INTERNSHIP REPORT

On

FINANCIAL STATEMENT ANALYSIS AT KS&DL

BY

SUSHMA M D

1NH17MBA80

DEPARTMENT OF MANAGEMENT STUDIES

NEW HORIZON COLLEGE OF ENGINEERING,

OUTER RING ROAD, MARATHALLI,

BANGALORE

In partial fulfillment of the requirements for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION

Under the guidance of

DR NIVIYA FESTON
ASSISTANT PROFESSOR
2017-19
 DEPARTMENT OF MANAGEMENT STUDIES

CERTIFICATE

This is to certify that, SUSHMA MD bearing USN 1NH17MBA80, 2017-19 batch, is a bonafide
student of Master of Business Administration, New Horizon College of Engineering, Bengaluru,
affiliated to Visvesvaraya Technological University, Belagavi.

Project report on „FINANCIAL STATEMENT ANALYSIS‟ is prepared by him/her under the

guidance of DR NIVIYA FESTON, in partial fulfillment of the requirements for the award of
the degree of Master of Business Administration of Visvesvaraya Technological University,
Belagavi, Karnataka.

Signature of Internal Guide Signature of HOD Principal

Name of the Examiners with affiliation: Signature with date

1.External Examiner

2.Internal Examiner
STUDENT DECLARATION

I here declare that the project report entitled “FINANCIAL STATEMENT

ANALYSIS” has been carried out by me under the guidance and supervision of

DR NIVIYA FESTON Assistant professor, department of management,

fulfillment for the requirement for the award of department of management studies

in the academic year 2018-19.

I also declare that the dissertation has not been submitted to any university /

institution for the award of any degree.

Place: SUSHMA M D

Date: (REG NO. 1NH17MBA80)

ACKNOWLEDGMENT

I have immense pleasure to thank “KARNATAKA SOAPS AND DETERGENT LIMITED”

for giving me the opportunity to undertake this project works for the partial fulfillment of degree
in the master of business administration.
I express my sincere of gratitude to Mrs. SHEELAN MISHRA HOD, MBA DEPARTMENT
NHCE and DR NIVIYA FESTON assistant professor, NHCE for their encouragement
throughout the project. I would also thank all teaching and non-teaching staff for their immense
support.
I express my appreciation and affection to my parents and dearest friends for their immense
patience and co-operation at all the moments and house of my academic venture.

SUSHMA M D (REG NO: 1NH17MBA80)

 CONTENTS

CHAPTER PARTICULARS PAGE NO.

I. INTRODUCTION 1 – 34

II. LITERATURE REVIEW 35–38

III. RESEARCH 39–44

METHODOLOGY

IV. DATA ANALYSIS 45–69

AND
INTERPRETATION

V. FINDINGS 70–72
AND
SUGGESTIONS

VI. BIBLIOGRAPHY
73
 LIST OF TABLES

Table No. TITILE PAGE NO.

47
1 Current ratio

2 Debt equity ratio 49

3 Absolute liquid ratio 51

4 Fixed asset turnover ratio 53

5 Working capital turnover ratio 55

6 Quick ratio 58

7 Proprietary ratio 60

8 Inventory turnover ratio 64

9 Earnings per share 65

10 Gross profit ratio 68

 LIST OF GRAPHS

TABLE NUMBER TITILE PAGE

NO.

1 Current ratio 48

2 Debt equity ratio 50

3 Absolute liquid ratio 52

4 Fixed asset turnover ratio 54

5 Working capital turnover ratio 56

6 Quick ratio 58

7 Proprietary ratio 61

8 64
Inventory turnover ratio

9 Earnings per share 66

10 Gross profit ratio 68

 EXECUTIVE SUMMARY

In order to gain the practical knowledge internship training was undertaken to study the
organizational aspects of KSDL,

The study is aimed at an overall expose to the working of an organization and to relate the
theoretical concepts, study has been conducted by collecting relevant data from the records of
the company and also observations made during the course of internship training.

The report deals with introduction to the industry profile and to the company profile. Later
part of the report is concerned with specific topic covering company profile of KSDL. This
report mainly consist of nature of the business and infrastructural facilities that have been
provided in the company.

A separate focus has been given towards the study of the organization the training method the
company follows in updating the knowledge of employees, duties and responsibilities of
executives and other are narrated. The strategy with the company adopts to eliminate their
waste, shared values that of the company to achieve its objectives have also been included.
 CHAPTER-1

INTRODUCTION
―FINANCE‖ is BLOOD of any business organization. The blood circulation is very
important for human body same like that for every organization the finance is the blood,
finance is very important and essential to the business organization for smooth functioning of
business. The financial analysis helps to know all the expenses and the loss in each and every
stage of the organization development. The financial analysis provides the complete expenses
list as well as the profit list that has occurred to the organization.
Financial managements involve managerial activities concerned with the acquisition
of fund for business purpose. The finance function does with procurement of money taking
into consideration today as well as future needs and finance is required to purchase a
machinery and raw materials, to pay salaries and wages and also for day-to-day expenses.
The financial statement analysis is the most important aspect to know whether the
organization is running in profit or the loss. The organization which I worked was
government organization. And I got a good experience of work by working in that
organization.

A financial statement is a collection of data organized according to logical and consistent

according procedures. It may show a position at a moment in time, as in the case of a balance
sheet, or may reveal a series of activities over a given period of time, as in the case of an
income statement.
Financial statements are the outcome of summarizing process of accounting. In the words of
John. N. Myer, ― The financial statement provide a summary of the accounts of a business
enterprise the balance sheet reflecting the assets, liabilities and capital as on a certain date and
the income statement showing the results of operations during a certain period‖.
These statements are used to convey to management and other interested outsiders the
profitability and financial position of a firm.

MEANING:-
The term ‗financial analysis‘, also known as analysis and interpretation of financial
statements‖, refers to the process of determining the financial strengths and weakness of the

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firm by establishing strategic relationship between the items of the balance sheet, profit and
loss account and other operative data.
METHODS OR DEVICES OF FINANCIAL ANALYSIS:-
 Comparative Analysis.
 Common - size Statement.
 Trend Analysis.
 Funds flow Analysis.
 Cash flow Analysis.
 Cost- volume- profit Analysis.
 Ratio Analysis.

COMPARITIVE FINANCIAL STATEMENT:-

Comparative financial statement refer to those statements of the financial affairs of a
business, which are prepared in such a way as to provide time perspective to the various
elements contained in such statements. In other words, financial statements are those, which
summarize and present relative accounting data for a number of years, incorporating therein
the changes in individual items. There are two important comparative financial statements
they are:

 Comparative balance sheet.

 Comparative income statement.
 Trend Analysis.

COMMON SIZE FINANCIAL STATEMENTS:-

Common-size financial statements are those statements in which the data or figures reported
in the financial statement are converted into percentages, taking some common base. It
includes common-size income statements and common size balance sheet. Generally, in the
common-size income statements, the net sales figures is taken as 100% and all other items of
the income statements are expressed as percentages of net sales. Similarly in common size
balance sheet, total of assets or the total of liabilities and capital is taken as 100% and all
items in the balance sheet are expressed as percentage of this total.

2
TREND ANALYSIS OR TREND PERCENTAGE:-
Comparison of past over a period of time with base year is known as trend analysis. So, trend
percentage or trend ratio analysis is a method of analysis under which the percentage
relationship that each financial statement item of each year bears to same item in the base
year is calculated. After the trend percentage of different items for various years are
calculated, the trend percentages or trend ratio are shown in comparative financial statements.

FUND FLOW ANALYSIS:-

The fund flow statement is the statement which shows the movement of funds and is a report
of the financial operation of the business undertaking. It indicates various means by which
were obtained during a particular period and the way in which these funds were employed. In
simple words, it is a statement of source and application of funds.

CASH FLOW ANALYSIS OR STATEMENT:-

A cash flow statement is a statement which depicts the changes in the cash position (i.e., cash
and bank balance) of the concern between one balance sheet date and another. In other words,
it is as statement, which indicates the cash flows during a financial period. It show as the
various sources from which cash was received and the various applications or uses of cash,
i.e., the various purpose for which cash was utilized during an accounting period, and also
resulting cash balance at the end of the accounting period.

COST-VOLUME-PROFIT ANALYSIS:-
Cost-Volume –Profit analysis is a technique for studying the relationship between cost,
volume and profit. Profits of an undertaking depend upon a large number of factors. But the
most important of these factors are the cost of manufacture, volume of sales and the selling
prices of the products. In the words of Herman C. Heiser, ―the most significant single factor
in profit planning of the average business is the relationship between the volume of business,
costs and profits‖.

3
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.
However, ratio analysis is not an end in itself. It is only a means of better understanding of
financial strengths and weaknesses of a firm.

CHART SHOWING THE TYPES OF FINANCIAL ANALYSIS:-

TYPES OF FINANCIAL
ANALYSIS

ON THE BASIS OF ON THE BASIS OF ON THE BASIS OF

MATERIAL USED MODUS OPERANDI OBJECTIVE OF ANALYSIS

ANALYSIS ANALYSIS ANALYSIS

INTERNAL VERTICAL SHORT TERM

ANALYSIS ANALYSIS ANALYSIS

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BASED ON MATERIALS USED:-
 EXTERNAL ANALYSIS:-

It is made by those who do not have access to the detailed records of the company. This
group which has to depend almost entirely on published financial statement includes
investors, credit agencies and government agencies regulating a business in normal way.
 INTERNAL ANALYSIS: -

Is accomplished by those who have access to the books of accounts and all other information
relating to the business. It is conducted by executives and employees of the enterprise as well
as governmental and court agencies, which may have regulatory and other jurisdiction over
the business.

BASED ON MODUS OPERANDI OF ANALYSIS:-

 Horizontal analysis:- when the financial statements for a number of years are
reviewed and analyzed, the analysis is called horizontal analysis. This is useful for
long-term trend analysis and planning.
 Vertical analysis:- it is frequently used for referring to ratios developed for one date
or one accounting period. This is not very conducive to proper analysis of the firm‘s
financial position and its interpretation as it does not enable to study data in
perspective.

