratio Year
20% 20%
20% 20%
20%
1 2 3 4 5
The above table 4 clearly explains the return on equity ratio of Bajaj Auto Ltd.
The highest return on equity ratio shown in the year 2021 was 25.59 percent.
The lowest ratio shown in the year 2022 was 18.07 percent. This ratio
suddenly decreased from 25.59 percent in the year 2021 to 18.82 percent in
the year 2023. Because of that the firm had increased equity shareholders fund
in their capital structure.

2.3 Return on Investment Ratio
The return on investment is helping to measure used to assess the

efficiency or profitability of an investment. Income from investment is not a
main source of business. Investment may be invested in other companies‟
equity shares, debenture, and another mode.
The formula for calculating Return on Investment ratio = Net Profit/

Investment ×100
Table 5 Return on Investment Ratio
Year Net Profit (Rs.) Total Investments (Rs.) Ratio %

2019 2,646.70 17,588.30 23.13
2020 3,890.34 19,159.36 20.13
2021 5,099.98 18,195.95 28.03
2022 4,554.59 22,630.95 24.40
2023 5018.17 23,818.76 23.13
Chart Title
35,000.00
30,000.00
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00
2019 2020 2021 2022 2023
Net Profit (Rs.) Total Investments (Rs.) Ratio %

3. Solvency Ratio
The solvency ratio is used to measure a firm‟s ability to its long-term

obligation of the business. It includes the debt-equity ratio and proprietary
ratio.
3.1 Debt- Equity Ratio
Debt- equity ratio is the important ratio to measure long-term obligations. It

matches the total liabilities with the total shareholders‟ equity fund. High debt
equity shows a levered firm and low debt-equity ratio low levered firms.
Table 6 Debt- Equity Ratio
Year Debt (Rs.) Equity (Rs.) Ratio (Times)

2019 120.77 16,518.29 0.007
2020 124.52 19,563.63 0.006
2021 125.59 19,925.49 0.006
2022 121.46 25,202.26 0.005
2023 159.07 26,668.80 0.006
120.77 124.52 125.59 121.46 159.07

Equity (Rs.)
Ratio (Times)
2500
2019 2020 2021 2022 2023
2000
1500
1000
500
0.007
0.007 0.006
0.006 0.006
0.006 0.005
0.005 0.006
0.006
0
16,518.29 19,563.63 19,925.49 25,202.26 26,668.80

3.2 Proprietary Ratio
The proprietary is another important ratio to evaluate the proportion of

shareholders' equity to the total assets of the firm. It is also called as a net-
worth ratio or equity ratio or shareholders' equity ratio. The result of this ratio
reveals how much the equity shareholders will get if the company goes to
liquidation. The formula for calculating proprietary ratio = Shareholders fund/
Total Asset
Table 7 Proprietary Ratio
Year Share holder fund (Rs.) Total Assets (Rs.) Ratio (Times)
2019 19,103.86 23,819.49 0.80
2020 21,779.90 27,380.39 0.80
2021 19,925.49 24,773.30 0.80
2022 25,202.26 31,530.20 0.80
2023 26,668.80 31,921.94 0.84
35,000.00
30,000.00
25,000.00
20,000.00
15,000.00
10,000.00
5,000.00
0.00
2019 2020 2021 2022 2023
Share holder fund (Rs.) Total Assets (Rs.) Ratio (Times)
Table 3.9 Shows the Proprietary ratio of the firm and highlights the
general financial strength of the firm. The proprietary ratio was increased from
0.80 times to 0.84 times in the year 2019 to 2023. The results of the proprietary
ratios were above the standard norm. It denotes the firm has enough assets to

meet its shareholders‟ fund. So, that firm can easily compensate their equity
shareholders fund.
4. Turnover Ratio
Turnover ratios help to calculate the business efficiency and how the
business uses its assets to generate revenue. It includes the Assets turnover
ratio, inventory turnover ratio, fixed assets turnover ratio, and current assets
turnover ratio.
4.1 Assets Turnover ratio
The assets turnover ratio measures how the firm utilized its total assets
in that business and how it helps to generate revenue for the business. The
higher the ratio denotes the company‟s better performance.
The formula for calculating assets turnover ratio = Revenue/Total assets
Table 8 Assets Turnover ratio
Year Total Revenue (Rs.) Total assets (Rs.) Ratio (Times)
2019 25,218.92 23,819.49 105.88

