1

A STUDY ON RATIO ANLYSIS AT KERALA FEEDS LTD, KALLETTUMKARA

INTERNSHIP TRAINING REPORT Submitted by

MEERA.A.M Reg. No. 098001112049

In partial fulfillment for the award of the degree of

MASTER OF BUSINESS ADMINISTRATION IN

DEPARTMENT OF MANAGEMENT STUDIES

MAHARAJA ENGINEERING COLLEGE AVINASHI-641654

AUGUST 2010

MAHARAJA ENGINEERING COLLEGE AVINASHI-641654

Department of management studies
INTERNSHIP TRAINING WORK PHASE I AUGUST 2010 This is to certify that the internship training work entitled

A STUDY ON RATIO ANALYSIS AT KERALA FEEDS LTD, KALLETTUMKARA

Is the bonafide record of internship training work done by

MEERA A.M Register No: 098001112049 Of MBA during the year 2010-2011 -----------------Internship Training Guide Department
Submitted by the internship training work Viva Voice examination held on ------------------------------------------Internal Examiner Examiner -------------------External

------------------Head of the

3 DECLARATION I affirm that the internship training work titled A STUDY ON RATIO

ANALYSIS AT KERALA FEEDS LTD being submitted in partial fulfillment for the award of MASTER OF BUSINESS ADMINISTRATION is the original work carried out by me. It has not formed the part of any other internship training work submitted for award of any degree or diploma, either in this or any other University

(Signature of the Candidate) MEERA A.M 09800112049

I certify that the declaration made above by candidate is true

(Signature of the Guide) Mrs. S.KALYANI, MBA, M.PHIL, PG Lecturer,

ACKNOWLEDGEMENTS I take this golden opportunity to show my gratitude to our honorable chairman Thiru.K.PARAMASIVAM, B.Sc, and Thiru.P.SATHIYAMOORTHY,B.E.,MBA, MS., correspondent of Maharaja Engineering College, Coimbatore for giving me an opportunity to be a student of this reputed institution. I extend my deep sense of gratitude and sincere thanks to our principal Dr.N.KUPPUSAMY, M.E., PH.D. FIE. I would like to express my sincere thanks to Mr.S.KUMAR, MBA, M.Phil., M.I.S.T.E Head of the department, department of management studies for his immense guidance and support during the course of the project. I extend my profound gratitude to my faculty guide Mrs.S.KALYANI MBA, M.Phil, PGDCA for her valuable guidance and encouragement for the successful completion of the project. I would also like to thank my company guide Mr.A.JOHNY manager of finance department Kerala Feeds Limited for helping me by providing valuable information for the study. I owe to my parents, all faculty members and my friends for the necessary support and encouragement in carrying out the project.

MEERA.A.M

LIST OF CONTENTS CHAPTER NO. Abstract List of tables List of figures Introduction About the study Chapter 1 1.2 About the industry 1.3 About the company 1.4 Review of Literature Main theme of the project 2.1 Objectives of the study Chapter 2 2.2 Scope & limitations of the study 2.3 Research methodology 2.4 Analysis & interpretation Findings, suggestions & conclusion 3.1 Findings Chapter 3 3.2 Suggestions 3.3 Conclusion Appendix Bibliography 11 12 13 15 65 67 68 1 5 6 9 iii iv v CONTENTS PAGE NO.

6 ABSTRACT The internship training work entitled A study on ratio analysis at kerala feed limited, kallettumkara is a study conducted in the finance department of Kerala Feeds Ltd. It was incorporated in 1995 as a public Limited company for producing cattle feed. The plant is situated in 27 acres of land at kalletumkara in Thrissur District. The details regarding the history and finance of the company was collected through the discussion with company officers. The main objective of the study is to know about the financial strength and weakness of the company through ratio analysis The secondary data were collected from records, reports and profile of the company. Data analysis was carried out and findings are listed down. Suitable suggestions have been provided. Thus the ratio analysis is the main tool used for analysis and interpretation of data, which include liquidity leverage, activity, profitability and expense ratios. The company is following a Speedy collection procedure which helps to reduce the trade debtors and increase the working capital. This study was concluded by pointing out that the company can increase the profit by reducing the expense cost and also by reducing the depreciation charged to fixed asset.

LIST OF TABLES

Table No 2.4.1 2.4.2 2.4.3 2.4.4 2.4.5 2.4.6 2.4.7 2.4.8 2.4.9 2.4.10 2.4.11 2.4.12 2.4.13 2.4.14 2.4.15 2.4.16 2.4.17 2.4.18 2.4.19 2.4.20 2.4.21 2.4.22 2.4.23 2.4.24 2.4.25 Current Ratio Quick Ratio Cash Ratio

NAME

Page No 15 17 19 21 23 25 27 29 31 33 35 37 39 41 43 45 47 49 51 53 55 57 59 61 63

Inventory to Working Capital Debt Ratio Debt Equity Ratio Equity Ratio Capital Employed to Net Worth Ratio Solvency Ratio Fixed Asset to Net Worth Ratio Fixed Asset Ratio Inventory Turnover Ratio Inventory Holding Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working Capital Turnover Ratio Fixed Asset Turnover Ratio Current Asset Turnover Ratio Capital Employed Turnover Ratio Gross Profit Ratio Net Profit Ratio Operating Profit Ratio Factory Expenses Ratio Administration Expenses Ratio Selling and Distribution Expenses Ratio

LIST OF FIGURES Table No 2.4.1 2.4.2 2.4.3 2.4.4 2.4.5 2.4.6 2.4.7 2.4.8 2.4.9 2.4.10 2.4.11 2.4.12 2.4.13 2.4.14 2.4.15 2.4.16 2.4.17 2.4.18 2.4.19 2.4.20 2.4.21 2.4.22 2.4.23 2.4.24 2.4.25 Current Ratio Quick Ratio Cash Ratio Inventory to Working Capital Debt Ratio Debt Equity Ratio Equity Ratio Capital Employed to Net Worth Ratio Solvency Ratio Fixed Asset to Net Worth Ratio Fixed Asset Ratio Inventory Turnover Ratio Inventory Holding Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working Capital Turnover Ratio Fixed Asset Turnover Ratio Current Asset Turnover Ratio Capital Employed Turnover Ratio Gross Profit Ratio Net Profit Ratio Operating Profit Ratio Factory Expenses Ratio Administration Expenses Ratio Selling and Distribution Expenses Ratio NAME Page No 16 18 20 22 24 26 28 30 32 34 36 38 40 42 44 46 48 50 52 54 56 58 60 62 64

10 CHAPTER I INTRODUCTION I.I ABOUT THE STUDY In todays competitive world of business, judicious management of both human & non-human resources by business enterprises is essential for its survival and growth with the rapid growth in the size of business firms and the consequent increase in the problem of internal control, management has become more complex. A manager needs both quantitative and qualitative information for taking decision and managing the firm efficiently and successfully. Here by using the financial resources available from annual report of Kerala Feeds Ltd. During the period of 31-March, 2005 to 31-March, 2010. I try to analysis the fund management of the company. In every business, capital is required for minimum stock of raw material to maintain continuity in production, minimum stock of finished goods to fulfill future demand, payment of wages and salary of the laborers and the employees for the processing period and minimum amount of debtors, cash and bank balances. Financial analysis is the process of identifying the strength and weakness of the company with the help of accounting information provided by the profit and loss account and balance sheet. It is a technique of x-raying the financial analysis will give the management considerable insight in to the level and areas of strength or weakness. The ratio analysis is one of the most powerful tool of financial analysis. It is the process of establishing and interpreting various ratios. It is with the help of ratios that the financial statement can be analyzed more clearly and decision from such analysis.

