FINANCIAL STATEMENT ANALYSIS KEL LTD

FINANCIAL STATEMENT ANALYSIS KEL LTD

NEW HORIZON COLLEGE, BANGALORE

PROJECT REPORT

“FINANCIAL STATEMENT ANALYSIS OF KERALA

ELECTRICAL AND ALLIED ENGINEERING COMPANY LTD”

SUBMITTED BY:

SUBITH S

(Reg NO.14P35H0209)

Under the guidance of

MRS.PADMA NANDANAN

Assistant Professor

NEW HORIZON COLLEGE

MASTERS OF BUSINESS ADMINISTRATION

BHARATHIAR UNIVERSITY

COLLEGE CODE: KA 11 B 131

2014-16



NEW HORIZON COLLEGE

STUDENT’S DECLARATION

I hereby declare that this project entitled “KERALA ELECTRICAL AND ALLIED

ENGINEERING CO. LTD “was prepared by me during the year 2014-2016 and was submitted

in partial fulfillment of the requirements for MASTERS OF BUSINESS ADMINISTRATION,

BHARATHIAR UNIVERSITY.

I also declare that this project report is original and genuine and has not been submitted to any

other university of the award of any degree, diploma or other similar titles or purposes.

Date: Signature

Bangalore SUBITH S

Reg no:14P35H0209



NEW HORIZON COLLEGE

GUIDE CERTIFICATE.

This is to certify that the project report entitled “KERALA ELECTRICAL AND ALLIED

ENGINEERING CO. LTD “ submitted by Mr. SUBITH S bearing Registration number

14P35H0209 to Bharathiar University for the partial fulfillment of Masters Degree in

Business Administration is an outcome of genuine research work carried under my guidance

and it has not been submitted for the award of any other degree, diploma or prize.

Date: Signature

Bangalore Mrs.Padma Nandanan

Assistant Professor



NEW HORIZON COLLEGE

PRINCIPAL’S CERTIFICATE

This is to certify that Mr. SUBITH S bearing Registration Number 14P35H0209 is a bonafide

student of this college. The project work entitled “KERALA ELECTRICAL AND ALLIED

ENGINEERING CO. LTD “ is a bonafide work carried out by him/her in partial fulfillment of

the requirements for Masters Degree in Business Administration of Bharathiar University

during the year 2014-2016

Date: Signature

Bangalore Dr.R.BODHISATVAN

Principal



ACKNOWLEDGEMENT

This project would not have been successfully materialized had it not been for the several

people who have directly and indirectly helped me. I am extremely indebted to all of them and

whole –heartedly thank everyone for their valuable support.

I would be failing in my duty if I do not express my deep sense of gratitude to Dr.

R.Bodhisatvan, Principal , New Horizon College. I also thank Mr. Arun Raghu Babu, the

Program Coordinator, New Horizon College

I express my sincere thanks to my guide Mrs. Padma Nandanan , Assistant Professor

New Horizon College for the guidance and support for she gave every step of my project.

I sincerely thank Mr. A.M. Abdul Rasheed (General manager) KERALA

ELECTRICAL AND ALLIED ENGINEERING CO. LTD. I also thank all the employees of the

finance department of TCL for providing information for my project work.

I sincerely thank family members and friends for the co-operation to complete this

project work successfully.

Above all, I thank God Almighty for the ever-abiding kind blessings he has showered

upon me.

SUBITH S



TABLE OF CONTENTS

CHAPTER NO. TITLE PAGE NO.

1

INTRODUCTION

1.1 FINANCIAL STATEMENT ANALYSIS

1.2 THEORETICAL BACKGROUND OF THE STUDY

1.3 TYPES OF FINANCIAL ANALYSIS

1.4 METHODS OF FINANCIAL ANALYSIS

1.5 ACTIVITY OR TURNOVER RATIO

1.6 LEVERAGE RATIOS OR SOLVENCY RATIOS

1.7 REVIEW OF LITERATURE

01-22

1

2

3

4

14

16

19

2 INDUSTRIAL& COMPANY PROFILE

2.1 INDUSTRIAL PROFILE

2.2 COMPANY PROFILE

23-38

23

26

3 RESEARCH DESIGN

3.1 TITLE

3.2 SCOPE OF THE STUDY

3.3 OBJECTIVE OF FINANCIAL STATEMENT

ANALYSIS

3.4 RESEARCH METHODOLOGY

3.5 LIMITATION OF THE STUDY

3.6 CHAPTER SCHEME

39-51

39

39

39

40

51

51

4 DATA ANALYSIS AND INTERPRETATION

1 RATIO ANALYSIS

2 COMPARATIVE STASTEMENT

52-81

52

74

5 FINDING ,SUGGESTION AND CONCLUSION

5.1 FINDINGS

5.2 SUGGESTIONS

5.3 CONCLUSION

82

83

84

BIBLIOGRAPHY

ANNEXURE

85

86



LIST OF TABLES

TABLE. No. TITLE PAGE No.

4.1 Current Ratio 52

4.2 Quick Ratio 54

4.3 Absolute liquid Ratio 55

4.4 Net profit ratio 57

4.5 Debtors turnover ratio 58

4.6 Fixed asset turnover ratio

60

4.7 Debt equity ratio 62

4.8 Proprietary ratio 63

4.9 Solvency ratio 65

4.10 Fixed asset to net worth ratio 66

4..11 Trend analysis 68

4.12 Trend analysis of inventory 69

4.13 Trend analysis of cash 71

4.14 Trend analysis of current asset 72

4.15 Comparative balances sheet 2010-2011 74

4.16 Comparative balance sheet 2011-2012 76





LIST OF FIGURES

CHART. No. TITLE PAGE

No.

4.1 Current Ratio 53

4.2 Quick Ratio

54

4.3 Absolute liquid Ratio

55

4.4 Net profit ratio

57

4.5 Debtors turnover ratio

59

4.6

Fixed asset turnover ratio

61

4.7 Debt equity ratio 62

4.8 Proprietary ratio 64

4.9 Solvency ratio 65

4.10 Fixed asset to net worth ratio 67

4..11 Trend analysis 68

4.12 Trend analysis of inventory 70

4.13 Trend analysis of cash 71

4.14 Trend analysis of current asset 73



CHAPTER 1

INTRODUCTION



CHAPTER 1

INTRODUCTION

1.1 Financial statement Analysis

Finance is the provision of money when it required. Every enterprise requires

finance to start and carry out its operation. Finance is the lifeblood of every

business. So the finance should be managed efficiency and effectively.

Financial statement is prepared mainly for the decision making. Financial

statement analysis is referred to the process of determining the strength and the

weakness of the firm by properly establishing strategic relationship between the

items of balance sheet and profit and loss account. There are many methods for the

analysis of financial statement, such as trend analysis, comparative statement,

common-size statement, ratio analysis etc. analysis of financial statement are used

by many interested parties such as investors, creditors, banks, management etc.

some of the steps involved in the analysis of financial statement analysis are:

First step to collect the information required for carrying out the study

Second step is to arrange the information so collected according to their

significant relationship.

Financial step is the drawing of conclusions and inferences.

In this project financial statement analysis has been made in the company

KERALA ELECTRICAL AND ALLIED ENGINEERING CO. LTD. All the

financial statement of KEL has been thoroughly checked for getting the

information and data so collected has been thoroughly interpreted for drawing for

the study.



More details regarding the project have been in the following chapters. Also the

details regarding the analysis and the tool used for the analysis has also been

mentioned in the continuing chapters. At last my findings and suggestions to KEL

have been mentioned.

1.2 THEORETICAL BACKGROUND OF THE STUDY

1.2.1 FINANCIAL STATEMENTS

The financial statements are prepared for the purpose of presenting the periodical

review or report of the progress made by the concern and deal with status of the

investment in business and results achieved during the accounting period.

According to John N Meyer "the financial statements provide a summary of the

accounts of a business enterprise, the balance sheet reflecting the assets and

liabilities and the income statements showing the results of operations during a

certain period." This definition emphasizes the importance of balance sheet and

profit and loss accounts, but ignores the importance of other financial statements

like fund flow statements and statement retained earnings.

1.2.2 FINANCIAL ANALYSIS

Financial analysis is also known as analysis and interpretation of financial

statements. It is the process of determining financial strengths and weaknesses of

an organization by establishing relationship between the items of balance sheet and

profit and loss account. It refers to an assessment of the viability, stability and

profitability of a business. It is a valuable tool used by the users of financial

information like management,

Investors, creditors, lenders, government etc. to make sense of the data given in

financial statements to make informed decisions. The goal in analyzing the



financial statements is to assess fast performances and current financial position to

make predictions about the future performance of a company.

1.3 TYPES OF FINANCIAL ANALYSIS

1.3.1 External and Internal Analysis

External analysis of financial statement is made by those who do not have access

to detailed accounting records. E.g. .Banks, Creditors, Public. They mainly

dependent upon published financial statements and other secondary sources of

data.

Internal analysis is made by the finance and accounting department of an

organization as a means to generate financial information for decision making. It is

based on relevant financial records maintained by the organization. Such an

analysis emphasizes on performance appraisal and assessment of profitability.

1.3.2 Short Term and Long Term Analysis

Short term analysis mainly involves analysis of working capital. In the short run, a

company must have ample funds readily available to meet its current needs and

sufficient borrowing capacity to meet contingencies. Hence, in short term analysis,

the current assets and current liabilities are analyzed and cash position of the

concern is evaluated. in long term analysis the stress is on the stability and future

earnings potential of the concern. Here fixed assets, long term debt structure and

ownership interest is analyzed.

1.3.3 Horizontal and Vertical Analysis



When financial statements for a number of years are reviewed and analyzed

together it is called as horizontal analysis. The preparation of comparative

statements is an example of horizontal analysis.

Vertical analysis is also known as static analysis. lt refers to analysis of items in

financial statements for a particular year with reference to other items in the same

financial statement. It involves calculating ratios between two items in the

financial statement for the same year. lt is not very useful for long term planning as

it does not include trend analysis. However, it is an effective tool for performance

evaluation.

1.4 METHODS OF FINANCIAL ANALYSIS

The analysis and interpretation of financial statement is used to determine the

financial positions and result of operation as well. A number of methods or devices

are used to study the relationship between different statements an effort is made to

use those devices which clearly analysis the position of the enterprise. The

following methods of analysis are generally used:

COMPARATIVE BALANCE SHEET

TREND ANALYSIS

STATEMENT OF CHANGES IN WORKING CAPITAL

RATIO ANALYSIS

COMMON-SIZE STATEMENT

FUND FLOW STATEMENT

CASHFLOW STATEMENT



These are the different methods used by experts to analysis the financial statements

of an enterprising during the current year.

A) COMPARATIVE STATEMENT

Comparative study of financial statement is the comparison of the financial

statement of the business with the previous year‟s financial statements and with the

performance of other competitive enterprises, so that weakness may be identified

and remedial measures applied. The comparative statement may show the

following:

Absolute figures

Changes in absolute figures

Absolute data terms of percentages

Increase of decrease in terms of percentage

Comparative statements can be prepared for both types of financial statements i.e.,

Balance sheet as well as profit and loss account. The comparative profits and loss

account will present a review of operating activities of the business. The

comparative balance shows the effect of operation on the assets and liabilities that

change in the financial position during the period under consideration.

