RATIO ANALYSIS

FINANCIAL ANALYSIS Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account. Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. The information in the statements is used by:-

Trade creditors, to identify the firms ability to claims i.e meet their. liquidity position of the company.

Investors, to know about the present and future profitability of the company and its financial structure.

Management, in every aspect of the financial analysis. It is the responsibility of to the management maintain sound financial condition in the company.

The present and future profitability of the company and its financial structure. The management maintain sound financial condition in the company. Trade creditors, to identify the firms ability to claims i.e meet their.

RATIO ANALYSIS The term Ratio refers to the numerical and quantitative relationship between two items or variables. A ratio is defined as the indicated quotient of two mathematical expressions and as the relationship between two or more things. In financial analysis, a ratio is used as a benchmark for evaluating the financial position and performance of a firm. Ratio analysis involves comparison for a useful interpretation of the financial statements. Single ratio in itself does not indicate favorable or unfavorable condition. Therefore in this report it is compared with: Past ratios, i.e. ratios calculated from the past financial statements of the same company. Since liquidity ratios and activity ratios helps to measure the firm ability to meet current obligations and firms efficiency in utilizing its assets respectively. Those two have been used. Limitations of Ratio Analysis It is difficult to decide on the proper basis of comparison. Price level changes make the interpretation of ratio invalid. The differences in the definition of items in the balance sheet and profit & loss The p&l a/c and balance sheet of an organization has made difficulty to make the

account make the interpretation of ratios difficult. interpretation of ratios. The results are based on highly summarized information. Consequently situations, which require control, might not be apparent or situations, which do not warrant significant effort, might be unnecessarily highlighted

This relationship can be exposed as: Percentages Fractions Proportion of numbers Ratio analysis is defined as the systematic use of the ratio to interpret the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined.

Ratio reflects a quantitative relationship helps to form a quantitative judgment.

STEPS IN RATIO ANALYSIS The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios. To compare the calculated ratios with the ratios of the same firm relating to the past or with the industry ratios. It facilitates in assessing success or failure of the firm. Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison. In the shape of report or recommended courses of action. It facilitates in assessing success or failure of the firm for taking the long term ecissions.

BASIS OR STANDARDS OF COMPARISON Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis.

The basis of ratio analysis is of four types: Past ratios, calculated from past financial statements of the firm. Competitors ratio, of the some most progressive and successful competitor firm at the same point of time. Industry ratio, the industry ratios to which the firm belongs to Projected ratios, ratios of the future developed from the projected or pro forma financial statements

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios.

The following are the three steps involved in the ratio analysis:-

Selection of relevant data from the financial statements depending upon the objective of the analysis.

Calculation of appropriate from the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.

INTERPRETATION OF THE RATIOS The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios.

The interpretation of ratios can be made in the following ways. Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparison

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios are Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis

IMPORTANCE OF RATIO ANALYSIS Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency

Effective tool

LIMITATIONS OF RATIO ANALYSIS Differences in definitions Limitations of accounting records Lack of proper standards No allowances for price level changes Changes in accounting procedures Quantitative factors are ignored Limited use of single ratio Background is over looked Limited use Personal bias

CLASSIFICATIONS OF RATIOS The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows: Traditional Classification Functional Classification

Significance ratios

1. Traditional Classification It includes the following: Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet. Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc., Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.

2. Functional Classification These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.

3. Significance ratios Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.

IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE:-

1. Liquidity ratio 2. Leverage ratio 3. Activity ratio 4. Profitability ratio

LIQUIDITY RATIO

Liquidity ratio measures the ability of the firm to meet its current obligations. It is necessary to strike a proper balance between high liquidity and lack of liquidity. A high degree of liquidity means that a firms fund will be unnecessarily tied up in current assets. Whereas lack of liquidity, implies failure of a company to meet its obligations due to lack of sufficient liquidity. which are used for the analysis of Escorts liquidity position in this report, are: Current Ratio Quick Ratio Activity ratio

CURRENT RATIO
Current ratio is calculated by dividing current assets by current liabilities:

Current ratio = Current Assets Current Liabilities 2004-05 Current Ratio 1.19 2005-06 1.03 2006-07 1.12 2007-08 1.16

From the above table it can be interpreted that Escorts liquidity position is not constant. As a conventional rule a current ratio of 2:1 or more is considered satisfactory because in a worse situation, even if the value of current assets become half, the firm will be able to meet its obligations. Current ratio refers to a margin of safety for creditors therefore higher the current ratio, the greater the margin of safety.

QUICK RATIO
Quick ratio establishes a relationship between quick or liquid assets and current liabilities. An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value. Inventories are considered to be less liquid therefore calculating quick ratio they are deducted from current assets.

Quick Ratio = Current Assets inventory Current liabilities

2004-05

2005-06

2006-07

2007-08

Quick Ratio

0.76

0.71

0.90

0.99

Escorts quick ratio in the current year has decreased in comparison to previous year, yet it can be considered to be satisfactory, as it is 1:1 times of current liabilities. Although quick ratio is more penetrating test of liquidity than current ratio. Yet it should be used cautiously, as all debtors may not be liquid and cash may be immediately needed to pay operating expenses. The value of quick ratio is decreasing every year. The satisfactory level of the quick ratio is 1:1. This shows the worse situation of the company. The current liabilities are more than the quick assets.