BASED ON OBJECTIVE OF ANALYSIS:-

 Long-term analysis:- this analysis is made in order to study the long-term financial
stability, solvency and liquidity as well as profitability and earning capacity of a
business. The objective of making this analysis is to know in the long-term that the
concern will be able to earn a minimum amount, which will be sufficient to maintain a
reasonable price if return in the investment.
 Short-term analysis:- this analysis is made to determine the short-term solvency,
stability, liquidity and earning capacity of the business. The objective is to know
whether in the short-run, a business enterprise will have adequate funds readily

5
 available to meet its short-term requirements and sufficient borrowing capacity to
meet contingencies in the near future.

THEORTICAL BACKGROUND OF THE STUDY

The main objective of this is to know all the methods and the financial statements that an
organization follows for their reference and also to know the future aspects of the
organizations. As they will be running in a profit or loss business in the upcoming days. The
financial statements helps the organization to determine and analyze the situations they may
face in the future days. It gives a complete information about the financial expenses and the
gains that an organization is getting in their day to day business.
Every financial analyst must recognize whether the organization is maintaining a proper
financial statements and also to know whether each and every records of the expenses and the
losses are maintaining properly on a daily basis of the organizational expenses and also to
know how the financial statements are recorded.
There are many different types of financial statement in the finance and accounts of an
organization. The financial statements are: balance sheet, income statement, cash flow
statement. These financial statements are the most important things for the smooth
functioning of an organization.

The two first steps are often dropped in practice, meaning that financial ratios are just
calculated on the basis of the reported numbers, perhaps with some adjustments. Financial
statement analysis is the foundation for evaluating and pricing credit risk and for doing
fundamental company valuation.

 Financial statement analysis typically starts with reformulating the reported financial
information. In relation to the income statement, one common reformulation is to
divide reported items into recurring or normal items and non-recurring or special
items. In this way, earnings could be separated in to normal or core earnings and
transitory earnings. The idea is that normal earnings are more permanent and hence
more relevant for prediction and valuation. Normal earnings are also separated into
net operational profit after taxes (NOPAT) and net financial costs. The balance sheet
is grouped, for example, in net operating assets (NOA), net financial debt and equity.

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  Analysis and adjustment of measurement errors question the quality of the reported
accounting numbers. The reported numbers can for example be a bad or noisy
representation of invested capital, for example in terms of NOA, which means that the
return on net operating assets (RNOA) will be a noisy measure of the underlying
profitability (the internal rate of return, IRR). Expensing of R&D is an example when
such investment expenditures are expected to yield future economic benefits,
suggesting that R&D creates assets which should have been capitalized in the balance
sheet. An example of an adjustment for measurement errors is when the analyst
removes the R&D expenses from the income statement and put them in the balance
sheet. The R&D expenditures are then replaced by amortization of the R&D capital in
the balance sheet. Another example is to adjust the reported numbers when the analyst
suspects earnings management.Financial ratio analysis should be based on regrouped
and adjusted financial statement.

FINANCIAL STATEMENT ANALYSIS CONSISTS OF:-

1) Reformulating reported financial statements

2) Analysis and adjustments of measurement errors, and

3) Financial ratio analysis on the basis of reformulated and adjusted financial

statements.

TWO TYPES OF RATIO ANALYSIS ARE PERFORMED:-

A) ANALYSIS OF RISK

B) ANALYSIS OF PROFITABILITY

A) ANALYSIS OF RISK :-

Typically aims at detecting the underlying credit risk of the firm. Risk analysis
consists of liquidity and solvency analysis. Liquidity analysis aims at analyzing whether the
firm has enough liquidity to meet its obligations when they should be paid. A usual technique
to analyze illiquidity risk is to focus on ratios such as the current ratio and interest coverage.
Cash flow analysis is also useful. Solvency analysis aims at analyzing whether the firm is

7
financed so that it is able to recover from a loss or a period of losses. A usual technique to
analyze insolvency risk is to focus on ratios such as the equity in percentage of total capital
and other ratios of capital structure. Based on the risk analysis the analyzed firm could be
rated, i.e. given a grade on the riskiness, a process called synthetic rating.

Ratios of risk such as the current ratio, the interest coverage and the equity percentage have
no theoretical benchmarks. It is therefore common to compare them with the industry average
over time. If a firm has a higher equity ratio than the industry, this is considered less risky
than if it is above the average. Similarly, if the equity ratio increases over time, it is a good
sign in relation to insolvency risk.

B) ANALYSIS OF PROFITABILITY:-

Refers to the analysis of return on capital, for example return on equity, ROE, defined as
earnings divided by average equity. Return on equity, ROE, could be decomposed: ROE =
RNOA + (RNOA - NFIR) * NFD/E, where RNOA is return on net operating assets, NFIR is
the net financial interest rate, NFD is net financial debt and E is equity. In this way, the
sources of ROE could be clarified.

Unlike other ratios, return on capital has a theoretical benchmark, the cost of capital - also
called the required return on capital. For example, the return on equity, ROE, could be
compared with the required return on equity, kE, as estimated, for example, by the capital
asset pricing model. If ROE < kE (or RNOA > WACC, where WACC is the weighted
average cost of capital), then the firm is economically profitable at any given time over the
period of ratio analysis. The firm creates values for its owners.

Insights from financial statement analysis could be used to make forecasts and to evaluate
credit risk and value the firm's equity. For example, if financial statement analysis detects
increasing superior performance ROE - kE > 0 over the period of financial statement
analysis, then this trend could be extrapolated into the future. But as economic theory
suggests, sooner or later the competitive forces will work - and ROE will be driven toward
kE. Only if the firm has a sustainable competitive advantage, ROE - kE > 0 in "steady state".

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 There are three major analyses you need to make. There are many others as well, but we‘ll
stick to the three major ones here, as follows:

1. ACTUAL VS. PLANNED PERFORMANCE:-

You did considerable business planning before you started your business (and you
likely updated it for the banks, investors, or suppliers), complete with pro forma financial
statements (no matter how crude).

So, after your business is operating, you will need to compare your actual performance (from
your financial statements) against your planned performance (from your pro forma financial
statements).

This financial statement analysis should be performed line item by line item. If you had fewer
sales than planned … you should know or find out why. If any costs were greater than
planned … again, you should know or find out why.

Ever rupee received, and every rupee spent shows up on your financial statements, and every
dollar that is different than you planned should be analyzed. This could be a good thing as
you may need to change your planning.

This is where it becomes important to have an advisory group where you can bounce
information, and ideas, around.

2.TREND ANALYSIS: -
By comparing current financial statements to previous financial statements you can see which
areas of your business have changed, and by how much.

Then you need to determine why the change occurred, whether positive or negative:

 Are sales trending up?

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 Are costs trending down (which ones aren‘t)?
 Are profits trending up?
 Is your cash flow improving?

These are the types of things you will want to look at in your financial statement analysis.

Like the performance analysis, you need to analyze your financial statements line item by
line item to determine trends … and don't be afraid to change your planning if you see a new
trend emerging.

3.IndustryComparisons:-

This analysis is not only a comparison or your business‘s performance to others in

your industry, but also to standards set by your banker, your investor(s), your advisory group,
or even yourself.

These comparisons are usually made in the form of financial ―ratios.‖

HERE ARE A FEW OF THE MORE COMMON FINANCIAL RATIO

ANALYSIS:

 BALANCE SHEET RATIOS:-

Balance Sheet ratios typically measure the strength of your business, using the
following formulas:

 CURRENT RATIO :-

This is one of the most widely used tests of financial strength, and is calculated by
dividing Current Assets by Current Liabilities. This ratio is used to determine if your business
is likely to be able to pay its bills.

Obviously, a minimum acceptable ratio would be 1:1; otherwise your company

would not be expected to pay its bills on time. A ratio of 2:1 is much more acceptable, and
the higher, the better.

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 QUICK RATIO:-

This is sometimes called the ―acid test‖ ratio because it concentrates on only the more liquid
assets of your business. It is calculated by dividing the sum of Cash and Receivables by
Current Liabilities.

It excludes inventories or any other current asset that might have questionable
liquidity. Depending on your history for collecting receivables, a satisfactory ratio is 1:1.

 WORKING CAPITAL:-

Bankers especially, watch this calculation very closely as it deals more with cash flow
than just a simple ratio. Working Capital equals Current Assets minus Current Liabilities.

Quite often your banker will tie your loan approval amount to a minimum Working Capital
requirement.

 INVENTORY TURNOVER RATIO :-

Not every business has an inventory that needs to be of concern, and if that is your situation
you can ignore this ratio.

This ratio tells you if your inventory is turning over fast enough, and is calculated by dividing
Net Sales by your average Inventory (at cost).

If you are concerned about your inventory, then you definitely should watch this ratio
carefully when comparing it to industry guidelines.

 LEVERAGE RATIO :-

This is another of the analyses used by bankers to determine if your business is credit worthy.
It basically shows the extent your business relies on debt to keep operating. This ratio is
calculated by dividing Total Liabilities by Net Worth (total assets minus total liabilities).

11
  Obviously, the higher the ratio is, the more risky it becomes to extend credit to your
business.This is often the calculation a supplier to your business will make before
extending credit to you.
 P&L RATIOS: -
Profit and Loss (P&L) financial statements also have some important ratio
calculations for your financial statement analysis.
 GROSS PROFIT RATIO :-

This is the most common calculation on your P&L—it is simply your Gross Profit divided by
Net Sales. Often, different industries will have standard guidelines that you can compare your
business‘s numbers to. It is also desirable to watch your trends and not let this number move
too far from your target.

 NET PROFIT RATIO :-

This calculation is simply Net Pre-tax Profit divided by Net Sales. Other than wanting this
number to be as large as possible, I usually don‘t pay too much attention to it because it
includes too many non-operating costs (depreciation, amortization, etc.) to be of any real
analysis value. (Your banker may be interested however.)