Comparative analysis is the study of trend of the same items and computed items

into or more financial statements of the same business enterprise on different dates.

The presentation of comparative financial statements, in annual and other reports,

enhances the usefulness of such reports and brings out more clearly the nature and

trends of current changes affecting the enterprise. While the single balance sheet

represents balances of accounts drawn at the end of an accounting period, the



comparative balance sheet represents not early the balance of accounts drawn on

two different dates, but also the extent of their increase or decrease between these

two dates. The single balance sheet focuses on the changes that have taken place in

one accounting period. The changes are the direct outcome of operational

activities, conversion of assets, liability and capital form into others as well as

various interactions among assets, liability and capital. The two comparative

statements are:

Balance sheet

Income statement.

B) TREND ANALYSIS

A trend analysis is a method of analysis that allows traders to predict what will

happen with a stock in the future. Trend analysis is based on historical data about

the stock‟s performance given the overall trends of the market and particular

indicators within the market. Trend analysis takes into account historical data

points for a stock and, controlling for other factors like the general changes in the

sector, market conditions, competitions for similar stocks, it allows traders to

forecast short, Intermediate, and long term possibilities for the stock.

Procedures for calculating trend analysis,

1.One year is taken as the base year. Generally the first or last taken as the

base year.

2. The figures of the base is taken as 100

3. The trend percentage are calculated in relation to the year



C) RATIO ANALYSIS

Ratio analysis is a widely use tool of financial analysis. It can be used to compare

the risk and return relationship of firms of different sizes. It is defined as the

systematic use of ratio to interpret the financial statements so that the strengths and

weakness of a firm as well as its historical performance and current financial

condition can be determined. The term ratio refers to the numerical or quantitative

relationship between two items and variables. These ratios are expressed as

I. Percentage

II. Fraction

III. Proportion of numbers

These alternative methods of expressing items which are related to each other are,

for purpose of financial analysis, referred to as ratio analysis. It should be noted

that computing the ratio does not add any information not already inherent in the

above figures of profits and sales. What the ratio does is that they reveal the

relationship in a more meaningful way so as to enable equity investors;

management and lenders make better investment and credit decision.

DEFINITION

According to accountant‟s Handbook by Wixon and Bedford, “A ratio is an

expression of the quantitative relationship between two numbers”



Utility of Ratio Analysis

Diagnosis of the firm‟s problems, weakness and strengths

For the assessment of firm‟s financial conditions and capabilities

Credit analysis

Comparative analysis

Time series analysis

Caution in using ratio analysis

Standards of comparisons

Company differences

Prices level

Different definition

Changing situations

Standard of comparison

Time series analysis

Inter-firm analysis

Industry analysis

Preformed financial statement analysis

USERS OF FINANCIAL RATIO

OWNERS

FINANCIAL MANAGERS

INVESTORS



CREDITORS

FINANCIAL OF LONG TERM FUND

GOVERNMENT AGENCIES

Advantages of Ratio Analysis:

1. It helps in analysis of the situation i.e., analysis on the financial situation and

performance

2. Inter-firm and intra-firm comparison is both possible on the basis of accounting

3. Accounting ratio not only indicates the present position but they also indicate the

cause leading up to the position of a large extend

4. It helps in obtaining best result when ratios for a number of years are put in tabular

form so that the figures for one year can be easily compared with those of other

year.

5. They provide simplicity to the complex accounting information presented by the

financial statements

6. They are very helpful to outsiders as well as for internal management

7. They are very helpful to outsiders as well as internal management

8. It is very helpful to internal managements, discharge of the basic managerial

functions

9. It also helps in planning, policy making & controlling the activities

10. They are helpful in establishing the standard casting system

Limitations of ratio analysis

1. Ratio provides only guidelines to the management they are only the means.

However they scratch surfaces and raise question. The limitation of the ratio may

force the management to have detailed investigation of the situation under question



2. Single accounting ratio is not useful at all unless it is studied with other accounting

ratios

3. They are based only on the quantitative information. Hence, qualitative

information puts limit on the ratios

4. Ratios are subject to arithmetical accuracy of the financial statements. Moreover

financial statement also includes estimated date like provision for depreciation, bad

and doubtful debts etc. hence, result revealed by ratios is subject to such estimates.

5. Ratios are computed on the basis of financial statements which are historical in

nature.

6. Knowledge of ratios only is meaningless unless it is also found how it is made up

7. Lack of homogeneity of data, personal judgment lack of consistency etc. is the

factors which limit the conclusions to be derived on the basis of accounting ratios.

Financial ratio:

Financial ratio is a relationship between two financial variables. It helps to

ascertain the financial condition of a firm.

Types of financial ratios

1. LIQUITDITY RATIOS

a) Current ratio

b) Quick ratio

c) Absolute Liquidity ratio

2. ACTIVITY RATIOS

a) Debtors turnover ratio

b) Working capital turnover ratio

c) Fixed assets turnover ratio

3. LEVERAGE RATIO



a) Debt equity ratio

b) Proprietary ratio

c) Fixed assets to net worth ratio

4. PROFITABILITY RATIO

a) Net profit ratio

LIQUITDITY RATIOS

It refers to the ability of the firm to meet its current liabilities. The liquidity ratio,

therefore, are also called solvency ratio. These ratios are used to assess the short-

term financial position of the concern. They indicate the firm‟s ability to meet its

current obligation out of current resources. In the word of Saloman j. Flink,

“Liquidity is the ability of the firms to meet its current obligation as they fall due”.

Liquidity ratio includes three ratios:-

CURRENT RATIO

QUICK RATIO OR ACID TEST RATIO

ABSOLUTE LIQUIDITY RATIO

A. CURRENT RATIO

The current ratio expresses the relationship between the firm‟s current assets and

its current liabilities. Current assets normally include cash, marketable securities,

accounts receivable and inventories. Current liabilities consist of accounts payable,

short term notes payable, short-term loans, current maturities of long term debt,

accrued income taxes and other accrued expenses (wages).



Current ratio = current assets/ current liabilities

Significance:

It is generally accepted that current assets should be 2 times the current liabilities.

In a sound business, a current ratio of 2:1 is considered an ideal one. If current

ratio is lower than 2:1, the short term solvency of the firm is considered doubtful

and it shows that the firm is not in a position to meet its current liabilities in times

and when they are due to mature. A higher current ratio is considered to be an

indication that of the firm is liquid and can meet its short term liabilities on

maturity. Higher current ratio represents a cushion to short-term creditors, “the

higher the current ratio, the greater the margin of safety to the creditors”. The

biggest drawback o the current ratio is that it is susceptible to “Window dressing”.

This ratio can be improved by an equal decrease in both current assets and current

liability.

B) QUICK RATIO

Measures assets that are quickly converted into cash and they are compared

with current liabilities. This ratio realizes that some of current assets are not easily

convertible to cash e.g., inventories. The quick ratio, also referred to as acid ratio,

examines the ability of the business to cover its short-term obligations from its

“quick” assets only (i.e., it ignores stock).

The quick ratio is calculated as follows

Quick ratio = quick assets/current liabilities



Significance

The standard liquid ratio is supposed to be 1:1 i.e., liquid assets should be equal to

current liabilities. If the ratio is higher, i.e., liquid assets are more than the current

liabilities, the short term financial position is supposed to be very sound. On the

other hand, if the ratio is slow, i.e., current liabilities are more than the liquid

assets, the short term financial position of the business shall be deemed to be

unsound.

C) CASH RATIO

This is also known as cash position ratio or super quick ratio. It is a variation of

quick ratio. This ratio establishes the relationship between absolute liquid assets

and current liabilities. Absolute liquid assets are cash in hand, bank balance and

readily marketable securities. Both the debtors and the bills receivable are exclude

from liquid assets as there is always an uncertainty with respect to their realization.

In other words, liquid assets minus debtors and bills receivable are absolute liquid

assets. The cash ratio is calculated as follows

Cash Ratio = Cash in hand & at bank + marketable securities/current

liabilities

Significance

This ratio gains much significance only when it is used in conjunction with the first

two ratios. The accepted norm for this ratio is 50% worth absolute liquid assets are

considered adequate to pay Rs.2 worth current liabilities in time as all the creditors

are not expected to demand cash at the same time and then cash may also be

realized from debtors and inventories. This test is a more rigorous measure of a

firm‟s liquidity position. This type of ratio is not widely used in practice.



1.5 ACTIVITY OR TURNOVER RATIOS

1. Debtors Turnover Ratio

This ratio indicates the relationship between credit sales average debtors during the

year.

Debtors turnover ratio = Net credit sales/avg debtors + avg B/S

When calculating this ratio, provision for bad and doubtful debt is not deducted

from the debtors, so that it may not give a false impression that debtors are

collected

Quickly.

Significance:

This ratio indicates the speed with which amount is collected from debtors. The

higher the ratio is better it is since it indicates that amount from debtors is being

collected more quickly. The more quickly the debtors pay the less the risk from

bad debts and so the lower the expenses of collection and increase in the liquidity

of the firm. By comparing the debtor‟s turnover ratio of the current year with the

previous year, it may be assessed whether the sales policy of the management is

efficient or not.

2. Fixed Assets Turnover Ratio:

The fixed assets turnover ratio measures the efficiency with which the firm has

been using its fixed assets to generate sales. It is calculated by dividing the firm‟s

sales by its net fixed assets as follows:



Fixed assets turnover ratio = Net sales/net fixed assets

Significance:

This ratio gives an ideal about adequate investment or over investment or under

investment in fixed assets. As a rule, over- investment in unprofitable fixed assets

should be avoided to the possible extent. Under-investment is also equally bad

affecting unfavorably the operating costs and consequently the profit. In

manufacturing concerns, the ratio is important and appropriate, since sales are

produced not only by use of working capital but also the capital invested in fixed

assets. An increase in this ratio is the indicator of efficiency in work performance

and a decrease in this ratio speaks of unwise and improper investment in fixed

assets.

3. Working capital turnover ratio:

This ratio shows the number of times the working capital results in sales. In other

words, this ratio indicates the efficiency or otherwise in the utilization of short

term funds in making sales. Working capital means the excess of current assets

over current liabilities. In fact, in the short run, it is the current assets and current

liabilities which pay a major role. A careful handling of the short term assets and

funds will means a reduction in the amount of capital employed, thereby improving

turnover. The following formula is used to measure this ratio:

Working capital turnover ratio = Net sales/working capital

Significance:

This ratio is used to assess the efficiency with which the working capital has been

utilized in a business. A higher working capital turnover indicates either the



favorable turnover of inventories and receivables and/or the inadequate of net

working capital accompanied by low turnover of inventories and receivables. A

low ratio signifies either the excess of net working capital or slow turnover of

inventories and receivables or both. This ratio can at best be used by making of

comparative and trend analysis for different firms in the same industry and for

various periods.

