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1 INTRODUCTION: The term Financial Analysis is also known as analysis and interpretation of financial statement refers to the process of determining financial strength and weakness of the firm by establishing strategic relationship between the items of the Balance Sheet, Profits and Loss account and other operative data. There are many different ways to measure financial performance, but all measures should be taken into aggregations. Line items such as revenue from operations, operating income cash from operations can be used as well as total unit of sales furthermore, the analyst or investor may wish to look deeps into financial statement and seek out margin growth rates or any declining debts.

The performance of the firm can be measured by its financial results, i.e., by its size of earnings Riskiness and profitability are two major factors which jointly determine the value of the concern. Financial decisions which increase risks will decrease the value of the firm and on the other hand, financial decisions which increase the profitability will increase value of the firm. Risk and profitability are two essential ingredients of a business concern. There has been a considerable debate about the ultimate objective of firm performance, whether it is profit maximization or wealth maximization. It is observed that while considering the firm performance, the profit and wealth maximization are linked and are effected by one-another. A companys financial performance therefore is normally judged by a series of ratios or figures, however there are following three ratio parameters which can be used to evaluate financial performance, they are:

a) Return on Equity b) Earnings per Share and c) Price Earnings Ratio.

All three parameters are discussed in detailed along with various other ratios. However, it is to be noted that fundamentally, the balance sheet indicates the financial position of the company as on that point of time. However, profit and loss account is a statement, which is

prepared for a particular financial year. In Indian context, where an analyst has to rely upon the audited financial statement for a particular company, the performance is to be judged from the financial statement only. This chapter however indicates some of the techniques, which can be used for such analysis of financial performance.

1.2 BACKGROUND OF STUDY

MARGHAM Publications was the dream of late Sri.K. Marghabandhu, which could be realized only after his untimely demise, by his son Mr.M. Narayanan in the year 1984. Encouraged by the success of its first publication, "Monetary Economics" written by Dr.S. Sankaran, a renowned author on Economics, Margham Publications added quality titles regularly and grew rapidly. From the Proprietary ownership when started, Margham became a partnership firm when the late Sri Margha bandhu's another son Mr. M. Chandrasekaran joined his younger brother to sustain their father's dream..

Today, with more than 150 titles on a range of subjects including Commerce, Accountancy, Economics, Management, Mathematics and Computer Science, the firm has emerged as one of the most popular publishers of educational books, many of which are recommended as text books by a number of universities. Margham Publishers, in a strategic business move, acquired their own complete printing facility in 2004 to ensure consistent quality and timely availability of their titles. Enjoying the enormous goodwill of both teaching & students communities

From Gurukul schools where knowledge & wisdom were transferred from mouth to ear, to today's modern universities where information can be accessed at the touch of a button on computers connected to a network, education has indeed come a long way. From oral communications to writing on nearly everything that could be written upon - stone, clay, tree bark, metal sheets, the so called "books" as we know now, too has changed form and shape over the years. Books are storehouses that hold facts of life, timeless thoughts and scientific truths. A good book is always a sought after commodity by those who seek information or knowledge.

Fully realizing the value of books in our lives, late Sri. K. Marghabandhu dreamt of starting a publishing house and his son Mr. M. Narayanan gave shape & life to his dream, in the year 1984. Thus started, MARGHAM Publications tasted success even with their first publication "Monetary Economics", written by Dr.S.Sankaran. Buoyed by the acclaim the book returned, MARGHAM consciously added quality titles authored by renowned writers. We are now one of the most trusted publishing house with many of our titles recommended as text books by universities.

1.3 STATEMENT OF PROBLEM:

In this present world, competition exists in all company, especially in Margham Publication.

This study is to analyze the performance of Margham Publication by calculating ratio from the provided companies Balance Sheets for the past five years from 2008-2012 and to provide suggestions based on the report. This study helps us to find out the present situation of the firm.

1.4 SIGNIFICANCE OF THE STUDY

To analysis the financial performance of Margham Publication and its strength and weakness through ration analysis. Analysis and interpretation through compilation of the

account department and revenue income and expenditure. So as to afford full diagnosis of the profitability of the financial soundness of the business. The More finance spend on the marketing purposes and totally 6 months only earned profit after that these money utilized other expenses used. Financial department vital role of company and spend on the money to promotion

activities.

1.5 Objective of the Study This study is under taken with an objective of analysis the financial performance of small industries Development Corporation limited in Tamilnadu. However the study in tended with the following specific objectives:-

To study the factor influencing the extent of profitability To examine the short term solvency To evaluate the solvency position from the long term perspective To examine the liquidness of the corporation To suggest for improvement and enhancement of the financial position of corporation 1.6 METHODOLOGY

Research Methodology is a way to systematically solve the research problem. It is a science of studying how research is done scientifically. It is purely and simply the frame work or plan for a study that guides the collection and analysis of the data.

RESEARCH: Research can be defined as A scientific systematic research for pertinent information on specific topics. Research comprises defining and redefining problems, formulating hypothesis on suggested solution collection, organizing and evaluating data, making deduction and reaching conclusions to determine whether they fit the formatting hypothesis.

PERIOD OF COVERAGE:

The study covered five year financial statement from the financial year 2008-2012

RESEARCH PROBLEM:

To find the present financial position of Margham Publication and to know the progress of growth in terms of profits, sales, debtors, cash position over a period of five years.

