CHAPTER-II

REVIEW OF LITERATURE
This chapter presents the review of literature relating to the study undertaken.
The collection of reviews has been made from various studies undertaken by academicians,
practitioners, researchers etc, from time to time. These reviews will enlighten the existing
knowledge of the researcher. Besides this, the reviews of empirical studies explore the
avenues for the present and future research related to the subject matter in order to understand
the research problem. The earlier attempts made by the academicians, economist, socialist,
etc, are needed to study. The review of literature guides the researchers for getting better
understanding of methodology used, limitation of various available estimation procedures,
databases, lucid interpretation and reconciliation of conflicting results. In case of conflicting
and unexpected results, the researcher can take the advantage of knowledge of other
researchers simply through the medium of their published works.
A large number of research studies had been carried out on different aspects of the
financial performance by the researchers, economists and academicians in India and abroad.
The different authors had analyzed profitability in different perspectives. A review of
these analyses is important in order to develop an approach that can be employed in the
context of the study of sugar industry in Tamil Nadu. Therefore the present chapter
reviews the various approaches to study the profitability analysis.
Whittington (1980)1 studied the profitability and size of united kingdom companies
covering the period from 1960-1974. He found that average profitability was largely
independent of firm size. The relationship between inter-companies dispersion of
profitability, and variability of profits through time tended to decline with the firm size.
He also found that the average profitability margin, and sales/assets ratio did not vary
systematically with firm size. Moreover the large firms tended to be relatively stable through
time whereas their sales/assets did not thus the relative stability through time of the rates of
return. Due to relative stability of their profits, rather then stability of the utilization
profitability was not an incentive for large firms to grow at a relatively higher rate.
1

Whittington.G. (1980), The Profitability and size of United Kingdom Companies 1960-1964. The
Journal of Industrial Economics, Vol .28, pp.335-342.
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Ramesh (1980)2 stated that the sugar industry in India is the second largest
processing industry in the country next only to textile. There are 320 factories producing
annually 6570 lakh tonnes of sugar. The aggregate assets of the industry are more than
Rs. 1300 crores. About 30 million cultivators are engaged in growing sugarcane and
supplying the same to sugar factories. The Sugar Industry disburses about Rs. 800 crores
annually towards the sugarcane price. It contributes more than Rs. 300 crores annually to
state and central exchequers. The factories are ideally suited for faster rural socioeconomic development. The prosperity of the sugar industry is, therefore, closely linked
with the development and prosperity of our vast population residing in the villages.
Shah and Shah (1980)3 pointed out that the cost of production of sugar factory
depends primary on the raw materials, the sugar recovery percentage and the duration of
crushing season. They suggested that the cost of sugar production can be brought down
by utilizing the processing unit for a maximum period, the proper checking of the machinery
of its day to day work, the cost of extra fuel, lubricants, spare parts, consumption of
chemicals, and sugar content in final molasses would be reduced, if the steam balance
and machinery maintained, proper plans and proper watch in clarification and boiling
house stations.
Murali (1980)4 suggested that break-even analysis is an important aspect for proper
planning of sugar industry and controlling its profits. It helps in determining:
Minimum level of operation required to avoid losses,
Volume of sale to be undertaken to achieve a profit target,
The effect of change in price, change in fixed costs, change in variable cost and change in
volume of sales on profit and
Assessment of the proportion and sales mix to maximize profits.
Manohar Rao (1980)5 rightly pointed out that the current international prices of
sugar and molasses, every sugar producing country has a strong reason to convert sugarcane
2

Ramesh N.A., (1980),"Adjudication of the Performance of Sugar Factories, Maharashtra Sugar 6(4),1980,
pp.47.
3
Shah H.P.and Shah N.K., Measures for Reduction in Cost of Production of Sugar, Gujarat Association
for Agricultural Science, 1980.
4
Murali P (1980), Sugar Industry Planning and Controlling Profiles, Maharashtra Sugar, 5(5),pp.39.
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into sugar and molasses to earn foreign exchange required for keeping up the balance of trade.
It may be even economical to import crude out of the foreign exchange earned by export of
sugar and molasses. However, as the international price of sugar is fluctuating widely and for
reducing the dependence on other countries for import of crude gradually for political reasons,
the sugar producing countries may have to convert the molasses into alcohol and also consider
the possibilities of converting a part of the sugar juice into alcohol. He further concluded that it
was more economical to convert sugarcane into sugar and molasses and to use molasses as raw
material for production of ethyl alcohol. The economic of these activities will however, largely
depend on the international price of these sugar, molasses and ethyl alcohol.
Singh (1980)6 reported that the by-products of sugar factories were neglected
continuously and income from by-products was lost. The realization from the by-product
of sugar factory represents about 1 to 3 per cent of the value of sugar. He suggested that
if the by-products of sugar factories (i.e. bagasses, molasses, filter mud, boiler ashes and
sugarcane tops) were put to right use, they could generate a new hope for the employees.
The sugar technologists have pointed out that if all the by-products are utilized in a sugar
factory, its probability may increase by as much as 50 per cent depending on the products
which it chooses to adopt from the by-products.
Tube (1980)7 in his work on Impact of Sugar Factories on the Rural Economy
A Case Study has studied in detail the impact of Sanjivani Cooperative Sugar Factory in
Ahmed Nagar district on agriculture, agriculturists, on the lives of agriculture labour,
economic conditions of factory workers and spread effects of the sugar factory and
overall economic change in rural area. He concluded with the findings that sugarcane
being the cash crop, area under sugarcane has increased, the area under irrigation has
increased and likewise the change in the cropping pattern and methods of farming have
changed. It is argued that the development of agriculture depends on major agro-based
industries. The real income of the farmers has increased but the real income of the
agricultural laborers has been decreased. It is concluded by the author that sugar factory
in rural area has worked as a growth centre.
5

Manohar Rao P.J (1980)., By-Products Utilization in Sugar Industry, Maharashtra Sugar, 6(5), pp.36.
Singh (1980) R.V., Wealth from Sugarcane Waste, Yojana, 24 (9), pp.7.
7
Tube S.D. (1980), The Impact of Sugar Factories on the Rural Economy A Case Study, Ph.D. Thesis,
University of Poona.
6

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Kasbekar (1981)8 has observed that the sugar economy has been passing through
phases of surplus and deficit in production and consumption leading wide fluctuations in
the prices of sugar. He further observed that it has affected the major indicators of sugar
industry and sugar prices.
Asha Jain (1981)9 studied on Price Cost Margin in Indian Manufacturing
Industries : An Econometric Analysis analyzed the price cost margin overtime in the Indian
Manufacturing . Price cost margin was used as a measure of profitability. Cost factors emerged
as significant determinants of profitability, while structure variables like concentration
ratio, capacity utilization, and growth and capital intensity, showed mixed pattern results
varied among the industries.
Sharma (1981)10 has stated that Co-operative sugar factories help farmers for
getting more yields by following ways:
Distribution of good quality cane which is disease free and improved varieties for
planting.
Land preparation to provide agricultural implements.
Irrigation facilities.
Technical knowledge of crop rotation, inter cropping by different trails and demonstration.
Hapse (1982)11 reported that the factors like inadequate supply of sugarcane due
to lack of sugarcane development programme, lack of irrigation facilities, lack of
regulation in sugarcane supply due to inadequate control leading to cane scramble,
inadequate own funds, excess burden of interest on temporary or short loan, unrealistic
sugar and sugarcane prices, lack of efficient management, lack of expertise in the board
of directors, competitions of gur and khandsari units and lack of long-term sugar policy
are the root causes for the sickness of the cooperative sugar factories in Maharashtra .

Kasbekar, (1981) S.A., Sugar Shares on Its Way to Recovery, Economic Times Research Bureau.
Asha Jain (1981) Price Cost Margin in Indian Manufacturing Industries: An Econometric Analysis,
Ph.D. Thesis Kanpur.
10
Sharma S.C (1981)., The Role of Sugar Industry in Rural Development With Special Reference to east
Uttar Pradesh., Indian Sugar, 31(6), pp.395.
11
Hapse D.G (1982), Sugar development Technology for Maharashtra, Maharashtra Sugar, 8(2), pp.51.
9

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Gangadhar (1982)12 in his studys, examined some aspects of profitability in cement

industries. He made comments on profitability of large public limited cement companies in
India. In order to bring out fluctuations and to offer possible causes for such fluctuations.
The study revealed that the profitability in cement industries, had fluctuated very widely with
low rate during the period under review. The profit margin in the cement had shown
declining trend where as the assets turn over showed an increasing trend.
Bhabotosh Banerjee (1982)13 in his study on Corporate Liquidity and
Profitability in India has identified the relationship of liquidity with profitability by
analyzing the trend of liquidity position of medium and large public limited companies in
India covering the period from 1971 to 1978. His study reveals that in industrial groups
belonging to ferrous, non-ferrous metal products for shipping, a raise in liquidity led to
raising profitability and vice versa, however, in other industry groups like tobacco, silk
and rayon textiles a rise in liquidity has been found to have a decline in profitability.
Kohak (1983)14 has studied the socio-economic effects of a cooperative sugar
factory on agriculture, cultivators and on agricultural laborers. He had chosen the Niphad
Shetkari Shakari sakhar Karkhana in Nasik district. He also studied the impact of sugar
factory on the development of infrastructure, social services like education, medical
facilities, capital formation, and employment generation in the area of operation of sugar
factory. From this study, he concluded that because of the establishment of the sugar
factory, the tendency of depending solely on the cash crop like sugarcane has been increasing
among the farmers, which may ultimately have adverse effect on other farmers. Secondly,
sugarcane requires proportionately more water compared to other crops i.e. nearly for a
period between 15 and 18 months till its maturity. If the available water is used for other
crops of 3 to 4 months duration, more land can be brought under irrigation. This will help in
increasing agricultural productivity and it is the need of the time. He also concluded that a
cooperative sugar factory accelerates economic development in its area of operation only.

