CHAPTER 1 INTRODUCTION OF GMK EXPORTS LIMITED

GMK Exports commenced operations toward the end of financial year 1998-1999 as a partnership firm, engaged in international trading and domestic trading activity. Main activities undertaken by the Company under international export include direct export, indirect exports and imports of various goods and merchandise. Domestically, Company mainly deals in sales and purchase of Commodities. GMK Exports was established on December 01, 1998 as a Partnership Firm. On August 31, 2005 the Company was incorporated as a Public Limited Company (GMK EXPORTS LIMITED). The Company is engaged in the business of Trading and Export of Commodities. The core export of the Company consists of Agro Based Commodities. The Company was conferred Certificate of Recognition as an Export House in May 2002. It is engaged exports (Direct and Indirect) and local sales. The Company has specialized and created a niche for itself in the area of exports of agro-based commodities. The Company has developed business strategy to switch over exports from one commodity to another with change in demand or inconsistency in pricing for any commodity during any season. This policy adopted by the management ensures that the Company does not pass through a lean period during the year. GMK Exports is the business of Exporting commodities and merchandise from India. Company commenced operations towards the end of Financial Year 1999-2000 as a partnership firm with exporting pulses. Over the years Company developed exports of various agro based commodities and merchandise. The Company is engaged in exports of various commodities like Red Split Lentils, Onions, Peanuts in shell, Brass items, Sugar, Wheat Flour, Soya Bean Meal, Rape Seed Meal, Chilly, Jiggery, Watermelon, Sesame, Seeds, Maize, Sun Flower Meal, Rice, Chick Peas, Yellow Split Lentil, Sesame Seed Meal, Castor Seed Meal, Castor, etc. In 1999, Company had started with one buyer in Colombo, Sri Lanka and today it has a Customer Base of over 75 in a number of countries like South East Asia, Middle

East, Europe, Africa and the United States of America Markets and sources commodities from close to 400 suppliers directly and indirectly. It has a reliable supply chain with more than 400 suppliers spread over different parts of the country and developed adequate and competitive logistic facility across the country. It is exporting from a number of sea ports alongthe entire coastline of India like Mundra, Kandla, JNPT, Nhava Shiva, Mumbai, Chennai, Kakinada, Vizag, apart from the dry ports. This gives it competitive advantage by cutting transport and freight cost. GMK Exports Ltd has been continuously studying and analyzing international markets and domestic production trends to keep pace with changing demand and trends in the domestic and international market.

Main Objects
To carry on the business in India or Globally as traders, dealers, exporters, importers, buyers, sellers, merchants, indenters, commission agents, brokers, buying, selling agents, factors, distributors, stockiest, in all kinds of products and articles of merchandise and to undertake carry on or acquire agencies of all kinds and for all types of products and articles of merchandise, commodities and to act as manufacturers representatives and to set up import and export houses for all types of products required or ordered by customers.

Strength of the Company

Professional Management: The Company is managed by a qualified management team with several years of relevant experience. The management team is supported by Board of Directors who are qualified and having experience in various knowledge domains. Strong Customer Relationship: Company started operation in December 1999 with just one customer. Today, Company services over 75 customers from a number of countries across five continents.

Large Sourcing Capacities:Over the years SEL has developed a network and bonding with brokers and over 400 suppliers to be able to source large quantities of commodities from the right place at the right time at right price. Timely Delivery: Meeting customer deadline and expectation for quality on a consistent basis is paramount for SEL's business. Dealing in commodities especially in case of perishable commodities timely delivery of goods is of utmost importance. SEL meticulously plans the entire logistics right from procuring the orders from customers to arranging to procure goods from manufacturers through brokers to arranging the shipment through C&F agents for timely delivery to customers across the Globe.

Subsidiary Companies
Sakuma Exim DMCC, incorporated in Dubai, United Arab Emirates is a wholly owned subsidiary of the Company.In terms of Section 212(a) of the Companies Act, 1956, the Central Government, Ministry of Corporate Affairs vide its General Circular 2/2011 dated 8th February, 2011 has granted a general exemption to the Company from the requirement of attaching to its annual report, the Balance Sheet, Statement of Profit and Loss and the report of the Directors and Auditors thereon of its subsidiary. Accordingly the same is not attached to the Balance Sheet of the Company. Shareholders who wish to obtain a copy of Annual Accounts of subsidiary company may write to the Compliance Officer at the registered office of the Company. Members can also email their request at the email address of the Compliance Office, Mrs. JyotiDeshpande; jyotip@gmk exportsltd.com

Board of Directors
The Board consists of 6 Directors out of which 3 are Independent Directors. Composition of the Board and category of Directors are as follows: Name Mr. Chander Mohan Mr. SaurabhMalhotra Ms. ShipraMediratta Mr.Ashok Kumar Doda Mr. RadheShyam Mr. Satyendra J. Sonar Executive/Non-Executive Executive- Chairman & Director Executive-Managing Director Non Executive Non Executive Non Executive Non Executive Promoter/Independent Promoter Promoter Promoter Independent Independent Independent

CHAPTER 2 FINANCIAL STATEMENTS

The major financial statements of a company are the balance sheet, income statement and cash flow statement (statement of sources and applications of funds). These statements present an overview of the financial position of a firm to both the stakeholders and the management of the company. But unless the information provided by these statements is analyzed and interpreted systematically, the true financial position of the company cannot be understood. The analysis of financial statements plays an important role in determining the financial strength and weaknesses of a company relative to that of other companies in the same industry. The analysis also reveals whether the companys financial position has been improving or deteriorating over time.