11 RATIO ANLYSIS Ratio analysis is the process of determining and interpreting numerical relationship based on financial statement. It is a technique of interpretation of financial statement with the help of accounting ratios arrived from the balace sheet and profit and loss account. It involves the comparison of existing ratios against standard established. The standard may be set by management as goals expressed in the budget or may be figures reflecting the performance of other companies. There are various methods or techniques used in analyzing financial statement such as Comparative Statement, Trend Analysis, Common Size Statement, Schedule of changes in working capital, Fund Flow Statement, Cost Volume Profit Analysis and Ratio Analysis. The ratio analysis is one of the most powerful tool of financial analysis. It is the process of establishing and interpreting various ratios. It is with the help of ratios that the financial statement can be analyzed more clearly and decision from such analysis. RATIO ANALYSIS Several ratios, calculated from the accounting data, can be grouped in to various classes according to financial activity or function to be evaluated. As started earlier, the parties interested in financial analysis. Owners concentrate on the firms performance. They have to protect the interests of all parties and see that the firms grow profitably. In view of the requirements of the various uses of ratios, this may be classified into: Liquidity Ratio Leverage Ratio Activity Ratio Profitability Ratio

12 I). LIQUDITY RATIO Liquidity ratio measure the firms ability to meet current obligations. Leverage ratio shows the proportion of debt and equity in financing the firms asset. Activity ratio reflect the firms efficiency in utilizing its asset, and profitability ratio measure overall performance and effectiveness of the firm.

II). LEVERAGE RATIOS, CAPITAL STRUCTURE RATIOS OR LONG TERM SOLVENCY RATIO To judge the long-term financial position of the firm, financial leverage, or capital structure ratios are calculated. A firm should have a strong short-term as well as long-term financial position. There ratios indicate mix of funds provided by owners and lenders. As a general rule, there should be an appropriate mix of debt and owners equity in financing the firms asset. The ratio may be calculated to determine the proportion of debt in total financing leverage ratios are also computed from the profit and loss items by determining the extent to which operating profit are sufficient to cover the fixed charges. The most common ratios which indicate the extent of leverage ratios are:a) Debt Ratio b) Debt Equity Ratio c) Equity Ratio / Net Worth Ratio d) Capital Employed to Net Worth Ratio e) Solvency Ratio f) Fixed Asset to Net Worth Ratio g) Fixed Asset Ratio

13 III). ACTIVITY RATIOS Activity ratios are employed to evaluate the efficiency with the firm manges and utilities its assets. There ratios are also called turnover ratios because they indicate the speed with which assets are being converted or tuned over in to sales. It involves a relationship between sales and assets. Several activity ratios can be calculated to judge the effectiveness of asset utilization. Depending up on the purpose, a number of turn over ratio can be calculated:Inventory Turnover Ratio Inventory Holding Ratio Debtors Turnover Ratio Creditors Turnover Ratio Working Capital Turnover Ratio Fixed Asset Turnover Ratio Current Asset Turnover Ratio Owned Capital Turnover Ratio IV]. PROFITABILITY RATIO The purpose of study and analysis of profitability ratio are to assess the adequacy of profit earned by the company and also to cover whether profitability is incurring or decreasing. The profitability ratio shows the combined effect of liquidity, asset management and debt management on operating results. Profitability ratio are measured with reference to sales, capital employed, total assets employed, shareholders fund etcThe profitability ratios in relation to sales are:Goss Profit Ratio Net Profit Ratio Operating Profit Ratio Expenses Ratio

14 1.2 ABOUT THE INDUSTRY Cattle feed sector in Kerala state: An overview From old times, the income of majority of keralites was agricultural and rearing of livestock. The geographical structure and climate of kerala was suitable for them and soil was very fertile. In the livestock sector, the main constituent was cattle. high yielding cross breeds. The most prominent among them was operation flood which prevailed 1980 1996.Even though, we are sufficient in milk, the feeds sector is left to be done, much more. The natural feeds like grass and hay re found to be inadequate and stress was given on Compounded Cattle Feeds (C.C.F). Compounded cattle feed is found to be a well-balanced food for cattle. It is cost effective also. East Asiatic Company in the brand name OK was first introduced by C.C.F in Kerala. Even today cattle feed is synonymous with the brand name. C.C.F manufacturers based in Kerala No. Name of Company Number of plants 1. 2. 3. 4. 5. Kerala Feeds Ltd KSE Ltd Kerala co-operative milk marketing Prime Agro Others Total 3 1 30 37 600 200 450 2190 Milma prima -------1 2 Installed Capacity (MT) 500 440 Kerala feeds K.S Brand Earlier, the cattle

population consisted of low yielding verities. Now 80% of the cattle population consists of

15 1.3 ABOUT THE COMPANY Kerala feeds Ltd is a public undertaken company, which has a good organization norms and standards. Kerala Feeds Ltd incorporated in 1995 as a public Ltd company for producing cattle feed. Government established this company as per Indian company Act 1956, production started in 1998-99, authorized capital is 30 crore. Within 30 core, 27 crore allocated as shares. In that, 76.95% to the government of Kerala and 18.79% to the government companies, 3.46% to milma and corporative society, societies, 200 shareholders are there. Mukundapuram Taluk of Trissur District. The cattle feed with 500 TDP capacity was commissioned in late 1998 and commercial production started in January in 1999 with one shift only. The second and third shift operations were commenced in June 1999 and July 2000 respectively. The plants is situated in 27 acres of lands and has sufficient scope for further expansion. The organization has procured and developed material handling systems in tune with its requirements to lighten the burden of the employees. The plants and its Milling, Mixing, Cooking and Palletizing (MMCP) technology was imported from Holland, the Netherlands. And these machines have helped the company to produce quality pellets and capture the market which was hitherto in the hands of the private sector companies. Kerala Feeds has been instrumental in not only increasing the quality of the feed available in the market but also has been able to stall the spiraling tendency of the feed prices. The raw material is checked for its quality, stored in godown, filled in to the bins, drawn in fixed proportions, ground to fine particular size, mixed homogeneity, cooked for better digestibility and palletized keeping the need of the cattle in mind. Human help is needed only to stored raw materials and to stock the cattle feed filled sacks, the rest are done by computers. This unit produces 500 tones of cattle feed per day. Apart from Kerala, the company caters to Karnataka & Lakshadeep. while making the product KLF follows BIS wheat etc. are teased in the bio-lab. Karnataka, Andrapradesh and Tamil Nadu are the material providers. 0.8% to ordinary The plants is situated at Kalletumkkara in