12

Gangadhar R.V (1982), Financial Analysis of Cement Companies ; a Profitability and Efficiency Focus,
the Management Accountant.
13
Bhabotosh Banerjee (1982),Corporate Liquidity and Profitability in India, Research Bulletin, July.
14
Kohak and Narwadkar D.S.(1983)Production Performance of Co-operative Sugar Units in
Maharasthra, Indian Journal of Agricultural Economics, XIV (3), pp.343.
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Agarwal (1983)15 also studied working capital management on the basis of

sample of 34 large manufacturing and trading public limited companies for the period
1966-67 to 1976-77. Applying the statistical techniques of ratio analysis, responses to
questionnaire and interview, the study concluded that the working capital per rupee of
sales showed a declining trend over the years but still there appeared a sufficient scope
for reduction in investment in almost all the segments of working capital. An upward
trend in cash to current assets ratio and a downward trend in cash turnover showed the
accumulation of idle cash in these industries. Almost all the industries had overstocking
of raw materials shown by increase in the share of raw material to total inventory while
share of semi-finished and finished goods came down. It also revealed that long-term
funds as a percentage of total working capital registered an upward trend, which was
mainly due to restricted flow of bank credit to the industries.
Kasar and Tilekars (1984)16 study indicated that the sugar industry has
significant impact on the employment of seasonal migrants in Maharashtra. The share of
sugar factory employment was to the extent of 45.51 and 75 percent in the total employment
of an average male, female and bullock pair of the migrant household. As regards the
income, it is noted that the sugar industry, on an average contributes 57 percent of the
gross income of migrant household. The seasonal employment provided by the sugar
industry enabled the migrant households to increase their income to enjoy a slightly better
position as compared to the non-migrants under study. Therefore, the policy has been
endorsed for the installation of agro-processing industries based on local raw produce in
rural areas in order to generate employment and income opportunities for the economic
development of weaker sections.
The Government (1985)17 of Maharashtra appointed a Committee for studying
the problem of sick Co-operative sugar factories under the chairmanship of Shri Gulabrao
Patil. The Committee found that inadequate supply of sugarcane, lack of sugarcane,
substantial increase in the project cost and lack of term loan arrangement, associated with
15

N.K. Agrawal, Management of Working Capital, Sterling Publication Pvt. Ltd., New Delhi, 1983.
Kasar D.V and Tilekar S.N (1984) Impact of Sugar Industry on Employment and Income of Seasonal
Migratory from Households in Maharashtra, Indian Journal of Agricultural Economics, Vol.44, No.3,
1989, pp.329.
17
Government of Maharashtra (1985), Sugarcane Control Order, Dated 28 th March, pp.3.
16

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relatively lower owner equity and excess burden of interest on short term loans, lack of
experienced technical personal for efficient use machinery, inefficient management and
lack of long term price policy for sugarcane, were the major reasons for sustained losses
from sugar production on a continual basis.
Singh, Sinha and Singh (1986)18 examined various aspects of working capital
management in fertilizer industry in India during the period 1978-79 to 1982-93. Sample
included public sector unit, Fertilizer Corporation of India Ltd. (FCI),Hindustan
Fertilizers Corporation Ltd.(HFC), The National Fertilizer Ltd., Rashtriya Chemicals and
Fertilizers Ltd and Fertilizer (Projects and Development) India Ltd. On the basis of ratioanalysis and responses to a questionnaire, study revealed that inefficient management of
working capital was to a great extent responsible for the losses incurred by the FCI and
its daughter units, as turnover of its current assets had been low. FCI and HFC units had
high overstocking of inventory in respect of each of its components particularly stores
and spares. Similarly, a quantum of receivables had been excessive and their turnover is
very low. However, cash and liquid resources held by FCI and its daughter units had been
much lower in relation to operation requirements. So far as financing of working capital
was concerned, long-term funds had been financing a low proportion of current assets
due to rapid increase of current liabilities. The profitability providing an internal base for
financing of working capital, had been very low in these undertakings.
Mukerjee (1986)19 in his study on Management of working capital in public
enterprises in respect of central government industrial undertaking covering a period
from 1974-75 to 1978-79, has revealed that the current assets due to the accumulation of
inventories and current liabilities increased due to increase in financing payables. The overall
size of the working capital requirements were not ascertained based on the consideration
as suggested for prudent financial management. There was a significant negative correlation
between overall profitability and size of working capital. The liquidity and probability had a
very significant negative correlation. There was an over investment in structural determinants
and huge size of working capital due to faulty financial policies adopted by the units.
18

Kamta Prasad Singh, Anil Kumar Sinha and Subas Chandra Singh,(1986) Management of Working
Capital in India, Janaki Prakashan, New Delhi, 1986.
19
Mukerjee A.K (1986), Management of Working Capital in Public Entersprices Allahabad, Vohra
Publishers, and Distributors.
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Jagdish Lal and Bajpai (1987)20 have indicated that growth rate of sugarcane
production was highest in Tamil Nadu followed by Karnataka, Maharashtra, Punjab,
Uttar Pradesh, Andhra Pradesh and Bihar. In the states with higher growth rates of area
and or production, the variability in area, production, productivity and price were observed to
be higher in the states having higher growth rates of these variables. They have said that
it is desirable to bring about substantial improvement in productivity for which efforts
should be made for replacement of currently grown varieties with superior ones, timely
and adequate supply of strategic inputs, effective transfer of plant and ratoon sugarcane
technology, control of disease and pests, drainage for water logged areas, reclamation of
saline alkali soils and timely payment of cane price to farmers .
Deepak Chawala (1987)21 studied an empirical analysis of the profitability of the
Indian man made fibers Industries. This study examined and explained the trends in the
profitability of India man made fibers Industries. The relevant data for the study was obtained
from 17 firms found in BSE official directory for the period 1963-64 to 1977-78. An increase
in the excise duty of man-made fibers seems to be associated with the decline in profitability
of the industries. Both concentration ratios and vertical integration influence the profitability.
However the impact differs for cellulose and petrol chemical based group of fibers.
Kharche (1987)22 has worked on the topic Cooperative Sugar Factories in
Marathwada A critical study. In his work, he has discussed the licensing policy of sugar
industry of the Government of India. Further, he analyzed financial structure of cooperative
sugar factories. In connection with the efficiency of sugar factories, the importance of the
supply of sugarcane, sugarcane development activities and other problems relating to the
supply of raw material i.e. sugarcane, are also discussed in this study. Furthermore, he has
also studied the cost of production of sugar, role of management in the development of the
sugar factories and the spread effects of cooperative sugar factories in their areas of
operation. Finally, he has analyzed the causes of sickness of sugar factories and has made
some recommendations to overcome the problems of sickness.
20

Jagdish Lal and Bajpai (1987), Measuring Growth in Area Production,Productivity and Prices of
Sugarcane and its Competing Crops and Gur in India, Bharatiya Sugar, 12(4), pp.15.
21
Deepak Chawala (1987) An Empirical Analysis of Profitability of the Indian Man Made Fibers
Industry Decision pp. 106-115.
22
Kharche.R.M.,(1987) A Cooperative Sugar Industry In Marathwada, Lease Industry for Development,
Reference to Sick Factories from Marathwada and Vidarbha,2(5) ,pp.15.
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Kuchhadiya and Shiyani and Parmer (1988)23 observed an increasing trend in all
the variables of sugarcane and sugar production in Gujarat and India as a whole, however the
growth rates were comparatively higher in the state as compared to the country as a whole.
Furthermore, they revealed that the variability of production was more than the variability in
area and yield of sugarcane in Gujarat as well as in India and arrived at the conclusion that
the cultivation of sugarcane crop in the Gujarat state was profitable to the farmers.
Pandey and Bhat (1988)24 Financial ratio patterns in Indian manufacturing
companies: A Multi-Variate Analysis, have analyzed the financial ratio patterns in
Indian manufacturing industries, by taking 612 companies from 1965-66 to 1984-85.
They have identified three groups of ratio that contain the maximum amount of
information about profitability and applied these ratios for the analysis of only
manufacturing and processing industries. The three groups of financial ratios used were
(i) Return on Investment (profit before depreciation, interest and tax to total tangible
assets), (ii) Sales efficiency (profit after tax to net sales) and (iii) Equity intensiveness
(retained cash flow operation to tangible net worth). Their study observed a declining
trend in profitability in relation to sales, share holder equity and total investment, the impact
of which increase with the increasing interest burden. It was also found that these three
groups of ratios of profitability showed a consistent declining trend a cross most of the firms.
Hinge, Pawar and Narwadkar (1989)25 showed that the installed capacity was
over utilized in the healthy class while in the remaining classes, it was under utilized due
to inadequate cane supply which in turn influenced per unit cost of production. The gap
between the highest and the lowest per quintal cost of manufacturing sugar was Rs.118.3
per sugar factory per annum value of sugar was the highest in the healthy class followed
by medium and sick sugar factories. The sugar factories belonging to all the classes
incurred loss. However, the loss was the highest in case of the sick sugar factories.
The net loss of 100 tonnes of installed capacity was observed to be largely influenced by
the magnitude of return from sugar production. In spite of the low per unit cost of
23
24