ACTIVITY RATIO Activity Ratios are used to evaluate the efficiency with which the firm manages and utilizes its assets. The ratios are called Turnover Ratios as they indicate the speed with which the firm manages and utilizes its assets. Activity ratios, which are used to analyze Escorts effectiveness in Asset utilization, are Inventory Turnover Ratio Fixed Assets Turnover Ratio Working Capital Turnover Ratio Debtors Turnover Ratio Creditors Turnover Ratio

It indicates the efficiency of the firm in producing and selling its product. It is calculated by dividing sales by avg. inventory. In a manufacturing company inventory of finished goods is used to calculate inventory turnover. Inventory Turnover = Cost of goods sold Avg. Inventory 2004-05 Inventory turnover 10.36 13.07 14.42 15.10 2005-06 2006-07 2007-08

If the company is comfortably meeting the customer needs with 9.73 days inventory of finished goods, all India basis. It is a good achievement for the Escorts Limited.

FIXED ASSETS TURNOVER RATIO

A firms ability to produce a large volume of sales for a given amount of net assets is the most important aspect of its operating performance. Unutilized or underutilized assets increase the firms need for costly financing as well as expenses for maintenance and upkeep. Fixed assets turnover is calculated by dividing net sale by net fixed assets. Fixed Assets Turnover = Sales Fixed Assets .

2004-05 F.A.T 1.98

2005-06 2.24

2006-07 2.29

2007-08 2.35

Escorts fixed asset turnover have increased in 2003-04. The fixed asset turnover of 2.78 implies that it is producing Rs.2.78 of sales for one rupee of capital employed. The higher the ratio, more it is satisfactory It should be interpreted very cautiously because the denominator of the ratio includes fixed asset net of depreciation. Thus old assets with lower book value may create a misleading impression of high turnover without any improvement in sales.

DEBTORS TURNOVER RATIO

Debtors turnover indicates the number of times debtors turnover each year. Higher the value of Debtors turnover, the more efficient is the management of credit. The liquidity position of the firm depends on the quality of the debtors to a great extent. Debtors Turnover = Credit Sales Avg. Debtors

2004-05

2005-06

2006-07

2007-08

Debtors Turnover

7.62

6.12

4.44

4.29

Escorts debtors turnover is quite lower. The debtors turnover ratio is high at 2003-04 . The ratio is decreasing. Also the debt collection period has its own importance. The debt collection period of Escorts was 76 days in 2003-04 but in the year 2004-05, it is increased to 95 days and it is maintained till today. This does not show the satisfactory level. The shorter the collection period, the better the quality of debtors, since a short collection period implies prompt payment by debtors. A too low collection period is also not necessarily favorable as it may indicate a very restrictive collection and credit policy. Because of the fear of bad debt loses the firm may be selling to those only whose financial conditions are sound and who are very prompt in making the payments.

CREDITOR TURNOVER RATIO

Creditors Turnover = Total Purchases Creditors 2004-05 Creditors Turn. 5.70 2005-06 3.67 2006-07 3.55 2007-08 3.45

Though the days are very high and apparently appears to substitute right collection, this extended credit has its own drawback like: High interest inbuilt in cost system. Sub-quality creditors may be accepted. Quality of material may be accepted. The payment period of Escorts Limited is 90 days in 2074-08, which is more reasonable than previous years. This helps to make good quality product and also better relationship with suppliers.

WORKING CAPITAL TURNOVER RATIO

Working capital turnover ratio has its own significance in the business organizations. It shows the efficiency of the firm. How much sale that the company get with the utilization of the limited working capital. Working Capital Turnover = Net Sales Net Working Capital 2004-05 Working.Cap.Turn. 23.02 2005-06 113.45 2006-07 28.30 2007-08

In the case of working capital turnover ratio Escorts is significantly going very downward. This is a very dangerous point of the firm. The company should try to improve it earlier. It shows that the company requires more money to generate sales.

The loans and advances include majorly the advances to employees and deposits to government. The loans and advances reduced because the employees set off their claims. The other current assets include the interest attained from the deposits.

The deposits reduced due to the declaration of dividends. So the other current assets decreased.

RESEARCH METHODOLOGY

RESEARCH METHODOLOGY Research methodology is a way to systematically solve the research problem. In it step by step methods are followed to solve a particular problem. It refers to a search for knowledge. It can also be defined as a scientific search for pertinent information on a specific topic. In fact, research is an art of scientific investment. In it step by step methods are followed to solve a particular problem. It refers to a search for knowledge. Redman & mory defines research systematized effort to gain new knowledge.

OBEJECTIVE:The objective is also to find out the reactions of both the assessors and assesses of Consumer behavior and sale promotion as to their satisfaction or otherwise of the existing system and their reaction to any changes in their performance appraisal system, especially about the latest method i.e. 3600 Appraisal method.