16 KFL has become a boon to farmers. It came out with advanced, innovative and original concepts leading to building up the expectation of the customers. The product matched with the expectation and the demand for it increased. Before the entry of the company, there was no brand name for the cattle feed. However, because of the companys entrance, private feed producers have to keep up the standard to complete. In the last 20 years the cost of the feed had increased by 450% whereas in the last four years the price has increased only by 16%. Hence the farmers bets maximum yield and better health for his cattle. The officials from KFL conduct classes for scientific feeding methods for owners of cattle through the Ksheeraotsavam organized by the Diary Department. 20 field staff are also roped in to bring awareness among the locals. Awareness as in any other field is very important since conventional farmers do not easily accept change, hence do not tap the maximum potential of their cattle. At present KFL has 400 dealers in 1151 or so Panchayats & Municipalities and 450 cooperatives. More publicity means more demand. Kerala Feeds also plans to launch a new product, a mineral mixture called Keramin. Keramin production has been started in March 2004. One packet of keramin is 1 kg. the product of keramin for 2004-05 is 821 MT. this to take care of the deficiency of cattle. The national Diary Development Board (NDDB) is expected to provide entire plants, machinery, technology, and know how at the subsidized rate for the project. Production is to carried out by womens societies under the supervision of NDDB. The production is proposed to sell through Kerala Feeds marketing network. OBJECTIVE OF THE COMPANY 1) To produce and make available good compounded cattle feed at optimum price. 2) Create awareness on feeding methods. 3) Educate farmers about the need for quality feeding 4) Supplement minerals and vitamins in their feed to level the inadequacy in natural feed compound.

17 SALIENT FEATURES OF KERALA FEEDS LTD Advanced technology. Computerized control system. The only which follows MMCP (Milling, Mixing, Cooking, and Palletizing) technology. The quality of the product is ensured from the collection of the raw material up to the finished feed. The moisture content is fully removed by heating at 80 degree which ease the digestion and can keep for long time. The palletized form help to keep the environment cleanly. It is highly homogametic. The M.R.P rate is not changed throughout Kerala. The standard of the product is improving continuously 24 hours working plant. The cattle feed is free from all types of germs.

18 1.4 REVIEW OF LITERATURE TIMO SALMI AND TEPPO MARTIKAINEN (1994), A Review of the theoretical and Empirical Basis of Financial Ratio Analysis, The Finnish Journal of Business Economics 4/94,426-448. Also published on the World Wide Web. Financial ratios are widely used for modeling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers main interest has been to develop models exploiting there ratios. BERRY, R.H., AND NIX, S. (1991) Regression analysis v. Ratios in the cross-section analysis of financial statements, Accounting and Business Research 21/82, 107-117. The common feature of all the areas of financial ratio analysis research seems to be that while significant regularities can be observed, they are not necessarily stable across the different ratios, industries, and time period, thus there remains much to be done to find a tenable theoretical background to improve the generalizability of financial ratio analysis. A systematic framework of financial statement analysis along with the observed separate research trends might be useful for furthering the development of research. If the research results in financial ratio analysis are to be useful for the decision makers, the results must be theoretically consistent and empirically generalizable.

19 MARTIKAINEN, T. (1992) Time-series distributional properties of financial ratios: empirical evidence from Finnish listed firms, European Journal of Operational Research 58/3, 344-355. The research on the functional form of financial ratios has been characterized by theoretical discussions about the ratio format in financial ratio analysis and empirical tesitn of the ratio mode. We conclude from the review that the proportionality assumption for financial ratios is stronger within an industry than between industries. Moreover, proportionality varies from ratio to ratio, and between time periods indicating problems in temporal stability. WHITTINGTON, G. (1980) Some basic properties of accounting ratios, Journal of Business Finance and Accounting 7/2, 219-323. It is obvious that the existing main research areas in financial ratio analysis are separate from each other sometimes with traditions of their own. Historically, these trends have developed to a degree on their own without a distinct theoretical framework to encompass the entire field of financial statement analysis. Of the four areas reviewed in this paper only the first and the second are closely interrelated

20 CHAPTER 2 MAIN THEME OF THE STUDY 2.1 OBJECTIVES OF STUDY PRIMARY OBJECTIVES The major objectives of the study are to know about financial strength and weakness of KERALA FEEDS LTD through RATIO ANALYSIS. SECONDARY OBJECTIVES To analyze the liquidity, profitability and efficiency positions of the company during the study period. To study and analyze various facts of the financial performance of the company To study comparisons between the ratio during different periods.

21 2.2 SCOPE & LIMITATION OF THE STUDY 2.2.1 SCOPE The Ratio analysis is one of the most powerful tool of financial analysis. Ratio analysis is the process of determining and interpreting numeric relationship based on financial statement with the help of accounting ratios arrived from the balance sheet and profit and loss account.

2.2.3 LIMITATIONS Financial analysis is a powerful mechanism for determining financial strength and weakness of the firm. But the analysis suffers from serious inherent limitation of financial statements. Financial analysis is based upon monetary information and non-monetary factors are ignored. Different people may interpret the same analysis in different way. The study is limited for a period of five years from 2005-2010

22 2.3 RESEARCH METHODOLOGY MEANING FOR RESEARCH Research is a scientific and systematic search for pertinent information on a specific topic. It is considered as a careful investigation or enquiry to find out new facts in any branch of knowledge. It is the original contribution to the existing stock of knowledge making for its advancements. Therefore research is systematized effort to acquire new knowledge. RESEARCH DESIGN A research design is purely planned for the study that guides in the collection of valid data. Here analytical research design is used for the study. DATA COLLECTION While dealing the real life problem, it is obvious that the data in hand are inadequate and hence it becomes necessary to collect the data that are appropriate. The data needed for the researcher study were collected as TYPES OF DATA 1. PRIMARY DATA 2. SECONDARY DATA

PRIMARY DATA Primary data do not exit already; the researcher has to gather primary data afresh for the specific study under taken by him. The primary data are explicitly gathered for the specific research protects at hand. But no primary data is used in the study.