1.6 LEVERAGE RATIOS OR SOLVENCY RATIOS

1. Debt to Equity Ratio

This ratio indicates the extentto which debt is covered by shareholder‟s funds. It

reflects the relative position of the equity holders and the lenders and indicates the

company‟s policy on the mix of capital funds. The debt to equity ratio is calculated

as follows:

Debt equity ratio = total debt/equity

Significance:

The importance of debt-equity ratio is very well reflected in the words of Weston

and Brigham which are reproduced here: “Debt-equity ratio indicates to what

extent the firm depends upon outsiders for its existence. For the creditors, this

provides a margin of safety. For the owners, it is useful to measure the extent to

which they can gain the benefits of maintaining control over the firm with a limited

investment”. The debt-equity ratio states unambiguously the amount of assets

provided by the outsiders for every one rupee of assets provided by the

shareholders of the company.



2. Proprietary Ratio:

This ratio is also known as „Owners fund ratio‟ or „shareholders equity ratio‟ or

„Equity ratio‟ or „Net worth ratio‟. This ratio establishes the relationship between

the proprietors fund and total tangible assets. The formula for this ratio may be

written as follows.

Proprietary ratio = Shareholders fund/total assets

Significance:

This ratio represents the relationship of owners‟ funds to total tangible assets,

higher the ratio or the share of the shareholders in the total capital of the company

better is the long term solvency position of the company. This ratio is of

importance to the creditors who can ascertain the proportion of the shareholder‟s

funds in the total assets employed in the firm. A ratio below 50% may be alarming

for the creditors since they may have to lose heavily in the event of company‟s

liquidation on account of heavy losses.

3. Solvency ratio

Solvency ratio = Asset/Total Debt

The main objective of solvency ratio is to test or measure the solvency of a firm.

The term solvency means the ability of a firm to pay the outside liabilities. For the

solvency ratios standard is not fixed. Generally, higher the solvency ratio, stronger

is its financial position and vice versa. It indicates the degree of solvency of the

business.



4. Fixed asset to net worth ratio

This is calculated for the purpose of knowing the extent of proprietor‟s funds

invested in fixed assets. There is no rule of thumb to interpret this ratio. But 0.60 to

0.65 (60 to 65%) is considered to be satisfactory in case of industrial undertakings.

Fixed asset to net worth ratio = Fixed assets/proprietor‟s

Significance

This ratio indicates the extent to which shareholders‟ funds are invested in the

fixed assets. Generally, the fixed assets should be purchased out of shareholders

fund. If the ratio is less than 1 it will mean that all fixed assets are purchased out of

proprietor‟s fund is invested in working capital.

PROFITABILITY RATIO

Net profit ratio

This is a widely used measure of performance and is comparable across companies

in similar industries. The fact that s business works on a very low margin need not

cause alarm because there are some sectors in the industry that on a basis of high

turnover and low margins, for example supermarkets and motorcar dealers. What is

more important in any trend is the margin and whether it compares well with

similar businesses.

Net profit ratio = net profit/net sales*100

Significance:

An objective of working net profit ratio is to determine the overall efficiency of the

business. Higher the profit ratio, the better business. The net profit ratio indicates



the management‟s ability to earn sufficient profits on sales not only to cover all

revenue operating expenses of the business, the cost of borrowed funds and the

cost of merchant designer servicing, but also to have a sufficient margin to pay

reasonable compensation to shareholders in their contribution to the firm. A high

ratio ensures adequate return to shareholders as well as to enable a firm to with

stand adverse economic conditions. A low margin has an opposite implication.

1.7 REVIEW OF LITERATURE

Literature review was done by referring previous studies, articles and books to

know the areas of study and the gap or study not done so far. There are various

studies were conducted relating to operational performance of the company from

which most relevant literature were reviewed.

Furkany.kamdar’S review (2008): The analysis of financial statements is a

process of evaluating the relationship between component parts of financial

statements to obtain a better understanding of the firm‟s position and performance.

Ratio analysis has a major significance in analyzing the financial performance of a

company over a period of time. Decisions affecting product prices, per unit costs,

volume or efficiency have an impact on the profit margin or turnover ratios of a

company.

Befekadu B. Kereta’s review (2007) the paper examines the performance of

MFIS in relation to outreach and financial sustainability. It reviews literatures on

core performance indicators of MFIS. The literatures noted that MFIS could be

examined though three main polar: outreach to the poor, financial sustainability

and welfare impact. The welfare impact assessment is not covered in this paper due

to time and money limitations.



J .I. Bogen (2004) has considered that performance analysis is the total of assets of

an enterprise which circulates from one form to another, for instance, from cash to

inventories to receivables to back into cash. Thus , the capital that circulates, equal

the assets of an enterprise, Hence, performance of the firm and current assets are

interchangeable terms.

Anderson Reddy p and SomaeswarRao k (1996) conduct a study in Hindusthan

cables Ltd. For the period of 1989-1990, they did the detailed study on the

company on the basis of ratio analysis. The study recommended for efficient

utilization of current assets.

The International Accounting Standards (IFRS, 2006) indicates the facts that

liquidity refers to the available cash for the near future, after taking into account

the financial obligations corresponding to that period. Liquidity risk consist in the

probability that the organization should not be able to make its payments to

creditors, as a result of the changes in the proportion of long term credits and short

term credits and the correlation with the structure of organization‟s liabilities.

Studying the management working capital in Colgative Palmolive (India) Ltd Mr.

Debasishsuri (1997) attempted to assess the efficiency of working capital

management in terms of working capital ratio, quick ratio, ratio of current asset to

total sales, and composition of working capital. The study recommended for

special attention to the management of inventories which constituted largest part of

the current asset.

A study conducted by Mr.Kuldeepgoyal (CMD) BSNL revealed that how India is

one of the top countries to set up a telecommunication Centre and how all the eyes

of the world have been on India for the same. The study gave me idea about the

recent trends in Indian telecommunication.



Weston and Brigham (1972) further extended the second proposition suggested

by walker by dividing debt into long-term debt and short-term debt. They

suggested that short-term debt should be used in place of long-term debt whenever

their use would lower the average cost of capital to the firm. They suggested that a

business would hold short-term marketable securities only if there is excess fund

after meeting short term debt obligations. They further suggest that current asset

holding should be expended to the point where marginal returns in these assets

would just equal the cost of capital required finance such increase.

Dr. HamadouBoubaca has considered that the financial analysis is objective if

this study is to taken into account the organizational characteristics that bind the

parent banks and their subsidiary companies to explain the financial performance

of banks foreign subsidiaries. To this aim we empirically study the average data

(from 2001 to Z005) of a sample of 123 bank subsidiary companies (with or

without majority ownership). The result shows that the percentage of the capital

held by the parent banks, an indicator of its capacity to influence the strategy of

subsidiaries, is not without consequence on their performance.

Kennedy and Muller(1999), has explained that “ The analysis and interpretation

of financial statements are an attempt to determine the significance and meaning of

financial statements data so that the forecast may be made of the prospects for

future earnings, ability to pay interest and debt maturities ( both current and long

term) and profitability and sound dividend policy.”

Jae K. Shim & Joel G. Siegel (1999), had explained that the financial statement of

an enterprise present the raw data of its assets, liabilities and equities in the balance

sheet and its revenue and expenses in the income statement. Without subjecting

these to data analysis, many fallacious conclusions might be drawn concerning the



financial condition of the enterprise. Financial statement analysis is undertaken by

creditors, investors and other financial statement users in order to determine the

credit worthiness and earning potential of an entity.

Elizabeth Duncan and Elliot (2004), had stated that the paper in the title of

efficiency, customer service and financing performance among Australian financial

institutions showed that all financial performance measures as interest margin,

return on assets, and capital adequacy are positively correlated with customer

service quality scores.

Jonas Elmerraji (2005) tries to say that ratios can be an invaluable tool for

making an investment decision. Even, so many new investors would rather leave

their decisions to fate than try to deal with the intimidation of financial ratios. The

truth is that ratios aren‟t that intimidating even if you don‟t have any degree in

business or finance. Using ratios to make informed decisions about an investment

makes a lot sense, once you know how use them.



CHAPTER 2

COMPANY AND INDUSTRY PROFILE



CHAPTER – 2

INDUSTRIAL & COMPANY PROFILE

2.1 INDUSTRY PROFILE

Heavy electrical industry encompasses important industry sectors including power

generation, transmission, and distribution equipment‟s. This also covers turbo

generators, boilers, turbines, transformers, switch gears and relays. This

performance of the industry is closely linked to the power programmer of the

country. The Government of India has an ambitious mission of „power for All

2012‟ as per working group on the power for 11thplan, a capacity addition of

72000MW is required.To reach wheel power, an expansion of the regional

transmission network and inter regional capacity to transmit power would be

essential. This will stimulate substantially demand for heavy electrical

equipment‟s. There is a strong manufacture base for the manufacture of heavy

electrical equipment in the country. The technology available in India is almost at

par with that in the international market barring few areas of the high voltage lines.

However, items like CRGO Steel and amorphous cores for low loss transformers

are being important.

The present buoyancy in India Economy would create demand for the electrical

product through industrial growth and general economic development. The power

sector reforms will create large business for power sector equipment manufacturers

and service providers. In the current favorable scenario, the electrical industry can

certainly look forward to growth.

TRANSFORMERS

A transformeris a voltage changer. The health of transformer industry depends

largely on the power generation and transmission sector. The major user of this



Industry is the State Electrical Boards and Industries. The transformer industry in

India has developed for over 50yrs and has a well matured technology base. It has

the technology to manufacture wide range of power transformers, distribution

transformers and special transformers for welding are also being developed to meet

international requirement. The export and import figure for the year 2007 were Rs

2923 crores respectively.

Transformer industry is divided into distribution, power and other type of

transformers. The demand for transformers comprises of the new demand as well

as replacement demand. About 95% of transformers used in India power network

are of indigenous make. New demand is depend on the new power generation

capacities added. Currently, India has an installed capacity of approximately

115000 MW. As per the planning estimates, the installed capacity should be

increased to 2000MW by 2012, majority of which is to be installed within next 3

years. The replacement demand depends on the life of the transformer and existing

capacity in the economy. At the end of the sixth five-year plan (1980-1985) a total

of 3, 37,584 MVA of transformer capacity was added. Since these transformers life

exceeds 20 yrs., they are due for replacement.

Also Indian players in the engineering segment, foraying into turnkey projects

overseas, are further adding to the demand for transformers. The demand is

expected to experience double digit growth over the next few years.

On the other hand the production numbers indicate a death in supply. Though on a

lower base the supply has grown at a rapid rate over a longer period of time, it

seems difficult to match the rate of growth in demand for the year ended April

2006, production of distribution transformers was 65,131,000KVA and 256,585

other transformers were produced. In light of strong demand and stringent supply,



the transformer manufactures are expected to enjoy strong order book along with

firm margins. The global price hike in transformer raw materials such as copper,

aluminum, and oil caused transformer prices to increase in India. Also, a shortage

of cold-rolled, grain- oriented steel is further escalating the price of this essential

transformer core material. With growing demand and price both rising, Indian

manufacturers are finding it difficult to maintain margins in the long term thereby

transferring the burden of increased costs to the end users.