25

Kuchhadiya D.B., Shiyani B.L., and Parmar G.D. (1988), An economic Analysis of Sugarcane, 39(9), pp. 739.
Pandey, I.M. and Bhat.R. (1988), Financial Ratio Patterns In Indian Manufacturing Companies;
A Multivariate Analysis, Working pp.764. August, Indian Institute of Management, Ahmedabad.
Hinge V.N Pawar (1989) J.R and Narwadkar D.S. Production Performance of Co operative Sugar Units
in Maharashtra, Indian Journal of Agricultural Economics, XIV (3), and pp.343.
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production of sugar, the overhead costs, were relatively very high in the case of sick
sugar factories. These sugar factories sustained heavy losses. The economics of scale
entirely depend on the ability of sugar factories to fully utilize the installed capacity.
Verma (1989)26 evaluated working capital management in iron and steel industry
by taking a sample of selected units in both private and public sectors over the period
1978-79 to 1985-86. Sample included Tata Iron and Steel Company Ltd(TISCO) in
private sector and Steel Authority of India Ltd(SAIL) and Indian Iron and Steel
Company, a wholly owned subsidiary of SAIL in public sector. By using the techniques
of ratio analysis, growth rates and simple linear regression analysis, the study revealed
that private sector had certainly an edge over public sector in respect of working capital
management. Simple regression results revealed that working capital and sales were
functionally related concepts. The study further showed that all the firms in the industry
had made excessive use of bank borrowings to meet their working capital requirement
vis--vis the norms suggested by Tandon Committee.
Nagarajan and Burthwal (1990)27 in their research work entitled profitability
and structure. A firm level study of Indian pharmaceutical industry intensively examined
relationship between profitability and structure. A sample of 38 Pharmaceutical firms in
India has taken for the study during the period of 1970-1982. The analysis demonstrated
that, under the condition of price controls the most significant determinants of the
profitability of the firms in this industry was integration size and advertising intensity did
not appear to be major determinants. This was perhaps due to the inability of firms to
translate their market power into prices, because of the controlled the coefficient of
growth rate of sales was positive and significant suggesting that factors on the demand
side of a firm had a greater impact on profitability than on supply side.
Harbir Singh (1990)28 in his study Management of working capital: A case
study of Modi Sugar Mills, Modinagar has stated that the financial health of a company

26
27

28

Harbans Lal Verma, (1989) Management of Working Capital, Deep and Deep Publication, New Delhi.
Nagarajan and Burthwal, (1990) Profitability and structure. A firm level study of Indian Pharmaceutical
Industry, the Indian Economic Journal, Vol.38, No.2, pp.70-84.
Harbir singh (1990), Management of Working Capital; A Case Study of Modi Sugar Mills, Modinagar,
Dissertation, Meerut University, Published in a Survey of Research in Commerce and Management,
pp. 477-483.
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can be improved, if stringent control is excised on raw materials, stores and spares, and
also by reducing the unprofitable investment blocked in current assets, the cash flow can
be regulated, the companies prepare weekly cash flow statement and cash budget on a
regular basis.
Krishnaveni (1991)29 in her study evaluated the impact of policy changes in
1982-1992 on profitability and growth of firms in the industry using tobins 9 as a
measure of profitability. The study finds no evidence to show that firms had made super
normal profits. The profitability was found to be explained mainly by age of the firms
vertical integration diversification and industry policy dummy variables important
determinants of growth of firms found as diversification Industries. Policy dummy
variable gross retained profits and expansion of capacities results also real erect in
performance between car and non car sector as well as within the sectors of the
industries.
Cleveland and Firedevicle (1993)30 in their study, Profitability Uncertainty and
Firm Size examined the connectors between variation in profit and loss rates among
firms size classes reflections of uncertainty. They found that within industries such
variations are particularly great for firms in small-firms size classes, leading to operating
policies for small firms in best characterized as entrepreneurial large firms in contrast
faced with less uncertainly in earning profit, appear in adopt polices that manifest an
emphasis on strategic planning.
Pavi, Vadivel and Kamala (1995)31 studied about the financial performance of
the diversified companies an effort was made to study the relationship between
diversified firms and their financial performance. Seven large firms having different
products both related and otherwise in their portfolio and operating in diverse industries
were analyzed. A set of performance measures ratios was employed to determine the
level of financial performance. The results revealed that diversified firms studied had

29

30

31

Krishnaveni (1991) Profitability and Growth in Indian Auto Mobile Manufacturing Industry, Indian
Journal of Economic Growth, Vol. 26, pp. 81-97.
Cleveland And Firedevicle.W (1993) Profitability Uncertainly And Firm Size, Small Business
Economic Vol.5, pp.87-100.
Pavi, V.S Vadivel.V and Kamala K.H (1995) Diversities Companies and Financial Performance:
A Study. Finance India Vol.IX ,N. 4, pp. 977-988.
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been healthy financial performance. However, narration in performance from one firm to
another had been observed and statically established.
In RBI Study (1995)32 an attempt was made to study the financial performance of
private corporate business sector. During the period 1994-95, 1030 company concerned
in this study, 925 were non-financial companies and 105 were financial companies.
The results of the financial and non-financial were also analyzed. Size wise apart from
the analysis of the consolidated results for the entire sector.The good corporate
performance during 1994-95 is reflected in major profitability ratios registering distinct
improvement in the year under review as compared to the previous year.
Vijayakumar and Venkatachalam (1995)33 in their study on Working capital
and Profitability-An empirical Analysis with reference to Indian automobile industry.
In summary, the literature review indicates that working capital management impacts on
the profitability of the firm but there still is ambiguity regarding the appropriate variables
that might serve as proxies for working capital management. The present study
investigates the relationship between a set of such variables and the profitability of a
sample of Indian Automobile firms. Further, most of the Indian studies used traditional
liquidity ratios viz., current and quick ratio as a measure of liquidity. Only a very few
studies used Cash Conversion Cycle (CCC) as a measure for liquidity. Therefore, to fill
this gap in the literature, as attempt has been made in this part to study the relationship
between cash conversion cycle and profitability of Indian automobile firms.
Vijayakumar and Venkatachalam (1995)34 studied the impact of working
capital on profitability in sugar industry in Tamil Nadu by selecting a sample of 13
companies; 6 companies in Co-operative sector and 7 companies in private sector over
the period 1982-83 to 1991-92. They applied simple correlation and multiple regression
analysis on working capital and profitability ratios. They concluded through correlation
and regression analysis that liquid ratio inventory turnover ratio, receivables turnover

32

33

34

RBI Corporate Studies Division (1995) Performance of Corporate Business Sector during the First
Half of 1995. Finance India Vol.XVII, No.3, pp.987-1002.
Vijayakumar and Venkatachalam (1995)Working Capital Managaement in Sugar Mills of Tamil Nadu
A Cash Study, Management and Labour Studies, Vol. 20, No.4, October 1995, pp. 246-354.
Vijayakumar, A. and A. Venkatachalam (1995).Working capital and Profitability-An empirical analysis, The
Management Accountant, pp.748-50.
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ratio and cash turnover ratio influenced the profitability of sugar industry in Tamil Nadu.
They also estimated the demand functions of working capital and its components i.e.
cash, receivables, inventory, gross working capital and net working capital, by applying
regression analysis. They showed the impact of sales and interest rate on working capital
and its components. When only sales was taken as independent variable, coefficient of
sales was more than unity in all the equations of working capital and its components
showing more than unity sales elasticity and diseconomies of scale. When sales and
interest rate were taken as independent variable, sales elasticity was again more than
unity in demand functions of working capital and its components except cash. So far as
capital costs were concerned, these had negative signs in all the equations but significant
only in inventory, gross working capital and net working capital showing negative impact
of interest rates on investment in working capital and its components. Thus study showed
that demand for working capital and its components was a function of both sales and
carrying costs.
Vijayakumar (1996)35 in his study Determinants of Profitability has examined the
determinants of profitability in sugar Industry of Tamil Nadu for the period 1982-1994.
He has identified that growth rate of sales, vertical integration, leverage current ratio and
operation expenses to sales are the important variables which determinate the profitability
of firms in the industry. He has revealed that efficiency in inventory management and
current assets are foot steps to improve profitability.
Vijayakumar (1996)36 in Assessment of Corporate Liquidity- A discriminated
analyzed approach had revealed that the growth rate of sales, leverage, current ratio,
operating expenses to sales and vertical integration in the sugar industry. Further the
author had studied the short term liquidity position in 28 selected sugar factories in
Co-operative and private sector, as discriminated from poor risk companies based on current
and liquidity ratios. Discriminating z scores have been calculated with the help of
discriminate function and according to the z scores the companies are ranked in the order of
liquidity.
35
36