 MANAGEMENT RATIOS:-
There are a couple of other ratios that interested outside parties will want to analyze

 RETURN ON ASSETS:-

This is calculated by dividing Net Pre-tax Profit by Total Assets. The ratio is supposed to
indicate how efficiently you are utilizing your assets. To me, this is a useless analysis for
helping you run your business. However, bankers and investors will always calculate this
ratio if you don‘t.

 RETURN ON INVESTMENT (ROI):-

To a bank or investor this is the most important ratio of all. It is supposed to tell you—the
business owner—if you are investing your time, and money, properly, or should you just
liquidate your business and put the money into a savings account. This, of course, is pure

12
bull … concocted by non-entrepreneurs and academics who have no idea what it means to be
an entrepreneur.

INDUSTRY PROFILE

Soap is one of the commodities which have become an indispensable part of the life of
modern world. Since it is non- durable consumer goods, there is a large market for it. The
whole soap industry is experiencing changes due to innumerable reasons such as government
relations, environment and energy problems increase in cost of raw material etc.
The changing technology and ever existing desire by the individual and the organization to
produce a better product at a more economical price has also acted as catalyst for the dynamic
process of change.
More and more soap manufactures are trying to capture a commanding market share by
introducing and maintaining acceptable products. The soap industry in India faces a cut throat
competition while multinational companies dominate the market. They are also facing severe
threat from dynamic and enterprising new entrance especially during 1991-92.
If we look back into the history of soaps & detergents, mankind knew about soaps nearly
2000 years back i.e. in 70 A.D. when Mr. Elder accidentally discovered the soap, when
roasted meat over flowed on the glow in ashes. This lump like product was soap & had
foaming & cleansing character. In 1192 .ADthe first commercial batch of soaps was made &
marketed by M/s Bristol soap market in London, from there in 1662A.D. the first patent for
making soap was taken in London. The world consumption of soap in 1884A.D. was said to
be 2 lakhs tones p.a.

The Founders of Mysore Sandal Soap:-

Nalwadi Krishnaraja Wodeyar

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Sir M. Visvesvaraya

Sri S.G.Shastri

India is a rich land of forest; ivory, silk, sandal; precious gems are magical charms of
centuries. The most enchanting perfumes of the world got their exotic spell with a twist of
sandal. The world‘s richest sandalwood resource is from one isolated stretch of forests land
in South India that is Karnataka.
The origin of sandalwood and its oil in Karnataka, which is used in making of Mysore sandal
soaps, is well known as Fragrant Ambassador of India & Sandalwood oil is in fact known as
―Liquid Gold”.
By the Inspiration of His Highness Maharaja of Mysore late Jayachamarajendra Wodeyar, the
trading of sandalwood logs started which was exported to Europe and New destinations, but
with commencement of First world War India faced Severe Crisis on the business of
sandalwood.
This situation gave rise to start of an industry, which produces value added products i.e., of
Sandalwood oil. His Highness Maharaja of Mysore created this situation as an opportunity by
sowing the seed of the Government Sandalwood Oil Factory, which is the present KS&DL.
The project was shaped with the engineering skills and expertise of the top level. Late Sir
Visvesvaraya, the great Engineer who was the man behind the project.

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Today‘s famous Mysore sandal soaps credit goes to late Sri Sosale Garalapuri Shastri who
incorporated the process of soap making using Sandalwood oil. He was an eminent scientist
in the field working at the Tata Institute, Bangalore. He was sent to England to master the
fine aspects of soap manufacturing.
The Maharaja of Mysore & Diwan Sir. M.Visvesvaraya established the Government
Soap factory during the year 1918. The factory was started as a very small unit near
K.R.Circle, Bangalore with the capacity of 100 tons P.A. In November 1918 the Mysore
sandal soap was put into the market after sincere effort and experiments were undertaken to
evolve a soap perfume blend using sandalwood oil as the main base to manufacture toilet
soap. The factory shifted its operation to Rajajinagar industrial area, Bangalore in July 1957,
where the present plant is located. The plant occupies an area of 39 acres (covering Soaps,
Detergents and Fatty Acid divisions), on the Bangalore – Pune Highway, easily accessible by
transport services and communication. Another sandal wood oil division was established
during the year 1944 at Shimoga, which stopped its operations in the year 2000 for want of
Natural Sandalwood.
This factory started at a moderate scale in year 1916. The first product was washing
soap in addition to the toilet soap in the year 1918. The toilet soap of the company was
made up of sandal wood oil.

In 1950 Government decided to expand the factory in two stages. The first stage of
expansion was done to increase the output to 700 tons per year and was completed in the year
1952 in the old premises.
The next stage of expansion was implemented in 1954 to meet growing demand for
Mysore sandal soap and for this purpose Government of India sanctioned license to
manufacture 201800 tons of Soaps and 75 tons of glycerin per year. The expansion
project worth of Rs.21 lacks includes the shifting of the factory to a newly laid
industrial suburban of Bangalore.

The factory started functioning in this new premise [i.e., present one] from 1st July 1957.
From this year onwards till date the factory had never looked back, it has achieved growth
and development in production scales and profits.
The industry has 2 more divisions one at Shimoga and another at Mysore where sandal wood
oil is extracted. The Mysore division started functioning from 1917 and only during 1984
manufacturing of perfumed and premiere quality Agarbathies at was started. Right from the
first log of sandalwood that rolled into the boiler room in 1916, the company has been single

15
– minded pursuit of excellence. The project took shape with the engineering skills and
expertise of top-level team under the leadership of Sir. M.Visvesvaraya, Prof. Watson and
Dr.Sudborough. Like this soap factory was started as a small unit and now it has grown up to
a giant size.

RENAMING:-
On 1st October 1980, the Government Soap Factory was renamed as ―Karnataka Soaps and
Detergent Limited‖ The Company was registered as a public limited company. Today
Company produces varieties of products in the toilet soaps, detergent, Agarbathies and
Cosmetics.

HISTORY OF THE SOAP:-

Soap manufacturing was started in North America. Some American companies
withwelknown names were started 200 years ago. During middle age soap was made at
various places in Italy, France, England & other countries. France became famous & many
small factories were established there.
In India the first soap industry was established by North West soap company in1897 at
Meerut following the Swedish movement. From 1905 onwards few more factories were
setup. They are,
 Mysore soap factory at Bangalore
 Godrej soap at Bombay
 Bengal chemicals
 Tata oil mills
 1930 Lever Brothers Company

PRESENT STATUS
 Market scenario:-
 India is the ideal market for cleaning products. The country‘s per capita consumption of
detergent powders & bars stands at 1.6kg & soaps at 543 Gm. Hindustan unilever, which
towers over the cleaning business, sells in all over the cleaning business but the tiniest of
Indian settlements.
 The 7.4lakhs tons per annum soap market in India in crawling along at 4%. The hope lies in
raising rupee worth, the potential for which is high because the Indian soap market is pseudo

16
 in nature & it is amazingly complex being segmented not Only on the basis of price, benefits,
but even a range of emotions within that outlining framework.

PROBLEMS OF SOAP INDUSTRY:-

 Soap industry faces some problems in case of raw materials. The major ingredients are soap
ash, linear alkyl, benzene and sodium. Tripoli phosphate poses number of serious problems in
terms of availability. The demand supply gap for vegetable oil is 1.5 to 2 Lakhs tons & is met
through imports. In recent times, caustic soda and soap ashes in the cheaper varieties of soaps
are quite huge.

KS&DL has the following departments:-

 Human Resource Dept.
 Production Dept.
 Marketing Dept.
 Finance Dept.
 Materials & Stores Dept.
 R & D Dept.
 Quality Control Dept.
 Environment & Safety Dept.

BIRDSEYE VIEW OF KS&DL:-

1916- Government Sandalwood oil factory was first started in Bengaluru and later shifted to
Mysore for extraction of sandalwood oil from the Sandalwood.

1918 – Government Soap Factory was started by Maharaja of Mysore and the Mysore Sandal
Soap was introduced into the market for the first time.

1950 - The factory output rose to 500 Tons with the following modifications.
1. Renovating the whole premises. 2. Installing new boiler soap building plant and drying
chamber.

1954 – Received license from Government to manufacture 1500 tons of soap and 75 tons of
glycerine per year.

17
1957 – Factory shifted its operation to Rajajinagar industrial area.

1974 – Mysore sales international limited was appointed as the sole selling agent, for
marketing its products.

1975 – Rs.4 Crores synthetic detergent plant was installed based on Italian technology by
Ballestra SPA.

1980 - On 1st October 1980 the Government Soap Factory was converted into a public sector
enterprise and renamed as ―Karnataka Soaps & Detergents Limited‖.

1981 – a) Production capacity increased to 6000 tons, b) Rs.5 Crores Fatty Acid Plant was
installed.

1984 – Manufacturing of premium quality of Agarbathies at Mysore division.

1985 – Production capacity was raised to 26,000 Tons Per Annum. A large variety of toilet
soaps at attractive shapes, colors and fragrances introduced to meet the varieties & tastes of
consumers.

1992 – The company was registered with the Board for Industries and Financial
Reconstruction (BIFR), New Delhi in December for rehabilitation, as the company suffered
losses continuously since 1980 at its net worth fully eroded.

1996 – The BIFR approved the rehabilitation scheme in September & the Company stated
making Profits.

1999 – ISO-9002 Certificate for quality assurance in production, installation and Servicing.

2000 – ISO-14001 certificate pertaining to environmental management system.

2003 – The entire carried forward loss of Rs.98 Crores wiped out and in May BIFR, declared
the company to be out of its Purview. The Company is making profit continuously, It is only
State Public Sector unit that has come out of BIFR.

2004 – The ISO-9002 was upgraded to ISO-9001-2004, Quality Systems.‘

18
2008- Company has introduced Hand wash liquids under the trade name of Herbal Hand
Wash and Rose Hand Wash liquids. Company has also introduced liquid Detergent under the
trade name of KLEENOL liquid with different variants for Floor wash, Dish wash and
Automobile wash.

