Ratio analysis

INTRODUCTION
Financial statements are prepared primarily for decision making. They play a dominant role in setting the frame work of managerial decisions. But the information provided in the financial statements is not an end in itself as no meaningful conclusions can be drawn from these statements alone. How even the information provided in the financial statements is of immense use in making decisions through analysis and interpretation of financial statements. Financial analysis is the process of identifying the financial strengths & weaknesses of the firm by properly establishing relationship between the items of the balance sheet and the profit & loss account. These are various methods (or) techniques used in analyzing financial statements such as Comparative, Common size, Working Capital, Funds Flow Analysis, Cash Flow, Analysis, Cost Volume Profit, Trend Analysis, Ratio Analysis.

MEANING & CONCEPT OF FINANCIAL ANALYSIS:

The term Financial Analysis also known as analysis and interpretation of financial analysis statements refers to the process of determining financial statements strengths and weaknesses of the firm by establishing strategic relationship between the items of the balance sheet profit and loss account and other operative data Analyzing financial statements according to Metcalf and tetrad is a process of evaluating the relationship between component parts of a financial statement to obtain a better understanding of a firms position and performance. In the words of Myers financial statement analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and study of the trend of these factors as shown is a series of statements.

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The purpose of financial analysis to diagnose the information contained in financial statements so as to judge the profitability and financial soundness of the firm. The Ratio Analysis is most powerful tools of financial analysis. It is the process of establishing and interpreting various (quantitative relationship between figures and groups of figures). It is with the help of ratios that the financial statements can be analyzed more clearly and decision made from such analysis. A Ratio is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. According to Kohler "A Ratio is the relation of the amount, A to another B expressed as the ratio of A to B; A: b (A is to B); or a simple fraction, integer, decimal fraction or percentage?

NEED FOR THE STUDY:

Financial analysis must require for a company in this cut though competition. Because of that reason ratio analysis is used in analyzing the Finn's position. Known fact that the success of an organization depends up on the Financial management. This situation has created an interest to study and analysis some of the Financial aspects of this organization. Hence the study may be undertaken of Financial analysis through ratio in Madhucon Sugar Ltd.,

OBJECTIVES OF THE STUDY:

The Ratio analysis is one of the most powerful tools of financial analysis. It is the process of establishing and interpreting various ratios (Quantitative relationship between figures and groups of figures). The purpose of preparation of Ratio analysis it to optimize and facilitate comparison with reference to periods, another organization or and industry organization.
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To analyze the financial performance of the firm through calculation of various ratios. To study the financial strengths and weakness of the firm. To examine the short-term solvency of the firm. To study the techniques of Ratio analysis for decision-making.

SCOPE OF THE STUDY:

The scope of the study is spread over for a period of Four years, i.e., 20082012 for the purpose of evaluating the financial position and data for the past five years, i.e., 2008-12 has been used in order to understanding the overall performance of MADHUCON SUGARS and POWER INDUSTRIES Ltd., The study has been conducted for the period of six weeks.

RESEARCH METHODOLOGY:
To achieve a fore said objective the following methodology has been adopted. The information for this report has been collected through the primary and secondary sources.

1. Primary Sources:It is also called as first handled information the data is collected through the observation in the organization and interviews with officials. by asking questions with the accountants and other persons in the financial department. A part from these some information is collected through the seminars, which were held by MADHUCON SUGARS and POWER INDUSTRIES Ltd.,

2. Secondary Sources:These secondary data is existing data which is collected data by others that is sources are financial journals, annual reports of the MADHUCON SUGARS and POWER INDUSTRIES Ltd., website and other publications of MADHUCON SUGARS and POWER INDUTRIES Ltd.,

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PERIOD OF STUDY During the 45 day of study of MADHUCON SUGAR and POWER INDUSTRIES LTD.
LIMITATIONS OF THE STUDY: Lack of awareness of power generating sets of MADHUCON SUGARS and POWER INDUSTRIES Ltd., Lack of time is another limitation factor the schedule period of 6 weeks are not sufficient to make the study independently regarding Ratio analysis in MADHUCON SUGARS Ltd., The busy schedule of the officials in the MADHUCON SUGARS Ltd., in another limiting faction. Due to the busy schedule of officials restricted me to collect the complete information about organization. The study is conducted in a short period, which was not detailed in all aspects. Lack of adequate standards. Inherent limitations of Accounting.

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INDUSTRY PROFILE
INTRODUCTION:
Sugar is the second largest agro-based industry in India. The industry provides employment to about two million skilled and semi-skilled workers besides those who are employed in ancillary activities, mostly from rural areas. Though the industry contributes a lot to the socioeconomic development of the nation, it is plagued with a number of problems such as cyclical fluctuations, high support prices payable to farmers, lack of adequate working capital, partial decontrol and the uncertain export outlook. Despite the problems, the industry has good growth potential due to steady increase in sugar consumption, retail boom and diversification into areas such as power generation and production of ethanol. In addition to this, strong possibilities exist for counter trade, if the Government designs and develops sugar industry oriented policies. With this background, an attempt has been made to examine the problems and prospects of sugar industry in India. Sugar has been known to India for about 2000 years and there is ample evidence to show that India is the original home of sugarcane, and also of sugar manufacture. Sugar has been mentioned in the epics as one of the five Amritas i.e., celestial sweets. Nothing tastes so sweet as sugar. Even the English term sugar is a derivative of the Sanskrit word Sakkara. The word Sakkara was in vogue in Prakrit literature for sugar. Therefore, it is found to be mentioned in many languages with different names, varying in pronunciation though resemble in some way. It has been mentioned as Schakar in Persian, Sukkar in Arabic, Sugar in Assyrian, Azucar in Spanish and Portuguese, Zuchero in Italian, Sucre in French, Zucker in German and so Dn. Mention about sugarcane is fjund in the Atharva Veda in 5000 B.C.

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There is perhaps no'earlier description of sugarcane man this in the hoary history of tfie world. References of sugar are also found in the inscriptions of Manu and the treatises of Charaka and Susruta dealing with medicine. Its mention is made in the records of Megasthenese and Chanakya during the period 321- 296 B.C. Alexander, the Great and his soldiers were the first foreigners (Europeans) to find sugarcane in India in 327 B.C. A Chinese encyclopedia in the middle of the 16* century mentioned that in India, the art of sugar making had reached such a high standard that the Chinese Emperor Taitsung (627- 650 A.D.) sent his men to learn the method of sugarcane cultivation and also the manufacture of sugar. In fact, India is the birthplace of the manufacture of sugar from sugarcane juice. India is the second largest producer of sugarcane in the world, next to Brazil. The latter produces primarily raw sugar while India produces almost exclusively white crystal sugar. In India, apart from sugar, other traditional sugarcane sweeteners such as khandasari and Jaggery/gur are also produced for the rural markets. Taking all sweeteners sugar, khandasari and gur, India is the world's largest producer of sugar, followed by Brazil in the second place. It is also the second largest agro-based industry in India located in rural areas. About 50 million farmers, their dependents and a large number of agricultural laborers are involved in sugarcane cultivation, harvesting and ancillary activities, constituting 7.5% of the rural population. Besides this, the industry provides employment to about 2 million skilled, semi-skilled and other workers employed in ancillary activities, mostly from rural areas2. With 453 operating sugar mills in different parts of the country, the industry has been a focal point for socio-economic development of the nation. Table 1 gives at a glance the impressive contribution of the Indian sugar industry to the national economy during the year 2003-04.