Vijayakumar.A (1996), Determinants of Profitability, Finance India, Vol. X, No.4, December, pp.925-932.
Vijayakumar.A (1996) an Assessment of Corporate Liquidity- A Discriminate Analysis Approach, Research
Studies In Commerce and Management, Classical Publishing Company, New Delhi, pp. 180-191.
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Beaumont Smith and Begemann (1997)37 in their study Measuring association

between working capital and return on investment, have studied the data of 135 firms
for the years 1984-1993.The main objectives of the study is, to identify the association
between working capital and return on investment and to find out whether the more
recently developed alternate working capital measures show improved association with
return on investment than of the traditional working capital ratios. The firm listed on
Johannesburg stock exchange was considered for study. Chi-square test and step-wise
regression were applied and it was found that the traditional working capital leverage
measures of total current liabilities divided by fund flow accounted for the greatest
association with return on investment.
Gangadhar (1997)38 in his study, Financial Analysis of Companies in Eritrea:
A Profitability and Efficiency Focus has made a profitability and financial analysis of
companies in Eritrea to study the impact of various factors influencing efficiency and
profitability of companies through studying the impact of the factors responsible for such
profit through sales and asset efficiency. The study placed its main emphasis on various facts
of profitability namely to examine the liquidity position of the companies, to study the long
term solvency position, to evaluate the use of asset efficiency, analyzing their impact on the
computation of various ratios relating to profitability, liquidity, solvency and asset
management. Whereas the two companies were compared financially, the study identified
that ROI (Return On Investment) has achieved more relatively higher, uniform, and stable
trend over the study period.
Hyun-Han shin and Lucsoenen (1998)39 in their study, Efficiency of Working
Capital Management and Corporate Profitability, have identified that there is a strong
negative relationship between the length of the firms. Net Trade Cycle (NTC) and the
profitability with 58,985 firms covering the period of 1975-1994. In addition, shorter
Net-Trade Cycles are associated with higher risk-adjusted stock returns. The study

37

Beaumont Smith and Begemann.E (1997), Measuring Association between Working Capital and Return
on Investment South African Journal of Business Management March Vol .28, pp.81-92.
38
Gangadhar .V (1997), Financial Analysis of Companies In Eritrea; A Profitability and Efficiency
Focus, The Management Accountant.
39
Hyun-Han shin and Lucsoenen (1998), Efficiency of Working Capital Management and Corporate
Profitability, Financial Practice and Education, fall, winter, pp.68-79.
28

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identified that the NTC is measuring liquidity different from the more conventional
current ratio, which is positively related to profitability.
Agarwal (1999)40 studied the profitability and growth in Indian Automobile
Manufacturing Industry. The objective of this study was to evaluate the impact of policy
changes since 1981-82 on profitability and growth of firms in the industry using tobins
square as a measure of profitability. The study finds no evidence to show that firms have
made super normal profits. Profitability was found to be explained mainly by the age of
the firms, vertical integration, diversification and industry policy dummy variable.
Important determination of growth of firms are found as diversification industry, Policy
dummy variables, gross retained profits and expansion of capacities.
Sahu (2000)41 analyzed the corporate profitability in multivariate approach.
This was as empirical based study on the secondary data from a sample of 100 non-financial,
non-government, public limited companies in eastern India for a span of ten years.
This study attempted to measure the composite profitability of a firm by single index,
facilitating case of comparison and ranking. The main objective of the study is the degree
of relationship between ratios.
George Gallinger (2000)42 in his study Return on Assets Performance has examined
the framework of financial statement analysis. The profitability of SALTON Company
has been examined in this study where its components related to return on sales and asset
managements were analyzed in depth. According to him, inefficient assets management
will result in destroyed market value of the company and will probably causes financial
distress problems that may even result in bankruptcy. The study revealed that if the
weighted average cost of capital on the profit before tax basis exceeds the return on
assets, the company would need to improve the performance through higher return on
sales, increased asset turn over or both.

40

Agarwal, N. and Singla, S.K (1999) How to Develop A Single Index For Financial Performance Indian
Management Vol.12, No.5, pp. 59-62.
41
Sahu R.K (2000) Analysis of Corporate Profitability: A Multivariate Approach, The Management
Accountant, Vol.35, No.8 August, pp.571-577.
42
George W.Gallinger (2000), Framework for Financial Statement Analysis, Part I; Return-on Assets
Performance, Business Credit, February, Vol.102, Issue.2, pp.103 -105.
29

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Rajeswari (2000)43 carried out a study on Liquidity Management of Tamil Nadu

Cement Corporation Ltd, Alangulam- A case study. Data was collected from the annual
reports of TANCEM for a period of five years from 1993-94 to 1997-98 to analyze the
liquidity position of TANCEM. It was concluded from the analysis that, the liquidity
position of TANCEM was not stable. It was observed from the liquidity ratio that their
two much of liquidity in the first two years of the study period. It was concluded that the
liquidity management of TANCEM was poor and not satisfactory. Since a very high
degree of liquidity is also as bad as an idle asset and efforts profitability.
Srinivasan (2001)44 suggested in his study that the opportunity for using by-product
molasses, which will be available in increasing quantities, for producing industrial and
potable alcohol, alcohol-based chemicals and ethanol should be fully utilized. There is
also scope for adopting co-generating system on ambitious lines for generating power and
producing steam with the use of bagasse in high pressure boilers. Any surplus power can
be sold to Tamil Nadu Electricity Board Grids at price advantages to both parties. These
measures can help in reducing all manufacturing costs noticeably.
Jadhaw (2001)45 told that approximately 70 percent of total world sugar
production is consumed domestically in the countries of origin and about 25 percent is
exported to other countries. It has been found from the study that the cost reduction is a
continuous process of follow up. It needs evaluation, redesigning and reevaluation. It is
difficult to suggest Universal Cost Reduction Techniques. To achieve cost reduction, it
is necessary to follow the below mentioned steps:
1. Establishing our own standards
2. Measuring performance against these standards and
3. Correcting deviation from standards.
It is also pointed out that the trust areas for cost reduction are improvement of
efficiency and productivity along with reducing wastage of man-hour, materials and
energy.
43

Rajeswari.N Liquidity Management of Tamil Nadu Cement Corporation Ltd., Alangulam-A Case
Study, the Management Accountant. Vol. 35, No.5, May 2000,pp. 377-378.
44
Srinivasan.N. (2001) Decontrol overdue, the Hindu Survey of Indian Industry, pp.297.
45
Jadhav, M.G (2001). World Sugar Market Structured Fluctuation and Hope for India Sugar, Co Operative
sugar Volume 33, No.2, October, pp.147.
30

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Pokharkar, Kasar and Shinde (2001)46 have pointed out that basic objective of the
study, has been to examine low productivity of sugarcane and profitability for different
planting types in different recovery zones in Maharashtra. It has been concluded that there is
a need to popularize the improved crop production technology among the sugarcane growers.
It will ensure reduction in a cost of cultivation on one hand and maintain the productivity of
sugarcane. The input infrastructure has to be properly developed so that crucial inputs would
be available to the growers in time to improve productivity.
Dabasish sur. Joydeep and Prasenjit, Ganguly (2001)47 studied the Liquidity
Management in Private Sector Enterprises- A case study of Indian Primary Aluminum
Industry, for the period 1989-90 to 1996-97 using the data as HINDALCO and INDAL taken
from the stock exchange official directory of the Mumbai stock exchange. The researcher
concluded that the overall liquidity management at INDAL was better in terms of
Efficiencies utilization of short term funds, whereas HINDALCO was unable to do so.
It was observed that the liquidity and profitability were found to be positively correlated
to a great extend in the both companies.
Debasish Rej and Debasish Sur (2001)48 undertook a study entitled
The Profitability Analysis of Indian Food Products Industry: A case study of Cardbury
India ltd. The relationship among various profitability ratios and their joint impact were
analyzed using multiple correlations, co-efficient and multiple regression method.
The study revealed that there was no correlation between the selected ratios.
Syed Mohammed Ather (2001)49 in his study examined The Profitability of Public
Industrial Enterprises in Bangladesh .The profitability of sample enterprises at shadow prices
was higher than the prevalent bank rates of interest .So the performance was not poor during
the study period. The inefficient use of working capital and fixed assets both seem to contribute
greatly to show decreasing trends of public profitability at constant shadow prices.
46