2009- Company has established In-House state of the Art manufacturing and filling of
Mysore sandal Talcum powder and Mysoresandal Baby powder.

2010- The ISO Certification was upgraded to ISO 9001:2008.

2011-Company launched Mysore sandalDhoop.

2012- Launched Super Premium Mysore Sandal Millennium Soap and also The Company
reached highest sales turnover and Profit of Rs.262.00 cores.

2013 –they reached highest sales turnover and profit (322Crore in FY2013) on 22nd of Aug
―National Award for Excellence Cost manufacturing” Karnataka Soap and Detergents
Ltd was the winner in the public manufacturing (Medium Organization) Category.

2014- The Company reached highest sales turnover and profit during 2013-2014 and is on
progressive during year 2013-2014 was Rs.353.00Crores with a net profit of Rs.32.83Crores.

2015- Up gradation of soap technology and commissioning of new lines for production
Is planned for execution.

2016-The company got chemical outstanding export performance in cosmetics & toilets panel
award on 8th February in Mumbai from Nirmala sitharaman ministry for commerce and
industries government of India (new Delhi).

19
 A typical organization chart of finance department:-

Managing
Director

Director Finance

AGM (Costing)/ Manager Manager AGM

AGM (Bills) (PR&PF) (LS) (Accounts)/AG
MMmM(CE&C
)
Junior Officer Junior Officer Junior Officer

S R Assistant S R Assistant S R Assistant

J R Assistant J R Assistant J R Assistant

ORGANIZATION PROFILE

PROMOTERS:

The promoters of the KSDL is the government itself and the employees of the
organization. The promotions are also made by the government through different
ways. KSDL have their own way of doing promotions and also they encourage the
employees to promote their products in the state.

20
VISION:

 Keeping pace with globalization, global trends and the state‘s policy for using technology
in every aspect of governance.
 Ensuring global presence of Mysore Sandal products while leveraging its unique
strengths to take advantage of the current technology scenario by intelligent and selective
diversification.
 Secure all assistance and prime status from Government of India, all technology alliances.
 Making all out efforts to achieve reasonable profits.
 Most importantly to earn the invaluable foreign exchange, both to the state and to the
country.

MISSION:

 To serve the National economy.

 To attain self-reliance.
 To promote purity & quality products
 To maintain the Brand loyalty of its customers.
 To build upon the reputation of Mysore sandal soap based on pure sandal oil.

QUALITY POLICY:

 Seek purchase of goods and services from environment responsible suppliers.

 Communicate its environment policy and best practices to all its employees‘
implications.
 Set targets and monitor progress through internal and external audits.
 Reuse and recycle materials wherever possible and minimize energy consumption and
waste.

21
PRODUCT/SERVICE PROFILE:

KS&DL is the true inheritor of golden legacy of India. Continuing the tradition of excellence
for over eight decades, using only the best East Indian grade Sandalwood oil & Sandalwood
soaps in the world. The products produced at KS&DL are the Soaps, Detergents, Agarbathies
and Sandalwood oil.

PRODUCT MANUFACTURED BY KS&DL

TOILET SOAPS

NAME OF THE PRODUCT UNITS OF GRAMS

Mysore Sandal Soap 75, 125

Mysore Sandal Classic Soap 75

Mysore Sandal Gold Soap 75, 125

Mysore Sandal Baby Soap 75

Mysore Special Sandal Soap 75

Mysore Rose Soap 100

Mysore Sandal Herbal Care Soap 100, 125

Mysore Jasmine Soap 100

Wave Soap 100

Mysore lavender Soap 150

Mysore Sandal bath tablet 150

Mysore Sandal classic bath tablet 150

Mysore Jasmine bath tablet 150

Mysore Special Sandal tablet 150

Mysore Sandal rose tablet 150

Mysore Sandal Guest tablet 17

22
 SBT

SJR
06 IN 01
GOLD SIXER

Others
Washing Half Bar
Washing Sandal Baby Wash

DETERGENTS:-

NAME OF THE PRODUCT UNITS IN GRAMS

Mysore detergent powder 1000
Mysore detergent powder 500
Mysore detergent Cake 125
Mysore detergent cake 250

TALCUM POWDER:-

NAME OF THE PRODUCT UNITS IN GRAMS

Mysore Sandal Talc 20, 50, 100, 300
Mysore Sandal Baby Talc 100, 200, 400

23
AGARBATHIES:-
NAME OF THE PRODUCT
Mysore Sandal Premium
Mysore Sandal Regular
Mysore Rose
Nagachampa
Suprabhatha
Mysore Jasmine
Parijata
Sir M.V.100
Bodhisattva
Venkateshwara
Durga
Ayyappa
Alif Laila
Meditation

PRODUCT RANGE FROM THE HOUSE OF MYSORE SANDAL SOAP

A) Mysore Sandal Soap (75gm, 125gm &20180gm)

24
B) Mysore Sandal Special shop (75gm)

C) Mysore Sandal Baby Soap (75gm)

D) Three-In-One Gift Pack – (SJR) 3Tabs (20180gm Each)

25
E) Mysore Sandal Gold Soap (125gm)

F) Mysore Rose Soap (100gm)

G)Six-In-One Gift Pack- 6Tabs (20180gm Each)

26
H) Mysore Sandal Gold Sixer 6 Tabs (125gm each)

I) Mysore Sandal Soap Bath Tablet Trio 3nos. (20180gm each)

J) Mysore Sandal Classic Soap (75gm)

27
DETERGENTS:-
KS&DL also manufactures high quality detergents applying the latest spray drying
technology with well balanced formulation of active matters & other builders; they provide
the ultimate washing powder.

1. Sensor Detergent Powder (1kg/2kg)

2. Mysore Detergent Powder (1kg/500gms)
3. Mysore Detergent bar (250gms)
4. Mysore Detergent Cake (125gms/250gms)

AGARBATHIS:-

 Mysore Sandal premium

 Mysore Rose
 Suprabath
 Parijata
 Venkateshwar
 Ayyappa
 Chandhana
 Mysore sandal
 Nagachampa
 Mysore Jasmine
 Bodhisattva
 Durga
 Alif Laila

28
SANDALWOOD OIL:-

In 5ml, 10ml,20ml, 100ml,500ml,2kg,5kg,20kg,and 25kg packing.

POWDERS:-
Mysore Sandal Talk: Cooling & Healing, Fragrant freshness, Net. Wt 20gm, 60gm, 300gm
and 1kg.
Mysore Sandal Baby Powder: Tender loving care for baby…& Mummy. Net wt 100-400gms.

29
 AREAS OF OPERATION

The area of operation of KSDL is throughout the country and the state. They are very popular for their
brand and the products that they manufacture.

INFRASTRUCTURAL FACILITIES
 Canteen facility
 Library
 Car stand
 Waiting room

COMPETITORS OF KS&DL PRODUCTS AND SERVICES:-

KS&DL is facing cut-throat competition in national and international market. Some of its
main competitors are:-

 M/S. Hindustan Uni Lever Ltd.,

 M/S. Godrej Soaps Private Ltd.,
 M/S. Proctor& Gamble
 M/S. Wipro
 M/S. Nirma Soaps Private Ltd.,
 M/S. Jyothi Laboratories

30
SWOT ANANLYSIS
STRENGTH
 A very little competition for its major products sandal soap.

 The factory is located in the city and has all infrastructure facilities.

 It is fully owned by government of Karnataka, if any financial problem arises then it can easily be
solved by the government.

 Abundant availability of raw materials at present

 Diversified product range keeps the company stable

WEAKNESS
 Low turnover

 The technology used for production is old and it need to be upgraded

 Excessive labor force has increased the operating cost

 Defective marketing strategy

OPPORTUNITIES
 The company has great opportunity to expand its market share by increasing exports

 At present it has good raw material sources to enhance production

 KSDL has a very good brand and the customers mostly like the sandal soap that is produced.

THREATS
 Government interference may reduce growth potential
 Unskilled labors
 Competition from other global leaders

31
FUTURE GROWTH AND ASPECTS
 Introduction of anti-bacteria, herbal transparent soap, made out of 33 essential oil
based perfume, Aloe Vera, Vitamin-E etc as additive and suitable for all types of skin
and all seasons.
 Improvement in existing products Mysore Sandal classic improved moisturizers &
skin conditions.
 Introduction of sandalwood powder in 50gms, 100gms to meet the growing demand
for religious purpose.
 Introduction of new higher powered detergent powder for institutional sales in bulk
packaging.
 To attain market leadership.
 Introduction of new trade schemes to increase sales.
 Aggressive advertisement and publicity as part of sales promotion.
 Reduction in distribution expenses.
 Cost-reduction in all areas.
 Instant decision making in certain procurement activities.
 Timely introduction and implementation of market driven decisions.
 Ensuring effective internal control.

ANATOMY/ TYPE OF FINANCIAL STATEMENT

 The position statement or the balance sheet.
 The income statement or the profit & loss account.
 A statement of changes in owner‘s accounts.
 A statement of changes in financial position.

32
 FINANCIAL STATEMENTS

Income Balance sheet Cash flow

statement statement

Revenues Asset Operation

Expenses Current Investment

Profits Non-current
Financing
Liabilities
Current
Non-current
Equity
Paid-in-Capital
Retained Earnings

BALANCE SHEET:-
The balance sheet is one of the important statements depicting the financial strength of the
concern. One hand it shows the properties that is utilizes and on the other hand the sources of
these properties. The balance sheet shows all the assets owned by the concern, and all the
liabilities and claims, it owes to owner and outsiders. The balance sheet is prepared on a
particular data. The right hand side shows properties and assets. Normally there is no
particular sequence for showing various assets and liabilities.

INCOME STATEMENT (PROFIT & LOSS A\C):-

Income statement is prepared to determine the operational position to the concern. It is a
statement of revenues earned and the expenses incurred for earning that revenue. If there is
excess of revenues over expenditures it will show a profit and if the expenditure are more
than the income then there will be a loss. The income statement is prepared for a particular
period, generally a year.