The regulatory structure of the power of the power sector has faced some

uncertainties in India due to the reluctance and failure of certain states to put the

regulations into practice. Furthermore, utilities are confronting financial problems

because of high transformation & distribution loses, thus increasing their debt.

Despite these setbacks, the power sector in India is likely to remain buoyant,

according. Reforms in the sector and the enlargement of the power distribution

network under India‟s Accelerated Power Development and Reforms Programme

is driving the growth and strengthening of sub transmission lines. In addition, the

increase in transmission grid reliability will result in heightened demand for power

transformers.

MARKET PLAYERS

The transformer market in India is unorganized players. The key organized players

in the segment include ABB, Bharat Biglee, BHEL, Crompton Greaves, EMCO,

Areva T&D, Indo Tech transformers and Volt Transformers.

The product range offered starts below 100 KVA capacity and spans beyond

10,000 KVA>



2.2 COMPANY PROFILE

The Kerala Electrical and Allied Engineering Company Limited (KEL) were

established in 1964 in the state of Kerala, India. It is fully owned by the state

government. The corporate office of the KEL is situated at panampilly

Nagar,Cochin. The company has a wide range of network of regional officers and

services centers located in most of the major cities and business centers in India for

effective marketing and to provide efficient after sales service for the product. The

major regional offices and service centers are at New Delhi, Mumbai, Chennai,

Bangalore, Cochin and Thiruvananthapuram.

The company has progressively expanded its range of manufactured goods and

services over the years and has strategically broadened its customer base services

over the years and has strategically broadened its customer base on a global level.

KEL offers quality of products and services through its various manufacturing

units and services divisions, with a manpower of over 1200 which includes over

250 highly qualified and well trained professional engineers.

The primary interest of a company is in the field of electrical and machinery

encompassing areas such as generation transmission, distribution and utilization of

electrical power. In the generating equipment side, KEL is a leading manufacturer

of inductor type brushless alternators used for train lighting and air conditioning. In

the field of transmission and distribution of electrical power, the company‟s efforts

have been directed in the manufacture of transformers, switchgear, transmission

line towers, substations equipment and accessories. KEL is a leading manufacturer

and supplier of these items to various State Electricity Boards in India. The KEL is

also experienced and competent in the erection, commissioning and maintenance

of electrical power transmission and distribution network which includes H.T.L.T



substations, both indoor and outdoor type, package/utilized substations overhead

transmission lines and pylons, booster stations, street lights etc. The company has

adopted modern technology in association with modern reputed overseas

manufactures, who are in the field. The technical overseas manufactures, who are

experts in the field. The technical collaboration with EVR of FRANCE (now

amalgamated with ALSTHOM ATLANTIQUE) for the manufactures of inductor

of HRC Fuses and MOTEURS LERROY SOMER of FRANCE for the

manufacturing units located in various districts of the state.

a. The inductor type brushless alternators , which is being manufactured at Kundara

Plant in Kollam Districts has been widely acclaimed and accepted by many railway

systems around the world. More than 20000 such alternators in operations which

the Indian Railway alone.

b. The second plant start began operations in 1968 at Mamala in Ernakulum District

with the manufacture of distribution transformers – up to 3000 KVA, 33KV class

with an annual production capacity of 600000KVA.

c. The third plant at olavakkot in Palakkad district, which was formely known as

MENCOS, was taken over by KEL in 1977; it provides HRC Fuse and other L.T.

switchgear items.

d. The fourth plant was commissioned at Kasargod District, in the year 1990 for the

manufacture of general- purpose brushless a.c. generators; KEL has consolidated

its position as a leading manufacturer of electrical equipment in India. This

company aided design center the latest VNC machines amongst other hi- tech

manufacturing and testing facilities.

The KEL has a well-organized Research Development Wing. Its inception in 1990

at corporate and R&D cell in Cochin. All R&D activities are coordinated from



corporate office, Cochin. The R&D wing of KEL has to its credit many special

application generators and other products that were indigenously designed and

developed. Ground power Units for Avro and Dornier Aircrafts 400Hz alternators

of various capacities, brushless alternators are some of achievements of the

company‟s R&D wing.

The company‟s products are marketed through an extensive network of marketing

offices located in major cities. These offices provide all supports services to the

sales and marketing team to guarantee complete customer satisfaction.

COMPANY PROFILE

NAME KERALA ELECTRICALS &

ALLIED ENGINEERING LTD

ESTABLISHED YEAR 1968

ADDRESS MAMALA P.O, COCHIN 682304

TOTAL LAND 13.10 ACRES

UTILIZED LAND 13.10 ACRES

NUMBER OF EMPLOYEES 294

FIRM TYPE PUBLIC LTD

PRODUCTS DISTRIBUTION

TRANSFORMERS& HEAVY

STRUCTURAL ITEMS

NATURE OF BUSINESS MANUFACTURER

CATEGORY ELECTRICAL ENGINEERING

KEY POINT MULTIFARIOUS ACTIVITIES

INDUSTRY FOCUS ENERGY AGENTS



LEVEL OF EXPAND INTERNATIONAL

AREA ALL OVER INDIA & ABROAD

HEAD OFFICE 7th

FLOOR, HOUSING BOARD

OFFICE COMPLEX,

PANAMPALLY NAGAR,COCHIN-

682036

VISION

Manufacture products to the requirements and to achieve targeted production.

Continues development in the field of experience to be a market leader

MISSION

Ensure prompt serving and to achieve continuous improvement.

Applying state-of-art technology, process and innovative solutions

Building long term relationship with stakeholders in an environment of fair

business ethics and values.

Creating value through sustainable and profitable growth.

Leveraging productivity through highly motivated and empowered team.

OBJECTIVES

The KEL which was formed in the year 1947 has the following objectives which

are as follows:

To carry on the business of electrical and structural engineering.



To manufacture engineering equipment and fittings, electrical and plastic

goods and goods required for military and sports.

To provide welfare for the company employees.

To enter into foreign collaboration.

To expand business to all others states in India

OWNERSHIP PATTERN

Kerala Electrical and Allied Engineering Co.Ltd is a public sector undertaking

which is fully owned by the government of kerala. It was incorporated on 5th june,

1964. The administrative department of KEL is the industries department of kerala

government. 100% equity is with government of kerala. The main source of fund

for the company is government. Other than Government, they had taken loans from

State Bank of Travancore (SBT), State Bank of India (SBI), State Bank of Mysore

(SBM), and Federal Bank. These banks are granting loans to government on the

basis to shares at time of new capital. The company had taken working capital

loans from industrial finance corporation of India (IFCI) and Industrial

Development Board of India (IBDI). The government will allow fund for the

company from the KIRFB (Kerala Industrial and Revitalization Fund Board).

HISTORY AND GROWTH

The KERALA ELECTRICAL AND ALLIED ENGINEERING COMPANY

LIMITED (KEL) was established in 1968 in the state of Kerala, India. It is fully

owned by the Government of Kerala engaged in manufacturing electrical

engineering goods. Kerala Electric and Allied Engineering Company Limited have



corporate office in Cochin which was properly situated at Panampally Nagar,

Cochin. It has four manufacturing units in various parts of state. The company has

various office which can be situated at major cities of the India to improve

marketing activities and to provide smooth after service to the company. Some of

the major centers among them are at New Delhi, Mumbai, Chennai, Bangalore,

Hyderabad, Cochin and Trivandrum. KEL is considered as the one of the biggest

public sectors in the state. The company has progressively expanded its range of

manufactured goods and service over the year and has strategically broadened its

customer base on a global level. KEL offers good quality products and service to

the customers, with a man power of over 1400 which included over 250

experienced and well qualified engineers.

The primary objective of company is generation, transmission, distribution and

utilization of electric power. KEL is a major producer and distributor of

transformer, switch gear, transmission line towers, substation equipment and

accessories to various State Electricity Boards of India.

KEL entered in multi-activities for broadening their wider domestic and overseas

market. The company has four manufacturing units located in various districts like

Kundara, Mamala, Olavakkot, and Kasargod has compliance with an ISO 9001-

2000 standards.

The KEL maintain electrical power transmission and distribution networks which

includes H.T, L.T, substations, both indoor and outdoor type, packages/unitized

substations, overhead transmission lines and Pylons, booster stations and street

light etc. KEL has acquired advanced technology with the support of various

expert manufactures from abroad like EVR of France for producing inductor type

brushless alternators, UNELEC of France for producing HRC fuses and



MOTEURS LEROY SOMER of France for producing air conditioner generators

etc.

PRODUCT PROFILE

The company has majorly operated through two divisions, which are

a) Transformer Division and

b) Structural Division

A. TRANSFORMER DIVISION

The Transformer division went on stream in 1968. It has facilities for producing

distribution transformer and medium power transformers up to 1600KVA 33KVA

with annual production capacity of 600000KVA. The transformers of 100KV,

160KV and 500KV have more demand. Major products ranges of this division are:

1) Oil filled circuit distribution transformer

2) Oil filled on load tap changer (OLTC). Transformers with automatic voltage

regulator (AVR) and remote tap changing cubicable (RTCC)

3) Oil filled autotransformer.

4) Oil filled amorphous core transformer.

5) Dry type transformer (resin impregnated)

6) Unitized substations with oil filled dry type transformer.

Even though the division has capacity to manufactures transformers of rating up to

3000KVA classes, the majority of transformers manufactured in the range

100KVA-160KVA.



B.STRUCTURAL DIVISION

The structural fabrication shop was setup in 1967. This division can have an

installed capacity of 1200 per annum. The division has a team of professional

engineers, Technicians & other employee with adequate experience for Performing

Designing Fabrication & Erection. There is a Centralized Planning & Quality

Assurance Department. This division will be able to earn good will of many states

and satisfied execution of number of projects involving Hydro mechanical

equipment. In structural division number of machines is employed one team will

work on each machine. Each team include three members, they are under the

control of leader. A team involves one welder, one fitter, and one unskilled worker.

These machines and its products are given:

1. Gear Hobbling Machines - used for gear cutting

2. Milling Machine - Slots, plane milling etc used for cutting

3. Laith machine - for forming thread

4. Vending Machine - Used for 12 mm pipe bending, which is used

in transformer tank

5. Gillette Machine - for cutting the palter up to 12mm

6. Press breaker Machine - Plates bending 90 degree, the capacity up to

12mm

7. Drilling Machine - used for drilling the plates

8. Mg Welding - used for welding

The structural divisions holds one manager, production Engineer, foreman and

charge.



MARKET

Their products are marketed by an extensive network of marketing officers located

in major cities like

New Delhi,Trivandrum, Cochin, Hyderabad, Kolkatta. These officers provide all

supportive services to the sales and marketing team to guarantee complete

customer satisfaction.