BALANCE SHEET AS AT 31 MARCH, 2012

Particulars AEQUITY AND LIABILITIES 1 Shareholder's Fund a) Share Capital b) Reserve and Surplus Note No. As at 31st March, 2012 As at 31st March, 2011

3 4

164,259,430 424,739,818 588,999,248

164,259,430 409,457,868 573,717,298

2 Non-current Liabilities Deferred tax liabilities(Net) 25.6 3 Current Liabilities a) Short-term borrowings b) Trade payables c) Other current liabilities d) Short-term provisions 10,200,348 10,200,348

12,403,215 12, 12,403,215

5 6 7 8

TOTAL B ASSETS 1 Non-current assets a) Fixed assets i) Tangible Assets b) Non-current Investments c) Long-term loans and advances d) Other non-current assets

636,754,902 116,215,243 365,053,954 25,969,073 1,143,993,172 1,743,192,768

385,422,182 74,347,778 21,477,014 20,928,207 502,175,181 1,088,295,694

9.A 10 11 12

47,150,436 2,806,281 17,421,768 9,622,314 77,000,799

46,464,336 1,669,823 22,546,768 9,622,314 80,303,241

2 Current Assets a) Inventories b) Trade Receivables c) Cash and Cash Equivalents d) Short-term loans and advances e) Other Current Assets TOTAL

13 14 15 16 17

920,424,287 283,176,162 33,203,135 427,471,129 1,917,256 1,666,191,696 1,743,192,768

482,123,725 136,600,861 316,136,922 64,587,673 8,543,272 1,007,992,453 1,088,295,694

STATEMENT OF PROFIT AND LOSS FOR THE YEAR ENDED 31 MARCH, 2012
Particulars Note No. As at 31st March, 2012 As at 31st March, 2011

1 Revenue from operations(gross) Less: Excise Duty Revenue from operations(net) 2 Other Income 3 Total Revenue(1+2) 4 Expenses a) Purchases of stock-in-trade b) Changes in inventories of finished goods, work-inprogress and stock-in-trade c) Employee benefits expense d) Finance costs e) Depreciation and amortization expense f) Other expenses Total expenses 5 Profit/(Loss) before exceptional and extraordinary items and tax (3-4) 6 Exceptional items 7 Profit/(Loss) before extraordinary items and tax (5+6) 8 Extraordinary items 9 Profit/(Loss) before tax (7+8) 10 Tax expense: a) Current tax expense for current year b) Current tax expense relating to prior years c) Net current tax expense d) Deferred tax 11 Profit/(Loss) from continuing operations (9+10)

18

19

9,656,030,998 9,656,030,998 43,057,767 9,699,088,765 8,592,995,229 (438,300,562) 18,952,233 47,417,815 8,280,110 1,368,671,271 9,598,016,096 101,072,669 101,072,669 101,072,669

6,326,494,337 1,738,713 6,324,755,624 19,957,945 6,344,713,569 5,872,512,436 (322,153,124) 12,079,638 21,366,841 8,797,905 678,605,090 6,271,208,786 73,504,783 73,504,783 73,504,783 25,293,900 220,065 25,513,965 (2,099,968) 23,413,997 50,090,786

20.a 20.b 21 22 9.B 23

9.A 10 11 12

33,300,000 3,100,000 36,400,000 (2,202,867) 34,197,133 66,875,536

CASH FLOW STATEMENT FOR THE YEAR ENDED 31 MARCH,2012.

Particulars As at 31st March, 2012 101,072,669 As at 31st March, 2011

ACash flow from operating activities Net profit / (Loss) before extraordinary items and tax Adjustments for: Depreciation and amortization (Profit)/Loss on sale/ write off of assets Finance costs Interest income Dividend income Net (gain)/Loss on sale of investments Operating profit/(Loss) before working capital changes Changes in working capital: Adjustments for(increase)/decrease in operating assets: Inventories Trade receivables Short-term loans and advances Long-term loans and advances Other current assets Adjustments for increase/(decrease) in operating liabilities Trade payables Other current liabilities Short-term provisions 41,867,465 308,725,242 5,167,755 (427,482,896) Net income tax(paid)/refunds (38,275,000) 59,327,940 (1,842,639) (246,041,448) (21,666,456) (438,300,562) (144,353,434) (362,883,456) 7,000,000 6,626,016 (322,153,124) (69,306,183) 4,388,737 (3,450,713) 8,280,110 47,417,815 (6,800,886) (1,301,630) 148,668,078 8,797,905 32,272 21,366,841 (14,848,415) (1,659,675) (199,177) 86,994,534 73,504,783