Moreover, instead of yearly appraisal they would like their Appraisal to be done more frequently as to twice in a year. It is more economical This method can cover wider areas This method is original and therefore very reliable. Respondents feel more comfortable while answering the questions asked.

The research involved data collection techniques: Primary Sources Secondary sources

PRIMARY SOURCES: Primary data is the data which is collected for the first time. It is collected from the source of origin. For primary data collection questionnaire was framed considering certain factors like manpower planning, recruitment sources, selection methods etc. the objectives of the study was also kept in mind. A copy of the questionnaire is also attached in the Annexure. Questionnaire method is being followed and was because: preferred over interview method

SECONDARY SOURCES:

The secondary data are those high are already in existence and which have been collected, for some other purpose than the answering of the questions in hand. The secondary data collection involved desk study, which was carried out to obtain background information about the sample companies. The main sources of information were company reports, pamphlets, and magazine and personnel department. In the secondry sources the data is collected for some other purpose than the answering of the questions in hand. The secondary data collection involved desk study, which was carried out to obtain background information about the sample companies

RESEARCH DESIGN Research Designs the way in which the research is carried out. It works as a blue print. Research Design is the arrangement of the conditions for the collections and analysis of data in a manner that to combine relevance to the research purpose with economy in procedure. In a research design: those studies are taken which are concerned with describing the characteristics particular individual or a group.

A research design is thse arrangement of condition s for collection and analysis of data in manner that aims to combined relevance to the research to the research purpose with economy in procedure. As such the design includes an outline of what researcher will do from writing the hypothesis and its operational implication to the final analysis of data. More explicitly, the design decisions happen to be in respect of: What is the study about?

Why is the study being made? Where will the study be carried out? What type of data is required data be found? Where can the required data are found? What periods of time will the study includes? What will be the sample design? What techniques of data collection will be used? How will the data be analyzed? In what style will the report be prepared? Why the required data be found?

TYPES OF RESEARCH DESIGN Exploratory Research Design Descriptive Research Design Experimental Research Design Diagnostic Research Design

Exploratory Research Design In it, a problem is formulated for precise investigation and working and hypothesis are developed.

Descriptive & Diagnostic Research Design

In descriptive of a research design: those studies are taken which are concerned with describing the characteristics particular individual or a group. Experimental Research Design In it casual relationships between the variables are tested. It is also known as Hypothesis Testing Research Design. The present project is descriptive in nature. The major purpose of descriptive research is the description of the state of affairs, as it exists in present. The main characteristic of this method is that the researcher has no control over the variables. He can only report what has happened or what is happening.

SAMPLE DESIGN It is not possible for any researcher to include each and every member of the universe in his research process. So, he selects small portion of the universe, which is its true representative. This group is known as sample and this process is called sampling. Sampling Techniques can be categorized into two broad categories namely: Non-probability Sample Probability Sampling

Non-probability Sampling

In it, researcher selects sample deliberately, by using his own judgement, in it every item of the universe does not have equal chances of inclusion in the sample. It can be of following type: Convenience Sampling Judgement Sampling Quota Sampling Ball Sampling

Probability Sampling It is known as Random Sampling or Chance Sampling. In it, each population element has equal chance of selection.

It can be of following types: Simple Random Sampling Stratified Sampling Cluster Sampling

In the present project, non-probability sampling has been used because sample is selected by researchers own view and every item of the universe has not equal chances of being selected. Under non-probability sampling, convenient

sampling has been used because sample has been selected according to own convenience.

Non-Probability Sampling In the non probability sampling, there is not a equal chance to select the element of any population. DATA COLLECTION There are several ways of collecting the appropriate data which differ considerably in context of money costs, time and other resources at the disposal of the researcher.

The data can be of two types: Primary Data Secondary Data Primary Data Primary data are those data, which is originally collected afresh. It dealing with any real life problem it is often found that data at hand are inadequate and hence, it becomes necessary to collect data that are appropriate. Primary data can be collected either through experiment or through survey. If the researcher conducts an experiment, he observes some quantitative measurements, or the data, with the help of which he examines the truth contained in his hypothesis. The case of survey, data can be collected by any one or more of following ways. (i) (ii) By observation: Through personal interview:

(iii) (iv) (v) (vi)

Through telephone interview. By questionnaires: Through schedules: Other method: a) warranty card b) mechanical devices c) Projective techniques d) Depth interview.

Secondary data:Secondary data means data that are already available i.e., they refer to the data which have already been collected and analyzed by someone else. when the researcher utilizes secondary data, then he has to look into various sources from where he can obtain them. Secondary data may either be published data or unpublished data. Usually published data are available in (a) various publication of central, state are local governments, (b) technical and trade journals (d) books, magazines, and newspaper. (e) Reports and publications of various associations connected with business and industry, bank stock exchange (g) Public record, and statistics, historical documents, and other sources of published information like website of industry or company. They those data which are already collected and stored and which has been passed through statistical research. In this project, Secondary data has been collected from following sources: Annual reports Books M.I.S Other material and report published by company

DATA COLLECTION & ANANLYSIS DATA ANANLYSIS

ANALYSIS OF RATIO

From the cash flow statements of the ESCORT PVT.LTD.It can be analyzed from the two years that the net cash balance of the company has increased manifold in 30-09-2008 than the year 30-09-2009.