33
STATEMENT OF CHANGES IN OWNER’S EQUITY:-
This statement gives details of the distribution of earning during a particular accounting
period. The balance shown by the income statement is transferred to the balance sheet though
this statement after making necessary appropriation. The balance sheet of this account
represents the retained earnings. This statement is the connecting link between balance sheet
and income statement.
Statement of changes in owner‘s equity simply shows the beginning balance of each owner‘s
equity account, the reasons for increase and decrease in each, and its ending balance.

STATEMENT OF CHANGES IN FINANCIAL POSITION:-

Statement of changes in financial position has to be prepared to show the changes in assets
and liabilities from the end of one period to the end of another point of time. The objective of
this statement is to show the movement of funds
(Working capital) during a particular period. The statement of changes in financial position
may take any of the following two forms:
 Fund flow statement: This statement enables the management to have an idea about
the sources of fund and their uses for various purposes.
 Cash flow statement: A statement of changes in the financial position of a firm on
cash basis is called cash flow statement.

34
 CHAPTER-II

LITERATURE REVIEW
Bansal and Gupta (1985) in their study entitled, ―Financial statement analysis and
statistics‖ enlightened that the coefficient of variation in the study period had a wide gap
varying between 7.1 per cent and 51.3 per cent for current ratio and ratio of fixed assets to
sales. The correlation of components of short term liquidity ratio generally possesses low
correlation as against long term solvency ratio components but the components of both
ratios independently possess quite satisfactory correlation in cotton textile industry. The
profitability ratio elements in the industry also have quite high correlation in cotton
industry as compared to synthetic industry.

Arun Ghosh his article entitled ―Education and Environment Contribution of the soap
and detergents industry‖ has reported that the growth rate over the period of the soap and
detergents was impressive and that the annual growth rate over the period 1951-1986tht
was 8.7 per cent for the capacity and that of production, 7.4 per cent. He has observed
that the overall capacity utilization and that the overall capacity utilization had been
declined from the ninety six per cent in 1951 to sixty per cent in 1986. He has also
observed that the capacity utilization was not in accordance with the growth of capacity
of the paper industry.

Kulkarni in his article ―Soap and detergents‖ has examined the capacity utilization of the
soap and detergents industry during the two decades. He has observed that the capacity
utilization declined very sharply from 823 per cent to 66.4 per cent during the first decade
and to 60.41 per cent during the second decade of the study. He has further found the
installed capacity was increased to 28.51 lakh tonnes per annum during the year 1988 as
against the installed capacity of 9.54 lakh tonnes in the year 1988 as against the installed
capacity of 9.54 lakh tonnes in the year 1971. The production of soap and detergents
industry boards was also increased in a similar manner as from 7.75 lakh tonnes to 17.20
lakh tones during the same period. Thus, it is noted that the capacity utilization of the
paper industry has an inverse relationship with the installed capacity and production.

35
Khan and MohalTutail Khanin their study, ―soap and detergents industry: An appraisal
pointed out that the saopand detergents industry is a highly capital intensive industry. Due
to steady rise in the cost of inputs, heavy overheads, paucity of power and adverse impact
of control orders over the industry, this industry has been unable to function vigorously.
They have selected some of the important companies for the analysis during the period
under review is not satisfactory. The profitability of these companies has been hampered
because of controls over price and production of soap and detergents should be removed.

Praveen Kumar Jain (1993) conducted a study among seven soap companies in India to
―Analyze the basic components of Working Capital‖. The study revealed that the current
ratio in public sector undertakings during the study period was found to be highly erratic
while the same in private sector undertakings registered continuous decrease. As far as
the inventory was concerned, the study revealed that it was highly unplanned in public
sector undertaking units when compared to private sector units. The study contributed
much in terms of realizing the importance of effective management of working capital.

Srinivasa Rao and Indrasena Reddy (1995) 7 in their study entitled ―Financial
Performance in soap and detergents Industry- A Case Study‖ stated that the financial
position of the company had been improving from year to year. The company‘s
performance in relation to generating internal funds in the form of reserves and surplus
was excellent and also was doing well in mobilizing outside funds. The liquidity position
of the company was sound as it was revealed by current and liquid ratios which were
above the standard. The solvency ratios showed that the company had been following the
policy of low capital gearing from 1990-91 as these ratios had been decreasing from this
year. The performance of the company 22 in relation to its profitability was not up to the
expected level. The company‘s ability to utilize assets for generation of sales had not
been improved much during the study period as it was revealed by its turnover ratios.

36
Sukamal Datta (1995) in his study entitled ―Working Capital Management through
Financial Statements: Analysis of soap and detergents Industry in West Bengal‖ found
that most of the firms were suffering from shortage of working capital. One of the
primary causes of such shortage of working capital was that most of the firms under study
were not capable of earning adequate profit and were also suffering from losses. The
expansion of fixed asserts also caused the working capital crisis. The utilization of fund
had not been covered by sufficient amount of fund by way of long-term investment.

Roger M. Shelor & et al. (1998) this study examines changes in ―Operating
Performance among soap and detergents Trusts‖ following an Initial Public Offering
(IPO). The purpose is to determine whether there is an enhancement in the value of the
underlying asset that is related to the IPO. They analyze equity, mortgage and diversified
REITs separately. They also compare the operating performance of recent IPOs to those
of earlier years to address the impact of the 1993 Revenue Reconciliation Act on
institutional investors‟ demand for REIT stock. Unlike previous analyses of industrial
firms, REITs were found to have significant increases in return on Assets and selected
measures of financial performance. The post-IPO cumulative stock price decline and
recovery is illustrated.

Gangadhar (1998) has made an attempt on ―Financial Analysis of Companies in

Criteria: A Profitability and efficiency focus‖ one of the objectives of the study is to
analyze the liquidity position of the companies and to point out the factors responsible for
such a position. It is concluded that the liquidity position was quite alarming since these
are facing chronic liquidity problems. Their proportion current assets in relation to the
current liabilities are very low. 23 It is suggested that, they may be improved by reducing
excessive burden of current liabilities or increasing the level of current assets depending
upon the requirements.

37
Muhammad Rafiqul Islam (2000) ―Working Capital Management of soaps and
detergents in Karnataka -An Overall View‖ concluded that all the units of the soap and
detergents industry had failed to manage their working capital requirements properly. The
reasons for working capital crisis were improper use of short-term funds, operating losses,
over stocking to stores and spares; and non-availability of rawmaterials.

Harris (2001) analyses the link between market orientation and performance has been
claimed largely on the basis of the analysis of subjective measures of performance.
Consequently, the aim of this study is to examine the links between market orientation
and objectively measured financial performance. The soap and detergents begins with a
brief examination of the definition and components of market orientation. Thereafter,
extant research into the consequences of developing market orientation is reviewed
critically, leading to the development of a number of research hypotheses. After detailing
the research design and methodology adopted in this study, the findings of a survey of
UK industry are presented. Briefly, the results indicate that when subjective measures of
performance are adopted, market orientation is associated with company performance in
certain environmental conditions. However, when objective measures of performance are
adopted, there is a narrower range of environmental conditions where market orientation
is positively associated with performance. The paper concludes with a series of
implications for both theorists and practitioners.

38
 CHAPTER-III
RESEARCH METHODOLOGY

NEED FOR THE STUDY

 To know the basic financial statements of the organization that they are following.
 To analyses the statements of the organization to know whether they are earning a
good profit or the loss.
 The major problem was found that there were many issues in the financial statement
of the KSDL.
 The financial analyst people did not have any proper maintenance of the financial
statement on the daily basis.
 To understand mainly what is the procedure to maintain a proper and good financial
statement in an organization.
 To analyze the future predictions of the organization that they take.
 To analyze the various scenarios when the organization will be developing from its
income or from any other improvements.
 To make sure that the analysts in the organization are maintaining all the day to day
records of expenses and gains.
 Mainly to understand what are the statements that should be maintained when a
organization is smoothly functioning.
 There are many kinds of financial statements and to know which is the most popular
and mainly followed by the organizations.

Financial soundness in terms of liquidity, leverages, profitability and activity, are the
main objective in front of growing organization. To analyze in this view and draw
meaningful conclusion to come to a right decision, analytical techniques are require,
among such techniques. Ratio analysis is a one of the valuable technique in the hands
of a financial analyst.
Therefore the study is conducted to analyze the financial analysis and financial ratios
in the evaluation of the Karnataka Soaps and Detergents Limited financial soundness.

39
OBJECTIVES

 To know about the subject and to get better and good knowledge regarding the
financial matters as well as analyze that to in KS&DL.

 To study the financial ratios in details.

 To analyze the management efficiency of the company.

 To evaluate the liquidity and profitability‘s position of the company.

 To know exactly the financial position and soundness of KS&DL.

 To gain a practical knowledge about the various financial activities of the company.

 To study the balance sheet structure.

 To offer findings and suggestions.

SCOPE OF THE STUDY

The study aims to evaluate the financial performance of KS&DL for the last five years by
using various tools and techniques.

RESEARCH DESIGN
Research design means a search of facts, answer to questions and solutions to the
problem. It is a prospective investigation. Research is a systematic logical study of an
issue or problem through scientific method. It is a systematic and objective analysis and
recording of controlled observation that may lead to the development of generalization,
principles, resulting in prediction and possibly ultimate control of events.
It refers to the arrangements of conditions of the study and collection of data in a manner
that aims to continue to combine relevance to the study purpose. There are various
designs, which are descriptive and helpful for analytical research.

40
Research design used in the specific study includes the following:-
 Identifying the statement of the problem.
 Collection of the company‘s specific literature i.e., annual report for the study period
and the profile of the company.
 Scanning through standard books to understand the theory behind the financial
performance evaluation.
 Collection of information from various journals to understand the industrial
background of the study.
 Decision regarding study period in this case it was decided to be 5 years i.e., from 2007-2012.
 Identification of financial ratios likely to reflect the capital adequacy, resources deployed,
assets quality, management quality, earning quality, liquidity of the organization. In this case
it was decided to be:

1. Profitability Ratio
2. Liquidity Ratio
3. Activity Ratio
 Calculations of the above ratios over the study period and analyzing it.
 Forwarding certain recommendation and conclusion to the company.

