CHAPTER-I

INTRODUCTION
NEED FOR STUDY
OBJECTIVES
METHODOLOGY
LIMITATION

INTRODUCTION
Financial statements are prepared primarily for decision
making .They play a dominant role in setting the frame work of
managerial decision making .But the information provided in as no
meaningful conclusions can be drawn from these statements alone.
However , the information provided in these financial statements are of
immense use in making decisions through analysis and interpretation of
financial analysis is the process of identifying the financial strength and
weakness of the firm by properly establishing relation between the items
of the balance sheet and profit and loss account .There are various
methods or techniques used analyzing financial statements such as
comparative statements schedules of changes in working capital funds
analysis etc. The Ratio analysis is the most powerful to do financial
analysis.
Ratio is a numerical relationship between two numbers which are
related in some manner. Ratio is a yardstick used to evaluate the financial
condition and performance of a firm, relating two pieces of financial data
to each other. Ratio analysis is a very powerful analytical tool, useful for
measuring performance of an organization. Ratio analysis concentrated
on the inter-relationships among the figures appearing in the financial
statements .It make comparison easy. The said ratio is compared with the
standard ratio and this shows the degree of efficiency utilization of assets,
etc. The results of two companies engaged in the same business can be
easily compared (inter-firm comparison) with the help of ratio analysis. It
allows interested parties to make evaluation of certain aspects of the
firms performance. It helps the management to analyse the past
2

performance of the firm and to make further projections. It allows

interested parties, like shareholders, investors, creditors and analysis to
make an evaluation of certain aspects of a firms performance. The
appraisal of the ratios will make proper analysis about the strengths and
weaknesses of the firms operations

Need for the study:

Paper is mainly used written and printing communications. In
addition paper and paper board provide materials for hundred of other
used, such as repaying packaging etc.. In Industrially developed countries
paper has become the fifth necessity after food, clothing, water and
shelter. In the household, paper nay be used as handkerchiefs, sanitary to
wells, toilet tissues and table napkins. Paper is used some countries likes
Japan as screens and curtains. When on reaches office, paper is required
for books records correspondence etc.. Paper is used for paper dishware
packaging in and host of others uses.
The increase in the number of mills has also resulted in the
increase in the production capacity. A Vamshadhara paper mill is an agro
based paper mill is an agro based paper mill situated in the madapam at
Srikakulam. As there is though competition in the market to dispose of
paper stocks at a profit, only a company with efficient distribution system
can survive and overcome the stiff competition.
Further physical distribution transportation and ware housing also
plays a dominant role in the distribution system. A firm without proper
physical distribution cannot supply the products to the customers in time
hence an attempt is made to study the distribution. Management of
V.P.M.L. firms with out proper distribution system cannot stand in the
market competition and if even exist form the market interested in every
3

aspect of the financial analysis. It is the over all responsibility to see that
the resources of the firm are used most effectively and efficiently and that
the firms financial condition id found.

Objectives of the study:

The following should be specified objectives of inventory management.
1. To know the profile of paper industry in general
2. To study the profile of Vamsadhara Paper Mill Limited,
Srikakulam.
3. To study the theoretical frame work of Ratio Analysis.
4. To study the financial performance of. Vamsadhara Paper Mill
through Ratio Analysis.
5. To identify the problem & suggest remedial measures.

Methodology of the study:

Methodology refers to the way adopted for colleting feats information
and premises formality presented for the process of drawing inference;
methodology plays a vital role in the analysis of the study. Methodology
is the science of system and the method of conducting a research work.
Here the date in this project is collected by two methods
Primary data
Secondary data
Primary data:
Primary data is on which is first hand information collected a fresh
this is original information. Primary data collected for the study is the
4

data given by the finance manger of VAMSHADHARA PAPER MILL

LIMITED, in the form of detailed information about the company and the
various out lets available.
Secondary data
Secondary data is one that already exists. Secondary data for the
study consists of company manuals, journals and annual books of
VAMSHADHARA PAPER MILL LIMITED and some websites
Limitations of the study:
The study has been presented with many limitations. The limitations
are:
1. The study consist of only 5days data i.e. 2004-2009
2. Since ratios are calculated form past records, there are no
indicators of the future.
3. The reliability and significance attached to ratios depends on the
accuracy of data based on which ratios are calculated.
4. The change in price levels due to inflation will distort the reliability
of ratio analysis.
5. Ratios are based only on the quantitative information. Hence,
qualitative information (i.e., character, managerial ability, etc.)
places a limit on the ratios.