Pokharkar .V.G, Kasar (2001) .D.V, And Shinde.H.R, Cases Low Productivity and Profitability Article
Published in Co-operative Sugar.
47
Debasish Sur. Joydeep Biswas and Prasenjit Ganguly, Liquidity Management in Indian Private Sector
Enterprises-A case Study of Indian Primary Aluminum Industry. Indian Journal of Accounting, Vol.XXXII,
June 2001, pp.8-14.
48
Debasish Rej and Debasish sur, Profitability Analysis of Indian Food Products Industry: A case study of
cardbury India Ltd, The Management Accountant, Vol.36, No.11, Nov 2001, pp.845-849.
49
Syed Mohammed Ather, A Profitability of Public Industrial Enterprises in Bangladesh, Indian Journal
of Accounting, Vol.XXXII, June 2001, pp.47-58.
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Samar K. Datta (2002)50 computed and presented the growth rates of production
and yield of sugarcane in his study, based on the source from Ministry of Agriculture,
Government of India: Agriculture statistics at a glance, 2001. It has been found that the
compound growth rate of production of sugarcane was only 2.70 and yield of sugarcane
was only 0.82 during 1991-92 to 2000-01
Bhattachrayya (2002)51 discussed in his study, the negative export growth of
sugar and molasses during 1995-96 to 1999-2000. It showed that it was 151.62 in 1995-96,
303.89 in 1996-97, 68.68 in 1997-98, 5.81 in 1998-99 and 8.74 in 1999-2000. However,
during 1999-2000, more than 70 percent of Indias agricultural exports have shown positive
growth trend, while only 27 percent of agro exports(including sugar and molasses), have
shown a negative trend.
Rajesh Kumar and Misra (2002)52 In their study, an effort has been made to
delineate sugar recovery zones in the country for the efficiency planning and development of
Sugar Industry. The objectives of identifying different sugar recovery zones into
emphasis that the crop area, quality and quantity of water, infrastructure, cane processing
technology, sugarcane supply management, etc., are quite different in different areas of
the country and require appropriate approaches. The study was concentrated on this 137
Districts and 5 Zones where demarcated. More than 85 percent sugar factories are located
in these Districts. As the average recovery increase from Zone I to V, average during of
crushing and factory productivity have also been found to increase thereby a close
association of the factors with recovery.
Vijayakumar (2002)53 in his work, Determinants of Profitability- A firm level
study of the Sugar Industry of Tamil Nadu made an attempt to study the various
determinants of profitability viz. growth rate of sales, vertical integration and leverage.
The study was also conducted by computing current ratio, operating expenses to sales
ratio and inventory turnover ratio. The author employed econometric models to test various

50

Samar (2002) K.Datta,Indian Agriculture:; Retrospects and prospect, Yojana, January ,pp.10.
Bhattachrayya.B, (2002) Global Competitiveness of India Agriculture, Yojana, January, PP.23&25.
52
Rajesh Kumar and misra, S.R (2002). Sugar Recovery Zones of India-Delineation and Critical analysis.
Sugar Tech, Volume. IV (1&2): 38-44, pp.38.
53
Vijayakumar.A (2002) Determinants of Profitability -A Firm Level Study of the Sugar Industry of Tamil
Nadu, The Management Accountant pp.458-465.
51

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hypotheses relating to profitability with other variables. It was concluded that efficiency
in inventory management and current assets were important to improve profitability.
Vijayakumar (2002)54 carried out a study entitled Assessment of Corporate
Liquidity- A Discriminate Analysis Approach in which 5 Co-operative sugar mills and 5
private sector companies in Tamil Nadu were taken into consideration among 14 cooperative
sugar mills and 14 private sector sugar mills . Only those units which were established before
1984 and having a crushing capacity of 2000 metric tonnes per day were selected for the study.
The discrimination analysis was employed to determine the combined effects of the ratios.
The author concluded that the Co-operative sector was classified as poor risk in all the selected
years on the basis of current and liquid ratio. The author further concluded that the same
became good risk during the years 1986-87 and 1987-88 on the basis of discriminating Z
score. The study revealed that the over all liquidity position of the industry was satisfactory.
Devek Bosworth and Joanne Loundes (2002)55 in their study entitled the
dynamic performance of Australian enterprises investigate the interaction of discretionary
investments (R&D, capital investment, training and advertising), innovation, productivity
and profitability with in a dynamic frame work of firm performance. A dynamic and
closed model of firm performance was setup, and the resulting empirical model was
tested as series of recursive equations, using a four year balanced panel data set of
Australian firms drawn from the business longitudinal survey. The results indicated that
current economics profit has an important role, to play in enabling firms to invest, and the
finding indicates which of these investment are complements and which are substitutes.
Wolfgang Aussenegg and Ranko Jelic (2002)56 examined the operating
performance of 154 polish, Hungarian and Czech companies that were fully or partially
privatized between January 1990 and December 1990. The study revealed that privatized
firms in the sample did not manage to increase profitability and significantly reduce the
54

Vijayakumar. A Assessment of Corporate Liquidity-A Discriminate Analysis Approach. Research

Studies in Commerce and Management, Classical Publishing Company, New Delhi, 2002, pp.121-130.
55
Devek Bosworth and Joanne loundes (2002), The Dynamic Performance of Australian Enterprises.
Melbourne Institute of Applied Economics and Social Research .The University of Melbourne, Working
pp: 03/2002.
56
Wolfgang Aussenegg and Ranko Jelic (2002) Operating Performance of Privatized Companies in
Transition Economics-The Case Of Poland, Hungary and The Czech Republic, Research Abstract,
Source: Www.Ssrn.Com
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efficiency and output in the post privatization period. The study further revealed that
private sector IPOs under perform their privatization counterpart in forms of profitability
efficiency, capital investments and output. Finally firms size did not seem to influence key
performance measure in selected companies.
Jack Glen Kevin Lee and Ajit Singh (2002)57 in their study presents time-series
analysis of corporate profitability in seven leading Developing Countries (DCs) using the
common methodology as the Persistence of Profitability (PP) studies and systematically
compare the results with those for Advanced Countries (ACs). Surprisingly both short
term and long term persistence of profitability for DCs was found to be lower than those
for ACs. This study concentrated on economic explanation for this finding. It also report
the results on persistence of two components as profitability-capital output ratios and
profit margins. These two components raise are important general issues of economic
interpretation for Persistence of Profitability (PP) studies, which are outlined.
Shanmugam and Bhaduri Saumitra (2002)58 in their study analyzed growth of
the Indian manufacturing companies taking a sample of 390 companies during 19901993. The age and size of the companies were taken as independent variables and growth
in sales as dependent variable. The statistical techniques such as mean, standard deviation
and regression analysis were used to study the growth of the companies. The study showed
that the age was positively influenced the growth and size had negative and significant
impact on growth.
Sirohi (2003)59 suggested that the sugar mills and their associations with the
assistance of the Ministry of Consumer Affairs, Public Distribution System and the Sugar
Directorate, should take a long term approach to overcome the negative financial scenario
of the sugar mills. The suggested approaches are: 1) Maintenance of 3-4 months sugar
consumption as carry over for next season, 2) Reduction in cost of production, 3) Production
of better quality of sugar, 4) Maximum saving of fuel, 5) Assessment of benefits of
57

58

59

Jack Glen, Kevin Lee and Ajit Singh (2002) Corporate Profitability and the Dynamics of Competition in
Emerging Markets- A time Series Analysis, ESRC Center for Business Research, University of
Cambridge, and Working pp.248.
Shanmugam K.R and Bhadurai Saumitra N. (2002), Size, Age and Firm Growth in the Indian
Manufacturing Sector Applied Economics Letters pp.607-613.
Sirohi(2003), S.S., Options for Revival Of Sugar Industry During Negative Financial Scenario,
Cooperative Sugar, Vol.34, No.9, pp.712.
34

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producing rich sugar molasses considering mandatory mixing of 5 percent anhydrous

alcohol in petrol and 6) production of value added products.
Vijayakumar and Kadirvelu (2003)60 studied Profitability and Size of Firm in
Indian Minerals and Metal Industry. Generally, it was suggested that the larger the firm
may be in a position to earn a higher rate of return on its investment than the smaller firm,
similarly, a counter argument was that size breeds inefficiency and profitability may decline
with size of firms. Those if becomes necessary to study the relationship between size and
profitability of the firms, for this purpose, Indian public sector minerals and metal
Industry have been selected. The study revealed that size was found to be significantly
associated with the profitability during the study period. It was also seen from the analysis
that size was positively associated with the profitability. Thus larger firm may be in a position
to earn higher rate of return on investment through diversification and moving into higher
technology.
Dangat Nilesu (2003)61 in his article on Co-operative Sugar Factories in
Maharashtra analyzed functioning of sugar industry in the state during 2000-01. Among
the 436 sugar factories operating in India, 137 sugar factories were operating in
Maharashtra

alone. The soil and climate conditions of Maharashtra are favorable for

the cultivation of sugar cane. The Co-operative sugar factories in Maharashtra were the
formers organization and they served as the primary force to the development of the rural
areas. These factories provided employment to a large numbers of workers in the
villages. A sugar factory with a daily crushing capacity of 2500 tonnes provide
permanent employment to 416 persons and seasonal employment to 653 persons.
Sudarsana Reddy (2003)62 carried out an extensive study on Financial
Performance of Paper Industry in Andhra Pradesh for the 10 years period from 1989-90
to 1998-99 by collecting data from companies having installed capacity of more than
33,000 tonnes per annum. The primary objectives of the study were to analyze the

60

Vijayakumar.A and Kadirvelu.S (2003) Profitability and Size of the Firm in Indian Mineral and Metals
Industry the Management Accountant pp.816-821.
61
Dangat Nilesh (2003) Co-operative Sugar Factories in Maharashtra Co-operative Perspective Vol.38,
No.1, April-June, pp.8-13.
62
Sudarsana Reddy.A (2003). Financial Performance of Paper Industry in Andra Pradesh, Finance India,
Vol. XVII, No.3, Sep.2003, pp.1027-1033.
35