DURATION OF RESEARCH
The duration for the research was 3 months, the duration was 3 months because to know
exactly how the organizations will maintain a proper financial statements and also what
kind of financial statements will the organization maintain in present as well as in the
future days.

41
 DATA TYPE
Both the sources of data are used i.e., primary data and secondary data.
 Primary data

In case of primary data, the data are collected by interviewing accounts manager and also
administrative manager.

 Secondary data

In case of secondary data, the data is collected from financial records of the company,
Internet, magazines.

DATA COLLECTION TOOLS

The analysis interpretation of the financial statement is used to determine the financial
position and result and operation as well. A number of methods and devices are used to study
the relationship between different statements.
The statistical tools adopted for the study are:

 Financial Ratio.

 Trend analysis.

 Working capital.

 Comparative balance sheet.

42
ANALYTICAL TOOLS
The analysis interpretation of the financial statement is used to determine the financial
position and result and operation as well. A number of methods and devices are used to study
the relationship between different statements.
The statistical tools adopted for the study are:

 Financial Ratio.

 Trend analysis.

 Working capital.

 Comparative balance sheet.

CHAPTER SCHEME
1. INTRODUCTION:-

This chapter covers the introduction to financial analysis, financial statements and it covers
the emergence of the industry and industrial background in India.
2. LITERATURE REVIEW

This chapter deals with what are the related studies have been carried out in the past and by
whom. The information is collected from the research articles pertaining to the topic.
3. RESEARCH METHODOLOGY

Brief information about how the research study was undertaken. The types of collecting data
about the organization as well as the topic that is chosen.
4. DATA ANALYSIS AND INTERPRETATION:-

This chapter deals in application of statistical tools on the data collected for the project report
and is being represented in graphs and diagrams.

43
5. FINDINGS AND SUGGESTIONS, CONCLUSION:-

This chapter gives details on the findings dealt with analysis and interpretation and deals with
providing suitable suggestions to the company based on the findings.It deals with how project
was dealt with and its suitability to the organization.

LIMITATIONS OF THE STUDY

 The study is confined to only one company.

 Due to the limited time, in-depth study could not be made.

 Analysis in the study will be dependent on the information supplied by the

company.

 The information available was limited, as it was confidential.

 The study is only based on financial analysis is the pool of tools.

44
 CHAPTER-4
DATA ANALYSIS AND INTERPRETATION

4.1RATIO 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.
A ratio indicates a quantitative relationship, which can be in terms used to make a judgment.

Following are the few ratios used in the research:-

 Current ratio
 Shareholders fund ratio
 Cash ratio
 Debt Equity ratio
 Working capital ratio
 Gross Profit ratio
 Quick ratio

CURRENT RATIO
Current ratio may be defined as the relationship between current assets and current liabilities.
Current assets refers to all those assets can be easily converted into cash within a period of 12
months. Current liabilities are those obligations which payable within a short period generally
one year. This ratio indicates the ability of a concern to meet its current liabilities. A current
asset includes cash in hand, cash at bank, sundry debtors, short term loans and advances and
inventories. A current liability includes sundry creditors, bills payable, provision for tax, etc.

45
Definition of Current Ratio

A liquidityratio that measures a company's ability to pay short-term obligations. An

indication of a company's ability to meet short-term debt obligations; the higher the ratio, the
more liquid the company is. Current ratio is equal to current assets divided by current
liabilities. If the current assets of a company are more than twice the current liabilities, then
that company is generally considered to have good short-termfinancial strength. If current
liabilities exceed current assets, then the company may have problems meeting its short-term
obligations.

FORMULA FOR CALCULATING CURRENT RATIO:-

Current Assets
CURRENTRATIO = -------------------------
Current Liabilities

46
 TABLE 1:- SHOWING CURRENT RATIO

YEARS CURRENT ASSETS CURRENT LIABILITIES RATIO

( ) ( )

97,81,31,731 22,73,50,353 4.30

2013-14

2014-15 1,120,640,446 373,557,127 2.99

2015-16 1,299,373,293 354,397,236 3.66

2016-17 1,684,689,526 633,442,659 2.65

2017-18 2,042,853,316 710,206,883 2.87

47
GRAPH 1: SHOWING CURRENT RATIO

CURRENT RATIO
2.5E+09

2E+09

1.5E+09

1E+09

50000000

ANALYSIS & INTERPRETATION

A relatively high current ratio is an indication that the firm is liquid and has the ability to pay
its current obligations in time as and when they become due. On the other hand, relatively
low current ratio represents that the liquidity position of the firm is not good and the firm
shall not be able to pay its current liabilities in time without facing difficulties. The standard
current ratio is 2: 1. The company‘s current ratio in the year 2013-14, 2014-15, 2015-2016,
2016-2017and 2017-2018are 4.2, 2.9, 3.6, 2.6 and 2.87respectively. Since the company is
maintaining above the standards hence the company short term solvency position is
satisfactory.

DEBT EQUITY RATIO:-

Debt equity ratio is calculated to measure the relative claims of outsiders and owners against
firm‘s assets. This ratio indicates the relationship between the external debt or outsiders fund
and internal equity or the shareholders fund.

DEFINITION:-

A measure of a company financial leverage. Debt/equity ratio is equal to long-term

debt divided by common shareholders' equity. Typically the data from the prior fiscal year is
used in the calculation. Investing in a company with a higher debt/equity ratio may be riskier,
especially in times of rising interest rates, due to the additional interest that has to be paid out

48
for the debt.

Loan Funds
DEBT EQUITY RATIO = ------------------------
Shareholders Fund

TABLE 2:- SHOWING DEBT EQUITY RATIO

YEARS LOAN FUNDS SHAREHOLDERS RATIO

( ) FUND

( )
2013-2014
646,953,719 709,741,693 0.91

2014-2015
675,22017,293 812,822,955 0.83

2015-2016
727,035,451 8,763,397,046 0.08

2016-2017
971,163,576 9,031,774,686 0.11

2017-2018
1,089,991,470 9,404,231,552 0.11

49
GRAPH 2: SHOWING DEBT EQUITY RATIO

DEBT EQUITY RATIO

8E+10
7E+10
6E+10
5E+10
4E+10
3E+10
2E+10
1E+10
0

ANALYSIS & INTERPRETATION

The debt equity ratio is calculated to measure the extent to which debt financing has been
used in a business. The ratio indicates the proportions claims of owners and the outsiders
against the firm‘s assets. Debt equity ratio of the firm for the year 2013-14, 2014-15, 2015-
16, 2016-2017and 2017-2018are 0.91,0.83,0.08,0.11 and 0.11respectively. Since Debt equity
ratio of the firm isdecreasing hence the company is relying upon for the equity Capital and it
is reducing the fixed obligation of paying interest hence this is a positive sign.

ABSOLUTE LIQUID RATIO:-

Cash is the most liquid asset. A financial analyst may examine cash ratio and its equivalent to
current liabilities. Trade investments or marketable securities are equivalent of cash therefore
they may be included in the computation of cash ratio.

The cash ratio is generally a more conservative look at a company's ability to cover its
liabilities than many other liquidity ratios. This is due to the fact that inventory and
accounts receivable are left out of the equation. Since these two accounts are a large
part of many companies, this ratio should not be used in determining company value,

50
but simply as one factor in determining liquidity.

DEFINITION OF 'ABSOLUTE LIQUID RATIO'

The ratio of a company's total cash and cash equivalents to its current
liabilities. The cash ratio is most commonly used as a measure of company liquidity. It can
therefore determine if, and how quickly, the company can repay its short-term debt. A strong
cash ratio is useful to creditors when deciding how much debt, if any, they would be willing
to extend to the asking party.

FORMULA FOR CALCULATING ABSOLUTE LIQUID RATIO:-

Cash + Marketable Securities

ABSOLUTE LIQUID RATIO = ------------------------------------
CurrentLiabilities

TABLE 3 :- SHOWING ABSOLUTE LIQUIDRATIO

YEARS CASH+ CURRENT RATIO

MARKETABLESECURITIES LIABILITIES

( ) ( )

2013-14 240,32017,20168 227,350,353 1.06

2014-15 377,803,712 373,557,127 1.01

2015-2016 431,911,843 3,554,397,236 1.21

51
 2016-2017 437,757,488 633,442,659 0.69

2017-2018 575,242,123 710,206,883 0.89

GRAPH 3:- SHOWING ABSOLUTE LIQUID RATIO

ABSOLUTE LIQUID RATIO

3E+12
2.5E+12
2E+12
1.5E+12
1E+12
5E+11
0

ANALYSIS & INTERPRETATION

This Ratio indicates the proportion of Cash and Bank balance. i.e., it shows the ability of a
firm to meets its current liabilities by using most liquid assets like Cash and Bank balance.
Here the Cash Ratio the company showsfor the year 2013-14, 2014-15, 2015-2016, 2016-
2017 and 2017-2018 are 1.06 , 1.01, 1.21,0.69 and 0.89respectively.This shows that the
company is increasing its cash position gradually so that the obligation is met in time .Hence
the cash position of the company is satisfactory.
The debt ratio can help investors determine a company's level of risk.

FIXED ASSETS TURNOVER RATIO:-

Fixed assets turnover ratio is the ratio between fixed assets and net sales. It indicates as to
what extent the fixed assets have been utilized.
DEFINITION:-

52
Asset turnover measures a firm's efficiency at using its assets in generating sales or revenue -
the higher the number the better. It also indicates pricing strategy: companies with low profit
margins tend to have high asset turnover, while those with high profit margins have low asset
turnover.