2020 30,357.57 27,380.39 110.87
2021 29,918.65 24,773.30 120.77
2022 27,741.08 31,530.20 87.98
2023 33,144.71 31,921.94 103.83

Chart Title
35,000.00
33,144.71
31,921.94
30,000.00 30,357.57 29,918.65 31,530.20
27,380.39 27,741.08
25,000.00 25,218.92 24,773.30
23,819.49
20,000.00
15,000.00
10,000.00
5,000.00
0.00 105.88 110.87 120.77 87.98 103.83
2019 2020 2021 2022 2023
Total Revenue (Rs.) Total assets (Rs.)

Ratio (Times)
From the above table 3.11 shows the assets turnover ratio of Bajaj Auto
Ltd from 2017 to 2022. This ratio increased from 105.88 times to 120.77 times
in the year 2019 to 2021. After that results suddenly decreased from 120.77 to
87.98 due to the post-impact of Covid-19. Then the ratio slowly increased to
103.83.

Chapter 5
SUMMARY OF
FINDING
SUGGESTIONS
CONCLUSION &
BIBLIOGRAPHY

Introduction:-
This chapter focuses on the major findings of the study & few
suggestions have been made in light of observed findings & at the end
conclusion is provided for the chapter. A finding is the research outcome of
investigation which investigated the results obtained.
➤ Findings
➤ Suggestions
➤ Conclusion

5.1FINDINGS
Gross profit shows good performance year by year, but in the recent
year 2014 it shows worst performance.
Net profit increases year by year. It shows that company's profitability
ratios are good. Company performance is well.
Return on total assets ratios are increases year by year in all 5 years.
Here total assets are utilized properly. Company is rotating their assets
into business purpose. These ratios show that company is able to rotate
their total assets in the business.
Overall company's profitability ratio is good. Company position is
good.
Fixed assets turnover ratios are having many fluctuations. In the 2012
get the high ratio. Here fixed asses utilized efficiently.
Working capital turnover ratio of Channamma Motors. Haveri. Shows
many variations. In the year 2011 shows better performance. It holds
with efficient utilization of working capital after the year ratios are
declined.

Company used the current assets for business purpose. These ratios are
good. Company is able to rotate their current assets efficiently.
Company manage its net asset efficiently for the purpose o maximize
sales.
An inventory turnover ratio depends upon sales. It contains many
fluxuation. In the year 2011 sales increases more so the inventory
turnover ratio also increases ie 8.08
Current ratio of Nimba Motors are more than the standards. This
indicates this company is able to pay its liabilities. The company
utilized idle funds. It's liquidity position is good.
Absolute liquidity ratios of this company are not good position. It shows
worst performance. Company is not able to realize its current liabilities
with its liquidity position. Its ratios are below the standard.
Ratio of inventory to working capital shows the overall good
performance.
Net working capital ratios are helps to measures the firm's liquidity.
This ratio shows sufficient amount of working capital.
Ratio of current assets fixed assets shows the company can able to
expanding their business easily.
Overall company's liquidity position is good. Company can able to pay
its liabilities easily.

5.2 SUGGESTIONS
 The company has a good record of quality of goods service in the market
with best of my enquiry and investigations.
 The company's financial position is very secuss. It is observed that most
of the ratios are as per the standard.
 Company has to adopts proper inventory control techniques to properly
management inventory.
 Company should conduct advertisement campaigns, to sales promotion.
 Company should give presentations for awareness of its products.
 The company should maintain the current ratio for the years by proper
maintaining current assets and current liabilities.
 The company should reduce cost of production & also operating cost
which may ultimately increase the profits of the company.
 The company should properly utilize its liquid assets by employing it in
better technologies, which may increase the efficiency and quality of the
product.