RESEARCH DESIGN:

The research design adopted for the study is descriptive research aims to gain familiarity and new insights into any phenomenon. Descriptive research design is concerned with the research studies with a focus on the portrayal of the characteristics of a group or individual or a situation.

1.7 LIMITATIONS OF THE STUDY It is comprehensive study of financial analysis from the year 2008-2012. The period of the study is restricted to 5 years. The value of money is not taken into account. The study is conducted on the basis of the data provided by the company.

TOOLS USED IN THE ANALYSIS:

The following are the various tools which are used in the analyzing the data: Common Size Statement Comparative Statement Trend Analysis Ratio Analysis Schedule of changes in Working capital

Common Size Statement

Common size statement indicates the relationship of various items with some common items. In this income statement, the sales figure is taken as basis and all other figures are expressed as percentages sales. In the balance sheets the total assets and liabilities is taken as base and all the other figures are expressed as percentages total. The percentages so calculated are compared with corresponding percentages in other periods or other periods or other firms and meaningful conclusions are drawn.

Comparative Statement

Comparative statements are those which have been designed in a way so as to provide time perspective to the consideration of various elements of financial position embodied in such statement. In these statement figures for two or more period are placed side by side to facilitate comparison.

Trend Analysis:

Trend analysis is immensely helpful in making a comparative study of the financial statement for several years. The method of calculating trend percentages involves the calculation of percentage relationship that each item bears to the same item in the base year. It is usually the earliest year. They are calculated only for important items since the purpose is to highlight importance changes. RATIO ANALYSIS MEANING OF RATIO: - A Ratio is 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 ACCOUNTANTS HANDBOOK BY WIXON, KELL AND BEDFORD, a ratio is an expression of the quantitative relationship between two numbers.

ACCORDING TO BATTY J. management accounting ratio can assist management in its basic functions of forecasting, planning coordination, control and communication. It is helpful to know about the liquidity, solvency, capital structure and profitability of an organization. It is helpful tool to aid in applying judgment, otherwise complex situations. RATIO ANALYSIS CAN REPRESENT FOLLOWING THREE METHODS: 1. PURE RATIO OR SIMPLE RATIO: - It is expressed by the simple division of one number by another. For example, if the current assets of a business are Rs.200000 and its current liabilities are Rs.100000, the ratio of current assets to current liabilities will be 2:1. 2. RATE OR SO MANY TIMES: - In this type, it is calculated how many times a figure is, in comparison to another figure. For example, if a firms credit sales during the year are Rs.200000 and its debtors at the end of the year are Rs. 40000, its debtors turnover ratio is 200000/40000 = 5 times. It shows that the credit sales are 5 times in comparison to debtors. 3. PERCENTAGE: - In this type, the relation between two figures is expressed in hundredth. For example, if a firms capital is rs.1000000 and its profit is rs.200000 the ratio of profit capital, in term of percentage, is 200000/1000000*100 = 20%

ADVANTAGES OF RATIOS ANALYSIS:

The information shown in financial statements does not signify anything individually because the facts shown are inter-related. Hence it is necessary to establish relationship between various items to reveal significant details and throw light on all notable financial and operational aspects. Ratio analysis caters to the needs of various parties interested in financial statements. The basic objective of ratio analysis is to help management in interpretation of financial statements to enable it to perform the managerial functions efficiently. The following are the advantages of ratio analysis.

(1) FORECASTING: Ratios reveal the trends in costs, sales, profits and other inter-related facts, which will be helpful in forecasting future events. (2) MANAGERIAL CONTROL: Ratios can be used as instrument of control regarding sales, costs and profit.

(3) FACILITATES COMMUNICATION: Ratios facilities the communication function of management as ratios convey the information relating to the present and future quickly, forcefully and clearly.

(4) MEASURING EFFICIENCY: Ratios help to know operational efficiency by comparison of present ratios with those of the past working and also with those of other firms in the industry.

(5) FACILITATING INVESTMENT DECISIONS: Ratios are helpful in computing return on investment. This helps the management in exercising effective decisions regarding profitable avenues of investment.

(6) USEFUL IN MEASURING FINANCIAL SOLVENCY: The financial statements disclose the assets and liabilities in a format. But they do not convey relationship of various assets and liabilities with each other, whereas ratios indicate the liquidity position of the company and the proportion of borrowed funds to total resources which reveal the short term and long term solvency position of a firm.

(7) INTER FIRM COMPARISONS: The technique of inter-firm comparisons can be carried out successfully only with the help of ratio analysis. Otherwise no firm may come forward to disclose full information. Inter-firm comparisons help the management to compare its performance with an external bench-mark or standard.

DISADVANTAGES:

Ratio analysis is to calculate and easy to understand and such statistical calculation stimulation thinking and develop understanding.

But there are certain drawbacks and dangers they are.

i) There is a trendy to use to ratio analysis profusely. ii) Accumulation of mass data obscured rather than clarifies relationship. iii) Wrong relationship and calculation can lead to wrong conclusion.

1. In case of inter firm comparison no two firm are similar in size, age and product unit.(For example :one firm may purchase the asset at lower price with a higher return and another firm witch purchase the asset at asset at higher price will have a lower return)

2. Both, the inter period and inter firm comparison are affected by price level changes. A change in price level can affect the validity of ratios calculated for different time period.

3. Unless varies terms like group profit, operating profit, net profit, current asset, current liability etc., are properly define, comparison between two variables become meaningless.

4. Ratios are simple to understand and easy to calculate. The analyst should not take decision should not take decision on a single ratio. He has to take several ratios into consideration.