FIXED ASSETS TURNOVER RATIO IS CALCULATED AS FOLLOWS:-

Net Sales
FIXEDASSET TURNOVER RATIO=-------------------
Fixed Assets

The ideal fixed asset turnover ratio is 5 times. When fixed assets turnover is 5 times or more,
indicates better utilization of fixed.

TABLE 4:- SHOWING FIXED ASSET TURNOVER RATIO

YEARS NET SALES FIXED ASSETS RATIO

( ) ( )

2013-2014 1,649,723,232 92,983,953 17.7

2014-2015 2,118,438,529 96,957,604 21.8

2015-2016 2,557,199,258 7,855,306,061 0.32

2016-2017 2,825,363,739 7,852,771,403 0.36

53
 2017-2018 3,178,805,980 7,854,703,587 0.40

GRAPH 4:-FIXED ASSET TURNOVER RATIO

FIXED ASSET TURNOVER

RATIO

3E+12
2.5E+12
2E+12
1.5E+12
1E+12
5E+11
0

ANALYSIS & INTERPRETATION

The following analysis is indicating that the fixed assets turnover ratio from the year 2013-
14, 2014-2015, 2015-2016, 2016-2017 and 2017-2018 are17.7,21.8, 0.32, 0.35 and 0.4
respectively but in the year 202017-2018 there is slight decline in the fixed asset turnover but
apart from that the company has used the assets efficiently for its productive purpose than in
the previous years. Hence the company fixed asset turnover ratio is satisfactory.

WORKING CAPITAL TURNOVER RATIO:-

54
This is also known as working capital leverage ratio. This ratio indicates whether or not
working capital has been effectively utilized in making sales. In case a company can achieve
higher volume of sales with relatively small amount of working capital, it is an indication of
the operating efficiency of the company.
DEFINITION:-
A company uses working capital (current assets - current liabilities) to fund operations and
purchase inventory. These operations and inventory are then converted into sales revenue for
the company. The working capital turnover ratio is used to analyze the relationship between
the money used to fund operations and the sales generated from these operations. In a general
sense, the higher the working capital turnover, the better because it means that the company
is generating a lot of sales compared to the money it uses to fund the sales.
THE WORKING CAPITAL RATIO IS CALCULATED AS FOLLOWS:-

Net Sales
WORKING CAPITAL TURNOVER RATIO = ----------------------
Working Capital

TABLE 5:- SHOWING WORKING CAPITAL TURNOVER RATIO

YEAR NET SALES NET WORKING CAPITAL RATIO

( ) ( )

2013-14 1,649,723,232 637,692,903 2.58

55
 2014-2015 2,118,438,529 747,083,319 2.84

2015-2016 2,557,199,258 944,975,057 2.70

2016-2017 2,825,363,739 1,051,246,867 2.68

2017-2018 3,178,805,980 1,332,646,433 2.3

GRAPH 5:- WORKING CAPITAL TURNOVER RATIO

WOKING CAPITAL TURNOVER RATIO

3.5E+09
3E+09
2.5E+09
2E+09
1.5E+09
1E+09
50000000
0
2013-14 2014-2015 2015-2016 2016-2017 2017-2018

NET SALES NET WORKING CAPITAL RATIO

ANALYSIS & INTERPRETATION

The working capital turnover ratio of the company from the year 2013-2014, 2014-2015,
2015-2016, 2016-2017 and 2017-2018 are2.58,2.83 ,2.7 ,2.6 and 2.3 respectively but from
the year 2010-11 to 202017-2018 the position of the working capital has been maintained
steadily and in the year 2011-12 there is slight increase in the working capital which has
increased from 2.58 to 2.83 this shows that the working capital turnover ratio of the company
is satisfactory.working capital Turnover Ratio of the company is satisfactory. Even if any of
these perform badly, the effect on net profits and their margins can be seen.

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QUICK RATIO:-
It is a ratio between Quick assets and Quick liabilities. Quick assets include all current assets
except Inventory.
Quick liabilities include all current liabilities except bank overdraft.

DEFINITION:-
The quick ratio is more conservative than the current ratio, a more well-known
liquidity measure, because it excludes inventory from current assets. Inventory
is excluded because some companies have difficulty turning their inventory into
cash. In the event that short-term obligations need to be paid off immediately,
there are situations in which the current ratio would overestimate a company's
short-term financial strength.

FORMULA:-

Quick Assets
QUICK RATIO = ………………..
Quick Liabilities

57
TABLE 6:- SHOWING QUICK RATIOS

YEARS QUICK ASSETS QUICK LIABILITIES RATIO

( ) ( )

2013-14 675905562 563447217 1.20

2014-2015 631126126 373557127 1.69

2015-2016 431911843 354397236 1.22

2016-2017 876546368 633442659 1.39

2017-2018 98318420172 710203883 1.38

GRAPH 6:- SHOWING QUICK RATIO

QUICK RATIO
1.2E+11
1E+11
8E+10
6E+10
4E+10
2E+10
0

58
ANALYSIS & INTERPRETATION:-
From the above analysis, the percentage of quick ratio from the year 2013-14, 2014-15, 2015-
2016, 2016-2017 and 2017-2018 are1.2, 1.69, 1.22, 1.39 and 1.38 respectively in 2011-12 it
was 1.69 and it has been decreased to 1.22 in the year 2012-2016 .So the firm has to take alert
against quick ratio though the current position is satisfactory but it must avoid the
fluctuations .since the company is maintaining above the standards hence it is satisfactory.

PROPRIETORY /EQUITY RATIO:-

DEFINITION:-

This is a variant of thedebt-to-equity ratio. It is also known asequity ratioor net worth to total
assets ratio. This ratio relates the shareholder's funds to total assets.Proprietary / Equity
ratioindicates the long-termor futuresolvency position of the business.

FORMULA OF PROPRIETARY/EQUITY RATIO:-

Shareholders’ funds
EQUITY RATIO = ………………..
Total assets

COMPONENTS:-

Shareholder's funds include equity share capital plus all reserves andsurplusesitems. Total
assets include all assets, including Goodwill. Some authors exclude goodwill from total
assets. In that case the total shareholder's funds are to be divided by total tangible assets. As

59
the total assets are always equal tototal liabilities, thetotal liabilities, may also be used as the
denominator in the above formula.

SIGNIFICANCE:-

This ratio throws light on thegeneral financialstrength of the company. It is also regarded as a
test of the soundness of thecapital structure. Higher the ratio or the share of shareholders in
the total capital of the company better is the long-term solvency position of the company. A
lowproprietary ratiowill include greater risk to the creditors.

This ratio may be further analyzed into the following two ratios:

 Ratio of fixed assets to shareholders/proprietors' funds

 Ratio of current assets to shareholders/proprietors' funds

TABLE 7:- SHOWING PROPRIETARY RATIO

YEARS SHARE HOLDERS TOTAL ASSETS RATIO

FUND ( )
( )

2013-2014 709,741,693 1,356,695,412 0.52

2014-2015 812,822,955 1,488,037,248 0.54

2015-2016 8,763,397,046 9,490,432,497 0.92

2016-2017 9,031,774,686 10,002,938,262 0.90

2017-2018 9,404,231,552 10,494,223,022 0.89

60
GRAPH 7: SHOWING PROPRIETARY RATIO

PROPRIETARY RATIO
120000,00,000

100000,00,000

80000,00,000

60000,00,000

40000,00,000

20000,00,000

0
2013-14 2014-15 2015-2016 2016-2017 2017-2018

Series1 Series2 Series3

ANALYSIS & INTERPRETATION:-

From the above analysis, the percentage of proprietary ratio from the year 2013-14,
2014-2015, 2015-2016,2016-2017 and 2017-2018 are0.52, 0.54, 0.92, 0.9 and 0.89
respectively however from the above analysis we can come to an inference that the company
has maintained a steady and uniform ratio though in the year 2013-14 the ratio may be dipped
down slightly but in the later years the company has maintained proprietary ratio efficiently
hence the company‘s proprietary ratio is satisfactory.

INVENTORY TURNOVER

Although the first calculation is more frequently used, COGS (cost of goods sold) may be
substituted because sales are recorded at market value, while inventories are usually recorded
at cost. Also, average inventory may be used instead of the ending inventory level to
minimize seasonal factors.

This ratio should be compared against industry averages. A low turnover implies poor sales
and, therefore, excess inventory. A high ratio implies either strong sales or ineffective
buying.

61
High inventory levels are unhealthy because they represent an investment with a rate of
return of zero. It also opens the company up to trouble should prices begin to fall.

DEFINITION OF 'INVENTORY TURNOVER'

A ratio showing how many times a company's inventory is sold and replaced over a period.

The days in the period can then be divided by the inventory turnover formula to calculate the
days it takes to sell the inventory on hand or "inventory turnover days."

FORMULA FOR CALCULATING INVENTORY TURNOVER RATIO:-

Sales
INVENTORY TURNOVER RATIO =
Inventory

APPLICATION IN BUSINESS:-

A low turnover rate may point to overstocking, obsolescence, or deficiencies in the product
line or marketing effort. However, in some instances a low rate may be appropriate, such as
where higher inventory levels occur in anticipation of rapidly rising prices or expected
market shortages.

Conversely a high turnover rate may indicate inadequate inventory levels, which may lead to
a loss in business as the inventory is too low. This often can result in stock shortages.

Some compilers of industry data use sales as the numerator instead of cost of sales. Cost of
sales yields a more realistic turnover ratio, but it is often necessary to use sales for purposes
of comparative analysis. Cost of sales is considered to be more realistic because of the
difference in which sales and the cost of sales are recorded. Sales are generally recorded at
market value, i.e. the value at which the marketplace paid for the good or service provided by
the firm. In the event that the firm had an exceptional year and the market paid a premium for
the firm's goods and services then the numerator may be an inaccurate measure. However,
cost of sales is recorded by the firm at what the firm actually paid for the materials available

62
for sale. Additionally, firms may reduce prices to generate sales in an effort to cycle
inventory. In this article, the terms "cost of sales" and "cost of goods sold" are synonymous.