CHAPTER-II
INDUSTRY PROFILE COMPANY PROFILE

INDUSTRY PROFILE
One is naturally interested to know how it had all started, for the
invention of paper, marks an important in the chronicles that log the
achievements of the ever striving human kind and its ever expanding
forms of creativity. Indians who in verity a rich cultural heritage that
dates backs to nearly 3000 BC are particularly aware of the literature and
inscriptions of the centuries before Christ which were written on pottery .
Until 05 AD leaves, sand bricks clothes etc played the paper role.
A Chinese scholar succeeded in making rough sheet of paper form
the pulp of sodden back. However the Egyptians in 2600 BC were
believed to have manufactured writing material similar per has to out
paper to day by their discovery of the need papers. The English paper it
self comes to us from the same papyruses. Arabs learned the art of
making paper through the prisoner taken from china in 751 AD at latter
paper making found its way to India through the North-East i.e., Tibet ,
Kashmir and Nepal form China . Through it had not be used widely
before the European domination, history has it that Indians used paper
even at the time when Europe and America where in a primitive stage.
The first ever paper machine was the result of experiment done by
john Gamble Henry Sealy for Drieneer, Bryan Dankin and Hall. Their
first machine worked at Hertford shore in 1803 and john Dickenson
patented a cylinder machine in 1809, which showed better results. The
modern paper making industry is one of the myriad gifts on the industrial
revolution of Europe.

Growth in paper industry in India:

The art of making paper reached India through Arabs who initially
learnt from chines prisoners when they raided parts Dian. Some Indian
Muslims might have also learnt it directly when they vigiled Mongolia.
But theatre of making paper was out a fairly guarded secret by few
families that initially learnt it these papermaking families were known as
Khagaziz.The khagaziz were largely settled in Punjab and Kashmir and
could not be wide spread in India because and his, which constituted
large majority of population, did not like handling of rages and essential
to paper making. Paper was served to be in common use almost all over
India at close of works the paper half of eighteenth century is considered
of high quality and smooth resistant.
The earliest effort of developing India paper industry where once
by William care in the beginning of 19 th century William by started a
paper mill in 1812 with the help of local kagazis. The mill was located
Sorampur of west Bengal in 1820 a paper en give was introduced for
operating

features , In 1867 the paper four driving machines was

transferred to the Royal paper mills , solely near Calcutta . This mills
capacity was 5000 tons per annum.
Titagore paper mills eventually absorbed this mill. The upper India
paper mill is started in Luck now in 1879 and oldest of existing mills.
During the period 1992-94 another unit by name in perial paper
mills was also set up in pune.At the beginning of 20 th century Indians

production of paper estimated at 19000 tones. By 1913 as many as seven

mills were production manufacturing 24000 to 25000 tones paper?
The raw material was Saba grass hemp. A paper mill entail to work
bamboo was started in India in 1918. This is Indian paper pulp Company.
This brief review is development of paper industry in India to the
beginning of the planning era suggest that the early era of paper industry
in India has been fairly checked and investments in paper industry in this
country have not been by common . Because of this reason paper
production started and 25000 tones per annum till about 1923.It is only
gradually picked up and reached a level of about 40000 tones per year by
1931.
The improvement in production levels were further speeded up to
wards 1935 with the setting up of four new mills viz.
The growth of paper industry under five year plans:
The growth of paper industry has been satisfactory with starting of
five-year plans. In 1995 there were 17 mills with an annual production
capacity of 1, 37,000 tones by the end of 1955. There new plants were
constructed and 14 existing units are modernized and expanded. Leading
an increase in capacity at 1, 89,000 tones. During third plan it was aimed
at achieving a self sufficiency that is also to meet the estimated demand
of 72000 tones by 1965-66. But unfortunately the progress registered by
industry during the tired plan was not satisfactory.
The fourth plan target for installed capacity was one million tones.
And production targeted was 18.51 lakh tones. During the plan the target
was reached. At this time the production came into the picture and
expansion of news print industry next place. In 5 th and 7th plans truest
were reached the paper of existing units. Was 57 with a capacity of 23.51
lakh tons. These are now over 325 units with a total.
9