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investment pattern and utilization of fixed assets, to review the profitability performance, to
ascertain the financing methods and to suggest measures to improve the profitability
ratios, trend, common size, comparative financial statement and statistical tests have been
applied in a appropriate context. The main findings of the study is that Andhra Pradesh
paper industry needs the introduction of additional funds along with restructuring of
finances and modernization of technology for better operating performance.
RBI corporate division (2003)63 studied the performance of corporate business sector
during the first half of 2002-2003. The results of 146 private companies of various
sectors were analyzed. On the various parameters of performance aggregation and
comparison of the results of the first two quarters were done on these performance
parameters. It was concluded that the performance of the private sector was better than
compared with the first half of the previous year (2001-2002). This was indicated by the
following parameters viz. higher sales, reduced interest payments and ultimately
improved profitability.
Ghosh and Santi Gopal Maji (2003)64 in Utilization of current assets and
operating profitability: An empirical study on cement and tea Industries in India: Made
an empirical study on utilization of current assets and operating profitability data for 11
firm of cement and tea industries were collected for the period 1992-93 to 2001-02. The
study concluded that the degree of current assets were positively associated with the
operating profitability of the firm.
Aarathi Kirshnan (2004)65 pointed out that the anticipated tightening of supplies
has already setoff an upward spiral in sugar prices, which have firmed up by about
20 percent over the past year. In the festival demand for sugar, which peaks in the September,
January period, could keep prices high, especially as supplies from the next crushing
season will trickle in only from November/December. Even when crushing does start, the
less than comfortable stocks could be continue to sustain firm trends in sugar prices. As

63

RBI Corporate Studies Division (2003) Performance of Corporate Business Sector During the First Half
of 2002-2003 Finance India Vol.XVII No.3, pp.987-1002.
64
Santany Kumar Ghosh and Maji (2003) Utilization of Current Assets and Operating Profitability an
Empirical Study on Current and Tax Industries in India, Indian Journal of Accounting Vol.XXXIV, pp.52-60.
65
Aarathi kirshnan (2004),Sugar-Receiving After The Caning Article Published In Portfolio Organizer, pp.43.
36

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sugar prices continue to rule high, players with huge inventories in their books will get to
liquidate their stocks at lucrative prices.
Maninder, Sarkaria and Shergil (2004)66 aimed to test how market structure
may affect performance. The study had employed model consulting determinants of both
structure and profits. In order to decompose the variation performance variables like
industry effect, seller concentration, market share, capacity, utilization, size, leverage,
skill, risks, age and capital intensity had been included in the regression models as the
determinants as performance. The study results suggested that market share was positively
and concentration was negatively related to performance.
Vijayakumar and Kadirvelu (2004)67 in their study Determinants of
Profitability : The case of Indian Public Sector Power Industries has presented a basic
model of multiple regression of profitability using return on total assets and profit margin
to sales ratio as the major indicators of profitability. The study is mainly focused to
examine the determinants of profitability in the selected Indian public manufacturing
industries during the period of 1981-2002. The determinants of profitability are analyzed
using the technique of ordinary least square. Regression technique has been used to
reduce the problem of auto correlation. Return on assets and return on sales are widely
used measure of profitability. Size was used as measure of total assets, growth by
measure of growth rate of assets. The other independent variables employed in the study
include leverage, current ratio, inventory turnover ratio, operating expenses to sales ratio
,vertical integration and age. The study was evaluated using two multiple regression
models one by using return on total assets as dependent variable and other using profitmargin on sales as dependent variables. The study identified that the age was strongest
determinant of profitability followed by operating expenses to sales ratio, leverage, fixed
assets turnover ratio, inventory ratio, size, current ratio, growth rate and vertical
integration and further, size , operating expenses to sales ratio and fixed assets ratio have
negative contribution in variation of profit in the Indian public sector power industries.

66

67

Maninder S.Sarkaria, Shergil US (2004) Market Structure and Financial Performance-An Indian
Evidence with Enhanced Controls Ph.D Thesis Submitted to the Guru Nanak Dev University.
Vijayakumar and Kadirvelu (2004), Determinants of profitability: The case of Indian Public Sector
Power Industries, The Management Accountant, Febrruary. pp 118-124.
37

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Adolphus (2005)68 has studied Corporate Liquidity Management Practices of

Nigerian Manufacturing enterprises. This study has intended to investigate and subsequently
improve the capability of corporate finance executives in handling acute liquidity shortages
through optimal cash flow management within a risk return framework .This study was based
on three models Viz,. operating cycle, cash flow cycle and design of marketable securites
portfolio. The study revealed that the finance manger in manufacturing enterprises have to
redefine their strategy for managing anticipated and unanticipated financing gaps.
Hamalakshmi and Manicham (2005)69 had made a study of this Financial
Performance Analysis of Selected Software Companies. In this study they examined the
management of finance playing crucial role in the growth. It was concerned within
examining the structure of liquidity position. Leverage position and profitability position
of selected thirty four software companies in India for a period of five years (1997-98 to
2001-2002). The study revealed that the liquidity position and working capital were
favorable during the period of study. The result indicated that the overall profitability
position of selected software companies had been increasing at a moderate rate. The
development will create large domestic demand over the next few years.
Mallik and Debasish Mukherjee (2006)70 had studied the performance of leasing
industry in West Bengal. This empirical study conducted covering fourteen leasing financing
companies in West Bengal. An attempt was made to ascertain the profitability and to make a
comparative analysis of the selected companies with the help of ratio analysis.
The performance of the selected units were evaluated. The findings of the study indicated
good performance of leasing industry in West Bengal over the period of the study.
Renu Luthra, Varishanmpayan and Dheeraj Misra (2006)71 had made Study
Profitability and Size a Study of Small Scale Industries in Uttar Pradesh. The objective of
his study was to assess the importance of certain structural variables for determining the
68

69

70

71

Adolphus, (2005) Empirical Survey of Corporate Liquidity Management Practices of Nigerian

Quoted Manufacturing Enterprises, Journal of Financial Management and Analysis, Vol.18(2),
February 2005, Pp.41-55.
Hamalakshmi R. and Manicham.M (2005) Financial Performance Analysis of Selected Software
Company, Finance India, Vol. XIX, No.3, pp.915-935.
Mallik U.K and Debasish Mukherjee (2006), Performance of Leasing Industry in West Bengal, the
Management Accountant, Vol.41, No.5, May pp.393-398.
Renu Luthra, Raishampayan J.V and Dheeraj Misra (2006), Profitability and Size: A study of Small Scale
Industries in Uttar Pradesh, The ICFAI a Journal of Management Research; Vol.V. No.1, Januarys, pp.28-37.
38

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profitability of firms in a small scale business in India. A single equation regression

framework had been chosen as the method of analysis the relationship between profitability
and different determinant of size such as total assets scale of operation etc.It was studied
by regressing the profitability on each of these variables. In this study hypothesis that
profitability of small business firm was a function of its size has been tested. A preliminary
cost section analysis of the concerned relationship was also done.
Sushma Vishnavi and Bhupesh Kr shah (2006)72 had studied the role of
working capital in profit generating process. The companies desire to take a greater risk
for bigger profit and losses. It reduces the size of its working capital in relation to its
sales. It was interested in improving its liquidity. It increases the level of working capital.
However, this policy was likely to result in reduction of sales volume and profitability. In
this study of Indian consumer electronics Industry for assessing the impact of working
capital on profitability during 1994-95 to 2004-05. The impact of working capital and
profitability had been examined by computing co-efficient of correlation and regression
analysis between profitability and working capital ratio.
Thirumavalavan (2006)73 in his study entitled Determinants of Earnings Before
Interest and Tax (EBIT) of Aluminum Companies, intensively measured the profitability
and performance of a corporate entity either internally or externally. Earnings before
interest and tax were major variables used to measure the internal performance of business
entity could be mainly influence by internal as well of external variables. External variable
of economic and industry are too large and highly dynamic. In this study an attempt had
been made to find out the internal variables which influence the earning before interest and
tax of aluminum companies through multiple regression, the results were HIDALGOs ECIT
was mostly influenced by fixed assets and net worth and INDACOs EBIT was mostly
influenced by cost of sales and profits retained.