TECHNOLOGY

It has a company in turn with modern technology associated with reputed overseas

manufactres who are expert in their respective fields. Technical collaboration are

with EVR of France for the manufactures of HRc fuses and MOTEURS LEROY

SOMER of France for the manufactures of brushless A.C generation.

TRADE UNIONS

KEL has four trade unions and have major rule in existing promotion policy of the

company. The existing promotions policy applicable to the work men of the

mamala unit was signed between the management and the trade union such as:

1. KEL employee congress (INTUC)

2. KEL employee union (CITUC)

3. KEL employee organization (STU)

4. KEL workers union



MAJOR CUSTOMERS

KSEB

INDIAN RAILWAYS

BHEL

CROMPTON GREAVES LTD

BEML

R & DE (engineers) PUNE

BDL HYDERABAD (HMS)

COMPETITORS

The main competitors of KEL in the market are:

1. Kaviaka transformers:Karnataka Vidyuth Karkhane (KaViKa) is

Government of Karnataka undertaking

2. Indo Tech Transformers: This is a Chennai based transformer

manufacturing company, who is one among the major competitors of

KEL. It is a private limited company.

3. Rohini transformers: It is also a private firm.

4. Kirloskar Bangalore

5. Crompton greaves Chennai

6. Intrans ernakulam

7. TELK angamaly



OVERSEAS PARTNERSHIP

As a company in true with modern technology, the company is associated with

reputed overseas manufactures who are experts in their respective fields.

PRODUCT MANUFACTURER

General purpose brushless air

conditioning generators

MOTEURS LEROY SOMERS,

FRANCE

Induction brushless alternators for

lighting and conditioning of rail

coaches.

EVR, FRANCE

HRC fuses UNELEC, FRANCE

SWOT ANALYSIS

In this segment we are dealing with the following aspects:

STRENGTHS OF KEL

WEAKNESSES OF KEL

OPPORTUNITIES TO KEL

THREATS TO KEL

STRENGTHS

It has highly qualified personnel

It is an ISO 9001 and 2000 certified company

Direct control from the part of Kerala Government



KEL provide inevitable and valuable service to society.

The Company manufactures good product without any delays.

It maintain good industrial relations.

It has good infrastructural facilities

It ensures quality of product

Following a dynamic and democratic management style within the firm.

WEAKNESSES

Modern technology and machines are not implemented

Adequate technology of material processing is not exercised.

In adequate control over raw materials result in wastage

Absenteeism because of heavy workload

Delay in decision making

OPPURTUNITIES

It can adopt new technology in production

It can adopt new method of accounting

It can buy quality materials and maintained an effective material

control.

Globalization enables the company to find new markets foreign country.

Due to excess use of electricity, there is always an opportunity for

expanding business.



Company can sustain existing monopoly environment due to less

competitor in the market.

THREATS

As due to lack of acknowledgement and decision there is resist in the

improvement and adaption of new technology for their products

Possibility of new foreign investment in this industry can affect the

market share of the firm.

Labor turnover

Hike in transportation charges

Lack of skilled work force

Absenteeism because of workload.

FUTURE EXPANSION

1. Development of dual frequency alternators for Army.

2. Development of under slung SLR power for Indian Railway

3. Development of water cooled alternators for India navy

4. Development of compact alternators of reduces cost.



CHAPTER 3

RESEARCH DESIGN



CHAPTER – 3

RESEARCH DESIGN

3.1 FINANCIAL STATEMENT ANALYSIS ON KEL LTD

3.2 SCOPE OF THE STUDY

The scope of the project is fully dependent upon the objective of the project.

The study can be helpful to the company for conducting any further

research.

The study is also helpful in finding out the respondent‟s opinion toward the

certain attributes.

It is also helps in finding out the reach and effectiveness of the financial system

3.3 OBJECTIVES OF FINANCIAL STATEMENTS ANALYSIS

The primary objective of financial statement analysis is to understand and diagnose

the information contained in the financial statement with a view to judge the

profitability and financial soundness of firm, and to make a forecast about the

future prospects of the firm. However the objectives of financial statement analysis

are as follows:

1. To assess the earning capacity or profitability of the firm

2. To make inter firm analysis and comparison

3. To assess the operational efficiency and managerial effectiveness.



4. To assess the term as well as long solvency of the firm

5. To help in decision making and control of the firm

These are some of the important objective for the analysis of financial statement

for a limited company. Thus the analysis of financial statement help the firm in

knowing their current position and as well as to position in the future

3.4 RESEARCH METHODOLOGY

Research methodology or research design is a comprehensive master plan

of the research study to the undertaken giving a general statement of the

methods to be used. Research methodology is the systematic way to solve the

research problems.

METHODS OF DATA COLLECTION

Primary data: Primary data are those collected by the researcher himself

and thus are original in character.

Secondary data: The study is based mainly on the secondary data. It is

taken from published source of the company like annual financial statements

and other financial official records magazines etc.

Secondary data has been collected with the help of company prospects,

brochures, annual reports, journals, magazines and internet.

DATA COLLECTION

The whole study mentioned above was based on secondary data of KEL.

Secondary data are those data which are published by the company. These data has



a nature of secondary style that‟s why it is called as secondary data. The following

secondary data were used for the analysis.

ANNUAL REPORT OF KEL

BALANCESHEET OF KEL

PROFIT AND LOSS OF KEL

3.4 COMPARATIVE STATEMENT

Comparative study of financial statement is the comparison of the financial

statement of the business with the previous year‟s financial statements and with the

performance of other competitive enterprises, so that weakness may be identified

and remedial measures applied. The comparative statement may show the

following:

Absolute figures

Changes in absolute figures

Absolute data terms of percentages

Increase of decrease in terms of percentage

Comparative statements can be prepared for both types of financial statements i.e.,

Balance sheet as well as profit and loss account. The comparative profits and loss

account will present a review of operating activities of the business. The

comparative balance shows the effect of operation on the assets and liabilities that

change in the financial position during the period under consideration.

Comparative analysis is the study of trend of the same items and computed items

into or more financial statements of the same business enterprise on different dates.



The presentation of comparative financial statements, in annual and other reports,

enhances the usefulness of such reports and brings out more clearly the nature and

trends of current changes affecting the enterprise. While the single balance sheet

represents balances of accounts drawn at the end of an accounting period, the

comparative balance sheet represents not early the balance of accounts drawn on

two different dates, but also the extent of their increase or decrease between these

two dates. The single balance sheet focuses on the changes that have taken place in

one accounting period. The changes are the direct outcome of operational

activities, conversion of assets, liability and capital form into others as well as

various interactions among assets, liability and capital. The two comparative

statements are:

Balance sheet

Income statement.

3.4 RATIO ANALYSIS

Ratio analysis is a widely use tool of financial analysis. It can be used to compare

the risk and return relationship of firms of different sizes. It is defined as the

systematic use of ratio to interpret the financial statements so that the strengths and

weakness of a firm as well as its historical performance and current financial

condition can be determined. The term ratio refers to the numerical or quantitative

relationship between two items and variables. These ratios are expressed as

IV. Percentage

V. Fraction

VI. Proportion of numbers



These alternative methods of expressing items which are related to each other are,

for purpose of financial analysis, referred to as ratio analysis. It should be noted

that computing the ratio does not add any information not already inherent in the

above figures of profits and sales. What the ratio does is that they reveal the

relationship in a more meaningful way so as to enable equity investors;

management and lenders make better investment and credit decision.

3.5 LIQUITDITY RATIOS

It refers to the ability of the firm to meet its current liabilities. The liquidity ratio,

therefore, are also called solvency ratio. These ratios are used to assess the short-

term financial position of the concern. They indicate the firm‟s ability to meet its

current obligation out of current resources. In the word of Saloman j. Flink,

“Liquidity is the ability of the firms to meet its current obligation as they fall due”.

Liquidity ratio includes three ratios:-

CURRENT RATIO

QUICK RATIO OR ACID TEST RATIO

ABSOLUTE LIQUIDITY RATIO

A) CURRENT RATIO

The current ratio expresses the relationship between the firm‟s current assets and

its current liabilities. Current assets normally include cash, marketable securities,

accounts receivable and inventories. Current liabilities consist of accounts payable,

short term notes payable, short-term loans, current maturities of long term debt,

accrued income taxes and other accrued expenses (wages).



Current ratio = current assets/ current liabilities

Significance:

It is generally accepted that current assets should be 2 times the current liabilities.

In a sound business, a current ratio of 2:1 is considered an ideal one. If current

ratio is lower than 2:1, the short term solvency of the firm is considered doubtful

and it shows that the firm is not in a position to meet its current liabilities in times

and when they are due to mature. A higher current ratio is considered to be an

indication that of the firm is liquid and can meet its short term liabilities on

maturity. Higher current ratio represents a cushion to short-term creditors, “the

higher the current ratio, the greater the margin of safety to the creditors”. The

biggest drawback o the current ratio is that it is susceptible to “Window dressing”.

This ratio can be improved by an equal decrease in both current assets and current

liability.

B) QUICK RATIO

Measures assets that are quickly converted into cash and they are compared

with current liabilities. This ratio realizes that some of current assets are not easily

convertible to cash e.g., inventories. The quick ratio, also referred to as acid ratio,

examines the ability of the business to cover its short-term obligations from its

“quick” assets only (i.e., it ignores stock).

The quick ratio is calculated as follows

Quick ratio = quick assets/current liabilities



Significance

The standard liquid ratio is supposed to be 1:1 i.e., liquid assets should be equal to

current liabilities. If the ratio is higher, i.e., liquid assets are more than the current

liabilities, the short term financial position is supposed to be very sound. On the

other hand, if the ratio is slow, i.e., current liabilities are more than the liquid

assets, the short term financial position of the business shall be deemed to be

unsound.

C) CASH RATIO

This is also known as cash position ratio or super quick ratio. It is a variation of

quick ratio. This ratio establishes the relationship between absolute liquid assets

and current liabilities. Absolute liquid assets are cash in hand, bank balance and

readily marketable securities. Both the debtors and the bills receivable are exclude

from liquid assets as there is always an uncertainty with respect to their realization.

In other words, liquid assets minus debtors and bills receivable are absolute liquid

assets. The cash ratio is calculated as follows

Cash Ratio = Cash in hand & at bank + marketable securities/current

liabilities

Significance

This ratio gains much significance only when it is used in conjunction with the first

two ratios. The accepted norm for this ratio is 50% worth absolute liquid assets are

considered adequate to pay Rs.2 worth current liabilities in time as all the creditors

are not expected to demand cash at the same time and then cash may also be

realized from debtors and inventories. This test is a more rigorous measure of a

firm‟s liquidity position. This type of ratio is not widely used in practice.



3.6 ACTIVITY OR TURNOVER RATIOS

Debtors Turnover Ratio

This ratio indicates the relationship between credit sales average debtors during the

year.

Debtors turnover ratio = Net credit sales/avg debtors + avg B/S

When calculating this ratio, provision for bad and doubtful debt is not deducted

from the debtors, so that it may not give a false impression that debtors are

collected Quickly.