PRICE OF INPUTS
Particulars
Hard wood pulp (MT)
Soft wood (MT)
Caustic Rye (Rs/MT)
Alum (Rs/MT)
Soapstone (Rs)
Electricity (Rs/Units)
Coal (Rs/MT)
1 HSD (Rs/MT)

February 2014
55,500
45,500
18,000
2,000
2,500
3.99
1,960
32.37

February 2013
47,500
35,500
18,500
2,250
3,500
4.17
2,050
33.65

Paper industry in andhara pradesh:

In Andhra Pradesh there are 15 paper mills. Andhra Pradesh
occupies 6th position in the countrys total; paper production. Andhra
Pradesh paper mill is first in the capacity of paper production. It is
installed capacity is 92, 5000 tons. Second position goes to sirpur paper
mills at Kagaznagar in

capacity 71,000 tons , third comes ITC,

Bhadrachalam paper and paper board capacity mills , charminar mills

Muthungi coastal paper mills at Kajima, kolluru paper mills at
Bommulru, Telangana paper mills at Kammam . All these have a capacity
of 10000 tons. Delta paper mills occupy with the capacity of 18,000 tons.
Vamsadhara paper mills and at Srikakulam and its capacity is 7500 tons.
Surya Chandra paper mills and prune paper mills at Nellore

The Andhra Pradesh paper mills Rajahmundry company earned a

profit of Rs. 2.94 cores for the year end march 1993 while 79% lower
10

than the previous year , However sales have move up 79% Rs .171 crores
over the previous year . But there was a decline in gross profit at Rs. 11.5
crores.
The poor performance of the industry and its inability to grow
commensurate with the countrys population growth and literacy drive
can be attributed to many reasons. Unlike san-woods in accessible areas.
The Indian Industry has to be content with bamboo, a paper non-woods
substitute raw material for the pulp and paper industry. The other popular
non-wood fivers include rice/wheat straw, baggage, cotton liters and sabat
grass. In the recent time there has been considerable shift to wards the use
of tropical hard woods like eucalyptus due to the scarcity of bamboo.
However these hard woods are in ferir to bamboo in fiber length and
strength proprieties of the 23 percent total designated forest are in India
(329 million hectors) only 14 percent can be regarded as productive
forest, the forest policy, of India expects forest-based industries to raise
their raw material through farm forestry in association with the flowers.
The idea of industry providing finance and technical inputs to farmer to
raise wood in their own lands is rather impracticable considering that it
takes 7 to 10 years to grow pulp able wood and long term finance of such
schemes finds virtually no aid from and agency . Government response to
the industrys demand to allow the mills raise their own plantation has not
been substantial as yet.
Government controlled plantation are found to yield startlingly low
paradoxical to the annual step price revisions by the Government which
Are perhaps based on the should raw material rates. The industries
attempt to look for alternative raw material has not met with total success.
While badges is regarded as a major alternative , the existing pulp and
resorting to second fiber like imported waste paper are the other options .
11

India units have been established with due consideration for

minimum economic size for viability and else of operation. Based on
preventing costs of inputs and price of end of product, the minimum
Economic size will be 300 tons a day ninety percent of level in size.
Technologies adopted and the equipment installed, are for below the
industries current standards poor demand coupled with un economic
prices has prevented the mills from upgrading their technology or
expanding their production or modernizing their facilities. The ill
equipment and poorly planned units have given rise to higher
consumption of input material when compared with efficient units else
where in the world.
News prints an overview:
Manufacturing of newsprint is often described as a
Technologists Night mare .News print is expected to be made at allow
cost despite emphasis on mandatory characteristics like high capacity ink
absorption property, smooth printing surface, pliability or resistance to
determination, low grange and breaking strength .Notably, all the news
print units are in the public sector as the return on investment is not
attractive enough for the private sector to venture into it. The countries
first news print factory at Nepal with a capacity 30,000 tons per annum
began production in Karnataka and Hindustan news print mills in Kerala
with installed operation in 1982. The last of the existing four units
Tamilnadu new prints and paper limited began commercial production in
1985 with a capacity of 50,000 tones of news print in addition to 40,000
tones of printing and writin