23 SEC0NDARY DATA Secondary data is those which have been collected by someone else and which have already been passed through the statistical processes. In this present study the secondary data being collected through Annual reports Internal records

PERIOD OF THE STUDY The study was conducted in the finance department of KERALA FEEDS LIMITED under the topic A STUDY ON RATIO ANALYSIS AT KERALA FEEDS LIMITED for a period of two months from June 2010 to July Sources of Secondary Data Most of the calculations are made on the financial statements of the company provided statements. Referring standard texts and referred books collected some of the information regarding theoretical aspects. Method-to assess the performance of the company method of observation the work in financial department in followed. TOOLS USED FOR ANLYSING DATA Ratio Analysis

24 2.4 ANAYSIS AND INTERPRETATION CURRENT RATIO Current Ratio may be defined as the relationship between current asset and current liabilities. A relatively high current ratio is an indicator that the firm is liquid and has the ability to pay its current obligations. It may be calculated as follows:Current Asset ----------------------Current Liability Table No.2.4.1 Current Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: secondary data INTERPRETATION In the current ratio of Kerala Feeds Ltd from 2005-2006 shows that the ratio ranging from 2.97 to 1.78. It means the company is able to meet its current obligations and it enjoys sufficient liquidity. As a conventional rule, idle current ratio should be 2:1 Current Asset In Rs. (2) 211357391 304838569 300522680 291679160 294395051 Current Liability In Rs. (3) 71278880 106420106 100610068 144363552 165078532 Ratio In times (2)/(3) 2.97 2.86 2.98 2.02 1.78

Current Ratio `

25

FIGURE NO.2.4.1 Current Ratio

Current Ratio
3.5 3 2.5 y-ratio 2 1.5 1 0.5 0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 x-year 2.02 1.78
Ratio (2)/(3)

2.97

2.86

2.98

26 QUICK RATIO / ACID TEST RATIO It establish a relationship between quick or liquid asset and current liabilities. It is also known as liquid ratio. It is computed as follows:Quick Asset -------------------Quick Liability Table No.2.4.2 Quick Ratio Quick Asset (In Rs.) (2) 155689413 231563286 206423924 162793813 158456325 Quick Liability (In Rs.) (3) 71278880 106420106 100610068 144363552 165078532 Ratio (In times) (2)/(3) 2.18 2.18 2.05 1.12 1.16

QUICK RATIO

Year

(1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: secondary data INTERPRETATION

A quick ratio of 1:1 is considered to be idle. This ratio is more rigorous test of liquidity then the current ratio and when used in conjunction with it gives a better picture of the firms ability to meet its short-term debt out of short-term asset.

27 FIGURE NO. 2.4.2 Quick Ratio

Quick Ratio
2.5 2.18 2 2.18 2.05

1.5
y tio -ra

1.12 1

1.16

Ratio In % (2)/(3)

0.5

0 2005-2006 2006-2007 2007-2008 x-year 2008-2009 2009-2010

28 CASH RATIO / LIQUIDITY RATIO Cash is the most liquid asset. A financial analyst may examine cash ratio and its equivalent to current liability. Trade investment or marketable securities are equivalent to ratio. It may be calculated as :Liquid Asset --------------------Current Liabilities Table No. 2.4.3 Cash Ratio Absolute Liquid Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION The Cash Ratio of KFL ranges from 1.45 to .58. The liquidity position of the company of 2007-2008 is 1.57 but in 2008-09 and 2009-10, the position is bad. Asset (In Rs) (2) 103526765 140131530 158078058 94314824 92654853 (In Rs) (3) 71278880 106420106 100610068 144363552 165078532 (In times) (2)/(3) 1.45 1.32 1.57 .65 .58 Current Liabilities Ratio

Cash Ratio =

29 FIGURE NO.2.4.3 CASH RATIO

Cash Ratio
1.8 1.57 1.45 1.4 1.32

1.6

1.2

yr t - aio

Ratio (2)/(3)
0.8 0.65 0.6 0.58

0.4

0.2

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

30 INVENTORY TO WORKING CAPITAL In order to that there is no over stocking, the ratio of inventory to working capital should be calculated. Working Capital is the excess of current liabilities. Increase in volume of sales requires increase in size of inventory, but from a sound financial point of view, inventory should not exceed amount of working capital. The desired ratio is 1:1. It is worked out as follows:Inventory ---------------Working Capital

Inventory to Working Capital =

Table No2.4.4 Inventory to Working Capital Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION The inventory to working capital ratio is less than 75% for last two years. It indicates under stocking, ie, inventory was not absorbing more than 75% of working capital. Inventory (In Rs) (2) 55667978 73275283 94098756 12888537 12564856 Working Capital (In Rs) (3) 140078511 198418463 199912612 147315608 129317652 Ratio (In times) (2)/(3) .397 .369 .470 ..087 .080

31 FIGURE NO. 2.4.4 Inventory to Working Capital

Inventory To Working Capital

0.5 0.47 0.45 0.397 0.369 0.35

0.4

0.3 y ao - t r i

0.25

Ratio (2)/(3)

0.2

0.15

0.1

0.087

0.08

0.05

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

32 DEBT RATIO It helps the firm to know the long-term solvency. The firm may be interested in knowing the proportion of the interest bearing debt in the capital structure. Total debt will include short and long-term borrowing from financial institution, bank borrowings and any other interest bearing loan. Because of the equality of capital employed and net asset, debt ratio can also be defined as total debt divided by net asset :Total Debt = -------------------------Net Asset Table No. 2.4.5 Debt Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION If the ratio for a firm is 1:2, it implies that one third of the total permanent capital of the firm is in the form of long-term debts. Although no hard and fast rule exist, conventionally a ratio of 1:2 is considered satisfactory. Debt (In Rs) (2) 10172911 8781140 7128022 515108 652435 Net Asset (In Rs) (3) 284222911 322978167 355488442 329283709 334685456 Ratio (In times) (2)/(3) .036 .027 .020 .001 .001

Debt Ratio

33 FIGURE NO.2.4.5 Debt Ratio

Debt Ratio

0.04

0.036

0.035 0.03
0.027

0.025

0.02

y-ratio

0.02 0.015

Ratio (2)/(3)

0.01

0.005

0.001

0.001

0 2005-2006 2006-2007 2007-2008 x-year 2008-2009 2009-2010

34 DEBT EQUITY RATIO Equity means share holders fund and debt means long-term borrowed fund (short term loans, current liabilities and provisions are excluded). The relationship between borrowed funds and owners capital is measured the long-term financial solvency of a firm. Debt equity ratio is the indicator of leverage. The debt equity ratio is expressed as a proportion between debt and equity. It can be expressed as :Debt Debt Equity Ratio = ----------------------Equity Table No. 2.4.6 Debt Equity Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION Debt Equity Ratio shows the decreasing trend. The Debt Equity Ratio is .04 to .001 in 2005-2010. It shows the financial position of the concern is very weak and risk of the long-term creditors is relatively less Debt (In Rs) (2) 10172911 8781140 7128022 515108 652435 Equity (In Rs) (3) 274050000 274050000 274050000 274050000 274050000 Ratio (In times) (2)/(3) .04 .03 .026 .001 .001

35 FIGURE NO.2.4.6 Debt Equity Ratio

Debt Equity Ratio

0.04
0.04

0.035

0.03
0.03

0.026
0.025

y-ra tio

0.02
Ratio (2)/(3)

0.015

0.01

0.005

0.001
0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009

0.001 2009-2010

36 EQUITY RATIO OR NET WORTH RATIO It express the relationship between Net Worth or Equity and Total Asset. It is usually expressed as a proportion. It is expressed as follows :Net Worth = -------------------------Total Asset Table No2.4.7 Equity Ratio Net Worth (In Rs) (2) 274050000 314197027 274050000 274050000 274050000 Total Asset (In Rs) (3) 346881647 428571038 414469713 429777154 459297854 Ratio (In times) (2)/(3) .79 .73 .66 .63 .66

Equity Ratio

Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION

From the table we can show that the Equity Ratio vary in different years. In the year of 2006-07 the ratio is lower than any other year. So the financial position of the concern is not good. Higher the ratio shows the stronger is the financial position of the concern, the lower ratio shows the weaker financial position of the concern.