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PROFILE OF INDIAN SUGAR INDUSTRY Number of factories Cane -price per tonne Annual payment for cane No. of sugarcane farmers Sugar production Value of sugar output Annual tax contribution to exchequer Employment (including ancillary activities) Fuel ethanol of 5% blend (value) 453 Rs. 950 Rs. 18.000 cr 50 million 22 million tonnes(raw value) Rs 27,000 cr per annum Rs. 2.700 cr 2 million people Rs. 600 cr per annum

The sugar industry until 1995 was totally regulated and to a certain extent protected. Sugar was a scheduled industry and for setting up new units, expanding existing units, licenses were required under the Industries (Development and Regulation) Act. The licenses were based on cane availability for which there had to be an exclusive demarcation of select Geographical area for the proposed sugar mills. The commodity was subject to dual pricing with obligation imposed on the mills to supply a percentage of I output to the Government at a fixed price. The Government laid down targets for sugar production, consumption and installed capacity during each of the Five-Year Plans. Imports of sugar were not generally permitted. And when imports were necessary, the Government was the sole importer and availability of foreign exchange was a constraint. Exports were canalized and affected in years of surplus stocks. The operation of the sugar cycle (two years of high production and depressed prices, followed by shortfall in production due to decline in cane availability and higher cane and sugar prices)

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was a regular feature of the industry and it was going through periods of boom once in four to five years to be followed by periods of depression and recession3. In short, sugar industry was controlled in the form of licensing, administered price for sugarcane, reservation of cane areas, control over the price of sugar and also restriction on sale and movement of sugar. The Government, as a part of the process of liberalization, has taken several initiatives in 1995 to unleash the potential of the industry. However, the government retained control over pricing, release mechanism of sugar, etc. Some of the significant initiatives are: The Molasses control order, under which the price, movement and distribution of were molasses all controlled, was rescinded enabling the industry to realize the full value of molasses and set up molasses- based downstream industries. Sugar was de-licensed and creation of new capacity as well as expansion of existing capacity was freed from licensing. The only constraint was availability of sugarcane. The Export promotion Act was replaced and export of sugar .was decanalized, enabling mills to undertake exports on their own and compete directly in the international market Likewise, the import of sugar was placed under Open General License, linking India to the global markets. The Government has progressively reduced the levy obligation imposed on producers from as high as 65% in the early 1980s to 10% from March 2002. The power sector reforms opened up new opportunities for cogenerators and along with the thrust on promoting renewable, energy, sugar mill's regeneration was opened up for development. Policies were announced by state governments for setting up of Bagasse-based cogeneration projects and also for purchase of power. It enabled sugar mills to set up high efficiency cogeneration systems to generate surplus power for sale to the grid using the by-product bagasse and earn additional revenue. In the above
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background, an attempt is made to examine the problems and prospects of sugar industry in India.

DIVERSION OF SUGARCANE:
In India, sugarcane is utilized by sugar mills as well as by traditional users like Jaggery/gur and khandasari producers. In the early 1980s, the proportion of cane lifted by the sugar industry was around 35%, which went up to 50% in the 1990s and to as high as 65.6% in 2002-03. Though a lion's share of the sugarcane is diverted to the manufacture of white sugar, still significant quantum of sugarcane is used in the manufacture of Jaggery and Khandasari. All the same, in 2003-04, the share of sugar mills, however, declined to 59.8% due to more intense competition from gur and khandasari. Table 2 gives data on cane utilization for different purposes. Year Table 2: Cane Production and Utilization Cane White Gur and Seed, Feed and Chewing Production Sugar Khandasari Million Cane Utilization(%) Tonnes 299 59.6 28.9 11.5 296 59.7 28.8 11.5 297.2 57.4 31.5 11.1 281.6 65.6 22.7 11.7 236.2 59.8 27.9 12.3

2007-08 2008-09 2009-10 2010-11 2011-12

CYCLICAL FLUCTUATIONS:
Sugar is a cyclical industry and historically it has been repeating its peaks and lows of production in a span of five to six years, its sugar cycle starts with higher production leading to depressed prices and lower realization and profitability. The lower profitability further results in irregular and delayed payment to cane growers, which compel the farmers to diversify to some other remunerative crops. Consequently, the price of sugar cane and sugar would increase gradually.
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For instance, since 1999 sugar production has shown an increasing trend leading to a glut situation in the country. Table 3 presents the production, consumption and stock position of sugar in India. Rising production for four successive years from 1999-2000 to 2002-03, burgeoning stocks with mills, falling prices and squeezed margins marked the period from 1999-2000 to 200203. But in 2003-04, a dramatic change in the sugar situation has taken place due to adverse natural factors In Tamil Nadu, another major producer, the production dropped by about 45.5%. In Uttar Pradesh, another major cane and sugar producing state in North India, sugar production declined by about 18.5% due to lower cane yield. On the whole, total sugar output has declined to 1,40,000 tonnes, inclusive of the output obtained/obtainable through processing of imported sugar. The decline in production has however brought a better balance between supply and demand. The year-end stocks (2003-04), which stood at 78,00,000 tonnes is expected to decline further to 39,00,000 tonnes in 2004-05. Consequently, the demand for sugar is outpacing supply, leading to increased sugar prices. For instance, the price of sugar per quintal has increased to Rs. 1844.79 in March 2005 from Rs. 1473.22 in 2003-04, representing 25% increase in prices. Table 3: Production, Consumption and Stock Position of Sugar Season 2007-08 2008-09 2009-10 2010-11 2011-12 Production 182.0 185. 1 185.3 201.0 140 Consumption 154.2 160.8 178.5 170.0 180 (Lakh tonnes) Stocks 100.1 112.0 109.0 123.0 78.0

HIGH SUPPORT PRICES:

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The Government fixes the statutory minimum price for sugarcane based on the recommendations of an expert body like the Commission for Agricultural Cost and Prices (CACP) and also in consultation with the Industry and Farmers Associations. The statute also provides for sharing of any additional realization on free sale sugar between industry and the farmers in equal proportions. Table 4: Sugar Cane Support Prices Per Quintal SLNo Name of the Juice Support Price Country Recovery (%) Paid to Fanners (in Rs.) 1 Australia 12 60 2 3 4 Thailand Brazil India 10 10 8.5 60 55 74.50

Source: The Hindu Survey of Indian Industry, 2004.

Not withstanding this, some state governments also announce advisory price, that is much higher than the price notified by the central government. Cane farmers in India are thus paid much more than their counterparts though the lower recovery in India impacts the viability and export competitiveness of the Indian industry in global markets

INADEQUACY OF CASH CREDIT LIMITS:

The industry has been suffering from inadequacy of cash credit limits for the last few years. Banks are generally unwilling to extend the limits for sugar factories because of their high-risk perception. The problem has got further accentuated due to steep fall in sugar prices from Rs. 1,300 in 2000-01 to Rs. 1,050 a quintal in 2002-03. The shortfall in cash credit limits is 30-40% of the requirement. As a result, sugar factories face severe cash crunch, causing payment arrears to cane growers.
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For instance, the peak deficit for all private sector and public sector factories which depend upon banks for cash credit limits in 2002-03 works out to be Rs. 10,850 cr against Rs. 10,580 cr in 2001-02. The bulk of the requirement for the industry is payment of cane price. Adding fuel to the fire, stringent penalties have been prescribed for nonpayment of cane price and include interest on dues at 15%. This only adds to the hardship of the organizations.

LOPSIDED POLICIES OF GOVERNMENT:

The lopsided policies of the Government adversely affected the viable operation of the industry. While the administered prices of sugarcane have been increased year after year inflicting additional costs on the industry, the price realization on sale of sugar has either been declining or kept under check as a populist measure. In India, ethanol is purchased by the Petroleum Ministry on a competitive tender basis. However, it is constantly looking for an avenue to reduce the ethanol price, sometimes on the plea of assumed imported price of petrol and sometimes on the basis of assumed imported price of ethanol. Such an exercise is inconsistent with the Government's policy to promote ethanol in the larger national interest.

PARTIAL LIBERALIZATION / GOVERNMENT CONTROL:

Even after economic liberalization, the industry continues to face restrictive policy environment No doubt, the web of controls and restrictions have been cleared slowly. The government's liberalization initiatives include de-licensing of the industry, removal of export restrictions and reduction in levy obligations from 65% in the early 1980s to 10% in 2002. Yet some critical controls remain. Important among these are the levy obligation on mills (10% since April 2002) and regulation of free sales quota. Mills are required to supply a portion of their production as levy sugar at below market prices, which the Government then sells at fixed prices through its public distribution system to consumers who live below the poverty line.