5.3. Conclusion:
Ratio analysis is the one of the financial tool. It helps to identify the
liquidity, solvency, efficiency of operations and profitability of the firm. Ratio
analysis is defined as the systematic use of ratio to interpret the financial
statements so that the strength & weaknesses of a firm, as well as its historical
performance & current financial conditions can be determined.
The overall financial performance of the company is satisfactory &

operating performance in terms utilization of various assets is good.
The net profit of the company is increasing so its overall performance

is good.
The company has high goals & objectives. The company made sincere
effort its goals & objectives over the years.
5.4. Bibliography:
1. I.M. Pandey - "Financial Management", Tenth edition SP Jain &K L

Narang - Advanced Accountancy Volume =II MY Khan &P K Jain -
Financial Management S. N. Maheshwari & S. K. M. Advanced
Accountency Volume=II
2. Internet
 www.google.com.
 Wikipedia

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“A STUDY ON RATIO ANALYSIS OF CHANNAMMA

Project Report submitted to

Reg. No.: 08P221091600611

M.Com 4th Semester

Under the Guidance of

Designation : Assistant Professor & HOD & HOD

Official Address : Dept. of Commerce, Govt. first Grade College,

Department of Studies and Research in Commerce

DEPARTMENT OF STUDIES AND RESEARCH IN COMMERCE

PROFORMA FOR PROJECT APPROVAL LETTER

Reg. No. : 08P221091600611

Name of the Student : SAVITA ASHOK NAYAKA

Dist.: Haveri 581116

Mobile No. : 7483941252

Area of Specialization : Accounting & Finance

Name of the Guide : Rohini R

Designation : Assistant Professor & HOD

Official Address : Dept. of Commerce, Govt. first Grade College, Shikaripur

Mobile No. : 9916239974

Proposed Title of the Project : 1. A Study on Investment Pattern of Women’s Investor

2. Organization Study AHP Apparel Private Ltd.

3. A Study on Ratio Analysis of Channamma Motors, Haveri

(For Office Use only)

KARNATAKA STATE OPEN UNIVERSITY

Name and Signature of

KARNATAKA STATE OPEN UNIVERSITY

CHANNAMMA MOTORS, HAVERI

KARNATAKA STATE OPEN UNIVERSITY

I hereby declare that the Project Report entitled “A STUDY ON RATIO

Name and Signature of the Student

I take this opportunity to express my sincere thanks to Department of Studies and

I express my sincere thanks to Rohini R, Asst. Prof. Govt. First Grade

I am pleased to place my profound etiquette to my beloved parents for their

Date: (Savita Ashok Nayaka)

Place: Mysuru Reg.no: 08P221091600611

Sl. No. Particulars Page No.

7. Chapter 1 : Introduction 11-14

8. Chapter 2: Coneptual Framework 15-32

9. Chapter 3: Company Profile 33-40

10. Chapter 4: Data Analysis and Interpretation 41-51

Chapter 5: Summary of Findings, Suggestions,

Sl. No. Table Name Page No.

3 Operating Profit Ratio 45

4 Return on Equity Ratio 46

5 Return on Investment Ratio 47

6 Debt- Equity Ratio 48

8 Assets Turnover ratio 50

Sl. No. Graph Name Page No.

3 Operating Profit Ratio 45

4 Return on Equity Ratio 46

5 Return on Investment Ratio 47

6 Debt- Equity Ratio 48

8 Assets Turnover ratio 51

K. S. O. U., Department of Commerce, Mysuru. Page| 11

Ratio analysis is a powerful tool of financial analysis. In financial

The traditional or basic monetary statements are balance sheet and

1.2 NEEDS FOR THE STUDY

The study of ratio analysis is needed as a supportive base for the

K. S. O. U., Department of Commerce, Mysuru. Page| 12

1.3 OBEJECTIVE OF THE STUDY