The net profit in 30-09-2008 is higher than the 30-09-2009, but due to certain changes there has been increase in the cash balance. The interest paid this year is ore of the last year, which implies that thee company has not repaid his borrowed capital, due to which the interest has got down. The depreciation has increased but it does not affect cash to an extent, as it is a non-cash item. In the head of working capital there is drastic change in the cash balance in the form of Trade and other Receivables; which has affected the cash balance.

There is outflow of cash for receivables rather than the inflow in the last year. So, the net effect is that the cash from operating activities has been decreased two times from the last year. The company has no accumulated losses as at the end of the financial year i.e. September 31, 2008. Provision for taxation has been made in accordance with the requirement of AS22 issued by Institute of Charted Accountants of India. Pursuant to that, current year deferred tax liability have been charged to profit & loss account In opinion of the board of directors of thee company, the current assets, loans and advances have a value on realization in the ordinary course of the business at least equal to the amount stated in the balance sheet and provision for all liabilities have been made. Balance of sundry debtors, creditors, loans and advances are subject to confirmation by the concerned parties.

METHOD OF ANALYSIS
1. Data analysis is done using the following statistical tools wherever required, in order to extract meaningful information from the collected data. o Simple percentage and averages o Bar diagram o Cone diagram

o Pie diagram 2. The collected data from the questionnaire has been put together in the form of tables. 3. Percentage has been calculated wherever necessary for generalization of the data.

4. Data analysis and interpretation has been done on the basis of primary and secondary data. 5. The findings researches have been recorded based on the analysis. 6. The study conducted pertains only to ESCORTS.LTD. 7. All bank balances (debit/credit) have been confirmed by the concerned bank.

There are two methods to analysis the ratio:

Indirect Method The indirect method (or reconciliation method) starts with net income and converts it to net cash flow from operating activities. In other words, the indirect method adjusts net income for items that affected reported net income but did not affect cash. To compute net cash flow from operating activities, non-cash charges in the income statement are added Back to net income and non-cash credits are deducted.

Direct Method

Under the direct method the statement of cash flows reports net cash flow from operating activities as major classes of operating cash receipts (e.g., cash collected from customers and cash received from interest and dividends) and cash disbursements

For example, cash paid to suppliers for goods, to employees for services, to creditors for interest, and to government authorities for taxes).

INDIRECT VERSUS DIRECT METHOD The most contentious decision that the FASB faced in issuing Statement No. 95 was choosing between the direct method and the indirect method of determining net cash flow from operating activities. Companies lobbied against the direct method, urging adoption of the indirect method. Commercial lending officers expressed a strong preference to the FASB hat the direct method be required. Supporters of the direct method contend that knowledge of the specific sources of operating cash receipts and the purposes for which operating cash payments were made in past periods is useful in estimating future operating cash flows In Favor of the Indirect Method The principal advantage of the indirect method is that it focuses on the differences between net income and net cash flow from operating activities. That is, it provides a useful link between the statement of cash flows and the income statement and balance sheet. Many providers of financial statements contend that it is less costly to adjust net income to net cash flow from operating activities (indirect) than it is to report gross operating cash receipts and payments (direct). Supporters of the indirect method also state that the

direct method, which effectively reports income statement information on a cash rather than an accrual basis, may erroneously suggest that net cash flow from operating activities is as good as, or better than, net income as a measure of performance. Special Rules Applying to Direct and Indirect Methods. Companies that use the direct method are required, at minimum, to report

separately the following classes of operating cash receipts and payments:

. In Favor of the Direct Method The principal advantage of the direct method is that it shows operating cash receipts and payments. That is, it is more consistent with the objective of a statement of cash flows to provide information about cash receipts and cash payments than the in-direct method, which does not report operating cash receipts and payment. Furthermore, in-formation about amounts of major classes of operating cash receipts and payments is more useful than information only about their arithmetic sum (the net cash flow from operating activities). Such information is more revealing of an enterprise's ability (1) to generate sufficient cash from operating activities to pay its debts, (2) to reinvest in its operations, and (3) to make distributions to its owners. Many corporate providers of financial statements say that they do not currently collect information in a manner that allows them to determine amounts such as cash received from customers or cash paid to suppliers directly from their accounting systems. But supporters of the direct method contend that the incremental cost of assimilating such operating cash receipts and payments data is not significant.