Net cash flow from/(used in) operating activities(A) BCash flow from investing activities Capital expenditure on fixed assets, including capital advances Proceeds from sale of fixed assets Current investments not considered as cash and cash equivalents - Purchased - Proceeds from sale - Purchase of long-term investments - Subsidiaries - Others Interest received Dividend received Net cash flow from/(used in) investing activities(B)

(465,757,896)

(267,707,904)

(8,966,211)

(513,072) 126,463

(524,800,000) 524,80,000 115,239,146

(1,131,458) (5,000) 6,800,886 1,301,630 (2,000,153)

14,848,415 1,659,675 131,360,627

CCash Flow from financing activities Redemption/buy back of preference/equity shares Net increase/(decrease) in working capital borrowings Proceeds from other short-term borrowings Repayment of other short-term borrowings Finance cost Dividends paid

Tax on dividend Net cash flow from/(used in) financing activities (C) Net Increase/(decrease) in cash and cash equivalents (A+B+C) Cash and cash equivalents at the beginning of the year Cash and cash equivalents at the end of the year Reconciliation of Cash and cash equivalents with the Balance Sheet Cash and cash equivalents as per Balance Sheet (Refer Note 15) Cash and cash equivalents at the end of the year* 236,832,720 222,392,616 (207,892,616) (47,417,815) (16,425,943) (2,664,700) 184,824,262 (282,933,787) 316,136,922 33,203,135 (100,009,200) 385,422,182 260,000,000 (260,000,000) (21,366,841) (9,576,225) (1,643,031) 252,826,885 116,479,608 199,657,314 316,136,922

33,203,135 33,203,135

316,136,922 316,136,922

CHAPTER 3 FINANCIAL RATIO ANALYSIS

Financial Ratio Analysis involves the calculation and comparison of ratios which are derived from the information given in the companys financial statement. The historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and its investment attractiveness. Financial Ratio Analysis groups the ratios into categories that tell us about the different facets of a companys financial state of affairs. Some of the categories of ratios are described below: Liquidity Ratios give a picture of a companys short term financial situation or solvency. Operational/Turnover Ratios show how efficient a companys operations and how well it is using its assets. Leverage/Capital Structure Ratios show the quantum of debt in a companys capital structure.

Profitability Ratios use margin analysis and show the return on sales and capital employed. Valuation Ratios show the performance of a company in the capital market.

LIQUIDITY RATIO
Liquidity refers to the ability of a firm to meet its short-term (usually up to 1 year) obligations. The ratios which indicate the liquidity of a company are current ratio, Quick/Acid-Test ratio, and Cash ratio. These ratios are discussed below. CURRENT RATIO: Current ratio is the ratio of total current assets (CA) to total current liabilities(CL). Current assets include cash and bank balances; inventory of raw materials, semi-finished and finished goods; marketable securities; debtors (net of provision for bad and doubtful debts); bills receivable; and prepaid expenses. Current liabilities consist of trade creditors, bills payable, bank credit, provision for taxation, dividends payable and outstanding expenses. This ratio measures the liquidity of the current assets and the liability of a company to meet its short-term debt obligation. CR measures the ability of the company to meet its CL, i.e., CA gets converted into cash in the operating cycle of the firm and provides the funds needed to pay for CL. The higher the current ratio, the greater the short-term solvency. While interpreting the current ratio, the composition of current assets must not be overlooked. A firm with a high proportion of current assets in the form of cash and debtors is more liquid than one with a high proportion of current assets in the form of inventories, even though both the firms have the same current ratio. Internationally, a current ratio of 2:1 is considered satisfactory. If you decide your businesss current ratio is too low, you may be able to raise it by: Paying some debts. Increasing your current assets from loans or other borrowings with a maturity of more than one year. Converting non-current assets into current assets. Increasing your current assets from new equity contributions. Putting profits back into the business.

Current Ratio= Current Assets Current Liabilities =1,666,191,969 1,143,993,172 =1.46:1 Current ratio of 1.46 shows GMK Exports Ltd has not that much liquidity as SEL has no enough current assets to meet current liabilities with a margin of safety for possible losses in current assets. QUICK TEST RATIO (ACID TEST RATIO): Quick Ratio (QR) is the ratio between quick current assets (QA) and CL. QA refers to those current assets that can be converted into cash immediately without any value dilution. QA includes cash and bank balances, short-term marketable securities, and sundry debtors. Inventory and prepaid expenses are excluded since these cannot be turned into cash as and when required. QR indicates the extent to which a company can pay its current liabilities without relying on the sale of inventory. This is a fairly stringent measure of liquidity because it is based on those current assets which are highly liquid. Inventories are excluded from the numerator of this ratio because they are deemed the least liquid component of current assets. Generally, a quick ratio of 1:1 is considered good. One drawback of the quick ratio is that it ignores the timing of receipts and payments. Quick Ratio= Quick Assets Current Liabilities =283,176,162+33,203,135+427,471,129 1,143,993,172 =0.65:1