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The sugar can be sold at market prices but subject to periodic quotas. There is an excise duty of Rs. 850 a tonne on sugar. Besides this, the industry has to pay Rs. 140 a tonne as sugar development fund.

UNCERTAIN EXPORT OUTLOOK :

The international sugar market is highly distorted. There are restriction of market access, high tariff and other barriers. Sugar subsidy granted by developed countries during 2002 was an estimated $ 5.5 bn. The World Trade Organization has been successful in opening market for industrial goods to a considerable extent but agricultural markets, particularly for sugar, remain largely closed due to quotas and tariffs. All the same, exports are not remunerative as international competitors like European Union get heavy subsidy from their respective governments and are able to sell at much lower prices. Contrary to this, sugar exports from India involved sizeable losses and reflect a dumped price.

PROSPECTS:
Despite the problems, the industry has bright prospects due to steady increase in sugar consumption, retail boom and also its diversification into areas such as power generation and production of ethanol. Besides this, strong possibilities exist for counter trade. In view of this, a brief discussion about the prospects of the industry is outlined.

INCREASED PER CAPITA CONSUMPTION:

Domestic consumption of sugar is growing at around 4.6% (on the basis of five years of cumulative annual growth rate) and therefore during 2004-05, the consumption of sugar stood at 191,00,000 tonnes. Taking into account all the three sweetners - white sugar, jaggery and Khandasari - on a per capita basis, Indian Consumption stands at a reasonably high figure. The consumption of white sugar is generally in urban areas while gur and Khandasari are consumed mostly in rural areas. Consumption in urban areas in some states with higher GDP and income levels matches favorably with the consumption figures in various devel.
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COMPANYPROFILE
During the year 2001-02 Madhucon sugars Limited was incorporated to purchase and take over the sick sugar mill namely THE PALAIR COOPERATIVE SUGARS LIMITED Established in 1982. At the time of talking over. The company is suffering with losses. After taken over by Madhucon Sugar Limited the company has earned net profit in the first year of operations itself. Later the company's name was changed as "MADHUCON SUGAR AND POWER INDUSTRIES LIMITED". These company is one of the company in group companies of Madhucon projects Limited which is having diversified activities of construction of infrastructure projects like Roads, Bridges, Canals, Buildings, Flyovers, Granites, Sugar and allied products. MADHUCON GROUP is working on projects in various core sectors of nation importance like highways. Irrigation, producing the construction materials, power houses, all of which, no need to say are so essential now for the all round infrastructure development of the nation.

MADHUCON GROUP CONSISTS FOLLOWING COMPANIES 1) MADHUCON PROJECTS LTD 2) MADHUCON GRANITES LTD 3) MADHUCON ENGINEERS LTD
4) MADHUCON BINAPURI JV

5) MBN ANCHORED EARTH LTD 6) VARALAKSHMI GRANITES PVT LTD 7) MADHUCON SUGAR AND POWER INDUSTRIES LTD.

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ABOUT MADHUCON SUGAR AND POWER INDUSTIRES LIMITED Madhucon Sugar and Power Industries Limited was Registered on 5th Nov. 2002 which was purchased under privatization scheme with a capacity of 1250 tons per day. The factory was located at Rajeswarapuram village in Khammam District. The factory consists of 207 villages situated in radius of 35 kms. And the company has 5577 cane farmers. Madhucon Sugar and power Industries is one of the group companied of Madhucon Projects Limited which is having diversified activities if construction of infrastructure projects like Roads, Bridges, Canals, Buildings, Flyovers, Granites, Sugar and allied products. The group turnover is around 600 Covers and earning reasonable profits. The present market price of Madhucon Projects Limited share of Rs.2.00 each is quoting around of Rs.300.00.

THE FOLLOWING IS BOARD OF DIRECTRS OF THE COMPANY NAME Sri N. Seethaiah Sri N .Krishnaiah Sri T. Venugopal Rao Sri K. Srinivasa Rao DESIGNATION Chairman Executive Director Director Director DIN 00022839 00022778 00070688 00022558

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LIST OF SHARE HOLDERS & THEIR SHARE HOLDINGS:NAME NAMA NAGESWARA RAO NAMA SEETHAIAH NAMA KRISHNAIAH NAMA CHINNAMMA T. VENUGOPAL RAO KAMMA SRINIVAS M.SEETHARAMAIAH K. LAKSHMANAM MADHUCON PROJECTS LTD MADHUCON GRANITES LTD TOTAL No. of Equity Value Rs. shares of Rs. 10/- each 204168 51042 51042 51042 51042 76563 76563 76563 1081500 991664 2711189 2041680 510420 510420 510420 510420 765630 765630 765630 10815000 9916640 27111890

The performance indicators of Madhucon Sugar Power Industries limited are as follows. Description Sales Net Profit Reserves and surplus Gross Block Net Block Share capital 2007-08 91.98 0.66 0.66 996.92 947.59 271.12 2009-10 1391.04 34.40 37.22 1054.59 895.42 271.12 2010-11 1523.75 77.49 111.61 1323.20 1050.02 271.12 2011-12 3254.98 240.77 346.30 1606.71 1178.44 271.12

In view of the good demand for the sugar and its allied products like Rectified Spirit, ENA, Ethanol ctc., the management has decided to undertake modernization /expansion of the existing equipment to enhance the crushing
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season 2008-09 and further expansion from 2000 TCD to 3500 TCD for the season 2009-10. The company also proposes to setup a new project for the production of Alcohol/Ethanol from Molasses and cereal grains with installed capacity of 65 KLPD. The proposed distillery will mainly manufacture RS, ENA and Impure Spirit using the available molasses for Sugar cane crushing during the seasonal operations. Use if own / procured Moasses as required and use of cereal grains will be made during the off-season operations. Thus the design of distillery ensures optimum utilization of the manufacturing facilities. The company also purposes to setup another new project for the production of power by setting of Co- gen plant with the installed capacity of 20 MW using the Begasse available form the sugar plant.

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SUGAR PRODUCTION DETAILS OF: MADHUCON SUGAR AND POWER PROJECTS INDUSTRIES LTD. PERTICULARS CANECRUSHED (M.T) SUGAR PRODUCED(QTLS) SUGAR SOLD (QTLS) STOCK OF SUGAR (QTLS) 1,26,902 72,601 131,420.34 1,01,454 1,20,654 4,341 1,41,631 88,749 1,83,171 2,01,191 1,31,243 60,330 1,44,425 1,56,737 1,76,796 2007-08 2008-09 2009-10 2010-11 2011-12

1,40,411 65,436.696 151,856.56 179,956.94 199,978.50

OBJECTIVIES OF THE COMPANY: Manufacturing of white crystal sugar To promote the agriculturists in that particular area To utilize the harvest of sugar cane in that area Improving the cultivation methods through giving better support to the farmers Issuing loans to members for productive and other similes purposes To encourage self help, thrift and co-operations among members
To undertake such other activities as are incidental and conductive to the

development of sugar cane, sugar and allied Industries.