In Favor of the Indirect Method The principal advantage of the indirect method is that it focuses on the differences between net income and net cash flow from operating activities. That is, it provides a useful link between the statement of cash flows and the income statement and balance sheet. Many providers of financial statements contend that it is less costly to adjust net income to net cash flow from operating activities (indirect) than it is to report gross operating cash receipts and payments (direct). Supporters of the indirect method also state that the direct method, which effectively reports income statement information on a cash rather than an accrual basis, may erroneously suggest that net cash flow from operating activities is as good as, or better than, net income as a measure of performance. Special Rules Applying to Direct and Indirect Methods

LIQUIDITY RATIO

1. CURRENT RATIO (Amount in Rs.) Current Ratio Year 2003 2004 2005 2006 2007 Current Assets 58,574,151 69,765,346 72,021,081 91,328,208 115,642,068 Current Liabilities 7,903,952 31,884,616 16,065,621 47,117,199 30,266,661 Ratio 7.41 2.19 4.48 1.94 3.82

Interpretation As a rule, the current ratio with 2:1 (or) more is considered as satisfactory position of the firm. When compared with 2006, there is an increase in the provision for tax, because the debtors are raised and for that the provision is created. The current liabilities majorly included ESCORTS Group of company for consultancy additional services.

The sundry debtors have increased due to the increase to corporate taxes.

In the year 2006, the cash and bank balance is reduced because that is used for payment of dividends.

In the year 2007, the loans and advances include majorly the advances to employees and deposits to government. The loans and advances reduced because the employees set off their claims

The other current assets include the interest attained from the deposits. The deposits reduced due to the declaration of dividends. So the other current assets decreased.

The huge increase in sundry debtors resulted an increase in the ratio, which is above the benchmark level of 2:1 which shows the comfortable position of the firm.

GRAPHICAL REPRESENTATION

2. QUICK RATIO

(Amount in Rs.)

Quick Ratio

Year

Quick Assets

Current Liabilities

Ratio

2003 2004 2005 2006 2007

58,574,151 52,470,336 69,883,268 89,433,596 115,431,868

7,903,952 31,884,616 16,065,620 47,117,199 30,266,661

7.41 1.65 4.35 1.9 3.81

Interpretation Quick assets are those assets which can be converted into cash with in a short period of time, say to six months. So, here the sundry debtors which are with the long period does not include in the quick assets.

Compare with 2006, the Quick ratio is increased because the sundry debtors are increased due to the increase in the corporate tax and for that the provision created is also increased. So, the ratio is also increased with the 2006.

GRAPHICAL REPRESENTATION

3. ABOSULTE LIQUIDITY RATIO (Amount in Rs.) Absolute Cash Ratio

Year

Absolute Liquid Assets

Current Liabilities

Ratio

2003 2004 2005 2006 2007

31,004,027 10,859,778 39,466,542 53,850,852 35,649,070

7,903,952 31,884,616 16,065,620 47,117,199 30,266,661

3.92 0.34 2.46 1.14 1.18

Interpretation
The current assets which are ready in the form of cash are considered as absolute liquid assets. Here, the cash and bank balance and the interest on fixed assts are absolute liquid assets. In the year 2006, the cash and bank balance is decreased due to decrease in the deposits and the current liabilities are also reduced because of the payment of dividend. That causes a slight increase in the current years ratio.

GRAPHICAL REPRESENTATION

LEVERAGE RATIOS 4. PROPRIETORY RATIO (Amount in Rs.) Proprietory Ratio

Year

Share Holders Funds

Total Assets

Ratio

2003 2004 2005 2006 2007

67,679,219 53,301,834 70,231,061 56,473,652 97,060,013

78,572,171 88,438,107 89,158,391 106,385,201 129,805,102

0.86 0.6 0.79 0.53 0.75

Interpretation
The proprietary ratio establishes the relationship between shareholders funds to total assets. It determines the long-term solvency of the firm. This ratio indicates the extent to which the assets of the company can be lost without affecting the interest of the company. There is no increase in the capital from the year2004. The share holders funds include capital and reserves and surplus. The reserves and surplus is increased due to the increase in balance in profit and loss account, which is caused by the increase of income from services. Total assets, includes fixed and current assets. The fixed assets are reduced because of the depreciation and there are no major increments in the fixed assets.

The current assets are increased compared with the year 2006. Total assets are also increased than precious year, which resulted an increase in the ratio than older.

GRAPHICAL REPRESENTATION

ACTIVITY RATIOS 5. WORKING CAPITAL TURNOVER RATIO (Amount in Rs.) Working Capital Turnover Ratio Year 2003 2004 2005 2006 2007 Income From Services 36,309,834 53,899,084 72,728,759 55,550,649 96,654,902 Working Capital 50,670,199 37,880,730 55,355,460 44,211,009 85,375,407 Ratio 0.72 1.42 1.31 1.26 1.13

Interpretation Income from services is greatly increased due to the extra invoice for Operations & Maintenance fee and the working capital is also increased greater due to the increase in from services because the huge increase in current assets.

The income from services is raised and the current assets are also raised together resulted in the decrease of the ratio of 2007 compared with 2006.

GRAPHICAL REPRESENTATION

6. FIXED ASSETS TURNOVER RATIO (Amount in Rs.) Fixed Assets Turnover Ratio Year 2003 2004 2005 2006 2007 Income From Services 36,309,834 53,899,084 72,728,759 55,550,649 96,654,902 Net Fixed Assets 28,834,317 29,568,279 17,137,310 15,056,993 14,163,034 Ratio 1.26 1.82 4.24 3.69 6.82

Interpretation Fixed assets are used in the business for producing the goods to be sold. This ratio shows the firms ability in generating sales from all financial resources committed to total assets. The ratio indicates the account of one rupee investment in fixed assets. The income from services is greaterly increased in the current year due to the increase in the Operations & Maintenance fee due to the increase in extra invoice and the net fixed assets are reduced because of the increased charge of depreciation. Finally, that effected a huge increase in the ratio compared with the previous years ratio.