Cash Ratio :Cash ratio is the ratio of cash and cash equivalents of a company to its current liabilities. It is an extreme liquidity ratio since only cash and cash equivalents are compared with the current liabilities. It measures the ability of a business to repay its current liabilities. Cash and bank balances and short term marketable securities are

the most liquid assets of a firm, financial analysts look at the cash ratio. The cash ratio is computed as follows: Cash Ratio=Cash + Cash Equivalents Current Liabilities =33,203,135 1,143,993,172 =0.03%

OPERATIONAL RATIO
These ratios determine how quickly certain current assets can be converted into cash. They are also called efficiency ratios or asset utilization ratios as they measure the efficiency of a firm in managing assets. These ratios are based on the relationship between the level of activity represented by sales or cost of goods sold and levels of investment in various assets. The important turnover ratios are debtors turnover ratio, average collection period, inventory turnover ratio, fixed asset turnover ratio, and total asset turnover ratio.Operating financial ratios are numbers that business managers use to help assess and make decisions about the health of a company. Operating financial ratios can be especially useful because most management decisions usually affect operations -- the principal activities a company engages in for the purpose of delivering a profit. Operating financial ratios usually exclude revenue or expenses associated with things like interest, taxes, non-operating investments, currency fluctuations and sales of assets. These are described below: Average Collection Period: ACP is calculated by dividing the days in a year by the debtors' turnover. The average collection period represents the number of day's worth of credit sales that is blocked with the debtors (accounts receivable). The average collection period is the number of days, on average, that it takes a company to collect its credit accounts or its accounts receivables. In other words, this financial ratio is the average number of days required to convert receivables into cash.It is computed as follows:

Average Collection Period= 365xAccounts Receivable Turnover Credit Sales =365 x 283,176,162 9,445,760,693 =10.94 days

The ACP can be compared with the firm's credit terms to judge the efficiency of credit management. For example, if the credit terms are 2/10, net 45, an ACP of 85 days means that the collection is slow and an ACP of 40 days means that the collection is prompt. This ratio measures the quality of debtors. A short collection period implies prompt payment by debtors. It reduces the chances of bad debts. Similarly, a longer collection period implies too liberal and inefficient credit collection performance. It is difficult to provide a standard collection period of debtors. Inventory or Stock Turnover Ratio: ITR refers to the number of times the inventory is sold and replaced during the accounting period. Inventory turnover is the ratio of cost of goods sold to average inventory. It is an activity / efficiency ratio and it measures how many times per period, a business sells and replaces its inventory again.It is calculated as follows: Inventory or Stock Turnover Ratio=Cost of Goods Sold Average Inventory = 8,154,694,667 701,274,006 =11.63

Average Inventory is calculated as the sum of the inventory at the beginning and at the end of the period divided by 2.Cost of goods sold figure is obtained from the income statement and the values of beginning and ending inventory are obtained from the balance sheets at the start and at the end of the accounting period.

ITR reflects the efficiency of inventory management. The higher the ratio, the more efficient is the management of inventories, and vice versa. However, a high inventory turnover may also resultfrom a low level of inventory which may lead to frequent stock outs and loss of sales and customergoodwill. For calculating ITR, the average of inventories at the beginning and the end of the year istaken. In general, averages may be used when a flow figure (in this case, cost of goods sold) isrelated to a stock figure (inventories). Fixed Assets Turnover: The FAT ratio measures the net sales per rupee of investment in fixed assets. The fixed asset turnover ratio measures the company's effectiveness in generating sales from its investments in plant, property, and equipment. It is especially important for a manufacturing firm that uses a lot of plant and equipment in its operations to calculate this ratio.Fixed asset turnover ratio compares the sales revenue a company to its fixed assets. This ratio tells us how effectively and efficiently a company is using its fixed assets to generate revenues. This ratio indicates the productivity of fixed assets in generating revenues. If a company has a high fixed asset turnover ratio, it shows that the company is efficient at managing its fixed assets. Fixed assets are important because they usually represent the largest component of total assets. There is no standard guideline about the best level of asset turnover ratio. Therefore, it is important to compare the asset turnover ratio over the years for the same company. This comparison will tell whether the companys performance is improving or deteriorating over the years. It is also important to compare the asset turnover ratio of other companies in the same industry. This comparison will indicate whether the company is performing better or worse than others.This ratio is usually used in capital-intensive industries where major purchases are for fixed assets. This ratio should be used in subsequent years to see how effective the investment in fixed assets has been.It can be computed as follows:

Fixed Assets Turnover=Net Sales Average Net Fixed Assets =9,445,760,693

88,712,655 =106.48 times This ratio measures the efficiency with which fixed assets are employed. A high ratio indicates a high degree of efficiency in asset utilization while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high (because the denominatorof the ratio is very low).The fixed assets usually include property, plant and equipment. The value of goodwill, long-term deferred tax and other fixed assets that do not belong to property, plant and equipment is usually subtracted from the total fixed assets to present a more meaningful fixed asset turnover ratio.