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WELFARE MEASURES TO THE EMPLOYEES: The following welfare measures are be provided by Madhucon Sugars for the employees. Providing quarters (as per their category) Shoes for the purpose of safety measures One pair of uniform for every year for every employ If any employees met with accident the management immediately

give the first aid and take the patient to khammam Govt. Head Quarters hospitals & provide two persons to assist them for during the hospitalization. accident Their cases have been recommended to the labor department for the The management every year has been sanction productivity linked compensation as per the factory act incentive (bonus) to employee for every year depending upon the percentage of the recovery. The labor department has been introduced the filarial fund to the employee and worker of the factory. PRODUCTION PROCESS : In the beginning of production process sugar canes are loaded into a container, cane carrier carries them into cane kicker. It helps to maintain a uniform level of sugar canes, cane cutters cut the whole cane in to small pieces and even cut the layer of the cut cane Those small pieces are send into crusher by crushing that small pieces of sugar cane more juice.Will be extract the mill extract the more juice which goes to process of manufacturing of sugar. There will be 4 mills in each mill there are three values. The prepared cane to 1st mill and there it will be crushed.
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Commissioner of labor & deputy commissioner, & deputy

commissioner we have to pay the compensation to the person who met the

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THEORITICAL FRAME WORK

MEANING OF RATIO: According to accountant's hand book by WIXON, KELL AND BEDFORD "A ratio is an expression of the quantitative relationship between two numbers" A Ration is a simple arithmetical expression of the relationship of one number to another. It may be defined as the indicated quotient of two mathematical expressions. Ratio provides clues to the financial position of a concern. One can draw conclusion about the exact financial position of a concern with the help of ratios. Ration analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. Ratios are among the best known and most widely used tools of financial analysis. Ratio is defined formally as the indicated quotient of two mathematical expressions. An operational definition of a financial ratio is the relationship between two financial values. The word relationship implies that a financial ratio is the result of comparing mathematically two values. A companys total asset turnover is calculated by dividing the companys total value into its sales figure. This ratio is the quantified relationship between sales and total assets. The resulting figure is also an index because it tells us how many times the values of total assets were incorporated into the firms products. The term ratio refers to the numerical or quantitative relation ship between two items variable. A ratio is calculated by dividing one item of the relation ship with the other. In other words, ratios, as a tool of financial management, can be expressed as

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a) b) c) Percentage, Fraction, and Proportion of numbers

The ratio reveals the relationship in a more meaningful way so as to enable us to draw conclusions from them. The use of ratios, as a tool of financial management, involves their comparison saw single ratio, unlike the absolute figures, which fails to reveal the position. DEFINITIONS: A ratio is the relation of the amount a to another b, expressed as the ratio of a to b; a: b., or as a simple fraction, integer, decimal fraction or percentage. E.L. Kohler. Ratio analysis is a process of evaluating the relationship between components parts of financial statement to obtain a better understanding of a firms position and performances. Met Calf and Titalrd. In simple language ratio is one number expressed in terms of another and can be worked out by dividing one number into the other. PURPOSE OF RATIO ANALYSIS: The ratio analysis is one of the most powerful tools of financial analysis it is used as a device to device to analyze and interpret the financial health of enterprise. It is used with the help of ratios that the financial statements can be analyzed more clearly and decisions made from such analysis. By the use of ratio analysis one can measure the financial conditions of a firm and can point out whether the conditions is strong, good, questionable or poor.

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MANAGERIAL USES OF RATIO ANALYSIS: Helps in decision making. Helps in financial forecasting and planning Helps in communicating Helps in co-ordination Helps in control INTER-FIRM COMPARISON: Ratio of one firm can also be compared with the ratios of some other selected firms in the same industry at the same point of time. This kind of comparison helps in evaluation relative financial position and performance of the firm. LIMITATIONS OF RATIO ANALYSIS: Ratio analysis is one of the most power tools of financial management through ratios are simple to calculate and easy to understand, they suffer from some serious limitations. Limited use of a single ratio Lack of adequate standards Inherent limitations of accounting Change of account procedure Window dressing Personal bias Un-comparable Absolute figures distortive Price level changes Ratios no substitutes
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ADVANTAGES OF RATIO ANALYSIS: Ratio analysis simplifies the understanding of financial statements. Ratios bring out the inter relationship among various financial

figures and bring to light their financial significances ration analysis is a device to analyze and interpret the financial health of enterprise. future. Rations facilities inter firm and intra firm comparison. They bring Ratios contribute significantly towards effective planning and

forecasting. A study of a trend in the past works as a helpful guide for the

out the strengths, weakness and efficiency of firms and their departments. Ratio survey as effective control tools. They also facilitate

establishment of a standard costing system and budgetary control.

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CLASIFICATION OF RATIONS: The use of ratio analysis is not confined to financial manager only there are different parties interested in the ration analysis for knowing the financial position of a firm for different purpose. In view of various users of ratios, there are many types of ratios which can be calculated from the information given in the financial statements. The particular purpose of the user determines the particular ratios that might be used for financial analysis

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TYPES OF RATIOS: Several ratios calculation from the accounting data can be grouped into the various classes according to the financial activities or function to be evaluated. The various parties that are generally under taken financial analysis to measure solvency and profitability of the firm. Management is interesting in evaluating every aspect of all parties and see that the firm grows profitability. In view of the requirements of the various users of ratios, we may classify them into the following four important categories. 1. Liquidity Ratios 2. Leverage Ratios 3. Activity Ratios 4. Profitability Ratios 1. Liquidity Ratios: Liquidity ratio measures the ability of the firm to meet its current obligations Analysis of liquidity needs the preparation of cash, budget and cash funds flow statement. But liquidity ratios by establishing rotation cash and other current assets to current obligations provide a quick measure of liquidity. A firm should ensure that it does not suffer from lack of liquidity, and also that it is not too much highly liquid. The failure of a company to meets its obligations due to lack of sufficient liquidity will result in bad credit image, A very high degree of liquidity is also bad. Ideal assets earn nothing. The firm's funds will be unnecessarily tied up in current assets. Therefore it is necessarily to strike proper balance between liquid and lack of liquidity. The most common ratios, which indicate the extent of liquidity or lack of its, are: a) Current Ratio b) Quick or Acid Test or Liquid Ratio c) Absolute Liquid Ratio or Cash Position Ratio.

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A) Current Ratio: The current ratio is calculated by dividing current assets by current liabilities. Current Assets Current Ratio = -----------------------------------------Current Liabilities (Or) Current Assets: Current liabilities Current Ratio may be defined as the relation ship between current assets and current liabilities Current Assets: Current Assets are those assets which are converted into cash easily or in a short period. Current Liabilities: Current Liabilities are those liabilities which are payable in a short period

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COMPONENTS OF CURRENT RATIO CURRENT ASSETS 1. Cash in hand 2. Cash at bank 3. Marketable securities (short-term) 4. Bills Receivable 5. Sundry Debtors 6. Short-term Investments 7. Inventories (Stock) 8. Work-in-progress 9. Prepaid expenses 10. Accrued Incomes 1. 2. 3. 4. 5. 6. 7. 8. 9. CURRENT LIABILITIES Out standing Expenses / Accrued Expenses Bills payable Sundry Creditor Short-term Advances Income-tax payable Dividends payable Bank overdraft (if not a

permanent arrangement) Income received in advance Other short-term Liabilities

The current Ratio is the measure of the firm's short-term solvency. A current Ratio of 2:1 is usually considered as ideal. If Current Ratio id less than 2, it indicates that the business does not enjoy adequate Liquidity. However a Current Ratio is more than 2, it indicates that the firm is having ideal funds and as not invested them properly. As a conventional rule, a Current Ratio of 2 of 1 or more is considered satisfactory. The Current Ratio represents a margin of safety for credits. B) Quick Ratio / Acid test Ratio /Liquid Ratio: Quick ratio is used as a measure of the company's ability to meet its current obligations. This ratio is calculated as supplement to the current ratio in analyzing the liquidity of the firm this can be calculated as: Quick Assets Quick Ratio=-------------------------------------Quick Liabilities
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Quick Assets: Current assets - (stock + Prepaid expenses) Quick Liabilities: Current Liabilities - (stock + Bank overdraft) A normal standard of 1:1 acceptable quick ratio. A very high or very low ratio is not desirable. It is used to measure the ability of the company meet its current Liabilities at short notice. 2. Capital Structure / Leverage Ratio / Long-term Solvency Ratio: The long-term financial stability of firm is considered as dependent upon its ability indicate the relative interests of owners and creditors in a business. The ratios, which arc measuring the long-term solvency, are
1. 2. 3. 4. 5. 6.

Debt-Equity ratio Share holder equity / proprietors Ratio / Equity Ratio Capital Gearing Ratio Fixed Assets Ratio Interest coverage Ratio (or) Debt service Ratio Dividend coverag Ratio.