GRAPHICAL REPRSENTATION

7. CAPITAL TURNOVER RATIO (Amount in Rs.) Capital Turnover Ratio Year 2003 2004 2005 2006 2007 Income From Services 36,309,834 53,899,084 72,728,759 55,550,649 96,654,902 Capital Employed 37,175,892 53,301,834 70,231,061 56,473,652 97,060,013 Ratio 0.98 1.01 1.04 0.98 1.00

Interpretation This is another ratio to judge the efficiency and effectiveness of the company like profitability ratio. The income from services is greaterly increased compared with the previous year and the total capital employed includes capital and reserves & surplus. Due to huge increase in the net profit the capital employed is also increased along with income from services.

Both are effected in the increment of the ratio of current year.

GRAPHICAL REPRESENTATION

8. CURRENT ASSETS TO FIXED ASSETS RATIO (Amount in Rs.) Current Assets To Fixed Assets Ratio Year 2003 2004 2005 2006 2007 Current Assets 58,524,151 69,765,346 72,021,081 91,328,208 115,642,068 Fixed Assets 19,998,020 18,672,761 17,137,310 15,056,993 14,163,034 Ratio 2.93 3.74 4.20 6.07 8.17

Interpretation Current assets are increased due to the increase in the sundry debtors and the net fixed assets of the firm are decreased due to the charge of depreciation and there is no major increment in the fixed assets. The increment in current assets and the decrease in fixed assets resulted an increase in the ratio compared with the previous year

GRAPHICAL REPRESENTATION

PROFITABILITY RATIOS

GENERAL PROFITABILITY RATIOS 9. NET PROFIT RATIO (Amount in Rs.) Net Profit Ratio Year 2003 2004 2005 2006 2007 Net Profit After Tax 21,123,474 16,125,942 16,929,227 18,259,580 40,586,359 Income from Services 36,039,834 53,899,084 72,728,759 55,550,649 96,654,902 Ratio 0.59 0.30 0.23 0.33 0.42

Interpretation The net profit ratio is the overall measure of the firms ability to turn each rupee of income from services in net profit. If the net margin is inadequate the firm will fail to achieve return on shareholders funds. High net profit ratio will help the firm service in the fall of income from services, rise in cost of production or declining demand. The net profit is increased because the income from services is increased. The increment resulted a slight increase in 2007 ratio compared with the year 2006.

GRAPHICAL REPRESENTATION

10. OPERATING PROFIT (Amount in Rs.) Operating Profit Year 2003 2004 2005 2006 2007 Operating Profit 36,094,877 27,576,814 29,540,599 31,586,718 67,192,677 Income From Services 36,309,834 53,899,084 72,728,759 55,550,649 96,654,902 Ratio 0.99 0.51 0.41 0.57 0.70

Interpretation The operating profit ratio is used to measure the relationship between net profits and sales of a firm. Depending on the concept, it will decide. The operating profit ratio is increased compared with the last year. The earnings are increased due to the increase in the income from services because of Operations & Maintenance fee. So, the ratio is increased slightly compared with the previous year.

GRAPHICAL REPRESENTATION

11. RETURN ON TOTAL ASSETS RATIO (Amount in Rs.) Return on Total Assets Ratio

Year

Net Profit After Tax

Total Assets

Ratio

2003 2004 2005 2006 2007

21,123,474 16,125,942 16,929,227 18,259,580 40,586,359

78,572,171 88,438,107 89,158,391 106,385,201 129,805,102

0.27 0.18 0.19 0.17 0.31

Interpretation This is the ratio between net profit and total assets. The ratio indicates the return on total assets in the form of profits. The net profit is increased in the current year because of the increment in the income from services due to the increase in Operations & Maintenance fee. The fixed assets are reduced due to the charge of depreciation and no major increments in fixed assets but the current assets are increased because of sundry debtors and that effects an increase in the ratio compared with the last year i.e. 2006.

GRAPHICAL REPRESENTATION

12. RESERVES & SURPLUS TO CAPITAL RATIO (Amount in Rs.) Reserves & Surplus To Capital Ratio Year 2003 2004 2005 2006 2007 Reserves & Surplus 65,599,299 34,582,554 51,511,781 37,754,372 78,340,733 Capital 2,079,920 18,719,280 18,719,280 18,719,280 18,719,280 Ratio 31.54 1.85 2.75 2.02 4.19

Interpretation The ratio is used to reveal the policy pursued by the company a very high ratio indicates a conservative dividend policy and vice-versa. Higher the ratio better will be the position. The reserves & surplus is decreased in the year 2006, due to the payment of dividends and in the year 2007 the profit is increased. But the capital is remaining constant from the year 2004. So the increase in the reserves & surplus caused a greater increase in the current years ratio compared with the older.