Total Assets Turnover: TAT is the ratio between the net sales and the average total assets.This ratio measures how efficiently an organization is utilizing its assets.The lower the total asset turnover ratio(the lower the # Times), as compared to historical data for the firm and industry data, the more sluggish the firm's sales. This may indicate a problem with one or more of the asset categories composing total assets inventory, receivables, or fixed assets. The small business owner should analyze the various asset classes to determine in which current or fixed asset the problem lies. The problem could be in more than one area of current or fixed assets. Since current assets also include the liquidity ratios, such as the current and quick ratios, a problem with the total asset turnover ratio could also be traced back to these ratios. Many business problems can be traced back to inventory but certainly not all. The firm could be holding obsolete inventory and not selling inventory fast enough. With regard to accounts receivable, the firm's collection period could be too long and credit accounts may be on the books too long. Fixed assets, such as plant and equipment, could be sitting idle instead of being used to their full capacity. All of these issues could lower the total asset turnover ratio. It can be computed as follows:

Total Assets Turnover=Net Sales Average Total Assets =9,445,760,693 1,415,744,231 =6.67 times

LEVERAGE/CAPITALSTRUCTURE RATIO

Any ratio used to calculate the financial leverage of a company to get an idea of the company's methods of financing or to measure its ability to meet financial obligations. There are several different ratios, but the main factors looked at include debt, equity, assets and interest expenses. A ratio used to measure a company's mix of operating costs, giving an idea of how changes in output will affect operating income. Fixed and variable costs are the two types of operating costs; depending on the company and the industry, the mix will differ. These ratios measure the long-term solvency of a firm. Financial leverage refers to the use of debt finance. While debt capital is a cheaper source of finance, it is also a risky source. Leverage ratios help us assess the risk arising from the use of debt capital. Two types of ratios are commonly used to analyze financial leverage - structural ratios and coverage ratios. Structural ratios are based on the proportions of debt and

equity in the financial structure of a firm. Coverage ratios show the relationship between the debt commitments and the sources for meeting them. The long-term creditors of a firm evaluate its financial strength on the basis of its ability to pay the interest on the loan regularly during the period of the loan and its ability to pay the principal on maturity. Debt-Equity Ratio:A measure of a company's financial leverage calculated by dividing its total liabilities by stockholders' equity. It indicates what proportion of equity and debt the company is using to finance its assets. A high debt/equity ratio generally means that a company has been aggressive in financing its growth with debt. This can result in volatile earnings as a result of the additional interest expense. This ratio shows the relativeproportions of debt and equity in financing theassets of a firm. The debt includes short-termand long-term borrowings. The equity includesthe networth (paid-up equity capital andreserves and surplus) and preference capital. Itcan be calculated as: Debt-Equity Ratio=Total Liabilities Shareholders Equity = 1,154,193,520 588,999,248 = 1.96

If a lot of debt is used to finance increased operations (high debt to equity), the company could potentially generate more earnings than it would have without this outside financing. If this were to increase earnings by a greater amount than the debt cost (interest), then the shareholders benefit as more earnings are being spread among the same amount of shareholders. However, the cost of this debt financing may outweigh the return that the company generates on the debt through investment and business activities and become too much for the company to handle. This can lead to bankruptcy, which would leave shareholders with nothing.

Return on Investment: A performance measure used to evaluate the efficiency of an investment or to compare the efficiency of a number of different investments. To calculate ROI, the benefit (return) of an investment is divided by the cost of the investment; the result is expressed as a percentage or a ratio.It indicates the efficiency that management uses the companys assets. In the above formula "gains from investment", refers to the proceeds obtained from selling the investment of interest. Return on investment is a very popular metric because of its versatility and simplicity. That is, if an investment does not have a positive ROI, or if there are other opportunities with a higher ROI, then the investment should be not be undertaken. Return on Investment=Net profit after taxes Total Assets =66,876,000 1,743,192,768 =0.04% The calculation for return on investment and, therefore the definition, can be modified to suit the situation -it all depends on what you include as returns and costs. The definition of the term in the broadest sense just attempts to measures the profitability of an investment and as such, there is no one right calculation. In order to interpret the Return on Assets ratio, you need comparative data such as trend (time series) or industry data. The business owner can look at the company's return on assets ratio across time and also at industry data to see where the company's return on assets ratio lies. The higher the return on assets ratio, the more efficiently the company is using its asset base to generate sales. The Return on Assets ratio is one of the key components of the Model in calculating Return on Equity. Return on Equity:One of the most important profitability metrics is return on equity (or ROE for short). Return on equity reveals how much profit a company earned in comparison to the total amount of shareholder equity found on the balance sheet. If you think back to lesson three, you will remember that shareholder equity is equal to total assets minus total liabilities. It's what the shareholders "own". Shareholder equity

is a creation of accounting that represents the assets created by the retained earnings of the business and the paid-in capital of the owners. The amount of net income returned as a percentage of shareholders equity. Return on equity measures a corporation's profitability by reveling how much profit a company generates with the money shareholders have invested. It indicates the how profitably the owners fund have been utilized by the firm. Return on Equity=Net Income X 100 Average Shareholders Equity =89,942,000 X 100 581,358,273 =15.47%