(A) Debt equity Ratio: Debt equity ratio indicates the relationship between long-term debts and share holders funds. It helps in knowing the soundness of the long-term financial policies of a company. If reflex the relative claim of creditors and share holders against the assets of business. It is calculated as. Long term Debt Debt-Equity Ratio =---------------------Share holders funds

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Long-term Liabilities = Long term Debt + Debentures + other Long-term Liabilities. Share holders funds = Equity share Capital + Preference share Capital + reserves - Fictitious assets The ideal Ratio is 2:1 (B) Proprietary Ratio: The proprietary Ratio is also known as Equity ratio as share holders to total ratio or net worth to total assets ratio. This ratio establishes the relationship between shareholders funds to total assets of the firm is calculated. Net worth Proprietary Ratio = -----------------------------Total Assets Net worth = Share holders funds Total Assets = Fixed Assets + Current Assets A high proprietary ratio indicative of strong financial position of business. The higher the Ratio, the better it is. (C) Proprietary Ratio: Capital gearing ratio determines the future financial structure of the Business. A company that is highly geared will have to raise funds by issuing fresh equity funds. Where as a lowly geared company would find with attractive to raise funds by way of term loans and debentures. It is calculated by the following formulae: Debentures + Term loans + preference share capital -------------------------------------------------------------------------Equity share capital + Reserves - fictitious Assets

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(D) Fixed Assets Ratio: This ratio indicates the mode of financing the fixed assets. Ti is calculated as Fixed Assets Fixed Assets Ratio =----------------------------Capital Employed Capital Employed = Equity share capital + preference share capital + Reserves + Long term liabilities - fictitious assets. 0.67 is considered as ideal 3. Activity Ratio (or) Turnover Ratio: Activity ratios measure how efficiency the firm employees its resources. These ratios involve comparison between the level of sales and Investment in various accounts such as inventories, debtors, creditors; fixed assets etc., Activity ratios are used to measure the speed with which various accounts are converted into sales are cash. Every turnover ratio is calculated by dividing cost of goods sold or net sales by respective account and each ratios gives the speed in which it turns cash or sales. Cost of goods sold (C.G.S) =Sales - gross profit The major turnover ratios are: a) Inventory turnover ratio/ Stock turnover Ratio b) Debtor's turnover ratio c) Creditor's turnover ratio d) Capital turnover ratio e) Working capital turnover ratio f) Fixed Assets turnover ratio g) Total assets turnover ratio
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Ratio analysis
A) Inventory turnover ratio: Inventory turnover ratio indicates the number of times the stock has been turnover during the paid and evaluates the efficiency with which is firm is able to manage its inventory Cost of goods Sold Inventory turnover ratio =------------------------Average Inventory

Opening stock + Closing stock Average Inventory ------------------------------------------------------2

Note:7. 8.

C.G.S is not known, sales may be taken as CGS. If opening Stock and closing stock are not given, the give stock is treated as average stock No. of days in a year

Stock convention Period =-----------------------------Stock turnover ratio 3. A stock turnover ratio of 8 is considered ideal. A high stock turnover ratio indicates that the stocks are fast moving and get converted into sales quickly.

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Ratio analysis
B) Debtors turnover ratio: Debtor's turnover ratio indicates the velocity of debt collection of a firm. It indicates the number of times the number of debtors turns over a year. Debtors turnover ratio express the relationship between debtors and sales. This can be calculated by the following formulae. Net credit sales Debtors =-------------------------Average debtors

*Noted points: Opening debtors + closing debtors Average debtors =------------------------------------------------------2 1. Debtors turnover ratio of 10 to 12 is an ideal 2. Debtors include bills receivables. 3. A high Debtors turnover Ratio or a low debt collection period is indicative of sound credit management policy. No. of days in a year Debt collection period =----------------------------Debtor's turnover ratio

Debt collection period of 32, 36 days is considered ideal

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Ratio analysis
C) Creditors turnover ratio: Creditor turnover ratio express the relationship [ between creditors and purchases. It is calculated as follows.

Net Credit Purchases Creditors turnover ratio =---------------------------------Average Creditors

Opening Creditors + Closing debtors Average debtors =----------------------------------------------2 * Noted points: 1. Creditor includes Bills payable 2. Creditor turnover ratio of 12 or more is an ideal No. of days in a year Debt Payment Period =------------------------------Creditors Turnover Ratio Debt payment period of 30 or less no. of days is not better indication.

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Ratio analysis
D) Capital Turnover ratio: It used to show how the capital employed is efficiency used in the business. It indicated the firm's ability to generate sale per rupee capital employed. Net sales Capital turnover ratio =----------------------Capital Employed Capital Employed = Long-term funds + Reserve and Surpluses + Preferential share capital + Equity share capital.

E) Working Capital Turnover ratio: Working capital of a concern is directly related to sales. The current assets like debtors, bills receivables, cash stock etc., changing with th increase or decrease in sales. This ratio explains the relationship between C.G.S to working capital. Cost of Goods Sales Working Capital turnover ratio =-----------------------------------Working Capital Working Capital = Current Assets + Current Liabilities * Note:A high working capital turnover ratio indicates efficient utilization of funds.

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Ratio analysis
F) Fixed Assets Turnover Ratio: This Ratio explains the relationship between Net sales to fixed assets. This can be calculated by the following formulae. Net sales Fixed Assets turnover ratio =----------------Fixed assets * Note:This Ratio of 5 is considered as ideal. A high fixed assets turnover ratio indicated better utilization of the firms fixed assets. G) Total Assets Turnover ratio: This Ratio explains the relationship between Net sales to total assets. This can be calculated by the following formulae. Net Sales Total Assets turnover ratio =------------Total assets

Total assets = Fixed Assets + Current Assets 4. Profitability Ratios: Profitability Ratios measure the profitability of a concern. Generally they are calculated in relation to sales or in relation to investments. The various profitability ratios are discussed under. In relation to sales: A. Gross Profit Ratio B. Net Profit Ratio C. Operating Ratio D. Operating Profit Ratio E. Expenses Ratio

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Ratio analysis
A) Gross Profit Ratio: Gross Profit Ratio measure the gross margin on total net sales of a company. This Ratio measures the efficiency of company's operations and can be used to compare with previous year's results. Higher the gross profit ratio, Better is for the company. Gross Profit Gross Profit ratio = -------------------------X 100 Net assets Gross Profit = Net Sales - Costs of Goods Sold C.G.S = Opening stock + purchases - Closing stock Net Sales = Sales - Sales returns Note:There is no ideal gross profit ratio is higher the ratio, the better will be the performance of the business. B) Net Profit Ratio: This Ratio is designed to focus attention on the net profit margin arising from business operations after internet tax.

Net Profit Net Profit ratio =--------------------------X 100 Net Sales Net Profit = Earnings After Tax and Interest Net Profit = Gross profit + (Office and administrative expenses + Selling & Distribution expenses + Financial expenses) There is no ideal ratio, the higher the ratio more profitable is the business.

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Ratio analysis
C) Operating Ratio: Operating Ratio establishes the relationship between cost of goods sold and after operating expenses on the one hand and the sales on the other. Operating Cost Operating Cost =-----------------------------X 100 Net Sales (or) Cost of Goods sold + operating expenses --------------------------------------------------------------------------x 100 Net Sales Operating Cost = C.G.S + Office and administrative expenses + Selling & Distribution expenses A low operating ratio is an indication of operating efficiency of the business low the ratio, the better it is. D) Operating Profit Ratio: It establishes the relationship between operating profit and sales. IT can be calculated by the following formulae. Operating Profit Operating Profit ratio =-----------------------X 100 Net Sales (Or) 100 - Operating Profit ratio Note: - the higher the ratio, the better it is.

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Ratio analysis
(A) Earning Per Share: - earning per Share is the relationship between net profit

and the number of shares outstanding at the end of the given period. This can be compared with previous years to provide a basic for assessing the company's performance. Net Profit after Tax - Preference dividend Earning Per Share (EPS) =----------------------------------------------------------Number of equity shares

(B) Price earning ratio: Price earning ratio is express the relationship between market price of one share of a company and the earning per share of that company. Market price per equity share Price earning ratio =-------------------------------------------Earning per share

Capital reserves & surplus Market price per equity share =-----------------------------Number of equity shares.