Significance:

This ratio indicates the speed with which amount is collected from debtors. The

higher the ratio is better it is since it indicates that amount from debtors is being

collected more quickly. The more quickly the debtors pay the less the risk from

bad debts and so the lower the expenses of collection and increase in the liquidity

of the firm. By comparing the debtor‟s turnover ratio of the current year with the

previous year, it may be assessed whether the sales policy of the management is

efficient or not.

4. Fixed Assets Turnover Ratio:

The fixed assets turnover ratio measures the efficiency with which the firm has

been using its fixed assets to generate sales. It is calculated by dividing the firm‟s

sales by its net fixed assets as follows:

Fixed assets turnover ratio = Net sales/net fixed assets



Significance:

This ratio gives an ideal about adequate investment or over investment or under

investment in fixed assets. As a rule, over- investment in unprofitable fixed assets

should be avoided to the possible extent. Under-investment is also equally bad

affecting unfavorably the operating costs and consequently the profit. In

manufacturing concerns, the ratio is important and appropriate, since sales are

produced not only by use of working capital but also the capital invested in fixed

assets. An increase in this ratio is the indicator of efficiency in work performance

and a decrease in this ratio speaks of unwise and improper investment in fixed

assets.

5. Working capital turnover ratio:

This ratio shows the number of times the working capital results in sales. In other

words, this ratio indicates the efficiency or otherwise in the utilization of short

term funds in making sales. Working capital means the excess of current assets

over current liabilities. In fact, in the short run, it is the current assets and current

liabilities which pay a major role. A careful handling of the short term assets and

funds will means a reduction in the amount of capital employed, thereby improving

turnover. The following formula is used to measure this ratio:

Working capital turnover ratio = Net sales/working capital

Significance:

This ratio is used to assess the efficiency with which the working capital has been

utilized in a business. A higher working capital turnover indicates either the

favorable turnover of inventories and receivables and/or the inadequate of net



working capital accompanied by low turnover of inventories and receivables. A

low ratio signifies either the excess of net working capital or slow turnover of

inventories and receivables or both. This ratio can at best be used by making of

comparative and trend analysis for different firms in the same industry and for

various periods.

LEVERAGE RATIOS OR SOLVENCY RATIOS

5. Debt to Equity Ratio

This ratio indicates the extentto which debt is covered by shareholder‟s funds. It

reflects the relative position of the equity holders and the lenders and indicates the

company‟s policy on the mix of capital funds. The debt to equity ratio is calculated

as follows:

Debt equity ratio = total debt/equity

Significance:

The importance of debt-equity ratio is very well reflected in the words of Weston

and Brigham which are reproduced here: “Debt-equity ratio indicates to what

extent the firm depends upon outsiders for its existence. For the creditors, this

provides a margin of safety. For the owners, it is useful to measure the extent to

which they can gain the benefits of maintaining control over the firm with a limited

investment”. The debt-equity ratio states unambiguously the amount of assets

provided by the outsiders for every one rupee of assets provided by the

shareholders of the company.

6. Proprietary Ratio:



This ratio is also known as „Owners fund ratio‟ or „shareholders equity ratio‟ or

„Equity ratio‟ or „Net worth ratio‟. This ratio establishes the relationship between

the proprietors fund and total tangible assets. The formula for this ratio may be

written as follows.

Proprietary ratio = Shareholders fund/total assets

Significance:

This ratio represents the relationship of owners‟ funds to total tangible assets,

higher the ratio or the share of the shareholders in the total capital of the company

better is the long term solvency position of the company. This ratio is of

importance to the creditors who can ascertain the proportion of the shareholder‟s

funds in the total assets employed in the firm. A ratio below 50% may be alarming

for the creditors since they may have to lose heavily in the event of company‟s

liquidation on account of heavy losses.

7. Solvency ratio

Solvency ratio = Asset/Total Debt

The main objective of solvency ratio is to test or measure the solvency of a firm.

The term solvency means the ability of a firm to pay the outside liabilities. For the

solvency ratios standard is not fixed. Generally, higher the solvency ratio, stronger

is its financial position and vice versa. It indicates the degree of solvency of the

business.

8. Fixed asset to net worth ratio

This is calculated for the purpose of knowing the extent of proprietor‟s funds

invested in fixed assets. There is no rule of thumb to interpret this ratio. But 0.60 to

0.65 (60 to 65%) is considered to be satisfactory in case of industrial undertakings.



Fixed asset to net worth ratio = Fixed assets/proprietor‟s

Significance

This ratio indicates the extent to which shareholders‟ funds are invested in the

fixed assets. Generally, the fixed assets should be purchased out of shareholders

fund. If the ratio is less than 1 it will mean that all fixed assets are purchased out of

proprietor‟s fund is invested in working capital.

PROFITABILITY RATIO

Net profit ratio

This is a widely used measure of performance and is comparable across companies

in similar industries. The fact that s business works on a very low margin need not

cause alarm because there are some sectors in the industry that on a basis of high

turnover and low margins, for example supermarkets and motorcar dealers. What is

more important in any trend is the margin and whether it compares well with

similar businesses.

Net profit ratio = net profit/net sales*100

Significance:

An objective of working net profit ratio is to determine the overall efficiency of the

business. Higher the profit ratio, the better business. The net profit ratio indicates

the management‟s ability to earn sufficient profits on sales not only to cover all

revenue operating expenses of the business, the cost of borrowed funds and the

cost of merchant designer servicing, but also to have a sufficient margin to pay

reasonable compensation to shareholders in their contribution to the firm. A high

ratio ensures adequate return to shareholders as well as to enable a firm to with

stand adverse economic conditions. A low margin has an opposite implication.



3.5 LIMITATIONS OF THE STUDY

The study was conducted mainly on the basis of published secondary data, so

the effectiveness of the study depends on the correctness of information provided

in the data.

The study covers only for a limited period of 5 years

Time available for the study was limited.

Inter firm comparison of the data was not possible due to the non- availability

of the data.

3.6 CHAPTER SCHEME

CHAPTER -1: Introduction to the study

CHAPTER -2: company and industry profile

CHAPTER -3: Research Design

CHAPTER -4: Data Analysis and Interpretation

CHAPTER -5: Findings &Suggestions ,Conclusion

Bibliography

Annexure



CHAPTER 4

DATA ANALYSIS AND INTERPRETATION



CHAPTER-4

DATA ANALYSIS AND INTERPRETATION

1) RATIO ANALYSIS

A)RATIOS

1. LIQUIDITY RATIO

A) CURRENT RATIO

Table 4.1 Table showing Current Ratio

Year

Current Assets

Current Liability

Current ratio

2009-2010 632667872 425018025 1.48

2010-2011 682525117 4626542840 1.47

2011-2012 899987886 636680194 1.41

2012-2013 642980970 732498707 0.87

2013-2014 866743883 905252247 0.95



Chart 4.1 Current Ratio of KEL from 2009-2014

INTERPRETATION

The idle current ratio of a firm is 2:1. The company is following a good current

ratio of 1.48 in the year 2008-2009, but after the current ratio of the firm is falling

at a drastic rate. It shows the poor management of working capital by the firm. In

the financial year 2013-2014 the company has made a slight improvement that is

from 0.87 to 0.95. This is good for the future.

0

0.2

0.4

0.6

0.8

1

1.2

1.4

1.6

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Current Ratio



B)QUICK RATIO

Table 4.2 Table showing quick Ratio

Year

Quick asset

Current Liabilities

2009-2010 435291318 425018025 1.02

2010-2011 498651099 462642840 1.07

2011-2012 704776653 636680194 1.10

2012-2013 458293986 732498707 0.62

2013-2014 678753862 905252247 0.74

Chart 4.2 Quick Ratio of KEL from 2009-2014

0

0.2

0.4

0.6

0.8

1

1.2

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Quick Ratio



INTERPRETATIONS

Quick ratio shows the relationship between quick asset and liabilities. The

standard quick ratio for a firm is 1:1. The KEL has a satisfactory quick ratio and

highest in the year 2011-2012. But it is reduced drastically in the year 2011-2012.

An improvement is made by the company in year 2013-2014

C) ABSOLUTE LIQUID RATIO

Table 4.3 Table showing Absolute Liquid Ratio

Year

Absolute Liquid

asset

Current Liability

Cash ratio

2009-2010 15303332 425018025 0.036006312

2010-2011 13919504 462642840 0.030086933

2011-2012 16069425 636680194 0.025239398

2012-2013 17561604 732498707 0.023974928

2013-2014 14817796 905252247 0.016368693



Chart 4.3 Absolute Liquid Ratio of KEL from 2009-2014

INTERPRETATION

Absolute liquid ratio shows the relationship between absolute liquid assets and

current liabilities. The standard quick ratio is 1:2. The absolute liquid ratio of KEL

in 2013-2014 is the highest. The lowest rate is during the year 2012-2013

0

0.005

0.01

0.015

0.02

0.025

0.03

0.035

0.04

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Absolute Liquid Ratio



2. PROFITABILITY RATIO

A) NET PROFIT RATIO

Table 4.4 Table showing Net profit Ratio

Year

Net profit / loss

Net Sales

Net profit ratio

2009-2010 -9781150 934451927 -1.046725863

2010-2011 -20735794 913913181 -2.268901951

2011-2012 -15081345 990745407 -1.522222045

2012-2013 -62828880 729296232 -8.615001318

2013-2014 -64932902 642127681 -10.11214809

Chart 4.4 Net Profit Ratio of KEL from 2009-2014

-12

-10

-8

-6

-4

-2

0

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014



INTERPRETATION

KEL is continuously running in loss from 2008 to 2013. The highest loss was made

during the financial year 2013-2014. Thus the net profit ratio of KEL is not

satisfactory.

3) ACTIVITY RATIO

A) DEBTORS TURNOVER RATIO

Table 4.5 Table showing Debtors Turnover Ratio

Year

Net Sales

Average Debtors

Debtors Turnover

2009-2010 934451927 329964471 2.831995591

2010-2011 913913181 391522743 2.334253111

2011-2012 990745407 508264320 1.949271999

2012-2013 729296232 501476910 1.454296733

2013-2014 642127681 436518813 1.471019488



Chart 4.5 Debtors Turnover ratio of KEL from 2009-2014

INTERPRETATIONS

KEL has a high debtor’s turnover ratio during the year 2009-2010. After that we

can see a reduction in each year. The lowest debtor’s turnover ratio is made

during the year 2012-2013.But made an improvement during the year 2013-2014.

Thus the debtor’s turnover ratio of KEL is satisfactory.

0

0.5

1

1.5

2

2.5

3

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Debtors Turnover Ratio



B) FIXED ASSET TURNOVER RATIO

Table 4.6 Table showing Fixed Asset Ratio

Year

Net sales

Net Fixed Asset

Fixed Asset

Turnover Ratio

2009-2010 934451927 93487443 9.99

2010-2011 913913181 90284879 10.12

2011-2012 990745407 73977716 13.39

2012-2013 729296232 70336181 10.36

2013-2014 642127681 76992939 8.34



Chart 4.6 Fixed Asset Turnover Ratio of KEL from 2009-2014

INTERPRETATIONS

KEL has maintained good fixed asset turnover ratio during the financial years

2009-2014.The highest ratio was maintained during the financial year 2011-2012.