This 15.47% is the return that management is earning on shareholder equity. Net income is considered for the full fiscal year after taxes and preferred stock dividends but before common stock dividends. Shareholders' Equity does not include preferred stocks and is used as an annual average.Return on Equity varies substantially across different industries. Therefore, it is recommended to compare return on equity against company's previous values or return of a similar company. Some industries have high return on equity because they require less capital invested. Other industries require large infrastructure build before generating any revenue. It is not a fair conclusion that the industries with a higher Return on Equity ratio are better investment than the lower ones. Generally, the industries which are capital-intensive and with a low return on equity have a limited competition. But, the industries with high return on equity and small assets bases have a much higher competition because it is a lot easier to start a business within those industries. Earnings per share:Earnings per share or EPS is considered as an indicator for choosing the stocks for investment. On the basis of the EPS it is determined what is the earning of the company per share. As earning of the company is a vital part of the fundamental analysis of the stocks, and EPS is a standardized form of calculating the earning, it helps to compare the earnings of the companies while making the selection of stocks by the traders. For considering the potential of a particular company the

Earnings per share or the EPS of the company for the past few years are considered by the experts. The sign of a potentially good company is the rising EPS for the successive years. It is believed that a higher EPS is a sign of a profit making company. Therefore, while choosing the stocks for investment EPS is a vital parameter that cannot miss. EPS or the earning per share ratio is also a vital parameter for deducting the P/E ratio of a particular stock. P/E ratio is calculated by dividing the current price of a single share of a stock with the EPS of that stock. The P/E ratio is one of the predominant indicators of the potential of a stock and EPS is obviously plays a crucial part in calculation of the P/E ratio. So there is no doubt about the fact that EPS of a particular stock is very much important in fundamental analysis of the stocks. If you want to choose the right stocks for investment you must take a serious consideration about the EPS of the stock along with other parameters that are important for fundamental analysis. It indicates the profit available to the equity shareholders on a per share basis.

Earnings per share=Earnings available to Equity Shareholders Number of Equity Shares = 66,875,536 16,425,943 = 4.07 per share.

The earnings per share is a good measures of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not the earnings power of the company has increased. ACTIVITY RATIO

Inventory Turnover:Measures the activity/liquidity of inventory of a firm;The speed with which inventory is sold.Inventory Turnover Ratio is one of the efficiency ratios and measures the number of times, on average, the inventory is sold and replaced

during the fiscal year. Inventory Turnover Ratio measures company's efficiency in turning its inventory into sales. Its purpose is to measure the liquidity of the inventory. Inventory Turnover Ratio is figured as "turnover times". Average inventory should be used for inventory level to minimize the effect of seasonality.This ratio should be compared against industry averages. Inventory Turnover Ratio formula is:

Inventory Turnover=Net Sales Closing Inventory = 9,445,760,693 920,424,287 = 10.26 times

A low inventory turnover ratio is a signal of inefficiency, since inventory usually has a rate of return of zero. It also implies either poor sales or excess inventory. A low turnover rate can indicate poor liquidity, possible overstocking, and obsolescence, but it may also reflect a planned inventory buildup in the case of material shortages or in anticipation of rapidly rising prices. A high inventory turnover ratio implies either strong sales or ineffective buying (the company buys too often in small quantities, therefore the buying price is higher).A high inventory turnover ratio can indicate better liquidity, but it can also indicate a shortage or inadequate inventory levels, which may lead to a loss in business. High inventory levels are usual unhealthy because they represent an investment with a rate of return of zero. It also opens the company up to trouble if the prices begin to fall. A good rule of thumb is that if inventory turnover ratio multiply by gross profit margin (in percentage) is 100 percent or higher, then the average inventory is not too high.

Net Working Capital Turnover:To assess the effectively the Net Working Capital is used to generate sales. The working capital turnover ratio measures how well a company is utilizing itsworking capital to support a given level of sales. Working capital is current assets minus current liabilities. A high turnover ratio indicates that management is being extremely efficient in using a firm's short-

term assets and liabilities to support sales. Divide net sales by working capital (which is current assets minus current liabilities). The calculation is usually made on an annual basis, and uses the average working capital during that period. The calculation is: Net working capital turnover=Net Sales Net Working Capital =9,445,760,693 522,198,797 = 18.09 times

The working capital turnover ratio measures the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation. An extremely high working capital turnover ratio can indicate that a company does not have enough capital to support it sales growth; collapse of the company may be imminent. This is a particularly strong indicator when the accounts

payable component of working capital is very high, since it indicates that management cannot pay its bills as they come due for payment. An excessively high turnover ratio can be spotted by comparing the ratio for a particular business to those reported elsewhere in its industry, to see if the business is reporting outlier results.