(C) Earning Yield Ratio: This Ratio is also shows a relationship between earning per share and market value of shares. Earning per share Earning yield ratio =--------------------------------X 100 Market price per share

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DATA ANALYSIS
1. LIQUIDITY RATIO A. CURRENT RATIO:Current Assets Current Ratio =----------------------------------Current Liabilities Current Ratio expressed as follows Particulars Current Assets Current Liabilities Current Ratio 4,88,37,361 66,038,060 4.14 3.13 15,81,19,445 9,42,04,564 2.44 6.47 12,54,72,620 3.38 2007-08 2008-09 2009-10 (Rs in Crores) 2010-11 2011-12

20,25,89,303 20,68,54,975 38,73,44,261 60,95,08,473 42,48,51,427

CURRENT RATIOS CHART:-

Interpretation:BITS,KHAMMAM Page 41

Ratio analysis

As a convention the minimum of 2 to I ratio is preferred to as a banker's rule of thumb (or) arbitrary standard of liquidity of a firm. A ratio equal/near to the rule of thumb of 2:1 i.e. Current Assets double the Current Liabilities is consider to be satisfactory. We can see from above chart that the Current Ratio of the year 2007-08 is very high when compared with other years the main factor is that in the year 200708 the sundry creditors for the materials are kept low when compared with other years. The overall position look satisfactory but the management should look after funds. Which are blocked in current assets? So that the firm can achieve the rule of thumb for all years.

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Ratio analysis
B. QUICK RATIO:Quick Assets Quick Ratio = -------------------------------Quick Liabilities Quick Assets = Current Assets - (Stock + Prepaid exp) Quick Liabilities = Current Liabilities - (Stock + Bank over draft) A normal standard of 1:1 acceptable quick ratio a very high / very low ratio is not desirable. It is used to measure the ability of the company meet its current liabilities at short notice. (Rs in Crores) Particulars Quick Assets Current Liabilities Quick Ratio 0.518 0.189 0.933 2.96 6.94 4,83,37,361 6,60,380,60 15,81,19,445 9,42,04,564 2,54,72,620 2007-08 2008-09 2009-10 14,74,56,317 2010-11 27,89,98,176 2011-12 17,68,81,461

2,50,48,554 1,24,89,625

QUICK RATIOS CHART:-

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Ratio analysis Interpretation:The Quick Ratio of the organization shows the intensity of the quick assets in the firm. The ratio has been changing continuously throughout the study period. The highest quick ratio is recorded in the year 2011-12 i.e. 6.94 to compare with other years. In this year the quick assets are high because the current assets will be increases and the current Liabilities are less in the current year the quick ratio is decreases because the firm only concentration on inventory highly in stock, but the overall performance of the firm is satisfactory. The firm reaches the ideal point. The lowest ratio is recorded in the year 2008-09 i.e. 0.189.

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Ratio analysis
2. Capital structure or leverage Ratio's or Long term solvency: A. DEBT EQUITY RATIO:Long term Debt Debt Equity Ratio = --------------------------------------------Share holder funds Long term Debt = Long term Debt + Debentures other long-term liabilities. Share holder funds = Equity share capital + Preference share capital + reserves fictitious assets

(Rs in Crores) Particulars Long term debt Share holders funds Debt Equity Ratio 3.40 2.00 1.23 0.30 2.28 2007-08 2008-09 2009-10 2010-11 2011-12 13,32,20,0163 583,546,002

21,04,76,499 28,48,50,259 16,59,17,744 16,50,23,71 3 61,742,003 141,869,614 134,813,423 542,943,907

DEBIT EQUITY RATIO CHART:

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Ratio analysis

Interpretation:
The debt equity ratio of the organization shows an fluctuating trend during the study period. The highest ratio is recorded in the year 2007-08 i.e. 3.40 to compare with other years the lowest ratio is recorded in the year 2010-11. The 2007-08 the share holders funds like share capital & reserves & surplus are lower than other years. The firm can reaches the ideal point in 2007-08.

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Ratio analysis
B. PROPRIETARY RATIO:Net Worth Proprietary Ratio = -----------------------------Total Assets Net Worth = Share holders funds.=Equity + Preference + Debt Total Assets = Fixed Assets + Current Assets. The high proprietary ratio indicative of strong financial position business the higher the ratio the ratio better it is. (Rs in Crores) Particulars Net Worth Total Assets Proprietary Ratio 2007-08 2008-09 2009-10 2010-11 542,943,907 2011-12 583,546,002

61,742,003 141,869,614 134,813,423

272,096,202 427,060,806 1,791,038,043 2,426,830,377 40,158,835,395 0.226 0.33 0.075 0.22 0.145

PROPRIETARY RATIO CHART:-

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Ratio analysis Interpretation:

The proprietary ratio of the organization shows the ratio has been changing continuously during the study period. The highest ratio is recorded in the year 2008-09 i.e. 0.33 to compared with others years. In the year the total assets like fixed .assets are very high so the ratio is lowest in the year 2009-10 i.e. 0.075 the current year ratio is satisfactory.

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Ratio analysis
C. FIXED ASSETS RATIO:Fixed Assets Fixed Assets Ratio = --------------------------------Capital Employed Capital Employed = Equity share capital + preference share capital + reserves + longterm Liabilities - fictions assets 0.67 is considered as ideal (Rs in Crores) Particulars Fixed Assets 2007-08 2008-09 2009-10 2010-11 2011-12

117,844,260 286,243,891 1,561,813,227 1,697,082,628 3,591,033,968 583,546,002 6.15

Capital Employed 61,742,003 141,869,614 134,813,423 542,943,907 Fixed Assets Ratio 1.908 2.017 11.58 3.12

FIXED ASSETS RATIO CHART:-

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Ratio analysis Interpretation:

Fixed Assets to net worth ratio is fluctuating the year to year changes. The highest ratio is recorded in the year 2009-10 i.e. 11.58 In this year the capital employed in the reserves & surplus are low. And the fixed assets are high to compare with other years the lowest ratio is recorded in the year 2007-08 i.e. 1.908.

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Ratio analysis
D. CURRENT ASSETS TO PROPRIETARY FUNDS:Current Assets Current Assets to proprietary funds = ---------------------------------Proprietary funds (Rs in Crorcs) Particulars Current Assets 2007-08 2008-09 I 2009-10 2010-01 2011-12 x 100

202,989,303 206,854,975 387,344,261 609,508,473 424,851,427

Proprietary funds 61,742,003 141,869,614 134,813,423 542,943,907 583,546,002 Current Assets to proprietary funds ratio CURRENT ASSESTS TO PROPRIETARY FUNDS: 328.7 145.8 287.3 112.2 72.8

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Ratio analysis Interpretation:

The current asset to proprietary funds ratio is explains that financial strength of the business. The highest current assets to proprietary funds ratio is recorded in the year 2007-08 i.e. 328.7 in this year the proprietary funds involved in share capital is highest. The current assets also be increased and the lowest ratio recorded in this year 2011-12 i.e. 72.8 the current year position is not satisfactory.

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Ratio analysis
3. ACTIVITY RATIO:A. INVENTORY TURNOVER RATIO:Cost of goods sold Inventory turnover ratio =-------------------------------- x 100 Average Inventory (or) Net Sales ----------------------------- X 100 Average Inventory Opening stock + Closing stock Average inventory = --------------------------------------------2 (Rs in Crores.) Particulars 2007-08 2008-09 2009-10 2010-11 2011-12

Net Sales Average Inventory Inventory turnover Ratio

325,492,839 322,047,728 189,952,469 551,565,539 371,206,624 125,779,544 129,962,828 170,512,369 24,910,448 192,231,996

258.78

247.8

111.40

221

193

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Ratio analysis
INVENTORY TURNOVER RATIO CHART:-

Interpretation:
The Inventory turnover ratio of the organization shows an fluctuating trend during the study period the highest inventory turnover ratio is recorded in the year 2007-08 i.e. 258.78 to compared with other years. In this year the Average inventory is low because the stock sugar is very low comparing to other years. The lowest inventory turnover ratio is recorded in the year 2009-10 i.e. 111.42 the current year stock is increased to compared with past years. So that over all performance is satisfactory.