Thus the fixed assets turnover ratio of KEL is appreciable.

0

2

4

6

8

10

12

14

16

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Fixed Asset Turnovrt Ratio



4) SOLVENCY RATIO

A) DEBT EQUITY RATIO

Table 4.7 Table showing Debt Equity ratio

Year

Long Term Debt

Share Holder Fund

Debt equity Ratio

2009-2010 519263522 715348598 0.72

2010-2011 549029182 716324575 0.76

2011-2012 433533779 873048598 0.49

2012-2013 210952754 871480770 0.24

2013-2014 284434163 871480770 0.32

\

Chart 4.7 Debt Equity Ratio of KEL from 2009-2014

0

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Debt Equity Ratio



INTERPRETATIONS

The standard debt equity ratio of a firm is 1:1 that mean shareholders and long –

term fund should be equal. But KEL is not maintaining a good debt equity ratio.

The highest ratio made was 0.76, but low debt equity ratio is favorable from long

term creditor’s point of view. Thus it will increase the sales.

B) PROPRIETARY RATIO

Table 4.8 Table showing proprietary ratio

Year

Share holders

Fund

Total Assets

Proprietary ratio

2009-2010 715348598 727773143 0.98

2010-2011 715348598 774427824 0.92

2011-2012 873048598 975588430 0.89

2012-2013 871480770 784429210 1.11

2013-2014 871480770 965731257 0.90



Chart 4.8 Proprietary Ratio of KEL from 2009-2014

INTERPRETATION

KEL show a satisfactory proprietary ratio. Thus it has a good long- term solvency

.The highest ratio was made during the year 2013-2014

0

0.2

0.4

0.6

0.8

1

1.2

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

proprietary ratio



C) SOLVENCY RATIO

Table 4.9 Table showing Solvency Ratio

YEAR

TOTAL LIABILITIES

TOTAL ASSETS

SOLVENCY RATIO

2009-2010 944281547 727773143 129.74

2010-2011 1011672022 774427824 130.63

2011-2012 1070213973 975588430 109.69

2012-2013 943451461 784429210 120.27

2013-2014 1189686410 965731257 123.12

Chart4.9 Solvency Ratio of KEL from 2009-2014

95

100

105

110

115

120

125

130

135

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014



INTERPRETATIONS

Generally lower solvency ratio is more satisfactory for a firm, but KEL is showing a

high solvency ratio which is not appreciable. The highest is show during the year

2011-2012. Thus KEL should try to reduce its total liabilities to reduce its solvency

ratio.

D) FIXED ASSET TO NETWORTH RATIO

Table 4.10 Table showing Fixed Asset to Net worth Ratio

Year

Fixed asset

Share holders fund

Fixed asset to net

worth ratio

2009-2010 93487443 715348598 13.06

2010-2011 90284879 715348598 12.62

2011-2012 73977716 873048598 8.47

2012-2013 70336181 871480770 8.07

2013-2014 76992939 871480770 8.83



Chart 4.11 Fixed Asset to Net worth Ratio of KEL from 2009-2014

INTERPRETATIONS

The shareholders fund of KEL is more compared to fixed assets. It is a good sing

because the owner’s are more than sufficient to financial the fixed assets of KEL.

Thus fixed assets to net worth ratio of KEL is satisfactory.

0

2

4

6

8

10

12

14

Fixed Asset To Net worth Ratio



B ) TREND ANALYSIS

1. TREND ANALYSIS OF SALES OF KEL FROM 2009-2014

Table 4.12 Trend Percentage of Sales (Base year 2009)

Year

Amount of Sales

Trend Percentage

2009-2010 934451927 100

2010-2011 913913181 97.80

2011-2012 990745407 106.02

2012-2013 729296232 78.04

2013-2014 642127681 68.71

Chart 4.12 Trend Percentage of KEL from 2009-2014

0

20

40

60

80

100

120

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Trend Percentage of Sales



INTERPRETATION

The highest sales were made by KEL during the year 2011-2012. But KEL has made

some reduction in sales during the year 2013-2014.Impovement should be made

in sales.

2) TREND ANALYSIS OF INVENTORY OF KEL FROM 2009 TO 2014

Table 4.13 Trend Percentage of Inventory (Base year-2009)

Year

Amount of Inventory

Trend Perecentage

2009-2010 197376554 100

2010-2011 183874018 93.15

2011-2012 195211233 98.90

2012-2013 1846869885 93.57

2013-2014 187990021 95.24



Chart 4.13 Trend Percentage of inventory of KEL FROM 2009-2014

INTERPRETATION

KEL’s maintenance of inventory is not consistent from 2009-2014.Compared to

2009-2010 the lowest maintenance of inventory made by KEL was during the

year2010-2011The trend percentage of inventory of KEL is just satisfactory.

88

90

92

94

96

98

100

102

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

Trend percentage of inventory



3) TREND ANALISIS OF CASH OF KEL FROM 2009-2014

Table 4.14 TREND PERCENTAGE OF CASH (Base year 2009)

Year

Amount of cash

Trend percentage

2009-2010 13919504 100

2010-2011 16069425 115.44

2011-2012 175616064 126.16

2012-2013 14817796 106.45

2013-2014 120702938 867.14

Chart 4.13 Trend percentage of cash of KEL from 2009-2014

0

100

200

300

400

500

600

700

800

900

1000

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

TREND PERCENTAGE OF CASH



INTERPRETATION

Trend percentage of KEL shows a steady improvement compare to2010-2011. The

highest percentage made in cash was during the year 2013-2014: we can see a

tremendous hike in cash. Thus KEL has a very good maintenance of liquid cash.

4) TREND ANALYSIS OF CURRENT ASSETS OF KEL FROM 2009 TO 2014

Table 4.15 Trend Percentage of Current Assets (Base Year -2009)

Year

Amount of current asset

Trend Percentage

2010-2010 632667872 100

2010-2011 682525117 107.88

2011-2012 899987886 142.25

2012-2013 693540970 109.62

2014-2014 886743883 136.99



Chart 4.15 Trend percentage of cash of KEL from 2009-2014

INTERPRETATION

Trend analysis of current asset of KEL is showing a good increase compared to

2009-2010.The height percentage of current asset is showing during the year

2011-2012.

0

20

40

60

80

100

120

140

160

2009-2010 2010-2011 2011-2012 2012-2013 2013-2014

TREND PERCENTAGE OF CURRENT ASSET



2) COMPARATIVE BALANCE SHEET

4.16 COMPARATIVE BALANCE SHEET OF KEL LTD

AS ON 31ST

MARCH 2010 AND 2011

PARTICULARS 2009-2010

(in Rs.)

2010-2011

(in Rs. )

ABSOLU

TE

CHANGE

PERCENT

AGE

CHANGE

ASSETS

CURRENT ASSETS:

Cash and cash equivalents

Debtors

Inventories

Short term loans and

advances

13919504

372712452

197376554

48659362

16069425

410333034

183874018

72248640

2149921

37620582

-13502536

23589278

15.44538512

10.09372823

-6.84100301

48.47839559

TOTAL CURRENT ASSETS 632667872 682525117 49857245 7.88047682

INVESTMENTS:

Current investments

Non-current investments

-

50000

-

50000

-

-

-

-

TOTAL INVESTMENT 50000 50000 - -

FIXED ASSETS:

Tangible assets

Capital work in progress

3324902

60237941

55217435

35067444

21967933

-25170497

66.06996099

-

41.78512177

TOTAL FIXED ASSETS 93487443 90284879 -3202564 -3.45662204

Long-term loans and

advances

Other fixed assets

1567828

-

1567828

-

-

-

-

-

TOTAL ASSETS 727773143 774427824 46654681 6.41060768

LIABILITIES AND

CAPITAL

CURRENT LIABILITIES:

Short-term borrowings and

payables

Short-term provisions

344354007

80664018

370092698

9255012

25738691

11886124

7.474485697

14.73534829

TOTAL CURRENT 425018025 462642840 37624815 8.852522196



LIABILITIES

LONG-TERM DEBTS:

Long-term borrowings

Long-term provision

218805765

300457757

234886031

314143151

16080266

13685394

7.349105267

4.554847955

TOTAL LONG-TERM DEBT 519263522 549029182 29765660 5.732284041

TOTAL LIABILITIES 944281547 1011672022 67390475 7.136692993

SHAREHOLDERS FUND:

Share capital

Reserves and surplus

715348598

-

931857002

715348598

-952592796

-

-20735794

-

2.225212018

TOTAL SHAREHOLDERS

FUND

-

216508404

-237244198 -20735794 2.225212018

TOTAL LIABILITIES

AND CAPITAL

727773143 727773143 46654681 6.41060768




AS ON 31ST

MARCH 2011 AND 2012


(in Rs.)

2011-2012

(in Rs. )

ABSOLUT

E

CHANGE

PERCENT

AGE

CHANGE

(in %)

ASSETS

CURRENT ASSETS:


Debtors

Inventories


advances

16069425

410333034

183874018

72248640

17561604

606195606

195211233

81019443

1492179

1995862572

11337215

8770803

9.285826966

4.773258689

6.165751488

12.13974824

TOTAL CURRENT

ASSETS

682525117 899987886 217462769 31.86150423

INVESTMENTS:

Current investments


-

50000

-

55000

-

5000

-

10

TOTAL INVESTMENT 50000 55000 5000 10

FIXED ASSETS:

Tangible assets


55217435

35067444

38910272

35067444

-16307163

-

-2953263403

-

TOTAL FIXED ASSETS 90284879 73977716 -16307163 -1806189827

Long-term loans and

advances

Other fixed assets

1567828

-

1567828

-

-

-

-

-

TOTAL ASSETS 774427824 975588430 201160606 25.97538463

LIABILITIES AND

CAPITAL


Short-term borrowings

and payables


370092698

9255012

491942446

141737748

121849748

52187606

32.92411568

56.3884667

TOTAL CURRENT 462642840 636680194 174037354 37.61808007



LIABILITIES

LONG-TERM DEBTS:


Long-term provision

234886031

314143151

223719987

209813792

-76242088

-39253315

-

32.45918358

-12.3884667

TOTAL LONG-TERM

DEBT

549029182 433533779 -115495403 -

21.03629584

4


SHAREHOLDERS

FUND:

Share capital


715348598

-952592796

873048598

-967674141

157700000

-15081345

22.04519593

1.583189067

TOTAL SHAREHOLDERS

FUND

-237244198 -94625543 142618655 -6011470721

TOTAL LIABILITIES

AND CAPITAL

727773143 975588430 201160 606

25.97538463




AS ON 31ST

MARCH 2012 AND 2013


(in Rs.)