Asset Turnover:The formula for the asset turnover ratio evaluates how well a company is utilizing its assets to produce revenue. The numerator of the asset turnover ratio formula shows revenues which is found on a company's income statement and the denominator shows total assets which is found on a company's balance sheet. Total assets should be averaged over the period of time that is being evaluated. For example, if a company is using 2009 revenues in the formula to calculate the asset turnover ratio, then the total assets at the beginning and end of 2009 should be averaged. It should be noted that the asset turnover ratio formula does not look at how well a company is earning profits relative to assets. The asset turnover ratio formula only looks at revenues and not profits. This is the distinct difference between return on assets (ROA) and the asset turnover ratio, as return on assets looks at net income, or profit, relative to assets.The efficiency which the firm uses all its

assetstogeneratesales. Asset Turnover=Sales Total Assets = 9,445,760,693 1,743,192,768 = 5.42

The higher the ratio, the more sales that a company is producing based on its assets. Thus, a higher ratio would be preferable to a lower one. However, different industries cannot be compared to one another as the assets required to perform business functions will vary. An example of this would be comparing an ecommerce store that requires little assets with a manufacturer who requires large manufacturing facilities and storage warehouses. Another breakdown for the formula for asset turnover ratio is companies that are using their assets now for future sales. This may be more of an issue for companies that sale highly profitable products but not that often.

Fixed Asset Turnover:Fixed asset turnover ratio compares the sales revenue a company to its fixed assets. This ratio tells us how effectively and efficiently a company is using its fixed assets to generate revenues. This ratio indicates the productivity of fixed assets in generating revenues. If a company has a high fixed asset turnover ratio, it shows that the company is efficient at managing its fixed assets. Fixed assets are important because they usually represent the largest component of total assets. There is no standard guideline about the best level of asset turnover ratio. Therefore, it is important to compare the asset turnover ratio over the years for the same company. This comparison will tell whether the companys performance is improving or deteriorating over the years. It is also important to compare the asset turnover ratio of other companies in the same industry. This comparison will indicate whether the company is performing better or worse than others. An increasing trend in fixed assets turnover ratio is desirable because it means that the company has less money tied up in fixed assets for each unit of sales. A declining trend in fixed asset turnover may mean that the company is over investing in the property, plant and equipment. This ratio is usually used in capital-intensive industries where major purchases are for fixed assets. This ratio should be used in subsequent years to see how effective the investment in fixed assets has been.To assess the amount of sales generated by each fixed asset dollar. The formula for calculation of fixed asset turnover ratio is given below: Fixed Asset Turnover=Sales Fixed Assets = 9,445,760,693 47,150,436 = 200 times

The fixed assets usually include property, plant and equipment. The value of goodwill, long-term deferred tax and other fixed assets that do not belong to property,

plant and equipment is usually subtracted from the total fixed assets to present a more meaningful fixed asset turnover ratio. LEVERAGE RATIO Debt to Asset Ratio:The Debt to Asset Ratio measures the percentage of the company's Total Assets that are financed with debt (Total Liabilities). This ratio basically looks at what debt the company owes, and compares that debt to what assets the company owns. Debt to Assets Ratio = Total Debt Total assets = 1,154,193,520 1,743,192,768 = 0.66:1

The 0.66:1 multiple in the ratio indicates a low amount of leverage, so SEL has enough assets to repay its liability. The higher the ratio, the greater risk will be associated with the firm's operation. In addition, high debt to assets ratio may indicate low borrowing capacity of a firm, which in turn will lower the firm's financial flexibility. Like all financial ratios, a company's debt ratio should be compared with their industry average or other competing firms. Total liabilities divided by total assets. The debt/asset ratio shows the proportion of a company's assets which are financed through debt. If the ratio is less than 0.5, most of the company's assets are financed through equity. If the ratio is greater than 0.5, most of the company's assets are financed through debt. Companies with high debt/asset ratios are said to be "highly leveraged," not highly liquid as stated above. A company with a high debt ratio (highly leveraged) could be in danger if creditors start to demand repayment of debt.

Proprietary Ratio:Proprietary ratio refers to a ratio which helps the creditors of the company in seeing that their capital or loans which the creditors have given to the company are safe. Proprietary ratio can be calculated as follows Proprietors funds/Total Assets. In the above formula proprietary funds includes equity and preference share capital of the company and reserves and surplus of the company, while total assets of company includes both fixed assets and current assets of the company but it excludes fictitious assets which company may have. Proprietary ratio highlights the financial position of the company and therefore Proprietary ratio can be interpreted as good if it is high because a higher proprietary ratio would imply that company has enough capital to repay its creditors whenever any such demand is made by the creditors. A lower proprietary ratio would imply that company is not in a position to pay all of its creditors and therefore a low proprietary ratio is a cause of concern for the creditors of the company.

Proprietary Ratio=Proprietors Fund Total Assets = 588,999,248 1,743,192,768 = 0.34

The higher this Proprietary ratio denotes that the shareholders have provided the funds to purchase the assets of the concern instead of relying on other sources of funds like bank borrowings, trade creditors and others However, too high a proprietary ratio say 100% means that management has not effectively utilize cheaper sources of finance like trade and long term creditors. As these sources of funds are cheaper, the inability to make use of it might lead to lower earnings and hence a lower rate of dividend payout. This ratio is a test of credit strength as too low a proprietary ratio would mean that the enterprise is relying a lot more on its creditors to supply its working capital. Debt to Equity Ratio: Assess the funds provided by creditors versus the funds by owners.