72

73

Sushma Vishnavi (2006), Inter-Relationship Between Productivity and Profitability Analysis For
Industrial Take-Off The Management Accountant, Vol, 10-29, June, pp.308-310.
Thirumavalvan.P (2006) Determinants of Earnings Before Interest and Taxation (EBIT) Of Aluminous
Companies, PSG Journal of Management Research, Vol.1, No.2, April June, pp.33-37.
39

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Singh (2007)74 studied Performance Assessment of the Sugar Industry and

setting targets for the relatively inefficient mills to improve their efficiency and
productivity is crucial. As the interest of various stakeholders are largely dependent on its
performance. This study, therefore, attempts to assesses the performance of the sugar
mills of Utter Pradesh, the largest sugarcane producing state of India. Data envelopment
analysis models have been applied on the input-output data of 36 sugar mills for the
period 1996-1997 to 2002-2003.This study finds that the average overall technical efficiency
in the sugar mills of the state has been 93 percent. This implies that an average mill can make
radical reduction in all its inputs by 7 percent without detriment to its output levels.
Bogetoft,Boye,Petersen, and Nielsen (2007)75 The reform of the EU sugar
regime involves significant price reductions for sugar and sugar beet. They examine
whether the Danish sugar industry can maintain production and profit levels by
reallocating production from less to more efficient farmers. The impact of alternative
reallocation mechanisms is estimated using a DEA model of sugar beet production,
together with information about processing capacity at the three Danish plants, beet
transportation costs and alternative crop options. The analysis shows that the present
allocation is far from efficient. With the new reform fully implemented and the quota
efficiently reallocated, actual production will fall by only 25 per cent, although profit will
be substantially lower.
Robert L. Howse and Bernard Hoekman (2007)76 studies on an important
recent World Trade Organization dispute settlement case for many developing countries
concerned European Union exports of sugar. Brazil, Thailand, and Australia alleged that
the exports have substantially exceeded permitted levels as established by European
Union commitments in the WTO. This case had major implications for both European
Union sugar producers and developing countries that benefited from preferential access

74

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S P Singh (2006) Performance of Sugar Mills in Uttar Pradesh by Ownership, Size and Location,
Prajnan, Vol.XXXV, No.4 2007.
Peter Bogetoft , Kristoffer Boye, Henrik Neergaard-Petersen ,and Kurt Nielsen (2007) Reallocating
Sugar Beet Contracts: Can Sugar Production Survive in Denmark? European Review of Agricultural
Economics, Vol. 34, No. 1, pp. 1-20, 2007.
Robert L. Howse and Bernard Hoekman (2007) European Community-Sugar: Cross-Subsidization and
the World. Trade Organization World Bank Policy Research Working pp. 4336.

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to the European Union market. It was also noteworthy in the use of economic arguments
by the WTO dispute settlement panel, which held that the excess sugar exports were in
part a reflection of illegal de facto cross-subsidization-rents from production that
benefited from high support prices being used to cover losses associated with exports of
sugar to the world market. Although in principle the economic arguments of the panel
could apply to many other policy areas, in practice WTO provisions greatly limit the
scope to bring similar arguments for trade in products that are not subject to explicit
export subsidy reduction commitments of the type that were made for sugar and other
agricultural commodities.
Thiyagu (2008)77 in his study Determinants the Profitability Analysis of Private
Sector Sugar Industries in India. The researcher takes 41 sugar industries for his study,
Mean, Co-efficient of variation, T-test, Correlation, Multiple Regression, Stepwise Regression,
Path analysis are statistical tools used for his analye. His main objectives are determining
the profitability of selected industry and analysis the financial performance. He suggested
that the companies shall resort to borrowings that total borrowings always less than that
of the share capital and reserves and surplus.
Tamizhselvan (2008)78 studied Profitability Analysis of South Indian Private
Sector Sugar Industries. The researchers main objectives of the study is, to analyse the
quantum of profit among Industries and trend analysis of profitability, effective
utilization of fixed assets and current assets. The researcher used various statistical tools
and Alt-man Z-Score model, and further analysed profitability, liquidity and working
capital.
David Kelch, Johannes Umstaetter and Aziz Elbehri (2008)79 study on The
European Union's sugar policy, in place since 1968, underwent its first major reform in
2005 in response to mounting and unsustainable imbalances in supply and demand. The
reform, however, targeted only a few policy instruments (intervention price cut, voluntary

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Thiyagu (2008) Determinants of Profitability In Sugar Industry: A Study With Special Reference to
Selected Sugar Companies in India Ph.D Thesis, Bharathiar University, March 2008.
Tamizhselvan (2008) Profitability Analysis of South Indian Private Sector Sugar Industry Ph.D
Thesis, Bharathiyar University, October 2008.
David Kelch, Johannes Umstaetter and Aziz Elbehri (2008) The EU Sugar Policy Regime and
Implications of Reform, Economic Research Report No. 59.
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production quota buyout, and restrictions on non quota sugar exports), while leaving
other key policies unchanged (interstate quota trading, sugar-substitute competition, and
import barriers). Consequently, the extent of the reform's impact is limited, compared
with more far-reaching alternatives, particularly when the oligopolistic nature of the
industry and its noncompetitive pricing behavior are taken into account. A model based
analysis suggests that the reforms by themselves are unlikely to induce price adjustments
sufficient to reduce overproduction unless quotas and/or high tariffs are reduced.
Dheenadhayalan and.Devianbarasi (2009)80 This study confines itself to Issues
relating Financial Performance of NPKRR Cooperative Sugar Mill Ltd. The prime objective
of the Study is to identify the relationship between liquidity and profitability of sugar mills. In
this aspect one of the famous and old cooperative sugar mills namely NPKRRCSML was
selected for the study as sample unit. Since it was ranked as 3rd in term of return on investment,
6th in terms of interest coverage ratio and 7th in term of debt equity ratio among 12 major
cooperative sugar mills in Tamil Nadu. A moderate lengthy period was deemed necessary to
arrive at meaningful and purposeful inferences.
Navaneetha Kannan (2009)81 The study confines itself to Issues relating to the
Financial Performance of MRK Cooperative Sugar Mill Ltd, Sethiyathope, Cuddulore
District. The prime objective of study is to identify and measure financial status of selected
sugar mill. The collected data have been analyzed and interoperated as intelligible as
possible to high light diverge activities related to the financial status of the selected sugar
mill ltd. The researcher analyses the financial performance using ratio analysis and
Altman`s score.
James A. Schmitz and Benjamin Bridgman (2009)82 study the U.S. sugar
manufacturing cartel that was created during the New Deal. This was a legal-cartel that
lasted 40 years (1934-74). As a legal-cartel, the industry was assured widespread
adherence to domestic and import sales quotas (given it had access to government
80

81

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Dr.V.Dheenadhayalan & Ms R.Devianbarasi (2009) Relationship Between Liquidity and Profitability

Indian Cooperative Review 2009 pp. 39 42.
V.Navaneetha Kannan.(2009) Financial Status of Co-operative Sugar Mill: A Micro Study Southern
Economist September 2009 pp.15-17.
James A. Schmitz and Benjamin Bridgman (2009) The Economic Performance of Cartels: Evidence
from the New Deal U.S. Sugar Manufacturing Cartel, Federal Reserve Bank of Minneapolis Staff
Report 437.
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enforcement powers). But it also meant accepting government-sponsored cartelprovisions. These provisions significantly distorted production at each factory and also
where the industry was located. These distortions were reflected in, for example, a
declining industry recovery rate, that is, the pounds of white sugar produced per ton of
beets. It declined from about 310 pounds in 1934 to 240 pounds in 1974. The cartel
provisions also distorted the location of industry. For example, it kept production in
California and the Far West. Since the cartel ended in 1974, California's share of sugar
production has dropped dramatically.
Jayantilal B, Patel (2009)83 studies Sugar Scenario in India economic Scenario,
sugarcane price, sugar price, cane development activities, co-product development,
decontrol of the sugar Industry, Co-operative sector of sugar Industry, National Federation of
Sugar Factories. The researcher suggested that recommendations of expert group on sugar
industry. The efficiency awards in various fields of sugar production has encouraged many
Co-operative sugar factories to achieve excellence.
Anuradha Rajendran (2009)84 studied Performance Appraisal of Private Sector
Sugar Companies in Tamil Nadu. The researcher undertook seven private sector sugar
industries for his study. Mean, Co-efficient of variation, T-test, Correlation, Multiple
Regression, Stepwise Regression, and Path analysis are statistical tools used for his analysis.
The main objectives is to determine profitability of selected industry and analysis the
financial performance and growth analysis. The researcher gives suggestion for further
development and growth of selected sugar industries.
Lakshmipathi Raju.M and Suryanarayana Raju (2010)85 studied the sugar
production and consumption in leading countries in the world, sugar cane production, sugar
production, the number of sugar mills operating in cooperative sector and private sector,
sugar recovery in India. This study highlights the reasons for high ups and downs in cane
production, sugar production, the number of sugar mills that carried sugar production and
made suggestions for stability in production of cane and sugar.
83
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Jayantilal B, Patel (2009) Sugar Scenario in India The co-operator .October 2009 pp.133-137.
Anuradha Rajendran (2009) Performance Appraisal of Private Sector Sugar Companies in Tamil
Nadu. Ph.D thesis, Bharathiyar University, May 2009.
Lakshmipathi Raju.M and Suryanarayana Raju (2010)Performance of sugar industry in India Southern
Economist May 2010, pp. 49-54.
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Navaneetha Kannan and Sakthivel Murugan (2010)86 studied on Sugar

Industry in Global Perspective. The main objectives are to analyze Indian sugar
industries from a global perspective and to evaluate future dimension of Indian sugar
industry. It can be observed that there is a growth trend in the sugar production. During
the period 2010, it can be seen that per capital consumption has gone upto 20 kgs. Indias
total sugar exports also gone up (3.298 million tones) and this is a healthy condition for
the country.
Thirupathy (2010)87 Studies Financial Performance of Selected Sugar
Companies in Tamil Nadu. The researchers main objectives of his study is, to examine
long-term and short-term financial solvency, profitability and growth performance of
sugar industry in Tamil Nadu, to measure the impact of utilization of assets on the
profitability of sugar Industry. The present study considers four private sector sugar
companies in Tamil Nadu.The study concludes that low sugar recovery percentage was
most serious problem faced by sugar industries.
Amit Kumar Dwivedi (2010)88 study on An Empirical Study on Gur (Jaggery)
Industryis a natural, traditional product of sugarcane. It can define as a honey brown
coloured raw lump of sugar. Kushinagar has large number of Gur manufacturing units,
mostly located in the rural areas and the manufacturers are following conventional
methods for producing this. In the district the major clusters which are having more
numbers of manufacturing units are Sukraouli, Kasia, Hata and Padarauna. Around half
of the rural population is employed in gur making industry in this region. Although, there
is number of R & D assistance and marketing institutions for support. It is found that the
manufacturers are producing majorly for distilleries and local liquor producers, not for
the food plate or common mans consumption. The study examines the cost-return
analysis, profitability and operational efficiency of Gur manufacturing units in study area.