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Ratio analysis
B. INVENTORY CONVERSTION PERIOD:No. of. Days Inventory Conversion Period = --------------------------------------Inventory turnover ratio (Rs in Crores) Particulars 2007-08 2008-09 2009-10 2010-11 2011-12

No of days in Year inventory turnover ratio Inventory Conversion Period

365 days 258.78 1 day

365 days 247.8 2 days

365 days 111.42 3 days

365 days 221 2 days

365 days 193 2 days

INVENTORY CONVERSION PERIOD CHART:-

Interpretation:
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Ratio analysis

The Inventory Conversion period of the organization shows the conversation period has -been changing continuously has been declined in the year 2007-08 i.e. 1 day In the year 2009-10 e. 3 days. It was increases because the stock ratio is low to compared with other years. It shows concentrated on reducing the conversation period. Which is not a good sign for company.

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Ratio analysis
C. DEBTORS TURNOVER RATIO:Credit sales (or) Total sales Debtors turnover ratio = ------------------------------------------------------ X 100 Average Debtors (R-S in Crores) Particulars Total sales Average debtors Debtors turnover ratio DEBTORS TURNOVER RATIO CHART:99 79 103 468 616 2007-08 325,492,839 3,255,474 2008-09 322,047,728 4,028,943 2009-10 2010-11 2011-12 371,206,624 60,265,407

189,952,469 551,565,539 1,840,344 117,766,446

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Ratio analysis

Interpretation:
The debtors turnover ratio of the organization during the period 2011-12 is very high i.e. 616 In the year 2010-11 the company debtors turnover ratio is recorded in 468. It is increased in past year to current year because the average debtors in the 2011-12 are highly increased & the total sales are decreased. If the ratio is increased in compared with previous years it is a good sign for the company.

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Ratio analysis
D. DEBT COLLECTION PERIOD:No of days in a year Debt collection period =-------------------------------------DEBTORS TURNOVER RATIO (Rs in Crores) Particulars 2007-08 2008-09 2009-10 2010-11 2011-12

No. of days in year Debtors turnover ratio Debt collection period

365 days 99 4 days

365 days 79.93 5 days

365 days 103.21 4 days

365 days 468 1 days

365 days 616 1 days

DEBT COLLECTION PERIOD CHART:-

Interpretation:
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Ratio analysis

The average collection period of the organization is very high recorded in the year 2008- 09i.e. 5 days. After that year collection period is declined during the year like 2010-11 i.e. 1 day. The current year average collection period i.e. 1 day. Because the debtors turnover ratio will be increased on this year. So that least average collection period is feasible, as it shows the efficiency debt collection.

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Ratio analysis
E. CAPITAL TURNOVER RATIO:Net sales Capital turnover ratio = -------------------------------Capital employed employed = Long term funds + Reserves & Surplus + Preference share capital + Equity stars coital (Rs in Crores) Particulars Net sales Capital Employed Capital turnover ratio CAPITAL TURNOVER RATIO CHART:5.27 2.27 1.4 1.02 0.63 2007-08 325,492,839 61,742,003 2008-09 2009-10 2010-11 2011-12 371,206,624 583,546,002

322,047,728 189,952,469 551,565,539 141,869,614 134,813,423 542,943,907

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Ratio analysis Interpretation:

The capital turnover ratio is the indication of efficiently used in the capital employed. In the year 2007-08 is very high to compare with other years. In this year capital employed in equity & performance share capital is lower than other years. The lowest ratio recorded in the ear 2011-12 i.e,.0.63 because in this year net sales is low & capital employed is very high. So the firm should concentrate on sales.

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Ratio analysis
F. WORKING CAPITAL TURNOVER RATIO:Sales Working capital turnover ratio = ---------------------------------Networking capital Networking capital = current assets - current liabilities. (Rs in Crores) Particulars 2007-08 2008-09 2009-10 2010-11 2011-12

Sales

325,492,839 322,047,728 189,952,469 551,565,539 371,206,624

Networking 154,251,942 . 140,816,915 229,224,816 515,303,909 180,269,135 capital Working capital turnover ratio WORKING CAPITAL TURNOVER RATIO CHART:2.11 2.28 0.83 1.07 2.059

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Interpretation:
The working capital ratio of the organization shows on fluctuating trend during the study period. The highest working capital recorded in the year 2008-09 i.e. 2.28. The main reason for having the highest ratio. The current assets are very high because the net working capital is low to compared with other years. If the current year 2011-12 i.e. 2.059 is also better having sufficient performance of the firm.

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Ratio analysis
G. FIXED ASSETS TURNOVER RATIO:Net sales Fixed Assets turnover ratio =----------------------------Fixed Assets This ratio of 5 is considered as ideal. A high fixed assets turnover ratio indicates better utilization of firms fixed assets (Rs in Crores) Particulars Net sales Fixed .Assets Fixed Asset turnover ratio 2007-08 2008-09 2009-10 2010-11 551,565,539 2011-12 371,206,624

325,492,839 322,047,728 189,952,469

1,174,844,260 286,243,891 1,561,813,227 1,697,082,628 3,591,033,968 0.27 1.13 0.121 0.32 0.10

FIXED ASSET TURNOVER RATIO CHART:-

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Ratio analysis Interpretation:

The fixed assets turnover ratio is indicates that the better utilization of a firm. The highest fixed assets turnover ratio recorded in the year. 2008-09 i.e. 1.13. In this year the fixed assets are effetely used and the current year 2011-12 the fixed assets turnover ratio is very low. It is the indication for the fixed assets are not using effectively. So it is a not good for the company.

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Ratio analysis
H. TOTAL ASSETS TURNOVER RATIO:Net Sales Total Assets turnover ratio = ------------------------------Total Assets Total Assets = Fixed Assets + Current Assets (Rs in Crores) Particulars Net sales Total Assets Total Asset turn over ratio FIXED ASSET TURNOVER RATIO CHART:2007-08 2008-09 2009-10 2010-11 2011-12 371,206,624

325,492,839 322,047,728 189,952,469 551,565,539

272,218,502 493,098,866 1,719,932,672 249,104,498 3,835,616,260 1.19 0.65 0.11 2.2 0.096

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Ratio analysis

Interpretation:
The above chart the total assets turnover ratio is recorded highest in the year 2010-11 i.e. 2.2 in this year the net sales of the organization is very high to compared with other year because the firm has concentrate on sales. And the current year 2011-12 i.e. 0.096 is decreases the ratio it shows the firm is not maintains a sufficient sales.

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Ratio analysis
4. PROFITABILITY RATIO'S: A. GROSS PROFIT RATIO:Gross Profit Grass Profit ratio = ----------------------------- X 100 Net Assets Gross Profit = Net Sales - Cost of goods sold C.G.S = Opening stock Purchases - Closing stock . -.lies = sales - sales returns (Rs in Crores) Particulars Gross Profit Net assets Gross Profit ratio 2007-08 83,556,087 272,218,502 30.69 2008-09 588,51,690 2009-10 2010-11 2011-12 187,631,568

438,855,145 335,363,909

427,060,806 1,791,038,043 249,104,498 3,886,630,775 13.7 24.5 134.62 4.82

GROSS PROFIT RATIO CHART:-

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Ratio analysis

Interpretation:
The gross profit ratio of the organization shows the gross profit has been changing continuously. The highest gross profit recorded in the year 2010-11 i.e. 134.62. In this year the gross profit is very high to compared with other years Because this year the manufacturing & theory. expenses are low. So the gross profit is increased. And the other 4 years also the gross profit is increased in fluctuating trends.