37 FIGURE NO. 2.4.7 Equity Ratio

Equity Ratio

0.79

0.8

0.73

0.7

0.66

0.63

0.66

0.6

0.5

Y-ratio 0.4
Ratio (2)/(3)

0.3

0.2

0.1

0 2005-2006 2006-2007 2007-2008 x-ye ar 2008-2009 2009-2010

38 CAPITAL EMPLLOYED TO NET WORTH RATIO This is another way of expressing the basic relationship between debt equity. This help to know how much funds are being contributed together by lending and owners for each rupee of the owners contribution. This can be found out by calculating the ratio of capital employed or asset. Capital Employed to Net Worth = Capital Employed ----------------------------------Net Worth

Table No. 2.4.8 Capital Employed to Net Worth Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETAION The ratio helps to know the owners contribution. The table shows that the owners contribution in the company the ratio ranging from 1.04 to 1.22. The contribution by the owners of the company is good Capital Employed (In Rs) (2) 284222911 322978167 355488442 329283709 334685456 Equity (In Rs) (3) 274050000 314197027 274050000 274050000 274050000 Ratio (In times) (2)/(3) 1.04 1.03 1.29 1.20 1.22

39 FIGURE NO.2.4.8 Capital Employed to Net worth Ratio

Capital Employed to Net Worth Ratio

1.4

1.29
1.2
1.2 1.22

1.04
1

1.03

0.8 y-ra tio

Ratio (2)/(3)

0.6

0.4

0.2

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

40 SOLVENCY RATIO This ratio helps to measure the solvency of a concern. Solvency of a concern means the ability of a concern to meet its total liability out of its total asset. Total Asset = ----------------------Total Liability Table No. 2.4.9 Solvency Ratio Total Asset Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION Higher the solvency ratio indicates the stronger is its financial position and lower the solvency ratio indicates the weaker is its financial position. This table shows that the financial position of KFL is weaker. The solvency ratio smaller than any other year ratio. (In Rs) (2) 346881647 428571038 414469713 429777154 415426854 Total Liabilities (In Rs) (3) 71278880 106420106 107738090 144878660 157885652 Ratio (In times) (2)/(3) 4.87 4.03 3.84 2.96 2.70

Solvency Ratio

41 FIGURE NO. 2.4.9 Solvency Ratio

Solvency Ratio

4.87

4.5

4.03
4

3.84

3.5

2.96
3 2.7

y-ra tio

2.5
Ratio (2)/(3)

1.5

0.5

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

42 FIXED ASSET TO NET WORTH RATIO This ratio shows the relationship between fixed asset and net worth. Fixed asset refers to assets, which are used in the enterprise permanently. Net Fixed Asset means, fixed asset less depreciation. This ratio indicates the proportion of fixed asset financed by the owners or the proprietors. This can be measured as followed. Net Fixed Asset Fixed Asset to Net Worth Ratio = --------------------------------Net Worth Table No. 2.4.10 Fixed Asset to Net Worth Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION The standard or ideal fixed asset to net worth ratio for an industrial undertaking is 2/3. If fixed asset constitute more than 67% of the proprietors fund, the indication is that the proprietors funds are mostly sunk in the fixed assets; such an indication means financial weakness of the concern and greater risks for the creditors. Net Fixed Asset (In Rs) (2) 135524256 123732529 113947033 138097994 156983468 Net Worth (In Rs) (3) 274050000 314197027 274050000 274050000 274050000 Ratio (In times) (2)/(3) .49 .39 .41 .50 .57

43 FIGURE NO. 2.4.10 Fixed Asset to Net Worth Ratio

Fixed Asset to Net Worth Ratio

0.6

0.57

0.5

0.49

0.5

0.41

0.4

0.39

y-ratio 0.3

Ratio (2)/(3)

0.2

0.1

0 2005-2006 2006-2007 2007-2008 x-year 2008-2009 2009-2010

44 FIXED RATIO ASSET This ratio explains whether the firm has raised adequate long-term funds to meet its fixed assets requirements. It is expressed as follows:Fixed Asset Fixed Assets Ratio = ----------------------------Capital Employed Table No.2.4.11 Fixed Asset Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION This ratio gives an idea as to what part of the capital employed has been used in purchasing the fixed assets for the concern. If the ratio is less than one it is good for the concern, the ideal ratio is .67. The fixed asset of KFL from 2005-2010 is in between .47 to .46. All the year it is less than one. Fixed Asset (In Rs) (2) 135524256 123732529 113947033 138097994 156983468 Capital Employed (In Rs) (3) 284222911 322978167 355488442 329283709 334685456 Ratio (In times) (2)/(3) .47 .38 .32 .41 .46

45 FIGURE NO. 2.4.11 Fixed Asset Ratio

Fixed Asset Ratio

0.5

0.47

0.46

0.45
0.41

0.4

0.38

0.35

0.32

0.3

y-ra tio 0.25

Ratio (2)/(3)
0.2

0.15

0.1

0.05

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

46 INVENTORY TURNOVER RATIO Inventory turnover ratio establishes the relationship between costs of goods sold and average inventory. This ratio indicate how many times during the period the firm has turned it is in other words it shows the rate at which inventories are converted into sales and than into cash. It computed as follows:Sales Inventory Turnover Ratio = --------------------------------Average Stock Average Stock Opening Stock + Closing Stock = -------------------------------------------------2 Table No. 2.4.12 Inventory Turnover Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Net Sales (In Rs) (2) 781901488 871280480 953752505 1086328446 1025452365 Average Stock (In Rs) (3) 76126913 64471630 50503120 69143752 70236541 Ratio (In times) (2)/(3) 10.27 13.51 18.88 15.71 16.03

Source: Secondary Data INTERPRETATION From the year 2005-2010, Kerala Feeds Ltd has maintained stock turnover ratio more than 8. This means that the company is efficient and stocks are moving very fast.

47 FIGURE NO. 2.4.12 Inventory Turnover Ratio

Inventory Turnover Ratio

20

18.88

18
15.71

16.03

16
13.51

14

12
10.27

y-ratio 10

Ratio (2)/(3)
8

0 2005-2006 2006-2007 2007-2008 x-year 2008-2009 2009-2010

48 INVENTORY HOLDING PERIOD It may also be of interest to see average time taken for clearing stock. This can be possible by calculating inventory conversion period. This period is calculated by dividing the number of days by inventory turnover.