GRAPHICAL REPRESENTATION

OVERALL PROFITABILITY RATIOS

13. EARNINGS PER SHARE (Amount in Rs.) Earnings Per Share Year 2003 2004 2005 2006 2007 Net Profit After Tax 21,123,474 16,125,942 16,929,227 18,259,580 40,586,359 No of Equity Shares 207,992 1,871,928 1,871,928 1,871,928 1,871,928 Ratio 101.56 8.61 9.04 9.75 21.68

Interpretation Earnings per share ratio are used to find out the return that the shareholders earn from their shares. After charging depreciation and after payment of tax, the remaining amount will be distributed by all the shareholders. Net profit after tax is increased due to the huge increase in the income from services. That is the amount which is available to the shareholders to take. There are 1,871,928 shares of Rs.10/- each. The share capital is constant from the year 2004. Due to the huge increase in net profit the earnings per share is greaterly increased in 2007.

GRAPHICAL REPRESENTATION

14. PRICE EARNINGS (P/E) RATIO (Amount in Rs.) Price Earning (P/E) Ratio Year 2003 2004 2005 2006 2007 Market Price Per Share 32.54 28.47 37.52 30.17 51.85 Earnings Per Share 101.56 8.61 9.04 9.75 21.68 Ratio 0.32 3.30 4.15 3.09 2.39

Interpretation The ratio is calculated to make an estimate of application in the value of share of a company. The market price per share is increased due to the increase in the reserves & surplus. The earnings per share are also increased greaterly compared with the last year because of increase in the net profit.

So, the ratio is decreased compared with the previous year.

GRAPHICAL REPRESENTATION

15. RETURN ON INVESTMENT (Amount in Rs.) Return on Investment Year 2003 2004 2005 2006 2007 Net Profit After Tax 21,123,474 16,125,942 16,929,227 18,259,580 40,586,359 Share Holders Fund 67,679,219 53,301,834 70,231,061 56,473,652 97,060,013 Ratio 0.31 0.3 0.24 0.32 0.42

Interpretation This is the ratio between net profits and shareholders funds. The ratio is generally calculated as percentage multiplying with 100. The net profit is increased due to the increase in the income from services ant the shareholders funds are increased because of reserve & surplus.

So, the ratio is increased in the current year.

GRAPHICAL REPRESENTATION

FINDINGS OF THE STUDY

FINDINGS There has been a significant decline in volume over the years from 2001-02 to 2005-06 as can be seen in the graph below:

CHANGES NET SALES VOLUME

NET SALE IN (Cr)

5000 1588 0 2005- 2006- 200706 07 08 YEAR

Table 4.3

1896

2300

The Net sales of Tractor has increased considerably from 2004-05 to 2007-08, This can be mainly attributed to changes in Variable and material costs and in the

price. The Net sale of Tractor has increased considerably from 2004-05 to 2007-08,

that is an decrease of Rs.7216 per tractor. This can be mainly attributed to changes in Variable and material costs and in

the prices. The current ratio has shown in a fluctuating trend as 7.41, 2.19, 4.48, 1.98, and 3.82 during 2003 of which indicates a continuous increase in both current assets and current liabilities. The quick ratio is also in a fluctuating trend through out the period 2003 07 resulting as 7.41, 1.65, 4.35, 1.9, and 3.81. The companys present liquidity position is satisfactory. The absolute liquid ratio has been decreased from 3.92 to 1.18, from 2003 07. The proprietory ratio has shown a fluctuating trend. The proprietory ratio is increased compared with the last year. The long term solvency of the firm is increased. The working capital increased from 0.72 to 1.13 in the year 2003 07. The fixed assets turnover ratio is in increasing trend from the year 2003 07 (1.26, 1.82, 4.24, 3.69, and 6.82). It indicates that the company is efficiently utilizing the fixed assets. The capital turnover ratio is increased form 2003 05 (0.98, 1.01, and 1.04) and decreased in 2006 to 0.98. It increased in the current year as 1.00. The current assets to fixed assets ratio is increasing gradually from 2003 07 as 2.93, 3.74, 4.20, 6.07 and 8.17.

It shows that the current assets are increased than fixed assets. The net profit ratio is in fluctuation manner. It increased in the current year compared with the previous year form 0.33 to 0.42.

The net profit is increased greaterly in the current year. So the return on total assets ratio is increased from 0.17 to 0.31.

The Reserves and Surplus to Capital ratio is increased to 4.19 from 2.02. The capital is constant, but the reserves and surplus is increased in the current year.

The earnings per share was very high in the year 2003 i.e., 101.56. That is decreased in the following years because number of equity shares are increased and the net profit is decreased.

In the current year the net profit is increased due to the increase in operating and maintenance fee.

The earnings per share is increased. The operating profit ratio is in fluctuating manner as 0.99, 0.51, 0.41, 0.57 and 0.69 from 2003 07 respectively.

Price Earnings ratio is reduced when compared with the last year. It is reduced from 3.09 to 2.39, because the earnings per share is increased.