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B. NET PROFIT RATIO: Net Profit Net Profit Ratio = ------------------------------- X 100 Net Sales There is no ideal ratio, the higher the ratio more profitable is the business (Rs in Crores) Particulars Net profit Net sales Net Profit Ratio 2007-08 2,076,532 325,492,839 0.63 2008-09 468,544 322,047,728 0.145 2009-10 7,743,945 189,952,469 4.07 2010-11 12,769,253 551,565,539 2.31 2011-12 40,602,095 999,735,354 4.06

NET PROFIT RATIO CHART:-

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Ratio analysis Interpretation:

The Net profit ratio of the organization shows intensity of net profit of the firm. The ratio has been changing continuously throughout the study period. The highest net profit ratio is recorded in the year 2009-10 i.e. 4.07 in this year the firm gross profit is also high and selling & -distribution expenses are very low to compared with other year. The current year 2011-12 net profit ratio is 4.06 it is increased comparing to last year performance.

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Ratio analysis
C. OPERATING RATIO: Operating Cost Operating ratio = ----------------------------------Net Sales (Or) Cost of goods sold + operating expenses ------------------------------------------------------------Net sales Operating expenses = office & administrative exp + selling & distribution expenses. Cost of goods sold - sates- gross profit (Rs in Crores) Particulars 2007-08 2008-09 2009-10 2010-11 2011-12 846,614,329 999,735,354 84.6 x 100 X 100

Operating cost 258,824,626 287,035,333 152,250,783 229,944,416 Net sales Operating ratio 325,492,839 322,047,728 189,952,469 551,565,539 79.5 89.1 80.15 41.6

OPERATING RATIO CHART:-

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Ratio analysis Interpretation:

Operating ratio indicates the percentage of net sales that is consumed by operating cost. The highest operating cost ratio is recorded in the year 2008-09 i.e. 89.1 In this year the cost of goods sold of firm is high to compared with other year, It indicates the favorable returns.

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Ratio analysis
D. EARNING PER SHARE (EPS):Net profit after tax - preference divided Earning per share (EPS) = ----------------------------------------------------------No of equity shares (Rs in Crores) Particulars 2007-08 2008-09 2009-10 2010-11 2011-12

Net profit after 24,076,532 tax & dividend No of equity shares Earning per share 100,00,00 24.0

468,544 100,000,000 0.00468

7,743,945 50,000,000 0.15

12.769,253 200,00,00 6.384

40,602,095 200,00,00 20.30

EARNING PER SHARE (EPS) CHART:-

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Ratio analysis Interpretation:

The earning per share is a good measure of profitability. The highest earning per share is recorded in the year 2007-08. i.e. 24. In this year the net profit is high & the number of equity share holder are low to compared with other year. It indicates that the firm having the high efficiency. The current year 2011-12 i.e. 20.30 this ratio is also good sign for the company.

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Ratio analysis
E. PRICE EARNING RATIO:Market price per equity share Price earning ratio = ---------------------------------------------------Earning per share Capital reserves & surplus Market price per equity share =--------------------------------------------No of equity shares (Rs in Crors) Particulars Market price per share Earning per share Price earning ratio PRICE EARNING RATIO CHART:6.737 2.435 84.64 42.53 14.36 2.4 4.685 0.15 0.638 2.03 2007-08 16.17 2008-09 11.41 2009-10 12.696 2010-11 27.14 2011-12 29.17

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Ratio analysis

Interpretation:
The price earning ratio is higher the better it is. The highest price earning ratio is recorded in this year 2009-10i.e. 84.64. In this year the number if equity share holder is high so the EPS is low. The lowest price earning ratio is recorded in the year 2008-09 i.e. 2.435.

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FINDINGS
The current ratio at Madhucon sugars & power Ltd for the last five years

are 2007-08 4.14, 2008-09 - 3.13, 2009-10 6.47, 2010-11 - 2.96, 2011-12 3.38.
The debt equity ratio of Madhucon sugar & power Ltd for the last five years

are 2007-08 3.40, 2008-09 - 2.00, 2009-10 - 1.23, 2010-11 - 0.30, 2011-12 2.28.
The proprietary ratio of Madhucon sugar & power Ltd for the last five years

arc 2007-08 0.226, 2008-09 - 0.33, 2009-10 - 0.075, 2010-11 - 0.22,.2011-12 - 0.145.
Fixed Assets ratio of Madhucon sugar & power Ltd for the last five years

are 2007-08 - 1.908, 2008-09 - 2.017, 2009-10 - 11.58, 2010-11 - 3.12, 201112 - 6.15.
The current Assets to proprietory funds ratio of Madhucon sugar & power

Ltd for the last five years are 2007-08 - 328, 2008-09 - 145, 2009-10 - 287, 2010-11 - 112, 2011-12 - 72.
The Inventory turnover ratio of Madhucon sugar & power Ltd for the last

five years are 2007-08 - 258.78, 2008-09 - 247.8, 2009-10 - 111.40, 2010-11 -221, and 2011-12-19.
The debtors turnover ratio of Madhucon sugar & power Ltd of last five

years are 2007- 08 - 99, 2008-09 - 79, 2009-10 -103, 2010-11 - 468, 2011-12616.
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Ratio analysis
the working capital turnover ratio of Madhucon sugar & power Ltd for the

last five years are 2007-08 - 2.11, 2008-09 - 2.28, 2009-10 - 0.83, 2010-11 1.1, 2011-12 2.059.
Tie fixed assets turnover ratio of Madhucon sugar & power Ltd for the last

five years are 2007-08 0.27, 2008-09 -1.13, 2009-10 - 0.121, 2010-11 - 0.32, 2011-12-0.10.
The Total Assets turnover ratio of Madhucon Sugar & Power Ltd for the

last five years ire 2007-08 - 1.19, 2008-09 - 0.65, 2009-10 -0.11, 2010-11 0.32, 2011-12-0.10.
The operating ratio of Madhucon sugars & powers Ltd for the last five

years are 2007-08-20.5, 2008-09 - 89.1, 2009-10 - 80.15, 2010-11 - 82.5, 201112 - 84.7.
The operating profit ratio of Madhucon sugar & power Ltd for the last five

years are 2007-08 - 20.5, 2008-09 - 10.9, 2009-10 - 19.85, 2010-11 - 17.5, 2011-12 - 15.3.
The earnings per share of Madhucon sugar & power Ltd for the last five

years arc 2007 - 08-2.4, 2008-09 - 4.685, 2009-10 - 0.15, 2010-11 - 0.638, 2011-12 - 2.03.
The price earning ratio of Madhucon sugar & power Ltd for the last five

years are 2007-08-6.737, 2008-09 - 2.435, 2009-10 - 84.64, 2010-11 - 42.53, 2011-12- 14.36.

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SUGGESTIONS
The analyzing various financial variables in the Madhucon sugar & power Ltd, I want to offer some suggestions. The organization has been main taining sufficient level of current assets. The current ratio of more than the ideal ratio through at the study so it is suggested that same place is need to continued in the coming days to maintain the consistency in the working capital. The quick assets are having the sufficient level in the Organization The quick ratio is meeting the ideal level Hence suggested that firm has to maintain the same level in further days. The Absolute quick / super quick assets portion is too low in the organization. So the organization has to maintain sufficient balance in the form super quick assets.
The firm's debt equity ratio reveals that the organization is only reloging on

the & more outsiders funds rather than share holders funds. It is suggested that the organization has to maintain a balance between both success of funds i.e. between out sides funds and share holders funds to built a sound capital structure.
The firm's solvency ratio indicates the firm's ability to repay its outsides

funds so the firms have to improve its total assets level to strengthen its solvency ability.

BITS ,KHAMMAM

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Ratio analysis BIBLIOGRAPHY

REFEREED BOOKS Management Accounting R.K. Shanna & Shashi K. Gupta. Financial Management S. N Mahsehwari Financial Management Prasanna Chandra Financial Management M Panday

REFEREED JOURNALS:

Annual reports of madhucon sugars ltd.

REFEREED WEB SITES:

www.madhucon.com www.madhucongroups.com www.accountingformanagement.com www.accountingmaster.com

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