Number of days Inventory Conversion Period = ---------------------------------Inventory Turnover Ratio Table No. 2.4.13 Inventory Holding Period Number of Days Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION From the above it is clear that the conversion period of inventory is less than any other period. Inventory conversion period is help to know the average time taken for clearing stock. 2005-06 it was 36 days, but in 2009-10, it is 27 days. (In Days) (2) 365 365 365 365 365 Inventory Turnover Ratio (In Rs) (3) 10.27 13.51 18.88 15.71 16.03 Ratio (In Days) (2)/(3) 36 27 19 23 23

49 FIGURE NO. 2.4.13 Inventory Holding Period

Inventory Holding Period

40

36
35

30

27

25

23

23

y-ra tio 20

19
Ratio (2)/(3)

15

10

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

50 DEBTORS TURNOVER RATIO Debtors Turnover Ratio indicates the number of time debtors turnover each year. Generally, the higher the value of debtors turnover, the more efficient is the management of credit. It is also called receivables turnover ratio relates net credit sales to sundry debtors. This ratio also indicates the rate at which cash is generated by turnover of debtors. It measure the fast debts are collected. It can be calculated as Net Credit Sales ------------------------------Average Debtors Table No. 2.4.14 Debtors Turnover Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Net Sales (In Rs) (2) 781901488 871280480 953752505 1086328446 1025452365 Average Debtors (In Rs) (3) 33575394 36445314 27975684 36377091 38523546 Ratio (In Days) (2)/(3) 23.29 23.91 34.09 29.86 29.21

Debtors Turnover Ratio

Source: Secondary Data INTERPRETATION Debtors Turnover Ratio is decreasing trend. It ranges from 23.29 to 29.21 in 20052010. To private sectors, they provide only after making advance payment but in the case of above mentioned government institution they provide on the credit basis. Because of more credit sales to government, sector Companys debtors turnover ratio is increasing.

51 FIGURE NO. 2.4.14 Debtors Turnover Ratio

Debtors' Turnover Ratio

35

34.09

29.86
30

29.21

25

23.29

23.91

20 y-ratio
Ratio (2)/(3)

15

10

0 2005-2006 2006-2007 2007-2008 x-yea r 2008-2009 2009-2010

52 CREDITERS TURNOVER RATIO Credit Turnover Ratio is the rate between net credit purchase and amount of sundry creditors. It implies the credit period enjoyed by the firm in paying creditors. It can be computed as follows:Net Credit Purchase Creditors Turnover Ratio =-------------------------------------Average Creditors Average creditors include creditors at the beginning of the year and divide two creditors at the end of year. Table No. 2.4.15 Creditors Turnover Ratio Net Credit Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION Creditors Turnover Ratio Indicate about the promptness in making payment of credit purchases. In the case of company the ratio is fluctuating. Kerala Feeds Ltd has a better creditors turnover ratio. Increase in ratio indicates that the company gets more time to make payment to their creditors. Comparatively the ratio is not bad. Purchase (In Rs) (2) 567913466 662704141 747277521 959070802 989854802 Average Creditors (In Rs) (3) 32123680 31626951 43678863 46314824 49567423 Ratio (In times) (2)/(3) 17.67 20.95 17.10 20.70 19.97

53

FIGURE NO.2.4.15 Creditors Turnover Ratio

Creditors' Turnover Ratio

25

20.95
20

20.7
19.97

17.67

17.1

15

y-ra tio
Ratio (2)/(3)

10

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

54 WORKING CAPITAL TURNOVER RATIO The term working capital refers to excess of current asset to current liabilities. This ratio helps to establish a relationship between working capital and sales. computed as follows:Working Capital Turnover Ratio Net Sales = --------------------------Net Working Capital Table No.2.4.16 Working Capital Turnover Ratio Net Working Year Net Sales (In Rs) (2) 781901488 871280480 953752505 1086328446 1025452365 Capital (In Rs) (3) 140078511 198418463 199912612 147315608 156324581 Ratio (In times) (2)/(3) 5.58 4.39 4.77 7.37 6.55 The ratio indicates the extent of working capital turnover in achieving sales of the firm. It is

(1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

Source: Secondary Data INTERPRETATION The ratio indicates that, low ratio is due to less working capital and high ratio is due to high net working capital. In the year 2005-06, it shows working capital turnover ratio is 5.58. However, in 2008-09, the ratio is 7.37 so the working capital came to increase. . A higher working capital turnover ratio indicates the inefficiency of the management in the utilization of working capital.

55 FIGURE NO. 2.4.16 Working Capital Turnover Ratio

Working Capital Turnover Ratio

7.37
7

6.55

5.58

4.77

4.39

y-ratio 4
Ratio (2)/(3)

0 2005-2006 2006-2007 2007-2008 x-year 2008-2009 2009-2010

56 FIXED ASSET TURNOVER RATIO This ratio indicates as to what extent the fixed assets of a concern have contributed to sales. In other word, it indicates as to what extent the fixed assets have been utilized. The ratio calculated as follows:Net Sales = ---------------------Fixed Asset Table No. 2.4.17 Fixed Asset Turnover Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Net Sales (In Rs) (2) 781901488 871280480 953752505 1086328446 1025452365 Fixed Assets (In Rs) (3) 139866880 123732529 113947033 138097994 145265478 Ratio (In times) (2)/(3) 5.29 7.04 8.37 7.87 7.06

Fixed Asset Turnover Ratio

Source: Secondary Data INTERPRETATION The standard or ideal fixed asset turnover ratio is 5 times. So, a fixed asset turnover ratio of 5 times or more indicates better utilization of fixed asset. On the other hand, a fixed assets turnover ratio of less than 5 may be noted that a very high fixed assets turnover ratio means under trading which is not good for the business. From the table it is clear that the companys fixed asset turnover ratio is less than 5 in than in 1998-03 and 2003-07 it is more than 5, it indicates that there is better utilization of fixed asset.

57 FIGURE NO. 2.4.17 Fixed Asset Turnover Ratio

Fixed Asset Turnover Ratio

9
8.37

7.87

8
7.04

7.06

6
5.29

5 y-ratio

Ratio (2)/(3)
4

0 2005-2006 2006-2007 2007-2008 x-year 2008-2009 2009-2010

58 CURRENT ASSET TURNOVER RATIO It is the ratio between current assets and turnover. This ratio indicates the contribution of current assets to sales. This is calculated as follows:Net Sales Current Asset Turnover Ratio = --------------------------Current Assets Table No. 2.4.18 Current Asset Turnover Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Net Sales (In Rs) (2) 781901488 871280480 953752505 1086328446 1025452365 Current Asset (In Rs) (3) 211357391 304838569 300522680 291679160 294395051 Ratio (In times) (2)/(3) 3.70 2.86 3.17 3.72 3.48

Source: Secondary Data INTERPRETATION There is no ideal or standard current asset ratio. Yet, the influence is that a high current asset turnover ratio is an indication of a better utilization of current assets. The lower current assets have not been utilized effectively. From the table it reveals that the current asset turnover ratio is in increasing trend. In the year 2004-05 the ratio is less than any other years ratio.