Debt to Equity Ratio=Total Debt Shareholders Equity = 636,754,902 588,999,248 = 1.08 Current Liabilities to Equity: Assess the short-term financing portion versus that provided by owners.The debt-to-equity ratio (D/E) is a financial ratio indicating the relative proportion of shareholders' equity and debt used to finance a company's assets.[1] Closely related to leveraging, the ratio is also known as Risk, Gearing or Leverage. The two components are often taken from the firm's balance sheet or statement of financial position (so-called book value), but the ratio may also be calculated using market values for both, if the company's debt and equity are publicly traded, or using a combination of book value for debt and market value for equity financially. Current Liabilities to Equity=Current Liabilities Shareholders Equity = 1,143,993,172 588,999,248 = 1.94

OTHER RATIOS

Price per Earning Ratio:Assess the amount investors are willing to pay for each dollar of earnings. In stock trading, the P/E ratio (price-to-earnings ratio) of a share (also called its "P/E", or simply "multiple") is the ratio of the market price of that share divided by the annual Earnings per Share (EPS).[2]

The P/E ratio is a widely used valuation multiple used as a guide to the relative values of companies: a higher P/E ratio means that investors are paying more for each unit of current net income, so the stock is more "expensive" than one with a lower P/E ratio. The P/E ratio can be regarded as being expressed in years: the price is in currency per share, while earnings are in currency per share per year, so the P/E ratio shows the number of years of earnings which would be required to pay back the purchase price, ignoring inflation, earnings growth and the time value of money.

Price per Earning Ratio=Market price per share Earnings per share = 14.50 4.07 = 3.56 times

By comparing price and earnings per share for a company, one can analyze the market's stock valuation of a company and its shares relative to the income the company is actually generating. Stocks with higher (or more certain) forecast earnings growth will usually have a higher P/E, and those expected to have lower (or riskier) earnings growth will usually have a lower P/E. Investors can use the P/E ratio to compare the value of stocks: if one stock has a P/E twice that of another stock, all things being equal (especially the earnings growth rate), it is a less attractive investment. Companies are rarely equal, however, and comparisons between industries, companies, and time periods may be misleading. P/E ratio in general is useful for comparing valuation of peer companies in similar sector or group. Either the stock is undervalued or the company's earnings are thought to be in decline. Alternatively, current earnings may be substantially above historic trends or the company may have profited from selling assets.

Dividend Payout Ratio:Dividend payout ratio compares the dividends paid by a company to its earnings. The relationship between dividends and earnings is important. The part of earnings that is not paid out in dividends is used for reinvestment and growth in future earnings. Investors who are interested in short term earnings prefer to invest in companies with high dividend payout ratio. On the other hand, investors who prefer to have capital growth like to invest in companies with lower dividend payout ratio. Dividend payout ratio differs from company to company. Mature, stable and large companies usually have higher dividend payout ratio. Companies which are young and seeking growth have lower or modest dividend payout ratio. Investors usually seek a consistent and/or improving dividends payout ratio. The dividend payout ratio should not be too high. The earnings should support the payment of dividends. If the company pays high levels of dividends it may become for it to maintain such levels of dividends if the earnings fall in the future. Dividends are paid in cash; therefore, high dividend payout ratio can have implications for the cash management and liquidity of the company. It indicates the percentage of profit that is paid out as dividend. The part of the earnings not paid to investors is left for investment to provide for future earnings growth. Investors seeking high current income and limited capital growth prefer companies with high Dividend payout ratio. However investors seeking capital growth may prefer lower payout ratio because capital gains are taxed at a lower rate. High growth firms in early life generally have low or zero payout ratios. As they mature, they tend to return more of the earnings back to investors. Note that dividend payout ratio is calculated as DPS/EPS. The formula for calculation of dividend payout ratio is given below: Dividend Payout Ratio=Annual Dividend per share Current market price per share =1 14.50 =0.069 times

It should be noted that the dividends are not paid from earnings; in fact they are paid from the cash. Dividend payout ratio compares dividends to the earnings, not to the cash. A company will not be able to pay dividends if it does not have sufficient cash even if it has a high level of earnings. A shareholder has two sources of return, namely periodic income in the form of dividends and capital appreciation. Dividend payout ratio tells what percentage of total earnings the company is paying back to shareholders. A healthy dividend payout ratio leads to investor confidence in the company. Plowback ratio (also called retention rate) is equals 1 payout ratio and it equals the earnings retained divided by total earnings for the period.

IMPORTANCE AND LIMITATIONS OF RATIO ANALYSIS

Advantages:
Liquidity position Long term solvency Operating efficiency Overall profitability Inter-firm comparison Trend Analysis

Disadvantages:
Difficulty in comparison Impact of inflation Conceptual diversity