86

87

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Navaneetha Kannan and Sakthivel Murugan (2010) Sugar Industry in Global Perspective Southern
Economist May 2010, pp.35-36.
Thirupathy (2010) An Analysis of Financial Performance of Selected Private Sector Sugar Companies
In Tamil Nadu. Ph.D thesis, Bharathiyar University, July 2010.
Amit Kumar Dwivedi (2010) An Empirical Study on Gur (Jaggery) Industry (With Special Reference to
Operational Efficiency & Profitability Measurement) Indian Institute of Management Working
pp.2010-12-03.

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The study revealed that units of medium and large sizes were able to cover their
operating expenses with significant level of profit but small size units were earning a
marginal profit. The profit earned by this category was very low as compared to other
two sizes. The manufacturers are not interested in any new product of Gur, they just want
to earn more profit through Gur only. This research will urged the policymakers to
streamline strategies that promote stabilization of sugarcane economy and make the
nation credible supplier of Gur in the International Market, benefiting Gur makers,
sugarcane growers and related stakeholders.
Ali Muhammed Khusik (2011)89 A study was conducted at technology transfer
Institute, Tandojam, Pakistan during 2008-09 to analyse sugar industry competitiveness
in Pakistan. For this purpose data were collected both primary and secondary sources.
The primary data were collected from sugarcane growers and sugar industry using a well
structured pre-tested questionnaire from Sindh, Punjab and NWFP (Khyber Pakhtunkhwa).
Secondary data were collected from published annual reports of Pakistan Sugar Mills
Association (PSMA). The results show that in sindh, 50 percent sugar industry falls in large
size group. In Punjab a major portion of sugar industry (70%) also falls in large size
group, while sugar industry of NWFP falls in small size group. In Punjab and NWFP,
76 and 70 percent small size growers having less than 6 hectares, Whereas, in Sindh
49 percent are small growers. The competitiveness of sugar industry indicates that sugar
industry of Punjab had the advantage of total quantity of sugar production.
Reddy (2011)90 studied Sugar and cane prices in India are highly regulated, as a
result free market prices in India are showing rising trend with high volatility. There is a
possibility of long run shortage of sugar in international markets due to diversion of cane
to produce ethanol and also reduction of domestic support as committed under WTO
regime. Suppressed Minimum Support Price (MSP), stagnation in productivity of cane,
obsolete technologies and low capacity utilization hindered long-term perspective.
To balance small-scale farming, economies of scale in mills, there is a need for reducing
89

Ali Muhammed Khusik, Asiam Memom and Ikram Saeed (2011) Analysis of Sugar Industry
Competitiveness In Pakistan J. Agri. Res., 2011,49(1).
90
Amarender A. Reddy (2011) Sugar and Cane Pricing and Regulation in India International Sugar Journal,
Vol. 113, No. 1352, pp. 548-556, August 2011

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cost of production and processing of cane. A formula based Fair and Remunerative Price
(FRP) is suggested for cane to take into account both cost of production and international
price realities along with complete freeing of sugar prices. Further for better price
discovery in domestic markets de-control of sugar prices should be accompanied by
re-introduction of futures market to reduce price volatility.
Vijayakumar (2011)91 study on The Determinants of Profitability: An Empirical
Investigation Using Indian Automobile Industry The profit of a business may be
measured by studying the profitability of investment in it. It is the test of efficiency,
powerful motivational factor and the measure of control in any business. Profitability is
highly sensitive economic variable which is affected by host of factors operating through
a variety of ways. The objective of this study is to examine the determinants of
profitability of selected Automobile Industry. Determinants of profitability are analyzed
using the techniques of ordinary least squares. It is evident from the results that size is the
strongest determinants of profitability of Indian Automobile Industry followed by the
variables vertical integration, past profitability, growth rate of assets and inventory
turnover ratio. The study concluded that industry should consider all these possible
determinants while considering its profitability.
Santimoy Patra (2011)92 study on public sector and private sector in the Indian
economic structure, public sector units were considered to be the main engine of growth
and accordingly many areas were reserved for public sector with few exceptions. But
after a long period of operation, the functioning of public sector units in the matter of
utilization of public money began to be questioned. As a result, in the new industrial
policy of 1991, the thrust of industrialization has been shifted from nationalization to
privatization and many areas were opened to the private sector with a view to initiating
healthy competition between the public sector and private sector which, in turn, might
lead to the economic progress of the country. In this backdrop the author has found it
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Vijayakumar (2011) The Determinants of Profitability: An Empirical Investigation Using Indian

Automobile Industry, International Journal of Research in Commerce & Management volume No. 2
(2011), Issue No. 9 (September) ISSN 0976-2183.
Santimoy Patra (2011) A Comparative Study of Return on Investment of Selected Public Sector And
Private Sector Companies In India International Journal Of Research In Commerce, Economics &
Management Volume No. 1 (2011), Issue No. 8 (December) ISSN 2231-4245.

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necessary to judge the capacity of earning reasonable return by effective investment and
optimum utilization of procured funds on the part of selected public sector and private
sector units. Hence an attempt has been made in this study to make a comparative study
of financial performance based on ROI of some selected public sector and private sector
companies belonging to the steel industry in India being one of the pillar sectors of Indian
economy. The study has found that on average the private sector companies achieved
relatively better performance from the view point of earning return and maintaining
consistency than the public sector companies. Some measures have also been suggested
in this study to uplift the performance of public sector companies.
Sathya (2012)93 studied on Analysis of Composite Profitability Index of the
Cement Companies in India. The return of a business may be measured by studying the
profitability of investment in it. Profitability may be defined as the ability of given
investment to earn a return from its use. This study based on the secondary data from a
sample of 30 cement companies, the study attempts to measure the composite
profitability of a firm by a single index. The analysis shows that in order to rank the
selected companies in terms composite profitability, ratio-wise scores have been
aggregated and the firm getting the highest total score has been ranked as 1 and the firm
securing the lowest total score has been ranked as 30.
Martina, Noronha and Dilipsinh Thakor (2012)94 studied on The Indian Sugar
Industry is marked by co-existence of different ownership and management structures.
At one extreme, there are privately owned sugar mills in Uttar Pradesh that procure
sugarcane from nearby cane growers. At the other extreme are cooperative factories owned
and managed jointly by farmer. This study attempts to find the financial viability of sugar
factories located in South Gujarat in India. It uses ratio analysis and discriminate analysis to
give the actual prediction equation to classify new cases. There is tremendous scope for India to
emerge as a significant player in the world sugar trade (milling and overheads) improvement.
If we can make a fair degree of progress on agricultural efficiency (per hectare output of sugar
93

94

Sathya (2012) Analysis of Composite Profitability Index of the Cement Companies in India, Zenith
International Journal of Business Economics & Management Research Vol.2 Issue 1, January 2012,
ISSN 2249 8826.
Martina. R. Noronha and Dilipsinh thakor (2012) Financial Viability of Sugar Factories in South
Gujarat-A Case Study,International Journal of Multidisciplinary Research, Vol.2 Issue 2, February
2012, ISSN 2231 5780.
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and cost of production) as well as conversion efficiency, India will surely become a major
exporter which will stabilize the industry and reduce its cyclicality significantly, as well as open
up new vistas of growth for the Indian Sugar Industry. An efficient and well managed future
trading mechanism needs to be put in place to facilitate price discovering both for farmers and
millers both in the domestic and global markets.

Conclusion
From the above reviews of the empirical work, it is clear that different authors
have approached analysis in different ways, in varying levels of analysis. These different
approaches helped in the emergence of more and more literature on the subject over the
time. It gives an idea on existence and diverse works on profitability. It has been noticed
that the studies on profitability in various sector provide divergent result for the period of
study. The main reason for diversion in the results is the difference in methods used for
the measurement of factors like profitability, liquidity etc.
All the studies arrived at analyzing profitability performance with number of
factors, it facilities to understand the various structural and non-structural variables that
determine profitability. It has been notified that the study on the profitability analysis in
various industries used the variables such as sellers concentration; advertising intensity,
economies of scale leverage, profit variability, firm growth and size, similarly few studies
approached which used the quantum of sales, return on investment and appropriation of
profit on investment and appropriation of profit to explore the profit variation of the
industries.
Survey of the existing literature indicates that no specific study has been carried
on to examine the profitability analysis of selected private sector sugar mills in Tamil Nadu.
The present study is an attempt towards this direction and therefore aims to enrich the
literature of profitability relating to private sector sugar industry. Further the study is
intended to employ different sophisticated statistical techniques, before qualifying and
any aspects of profitability for wider acceptability and appreciation.

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