59 FIGURE NO. 2.4.18 Current Asset Turnover Ratio

Current Asset Turnover Ratio

4
3.7

3.72

3.48 3.5
3.17
2.86

2.5

Ratio (2)/(3)

1.5

0.5

0 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010

60 CAPITAL EMPLOYED TURNOVER RATIO In this ratio indicates the relation between net sales and net worth. This ratio is a good index of the utilization of the owners fund. It can be expressed as:Net Sales Capital Employed Turnover Ratio = -----------------------Net Worth Table No. 2.4.19 Capital Employed Turnover Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Net Sales (In Rs) (2) 781901488 871280480 953752505 1086328446 1025452365 Net Worth (In Rs) (3) 274050000 314197027 274050000 274050000 274050000 Ratio (In times) (2)/(3) 2.85 2.77 3.48 3.96 3.74

Source: Secondary Data

INTERPRETATION If the volume of sales in relation to net worthy is reasonable, the indication is that the capital is effectively utilized. In this context, it may be noted that excessively large sales in relation to net worth mean over trading.

61 FIGURE NO. 2.4.19 Capital Employed Turnover Ratio

Capital Employed Turnover Ratio

3.96
4 3.74

3.48
3.5

2.85

2.77

2.5

y-ra tio

2
Ratio (2)/(3)

1.5

0.5

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

62 GROSS PROFIT RATIO These ratio measure the gross profit margin on the net sales made by the company. The gross profit represents the excess of sales proceeds during the period under observation over their cost, before taking in to account of administration, selling and distribution and financing charges. These ratio measures the efficiency of to ascertain the efficiency partners with respect to the previous year. It can be computed as follows:Gross Profit Gross Profit Ratio = -------------------------------- X Net Sales Table No. 2.4.20 Gross Profit Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION In Kerala Feeds Ltd major components is raw materials of total cost is incurred for consumption of raw materials. Company depends Kerala market and outside market for purchase of raw materials. Gross profit margin is good for KFL Gross Profit (In Rs) (2) 98990882 137692000 155872381 189328117 206568412 Net Sales (In Rs) (3) 781901488 871280480 95752505 1086328446 1025452365 Ratio (In %) (2)/(3) 12.66 15.80 16.34 17.43 20.14 100

63 FIGURE NO. 2.4.20 Gross Profit Ratio

Gross Profit Ratio

25

20.14 20

17.43

16.34

15.8
15

12.66
y-ra tio
Ratio (2)/(3)

10

0 2005-2006 2006-2007 2007-2008 x -ye ar 2008-2009 2009-2010

64 NET PROFIT RATIO Net profit margin ratio establishes a relationship between net profit and sales, that indicates managements efficiency in manufacturing, administrating and selling the products. The ratio is designed to focus attention on the net profit margin arising from business operation before interest and tax is deducted. Net Profit Net Profit Ratio = ----------------------------- X 100 Net Sales Table No. 2.4.21 Net profit Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data Net Profit (In Rs) (2) 46622854 51929000 58239411 72405132 78965423 Net Sales (In Rs) (3) 781901488 871280480 953752505 1086328446 1025452365 Ratio (In %) (2)/(3) 5.96 5.96 6.11 6.67 7.70

INTERPRETATION Net profit earned by the company during the last 18 years. In the year 1998-03 it incurred loss that is , .07. during the year 2007-2008 company earned net profit of 7.7 in the year 1998-1999 company incurred losses due to high depreciation cost charged on fixed asset.

65 FIGURE NO. 2.4.21 Net profit Ratio

Net Profit Ratio

7.7

7
6.11

6.67

5.96

5.96

Y-ra tio 4

Ratio (2)/(3)

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

66 OPERATING PROFIT RATIO Operating ratio establishes the relationship between operating expenses on one hand and sale on the other hand. The ratio of all operating. A comparison of the operating ratio would indicate whether the cost content is high or low in the figure of sales. It can be computed as follows:Operating Cost Operating Ratio = ----------------------------- X 100 Net Sales Operating cost can be found by adding operating expenses to the cost of goods Table No2.4.22 Operating Profit Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Operating Cost (In Rs) (2) 751370162 1029211201 1205731103 1395731300 1523654254 Net Sales (In Rs) (3) 781901488 871280480 953752505 1086328446 1025452365 Ratio (In %) (2)/(3) 96.12 118.12 126.42 128.48 132.52

Source: Secondary Data INTERPRETATION The ratio is calculated mainly to ascertain the operational efficiency of the management in their business operations. As it shows them, percentage of the net sales is absorbed by the cost of goods sold. Higher the operating expenses ratio is less favorable.

67 FIGURE NO.2.4.22 Operating Profit Ratio

Operating Profit Ratio

140
126.42
118.12

132.52
128.48

120

100

96.12

80 y-ra tio

Ratio (2)/(3)
60

40

20

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

68 FACTORY EXPENSES RATIO Factory Expenses Ratio is the ratio expresses the relationship between factory expenses and sales. Factory expenses refer to all the three expenses, which are incurred to make the good for ready for sale. The factory expenses ratio indicates the economy and efficiency in the manufacturing process. This can be expressed as a percentage:Factory Expenses Factory Expenses Ratio = -------------------------------------------- X 100 Net Sales Table No.2.4.23 Factory Expenses Ratio Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION Factory expenses ratio is low than any other years of ratio, it is only 9.29 in 200506. It shows the companys efficiency in the manufacturing operations. But the ranging from the ratio is 9.26 to 11.89. It shows that increase in factory expenses. Factory Expenses (In Rs) (2) 72069101 83686523 95633324 118349012 125295324 Net Sales (In Rs) (3) 781901488 871280480 953752505 1086328446 1025452365 Ratio (In %) (2)/(3) 9.29 9.6 10.03 10.89 11.89

69 FIGURE NO. 2.4.23 Factory Expenses Ratio

Factory Expenses Ratio

11.89 12

10.89

10.03
10

9.29

9.6

y-ra tio

6
Ratio (2)/(3)

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

70 ADMINISTRATIVE EXPENSES RATIO Administrative expenses ratio is the ratio, which expresses the relationship between administrative expenses and sales. The administrative expenses ratio indicates the economy and efficiency in the general administration of the concern. Administration Expenses Administration Expenses Ratio = -------------------------------------X 100 Net Sales Table No. 2.4.24 Administration Expenses Ratio Administration Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION On the other hand, a high administrative expenses ratio is an indication of the in efficiency in general administration of the concern. In this company administration expenses ratio also declining, it shows the efficiency in general administration of the concern. Expenses (In Rs) (2) 17080029 21470679 20100907 22351550 24587563 (In Rs) (3) 781901488 871280480 953752505 1086328446 1025452365 (In %) (2)/(3) 2.2 2.46 2.1 2.1 2.18 Net Sales Ratio

71 FIGURE NO. 2.4.24 Administration Expenses Ratio

Administration Expenses Ratio

2.5

2.46

2.4

2.3

2.2

y-ra tio 2.2

2.18

Ratio (2)/(3)