2012-2013

(in Rs. )

ABSOLU

TE

CHANGE

PERCENTA

GE

CHANGE (in

%)

ASSETS

CURRENT ASSETS:


Debtors

Inventories


advances

17561604

606195606

195211233

81019443

14817796

396758213

184656985

46717976

-2743808

-

209437393

-10524248

-34301467

-15.62390315

-34.54947395

-5.391210249

-42.3373276

TOTAL CURRENT

ASSETS

899987886 642980970 -

257006916

-28.55670837

INVESTMENTS:

Current investments


-

55000

50960000

55000

50960000

-

-

-

TOTAL INVESTMENT 55000 51015000 50960000 92654.54546

FIXED ASSETS:

Tangible assets


38910272

35067444

35268737

35067444

-3641535

-

-9.358801193

-

TOTAL FIXED ASSETS 73977716 70336181 -3641535 -4.922475574

Long-term loans and

advances

Other fixed assets

1567828

-

19448788

648271

17880960

648271

1140.492452

-

TOTAL ASSETS 975588430 784429210 -

199159220

-19.59424837

LIABILITIES AND

CAPITAL



payables


491942446

141737748

346279601

386219106

-

145662845

-

241481358

-29.6 0

0973305

166.8406213



TOTAL CURRENT

LIABILITIES

636680194 732498707 95818513 15.04970846

LONG-TERM DEBTS:


Long-term provision

223719987

209813792

90288844

120663910

-68355099

-

154225926

-43.08711553

-56.10463022

TOTAL LONG-TERM

DEBT

433533779 210952754 -

222581024

-51.34110323

TOTAL LIABILITIES 1070213973 943451461 -

126762512

-11.84459512

SHAREHOLDERS FUND:

Share capital


873048598

-967674141

871480770

-

1030503021

-1567828

-62828880

-0.179580839

6.492772447

TOTAL SHAREHOLDERS

FUND

-94625543 -15902251 -64396708 68.0542465

TOTAL LIABILITIES

AND CAPITAL

975588430 784429210 -

199159220

-19.59424837




AS ON 31ST

MARCH 2013 AND 2014


(in Rs.)

2013-2014

(in Rs. )

ABSOLUT

E

CHANGE

PERCENTA

GE

CHANGE (in

%)

ASSETS

CURRENT ASSETS:


Debtors

Inventories


advances

14817796

396758213

184656985

46717976

120702938

476279412

187990021

81771467

10 5885187

79521199

33030336

35053491

714.5812171

20.04273545

1.788450875

75.03212682

TOTAL CURRENT

ASSETS

642980970 866743883 223762913 34.8008609

INVESTMENTS:

Current investments


50960000

55000

-

55000

-50960000

-

-100

-

TOTAL INVESTMENT 51015000 55000 -50960000 -99.89218857

FIXED ASSETS:

Tangible assets


35268737

35067444

35283569

41709370

14832

6641926

0.042054242

18.94043375

TOTAL FIXED ASSETS 70336181 76992939 6656758 18.982488

Long-term loans and

advances

Other fixed assets

19448788

648271

21291164

648271

1842376

-

9.472960474

-

TOTAL ASSETS 784429210 965731257 181302047 23.11260783

LIABILITIES AND

CAPITAL



payables


346279601

386219106

445249536

460002711

98969935

7378605

28.58093134

19.10407949

TOTAL CURRENT 732498707 905252247 172753540 23.58414265



LIABILITIES

LONG-TERM DEBTS:


Long-term provision

90288844

120663910

164842431

119591732

74553587

-1072178

82.57231314

-0.888565603

TOTAL LONG-TERM

DEBT

210952754 284434163 73481409 34.83311197


SHAREHOLDERS FUND:

Share capital


871480770

-

1030503021

871480770

-

1095435923

-

-64932902

-

6.30108798

TOTAL SHAREHOLDERS

FUND

-15902251 -223955153 -6432902 0.408325

TOTAL LIABILITIES

AND CAPITAL

784429210 965731257 181302047 23.11260783



CHAPTER 5

FINDINGS SUGGESTIONS AND CONCLUSIONS



CHAPTER 5

FINDINGS,SUGGESTION & CONCLUSION

FINDINGES

Some of the findings made during the analysis of financial statement of KEL Were

as follows

KEL indicating a satisfactory current ratio which indicates that they

are maintain a good liquidity position.

KEL showing allow quick ratio which is favorable for the firm.

KEL is consistently going on a period of loss under the study. This is

not at all satisfactory for a government company.

KEL have a high fixed assets to net worth, this shows that owner fund

are more than sufficient to fiancé the fixed asset.

KEL had a good management of working capital till March 2012. But

after that the working capital turnover ratio of KEL is falling at a high

pace. This shows the in ability of the firm to manage working capital.

KEL is showing a high solvency in period under study ratio which is no

appreciable. A low solvency ratio is usually good.

KEL has a good long- term solvency so it shows a high proprietary

ratio in the period under study.

KEL has a low debt equity ratio which is satisfactory for long –term

creditor’s point of view



The trend of sales was showing an increasing trend till 2011-2012

and then decreased slightly when it reached 2013-2014 .This indicate

that slight in efficiency in the management of working capital by KEL.

Compared to base year 2009-2010 KEL showing a tremendous

improvement in the case of maintain cash. The trend of cash showing

an increasing trend.

The trend of current liability of KEL is showing an increasing trend.

This indicates that company is enjoying credit facilities from

suppliers.

The trend percentage of current assets is showing a great

improvement compared to the base year 2009-2010. Thus it shows

that the company having a good ability to meet it short –term

obligation.

5.2 SUGGESTION

KEL should try to adopt innovative technology to reduce its cost of

production.Also the adoption of new technology help the firm increase its

production and sales.

Although the current ratio of KEL is satisfactory, it should try to maintain it

at a standard rate of2:1 which would be good.

KEL’s average collection period is very high, for avoiding this company

should adopt some new technique.This will to help to improve the short

term liquidity position.

Company is running for a loss for last five years mainly due to the heavy

expenses incurred in the purchasing of raw material for production. They



should try to reduce its by purchasing the same material at a lower price

from other suppliers through questions.

KEL should t which will automatically increase their profit.

KEL should try to manage their working capital properly in order to meet its

short-term obligation and to increase the level of liquid cash.

The company should conduct a weekly meeting for material management,

production management and working capital management for better

operation of the company.

The company should conduct monthly regarding the performance of the company

during that month. This will help the employees to know the position of the firm

and will try to improve the performance of the firm

5.3 CONCLUSION

Financial statement of KEL has been thoroughly checked for getting the

information and data so collected has been thoroughly interpreted for drawing for

the study.

Inorder to avoid further loss KEL should try to adopt innovation technology to

reduce its cost of production. This will help the firm to increase its production and

sale. Through conducting weekly meeting and performance check employees will

be aware of company‟s position and though various employee friendly

motivational activities employees will try to improve their performance and

company will have a good fortune.

It has been a matter of immense pleasure, hunour and challenge to have this

opportunity to take up this project and complete it successfully. While developing

this project. I have learnt a lot about how a firm manages its financial statement.



BIBLIOGRAPHY



BIBLOGRAPHY

Annual Report of FINANCIAL STATEMENT ANALYSIS OF KERALA

ELECTRICAL AND ALLIED ENGINEERING COMPANY LTD. (2009 - 2014)

KOTHARI C.R, Research Methodology, New Delhi, Vikas Publishing House,

1990.

M.Y KHAN AND P K JAIN, Financial Management, New Delhi, Tata

McGraw-Hill

Publishing Company Limited, 2006.

PANDEY I M, Financial Management, Vikas Publishing House Private

Limited, 2004.

PERIASAMY P, Financial Cost and Management Accounting, Mumbai,

Himalaya Publishing House, 2013.

TulsianP.C ,Cost accounting, Tata Mcrow-Hill Publishing Company Ltd

2008.

Websites

https://www.google.co.in/search?newwindow=1&site=&source=hp&q=FINAN

CIAL+STATEMENT+ANALYSIS



ANNEXURES



ANNEXURE

BALANCDSHEET AS ON 2009-10

PARTICULARS AMOUNT

ASSETS

CURRENT ASSETS:


Debtors

Inventories

Short term loans and advances

13919504

372712452

197376554

48659362

TOTAL CURRENT ASSETS 632667872

INVESTMENTS:

Current investments


-

50000

TOTAL INVESTMENT 50000

FIXED ASSETS:

Tangible assets


3324902

60237941

TOTAL FIXED ASSETS 93487443

Long-term loans and advances

Other fixed assets

1567828

-

TOTAL ASSETS 727773143

LIABILITIES AND CAPITAL


Short-term borrowings and payables


344354007

80664018

TOTAL CURRENT LIABILITIES 425018025

LONG-TERM DEBTS:


Long-term provision

218805765

300457757

TOTAL LONG-TERM DEBT 519263522

TOTAL LIABILITIES 944281547

SHAREHOLDERS FUND:

Share capital


715348598

-931857002

TOTAL SHAREHOLDERS FUND -216508404

TOTAL LIABILITIES AND CAPITAL 727773143



BALANCESHEET AS ON 2010-11

PARTICULARS AMOUNT

ASSETS

CURRENT ASSETS:


Debtors

Inventories


16069425

410333034

183874018

72248640


INVESTMENTS:

Current investments


-

50000


FIXED ASSETS:

Tangible assets


55217435

35067444


Long-term loans and advances

Other fixed assets

1567828

-






370092698

9255012


LONG-TERM DEBTS:


Long-term provision

234886031

314143151



SHAREHOLDERS FUND:

Share capital


715348598

-952592796






PARTICULARS AMOUNT

ASSETS

CURRENT ASSETS:


Debtors

Inventories


17561604

606195606

195211233

81019443


INVESTMENTS:

Current investments


-

55000


FIXED ASSETS:

Tangible assets


38910272

35067444


Long-term loans and

advances

Other fixed assets

1567828

-






491942446

141737748


LONG-TERM DEBTS:


Long-term provision

223719987

209813792



SHAREHOLDERS FUND:

Share capital


873048598

-967674141





BALANCESHET AS ON 2012-13

PARTICULARS AMOUNT

ASSETS

CURRENT ASSETS:


Debtors

Inventories


14817796

396758213

184656985

46717976


INVESTMENTS:

Current investments


50960000

55000


FIXED ASSETS:

Tangible assets


35268737

35067444


Long-term loans and

advances

Other fixed assets

19448788

648271






346279601

386219106


LONG-TERM DEBTS:


Long-term provision

90288844

120663910



SHAREHOLDERS FUND:

Share capital


871480770

-1030503021






PARTICULARS AMOUNT

ASSETS

CURRENT ASSETS:


Debtors

Inventories


120702938

476279412

187990021

81771467


INVESTMENTS:

Current investments


-

55000


FIXED ASSETS:

Tangible assets


35283569

41709370


Long-term loans and

advances

Other fixed assets

21291164

648271






445249536

460002711


LONG-TERM DEBTS:


Long-term provision

164842431

119591732



SHAREHOLDERS FUND:

Share capital


871480770

-1095435923



FINANCIAL STATEMENT ANALYSIS KEL LTD

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