The return on investment is increased from 0.32 to 0.42 compared with the previous year.

The profit and shareholders funds increase cause an increase in the ratio.

CONCLUSION & RECOMMENDATION

CONCLUSION
The study on competency level of employees at ESCORTS PVT.LTD. gave an insight about the acceptance of competency mapping by employees. The employees at ESCORTS welcome the introduction of competency mapping in their organization as they felt it was very much essential in enhancing their skills and organizational development. The organization has provided the recourses guidance and support to facilitate the introduction of competency level easily and To develop the employees in such a way that they can face any kind of challenge. However the level of competency in employees is found to be satisfactory. Providing proper training, education and guidance to the employees can enhance the level. This study was mainly carried out to find out whether thee competency mapping being followed by the company is effective till date. If the competency mapping and fitment to the organization. By looking at the graphs and tables it is quite that the employees still are not up to the level of competent pool, they still have to be trained and made competent in order to fill the gap. As the organization has just applied the mapping, it has to see to that it meets all the requirements for competency mapping. Therefore the graphs make it quite clear that, the potential of the employees is not up to the mark, and i.e. they are not competent enough to meet the competencymapping requirement. Hence by further training and counseling this gap can be closed.

RECOMMENDATION

Loans & Advances Special efforts should be made to analyze loans & advances, which are between 35% to 56% of current assets. This can be classified between production / operation relation related and non-production / operation related. No production related cases might be financed from other sources like debenture etc. and treated separately. Inventory Inventory should be reviewed constantly to identify show / dead / obsolete item and then disposed until 2000-01 level is again achieved.

Optimum level should be revised periodically, keeping in view, distance of suppliers, production lead time of supplier, transport problem if any and reliability of suppliers. This will help to avoid obsolesce and dead inventory.

Debtors A study may be conducted if required by experts to pinpoint reason behind Escorts high correction period of 95 days in 2007-08 against 50 days of Mahindra & Mahindra. It is due to quality of products, quality of customer, the segment of customers marketing effort, distribution pattern or other reasons. Creditors

Though high payout days may be appartenly beneficial for the company. It has it very heavy long term cost like high interest cost, bad credit ratings and shyness of good quality / standard suppliers.

Ratios The company should try to improve its current situation. The ratios, which are taken in this research to evaluate the companys position, are Current ratio, Quick ratio and Activity ratio. These ratios show the actual position of the company. The Quick ratio is declining since 2001-02 till now. There is a drastic declining in the working capital turnover ratio. This ratio goes to ve position in current year compared to previous. The Debts collection period is 359 days for Exporters. This shows the poor collection policy. The current ratio is 1.12 in 2006-07, which is not upto the ideal ratio. This shows that the current assets are equal to the current liabilities. Not satisfactory

SUMMARY

After the analysis of Financial Statements, the company status is better, because the Net working capital of the company is doubled from the last years position.

The company profits are huge in the current year; it is better to declare the dividend to shareholders.

The company is utilising the fixed assets, which majorly help to the growth of the organisation. The company should maintain that perfectly.

The company fixed deposits are raised from the inception, it gives the other income i.e., Interest on fixed deposits.

The companys overall position is at a good position. Particularly the current years position is well due to raise in the profit level from the last year position. It is better for the organization to diversify the funds to different sectors in the present market scenario.

QUESTIONNAIRE

ESCORTS LIMITED

NAME ..AGE . DESIGNATION .. LOCATION . ADDRESS MOBILE NO . Annual income: (a) <100000 (b)< 200000 (c) < 300000 (d) >300000 1. Do you have a job? (a)Yes (b) No

2. If yes, then state the post .. 3. If no, then state the post willing to adopt . 4. Are you a job seeker? (a) Yes (b) No

5. Have you done any course? (a) Yes ( b)No

6. While seekin job, which factor will you consider? (a) sallary 7. How will you prefer ? (a) official 8. Which one is more friendly? (a) staff (b) employes (b) marketing (b) Quality (c) company name

9. Do you have any further plan to high salary in near future? (a) Yes 10. What is the purpose of sallary? (a) Personal use (c) Study (b) Office use (d) Entertainment. (b) No

11. Do you know that escorts have done production of many parts? (a) Yes (b)No

12. What do you suggest to increase market share of escorts product. (a) Advertisement (c) sales promotion ( b) Attractive package (d)Finance

13. Do you know about escorts financial scheme?

(a) Yes

(b) No

14. Do you think, parts are affordable? (a) Yes (b)No

If NO, then why. 15. Do you think, customer satisfaction is very useful to beat a compitition? (a)Yes (b)No

16. Do you think, every employee should have rights? (a) Yes (b) No

17. Are you aware, that escorts product range starts from 25000/-? (a) Yes (b) No

BIBLIOGRAPHY

REFFERED BOOKS Financial management- K M Panday Manangement accountancy - Pillai & Bagawati Financial Management & Policy Sharma & Gupta Cost & Management Accountancy- S.N. Maheshwari

WEBLIOGRAPHY

www.escortsagri.com www.economictimes.com www.planware.com www.icraindia.com