2.1

2.1

2.1

1.9 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

72 SELLING AND DISTRIBUTION EXPENSES RATIO Selling and distribution ratio is the ratio, which express the relationship between selling and distribution expenses and sales. Selling and distribution expenses ratio indicates the economy and efficiency in the selling and distribution of goods. The ratio usually expressed as percentage. Selling & Distribution Expenses --------------------------------------- x 100 Net Sales Table No. 2.4.25 Selling and Distribution Expense Ratio Selling & Year (1) 2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 Source: Secondary Data INTERPRETATION A high selling and distribution expenses ratio is an indication of the inefficiency in the selling and distribution of goods. In the year of 2005-2010, it is increasing trend. It is ranging from 6.8 to 7.21, which means there is inefficiency in the selling and distribution distribution (In Rs) (2) 53058680 66542719 81100719 82222604 83254566 (In Rs) (3) 781901488 871280480 953752505 1086328446 1025452365 (In %) (2)/(3) 6.8 7.6 8.5 7.57 7.21 Net Sales Ratio

Selling and Distribution Expenses Ratio =

73 FIGURE NO. 2.4.25 Selling and Distribution Expense Ratio

Selling & Distribution Expenses Ratio

8.5

7.6

7.57
7.21

6.8

5 y-ra tio 4
Ratio (2)/(3)

0 2005-2006 2006-2007 2007-2008 x -ye a r 2008-2009 2009-2010

74 CHAPTER 3 FINDINGS, SUGGESTIONS AND CONCLUSION 3.1 FINDINGS

The company has not sufficient liquidity in last two year and not able to meet shortterm obligation. It reveals from the liquidity ratio from 2005-2010 is 1.45 to .58. The Debt Equity Ratio is .04 to .001 in 2005-2010. It shows the financial position of the concern is very weak and risk of the long-term creditors is relatively less. The company has maintained an inventory Turnover Ratio more than eight from 2005 to 2010. The good inventory control system helps the company to move the stock very fast in efficient way. As per the Debtors Turnover Ratio, Kerala Feeds Ltd has a better average collection period from 2005 to2010. The point of company ideal period is 20 days. Because of immediate payment from debtors company generate more cash balance and has good working capital. Better creditors turnover ratio helps the company to get more time to make payment to suppliers. Increased in ratio indicates that the company get more time to make payment to their creditors. It is high in the year of 2006-07 & 2008-09 is respectively 20.95 &20.7. In the year 2005-06, it shows working capital turnover ratio is 5.58. However, in 2008-09, the ratio is 7.37. Therefore, working capital came to increase. This shows inefficiency of management in the utilization of working capital. Gross profit ratio is fluctuating. The main reasons for fluctuating the ratio is increase in the cost of raw material

75

The operating profit ratio is above 95% from the year 2005 to 2010. Higher the operating ratio is less favorable. The operational efficiency of the management in their business operations is not good. Efficiency in the manufacturing operations of the enterprise means efficiency in general administration of the concern. There is inefficiency in the selling and administration of goods.

76 3.2 SUGGESTIONS The company can develop the gross profit ratio in the coming financial year by increasing the selling prices, and decreasing direct expenses. The firm debt has highly decreased. Therefore, the firm should concentrate in the issue of shares and debenture. The company can increase its net profit ratio by introducing the indirect expenses like administration expenses and non-operating expenses. Management in management of short-term funds should make special attention. That is surplus cash generation should be used for some productive investment. Gross profit and net profit during 2005-2006 was less due to the increase in the cost of raw materials. Company can overcome such loss by increasing the price of the product. For sales promotion arrangement, more campaigns. Raw material constitutes almost 80%-85% of total cost. Hence effort must be made to reduce the raw materials cost by producing the materials at a lower rate. This will have tremendous effort in the bottom line. Even 1% decrease in the raw material procurement cost will increase the net profit of the company.

77 3.3 CONCLUSION This study was conducted in Kerala Feeds Ltd. to study the financial performance of the company. From the study it is found that the company has no profit in the earlier period due to high expenses ratio such as high depreciation charged to its fixed asset. But the end of 2007. Financial year 2006 company earned profit by reducing the expense cost company gets immediate payment from the customers and get more time to make payment from suppliers. Because of this, more cash and bank balances are generated and shows an increasing net working capital. This shows the companies ability to meet short-term obligation.

78 APPENDIX SUMMARIZED PROFIT AND LOSS ACCOUNT FOR THE LAST FIVE YEAR (Rs.in lakhs) PARTICULARS A. EARNED FROM 1. Sales 2. Other Income B. PAID AND PROVIDED FOR Raw Materials Manufacturing, Administrative, Selling and Other Expenses Depreciation C. PROFIT BEFORETAX (A-B) Less : Gratuity Reserve Taxation NET PROFIT 1. Dividend 2. Corporate Dividend Tax RETAINED EARNINGS 854.25 45.21 854.25 -478.69 724.05 727.05 39.36 582.39 68.51 9.60 504.28 6.77 235.37 519.29 68.51 9.60 441.18 -54 466.22 446.22 233.92 190.74 163.86 9513.9 220.07 8469.01 225.67 777.98 14920.56 11661.4 12032.08 9241.43 2654.56 2229.23 7381.70 1968.34 6531.95 1716.99 6127.24 1422.07 10254.52 10863.28 9537.52 820.72 552..76 519.41 8712.80 517.64 7819.01 416.79 8235.8 2009-10 2008-09 2007-08 2006-07 2005-06

11075.24 11416.04 10056.93 9230.44

79 SUMMERIZED BALANCE SHEET FOR THE LAST FIVE YEARS (Rs.in lakhs) PARTICULARS A. ASSETS 1. Net Fixed Asset Gross FA Less Depreciation 2. Investment 3. Current Asset B. LIABILITY 1. Current Liability 1650.78 1443.63 1006.10 1064.20 1650.78 1443.63 1006.10 1064.20 C. NET WORTH (A-B) 1759.93 2854.13 3138.59 3221.5 REPRESENTED BY 1. Share Capital 2. Reserve and Surplus TOTAL 2740.50 2740.50 2740.50 2740.50 2300.35 401.47 5040.85 2740.50 2740.50 3141.97 2740.50 2740.50 712.78 712.78 2756.03 4118.53 3616.56 3188.86 3136.43 2469.50 2235.58 2049.39 1899.11 1649.02 1380.97 1139.47 1237.32 2943.95 2916.79 3005.22 3048.38 4592.97 4297.76 4144.69 4285.7 3031.12 1675.87 1355.24 2113.57 3468.81 2009-10 2008-09 2007-06 2006-07 2005-06

80 BIBLIOGRAPHY BOOKS KOTHARI .C.R (2005) ,RESEARCH METHODOLOGY ,wisha publications Pvt .limited . DR .S.N MAHESHWARI ,FINANCIAL MANAGEMENT ,sultan chand & sons publications Pvt .limited ,new Delhi ,2000 DR. V .B BAHALIA ,FINANCIAL MANAGEMENT & POLICY ,Anmol publications Pvt .limited .1998 DR. S.P JAIN & K.L NARANG ,FINANCIAL ACCOUNTING ,sultan chand & sons publications pvt .limited ,new Delhi 2001 Dr T.S REDDY .& Y .HARI PRASAD REDDY ,MANAGEMENT ACCOUNTING ,Margham publications Pvt limited ,Chennai 2004 2 nd edition WEBSITE www.keralafeedsltd.com www.cattlefeedindustry.com