An item whose inventory is sold (turns over) once a year has higher holding cost than one
that turns over twice, or three times, or more in that time. Stock turnover also indicates the
briskness of the business.

THE PURPOSE OF INCREASING INVENTORY TURNS IS TO REDUCE

INVENTORY FOR THREE REASONS:-

 Increasing inventory turns reduces holding cost. The organization spends less money
on rent, utilities, insurance, theft and other costs of maintaining a stock of good to be sold.
Reducing holding cost increases net income and profitability as long as the revenue from
selling the item remains constant.
 Items that turn over more quickly increase responsiveness to changes in customer
requirements while allowing the replacement of obsolete items. This is a major concern in
fashion industries.
 When making comparison between firms, it's important to take note of the industry, or
the comparison will be distorted. Making comparison between a supermarket and a car
dealer, will not be appropriate, as supermarket sells fast moving goods such as sweets,
chocolates, soft drinks so the stock turnover will be higher. However, a car dealer will have a
low turnover due to the item being a slow moving item. As such only intra-industry
comparison will be appropriate/

TABLE 8:- SHOWING INVENTORY TURNOVER RATIO

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 YEARS SALES INVENTORY RATIO

( ) ( ) (TIMES)

2013-14 1,649,723,232 169,02017,641 9.72

2014-2015 2,118,438,529 2,20173,016,643 9.89

2015-2016 2,551,767,323 2,12018,016,643 8.02

2016-2017 2,822,563,576 652,299,664 4.3

2017-2018 3,178,805,980 933,856,166 3.4

GRAPH 8; SHOWING INVENTORY TURNOVER RATIO

INVENTORY TURNOVER RATIO

100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%

ANALYSIS & INTERPRETATION:-

64
From the above analysis, the inventory turnover ratio from the year 2013-14, 2014-15, 2015-
2016, 2016-2017 and 2017-2018 are 9.72,9.89,8.02,4.3 and 3.4 times respectively from the
above analysis we can come to know that the Increasing inventory turns reduces holding cost
but in the year 2010-11 and 202017-2018 the company‘s inventory turnover is less and hence
the holding cost of the company increases and in turn the company‘s profit will reducehence
the company must concentrate on reducing inventory holding cost and all other years are
satisfactory.

EARNINGS PER SHARE:-

When you are considering the price of a stock, it will hardly give you any idea whether it is a
good stock to invest in or not. The current stock price will tell you at what price you can buy
the stock or what will you get after you sell the stock. The earning of the company though is
an indicator of the financial standing of the company it doesn‘t give you a chance to compare
one company to the other to judge which one is a better company to invest in. For example if
two company posts same earnings in a particular year, you cannot really judge which one is
better. This is because these two companies will have different number of shares in the
market and that will create a difference in the standard of the company. Theoretically a
company with less number of shares is more successful if compared with a company that has
got more number of shares and with the same earnings. That is why EPS or earnings per
share ratio are the ideal formula to compare both the shares in a common platform.

DEFINITION OF 'EARNINGS PER SHARE - EPS'

The portion of a company's profit allocated to each outstanding share of common

stock. Earnings per share serve as an indicator of a company's profitability.

FORMULA FOR CALCULATING 'EARNINGS PER SHARE:-

EARNINGS PER SHARE = Earnings available to Equity shareholders

TABLE 9:- SHOWING EARNINGS

Total No ofPER SHARE
Equity Shares
65
 YEARS EARNINGS NO OF EQUITY EPS PER
AVAILABLE TO SHARES SHARE
EQUITY (NO) ( )
SHAREHOLDERS

( )

2013-2014 48,041,547 350,000 20167.26

2014-2015 20164,518,037 350,000 384.34

2015-2016 217,419,744 350,000 621.2

2016-2017 328,374,699 350,000 938.21

2017-2018 451,876,451 350,000 1291.07

GRAPH 9:- SHOWING EARNINGS PER SHARE

EARNINGS PER SHARE

250000,00,000

200000,00,000

150000,00,000

100000,00,000

50000,00,000

0
2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

EARNINGS AVAILABLE TO EQUITY SHAREHOLDERS

NO OF EQUITY SHARES
EPS PER SHARE

ANALYSIS & INTERPRETATION:-

66
From the above analysis, the earnings per shareof the company from the year 2013-2014,
2014-2015, 2015-2016, 2016-2017 and 2017-2018 are Rs 20167.26, Rs 384.33, Rs 621.19,
Rs 938.21 and Rs 1291.07 respectively from the above analysis we can see that the earnings
per share has seen huge fluctuations though from the year 2013-2014 to 2014-2018the
company‘s return to its shareholder is in increasing trend.

GROSS PROFIT RATIO:-

When analyzing a company, gross profit is very important because it indicates how
efficiently management uses labor and supplies in the production process. More specifically,
it can be used to calculate gross profit margin. Keep in mind that gross profit varies
significantly from industry to industry.

DEFINITION OF 'GROSS PROFIT'

A company's revenue minus its cost of goods sold. Gross profit is a company's residual
profit after selling a product or service and deducting the cost associated withits production
and sale.

FORMULA USED TO CALCULATE GROSS PROFIT RATIO:-

GROSS PROFIT RATIO =Gross Profit

× 100

Sales

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TABLE 10:- SHOWING GROSS PROFIT RATIO

YEARS GROSS PROFIT TOTAL ASSETS RATIO

( ) ( )

2013-2014 102,759,224 1,684,12017,944 6 .10

2014-2015 208,455,929 2,20186,483,526 9.67

2015-2016 398,330,347 2,587,839,962 2018.39

2016-2017 562,770,949 2,916,92017,702 19.29

2017-2018 665,12017,481 3,220,820,347 20.65

GRAPH10: SHOWING GROSS PROFIT RATIO

Chart Title
3.5E+11
3E+11
2.5E+11
2E+11
1.5E+11
1E+11
5E+10
0
YEARS 2013-2014 2014-2015 2015-2016 2016-2017 2017-2018

68
ANALYSIS & INTERPRETATION:-
From the above analysis, the gross profit ratio of the company from the year 2013-2014,
2014-15, 2015-16, 2016-17 and 2017-18 are 6.1,9.67,2018.39,19.29and 20.65 respectively
from the above analysis we can come to a conclusion that the company is earning steadily
and the company‘s earning is almost 9% on its investment if the company try‘s and put some
more effort it can improve and hence the company‘s position is satisfactory.

CHAPTER-5

69
 FINDINGS AND SUGGESTIONS

FINDINGS
 The liquidity position of the firm is falling .i.e. the ability to pay the firms current
obligation is low.
 The fixed asset turnover ratio is high which indicates the better utilization of the fixed
assets.
 The long term solvency of the firm is satisfactory.
 The gross profit ratio is seen to be slightly decreasing trend in the past 5 years.
 The expenditure of the firm is increasing in the past 5 years.
 The company has slow moving stocks as indicated by its decreasing trend in stock
turnover ratio. The working capital is efficiently utilized. Total assets also have been
utilized properly.
 The company‘s ability to create working capital through the sales is satisfactory.

 The cash ratio is quite more then compared to standard ratio i.e. 0.5:1 and it shows
that firm‘s commitment to meet its short term liabilities.

 The net working capital ratio is increasing year by year, which indicates that the
firm‘s liquidity is increasing.

 The interval measure indicates that it has sufficient liquid asset to finance its
operations.

 Current assets and Current liabilities are increasing.

 Finally the overall position of the company‘s position is good & strong enough to give
them Good profit from last few year i.e. from 2006-201

SUGGESTIONS
 The company may try to improve its short term liquidity position by either reducing
current liability or increase highly liquid current assets.
 The management must think over new policy to generate income by sufficient
utilization of existing assets.

70
 Reduce the excessive use of outsiders fund in financing the assets of the company.
 It is suggested to the management to reduce the fixed commitment charges on debts
so that a good returns can be generated to its shareholders.
 The profits are the measure of overall efficiency of the business, higher the profits, the
more efficient is the business considered. So they have to increase profitability
through reducing the expenses which may be operating or non-operatingexpenses.

 The company has to increase its current assets and quick assets adequately.

 The company should increase its investment in working capital from sales so that they
can meet the current liabilities in future.

 Company has to take corrective steps towards proper usage of short term assets for
making sales.

 The cash position has to be maintained adequately even in future which help company
to meet short term commitments.

 Company can try to have future plans as for as production and business activities are
concerned and also to forecast the future requirement of working capital so that it can
increase its sales and profit.

 The company should maintain stable rate of current ratio.

 Working capital ratio has increased. This is due to considerable increase in sales,
however working capital is concerned so the company should put more effort to
increase the sales and continue the same.

71
CONCLUSION:-
An analysis of financial statements show that the organization in making good profits.
KS&DL will remain a household name to the people of India. Their ambition has always
been and will continue, to make soaps for the family of all around the country. And bringing
new brands extension to suit the need of traditional and modern scenario. The organization
firmly believes that giving its people the right encouragement yield in comparable rewards.
Emphasis is given to man, management and every opportunity so that people can grow with
the organization. Its giant infrastructure and network people working toward a common goal
to give the customer service and value that he deserve through relentless search for quality
and pursuit of excellence looking toward the next century.
Ever the future of KS&DL factory, Bangalore is quite bright, when we find that performance
has been really satisfactory. Over the last five years there has been a continuous growth in the
pairage, not only of the estimated but also for the actual pairage. The standard cost
comparison of the factory however shows that cost is increasing at slow pace over the year.
To conclude, the company‘s financial position is satisfactory. The analysis of the company
was made using various tools techniques like trend analysis, financial analysis and ratio
analysis.

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BIBILOGRAPHY:

TEXT BOOKS:

 Financial statement analysis : A practitioners guide – Fernando

Alvaraz & martin fridson
 Financial statement analysis – wild & subramanyam
 International financial statement analysis, 3ed (CFA institute
investment series)

WEBSITES:

 www.mysoresandal.org
 www.investopedia.com
 www.wikipedia.com

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