Demand and supply of news print

12

Year

2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014

Product Imports Consump

-tion
ion
3.50
3.95
4.10
4.34
3.80
3.95
4.15
3.90
4.10
4.35

3.50
3.80
4.05
4.14
3.50
3.80
4.00
3.80
4.15
4.25

7.10
7.25
8.00
8.16
8.80
6.90
7.05
7.15
7.30
7.52

Imports as
Percentage
Consumption

68
72
74
70
68
68
69
72
75
67

Show newsprint demand projections of the development council for

paper, pulp and allied Industries. If the fore drain is to be constantly avoid
in the coming as simple as that. The existing units other than TNPL
depend on conventional raw materials like eucalyptus and are
consequently facing either scarcity of raw materials of high
transportation. TNPL on the other hand depends on rightly claim to the
pride of Indian news print Industry.
The government of Karnataka has allotted a large track of forest lands
for developing a captive plantation for the Mysore paper ills. Other slate
Government may take out from this. However this particular solution is
not as sound as having mills like TNPL , which depend renewable
inputs .Regarding imported newsprint the price are expected to take a dip
in the coming few years due to the general demand recession and surplus
capacity of exporting nations . Chalkier committee had already gone in to
this aspect and recommended to have attracted tariff mechanism in order
to protect in Indian newsprint Industry.
PRODUTION IN 1000 TONES
YEAR
2004-2005

PRODUCTION
434.12
13

2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014

450.50
469.18
541.34
598.76
680.90
810.44
867.80
932.96
980.75

NEWS PRINT DEMEND PROJECT UP TO 2002 AD

YEAR
2004-2005
2005-2006
2006-2007
2007-2008
2008-2009
2009-2010
2010-2011
2011-2012
2012-2013
2013-2014

DEMAND
7.45
7.91
8.39
8.90
9.42
9.96
10.54
11.29
12.11
13.96

PROFILE OF VAMSHADHARA PAPER MILLS

The Vamshadhara Paper Mills Ltd was established at
Madapam on the banks of river Vamshadhara in Srikakulam District , a
centrally declared backward area as an agro based industry in the year
1980 for manufacture of KRAFT PAPER using PADDY STRAW and
GUNNY as the main raw materials supported by waste paper as
secondary raw material with a licensed capacity ; of 7500 tons per annum
with the assistance of state level financial institutions and banks and seed
capital assistance of equity participation form IDBI and ICICI

14

Objectives of vamshadhara paper mills ltd

To carry on the business of manufactures buyers. Sellers. Importers
and exporters and dealers in all kinds and classes of paper board,
card board and pulp
To carry on the business of manufacture using purchasing. Selling
or other wise. Delaying in cartons fibber-boxes, corrugated
wrapper. Corrugated papers and other packing materials products
and like.
The unit into went into commercial production towards end of
January 1983-84 and went for an expansion cum balancing
program and they have been production floating media. Semi
virgin (medium) and high strength Kraft

Paddy straw or rice straw is the main raw material for the unit. The
company producing other materials like waste gunny degasses. Waste
paper is importing from Singapore, Netherlands, USA, Switzerland,
Malaysia .Through the channel of vizag, Chennai & Mumbai etc.
Vijayawada, Cuttack, Calcutta etc.
It is also purchasing packaging materials like Hessian clots. Reel
cores, wooden flogs and others.

15

Organization set up in Vamshadhara paper mills is functional headed

by managing director who assist by joining managing director and
executive director i.e. group activities in accordance with the functions.
Here the basic enterprise functions are personnel production, finance,
commercial (purchases) and marketing coordination among these
different function an activities has been achieved successfully as so far.
Brief details of the unit
LOCATION: Madapam Village, Srikakulam (district). On the Banks of
River of Vamshadhara
Constitution:

Public

limited

company,

Recognized

by

Indian

Government.
Date of incorporaton: 2 April 1980
Date of commencement of procuction:
28 January 1983 15 tons per day capacity
Initial proposed cost of the project; 264.37 Lakhs
Present existing cost of the project: 12 crores (in 2002 year)
Initial proposed cost of the project: 264.37 Lakhs
Present per day capacity: 58-60 tons per day
Sources of water: This unites also attached to river Vamshadhara. So
underground through bore wells.
Fuel: Coal, husk, cashawshelt, G.N. shell gabasee
Power source: A.P.S.E.B, AP Tran
Favourable causes of location of vamshadhara

paper mills ltd:

The main factory that is motive to establish factory is Madapam

Availability to labor at cheep rate
Availability of continuous water supply
The moving sources to run the factory ele
Availability of waste paper
16

 The communication and transport facility

Availability of labor and transport facility of the
importance factory and it was true in the case of Vamshadhara paper mills
Ltd. regarding supply of water. There was a big Banta situated very
nearer with the plant it is bring tank of 200 feet depth the four to five
acres of plant area . This unit was established along the madras Howrah
Railway Track which generally contributes to easy transportation and also
factory is located at the side of road way linking Srikakulam
Visakhapatnam. Hence it offered good communication and infra
structural facilities. The Government of Andhra Pradesh supply electricity
of lower rate
Electricity
It is the main source of energy for the unit .The unit is having 331140
substations with an installed capacity of 2000 kava. This substation has a
33 kva line passing through project site. The maximum record demand is
the post around 12,200 kva
The substation is sufficient to meet the requirements of the unit. But
initially the company had to face lot of problem become of heavy power
cut. To over come this problems two die generator gets of capacity 750
kva each have been installed in the plant
These are capable of taking core of 100% of power cut at the existing
installed capacity and around 5 Lakhs was invested for some auxiliaries,
such as motors, capacitors, etc...
Coal
The company uses coal in boilers at very level. The company also
needs non-conventional fuels such as rice husk, groundnut shells and
cashew nut shells. These non-conventional fuels are locally available.
17

Machinery:
M/s several Engineering works who are one of the required paper
mill machinery manufactures had made the technical evaluation of the
machine condition. As per their findings the areas requiring immediate
attention were the head base, press port, dryers section calendaring and
pope sections of the paper machinery in these sections of the recording it
is valuable assets of an organization of a factory. Organization and money
of physical equipment an organization performance and resulting
productivity are directly proportional to the quantity and quality of its
human resources. The other officers of the company have been recruited
with persons having relented and experience and qualifications.
Remedian measures:
Making use of the maximum quantity of raw materials locally
available.
The Srikakulam District is generating sufficient quantities of
agroresidace and there will not be any dearth of raw material even if
the plant capacity increased to
Man power:
Since the unit is located in a remote backward area, recruitment of
trained and experienced personnel was a big problem to the firm.
However, the company able to strength is organization structures by the
following methods.
Trainees:
With a view to help the local educated unemployed, youth the
unit has embarked on a training programmer in which 145 trainees were
recruited. These trainees had in plant training and majority of them
confirmed.
18

Raw material
The company uses unconventional raw materials, Chemicals,
and packaging materials for manufacturing the paper, un-conventional
raw material include paddy straw, waste gunny, bagasse, waste paper
etc...
Paddy straw is the main raw material for the unit. It is available
plenty in near village of the plant site. The company has procuring other
materials (like waste gunny, bagasse waste paper) is importing form
(through waste of) Vizag, Madras, Mumbai, Cuttack, Vijayawada etc..
The company is also importing waste paper from other countries.
The mill uses chemicals along with above mentioned raw materials
Chemicals like Alum Sodium sulphate, caustic soda, guar gum, Rosin and
other chemicals.

Packaging material:
It is also purchasing packaging materials like Hussein cloth, red
cores, wooden plugs gumpatpe and pp strip roles and others .
POWER&FUEL
Electricity
Own generation
Through diesel generation
Coal
Waste paper
Purchased pulp
Paddy straw
Kenaj
19

 Bagasse
Waste gunny
Non- conventional fuel

Profile of finance department:

Vamshadhara paper mills was set up by the Technical promoter Sri
S.R.Rabinder with the help of the co-promoters and with the assistance of
M/S. APIDC
M/S.IDBI
M/S.ICICI
As equity participants, the term loan have been extended by
M/S APIDC
M/S APSFC
M/S SBI
M/S ANDHARA BANK

Participating financial institutions:

Apidc- Andhra Pradesh industrial development corporation limited,
Hyderabad.
Apsfc- Andhra Pradesh state financial corporation, Hyderabad
Idbi- industrial development bank of India, Mumbai.
Icici- industrial credit and Investment Corporation of India ltd
Sbi%ab-state bank of India
Ab Andhra bank

20

Srikakulam district MPS classified as category b in industrial

back ward ness. The following are the incentives given by the
government to any industry located in this district.
Capital subsidy: 20% of the fixed capital seeds new assets
Power subsidy: 25% of the computed consumption for a period of 5
years.
The unit went into commercial production towards the end of
January, 1983-84 and went for an expansion cum balancing programme
and completed the same and increased its installed capacity to 21750
installed tones per annum. During the year 2008-2009 net loss (112.47
lakhs)

Organizationals various stages in paper manufacturing:

The following are the stages involved in paper manufacturing.
Pulping: straw cutting, passes through conveyors, Digesters, using steam
it is cooked them they are washed.
Stock making: They mix all kinds of pulps up to their individuals
requirement on the basis of paper to be made. Coloring also made per the
requirement .Paper machine section: Mixing the pulp in water, sheets
format takes place, dewatering, drying of sheet.

21

Calendaring: Smoothing activity of paper takes place, Rewinding and

cutting: cutting of paper into required sizes.
Finishing house: paper is finished into number of sheets .500 sheets is
termed as ream bale is equal to 50 K.Gs
Packing: packing is done as per the orders.
Warehousing: Here central excise activities are performed i.e. Duty
payment
Dispatching: The movement of material form the factory gate to the
concerned authorities once material is dispatched, title changes.

Structure in vamshadhas paper mills

Organizational structure is the established pattern of relationship
among parts or components of the organization. This prescribes the
hierarchy of relationships among various positions and activities. Since
people hold these positions the structure is the relationship among the
people in the organization.
Organization structure is required where we conceive of organized
activities whether in business or in any other field. If the organization
plan is not designed well , them management is rendered difficult and
ineffective on the other hand , it is logical, clear cut and stream lined to
22

meet present day requirements , they

the first requisite of the

management has been achieved

In short organization structure facilitates management process,
encourages growth and diversification, provides for optimum use of
technological improvements encourages human use of human beings and
stimulates creativity. Departmentation is the process of dividing the work
of an organization into various units or departments that result form
departmentations are departments are sections. The terminology may very
indifferent types of organizations
Thus organization chart is snapping shot of an organization .It departs the
flow of authority, responsibility and communication among various
departments, which are located at different levels of the hierarchy. The
connecting lines on this chart show who is accountable to whom and who
is in charge of what department.

CHAPTER-III
23

THEORITICAL FRAMEWORK OF RATIO ANALYSIS

Ratio analysis
Meaning of ratio analysis:
Ratio analysis defined as the systematic use of ratio to interpret
the functional statements so that strengths and weakness of a firm as well
as its historical performance and current financial conditions can be
determined. This relationship can be expressed as
1. Percentage
2. Fraction
3. Proportion of numbers

24

A ratio is a quotient of two numbers and the relation expressed

between two accounting figures is known as accounting ratio. Ratio
analysis is a very powerful analytical tool, useful for measuring
performance of an organization. Ratio analysis concentrates on the interrelationship among the figures appearing in the afore-mentioned four
financial statements.
Definition of ratio analysis:
Ratio is a yardstick used to evaluate the financial condition and
performance of a firm, relating two pieces of financial data to each other.
-James C. Van Harne
The relation of one amount, a to another b, expressed as
the ratio of a to b.
-Kohler
Ratio is a fraction whose numerator is the antecedent and denominator
the consequent.
Ratio is the relationship or proportion that once amount bears to another,
the first number being the numerator and the later denominator.
- H.G. Guthmann

Importance of Ratio Analysis

Ratio Analysis is relevant is assessing the performance of a
company in respect of the following aspect:

Liquidity Position:
Companys liquidity position can be determined with the help of
ratio analysis. If the company is able to meet its current obligations, its
25

liquidity and vice versa. Ratios of liquidity are particularly useful in

credit analysis by banks and other suppliers of short term loans.

Long-term solvency:
Supplies of long term debt are concerned with the companies
long-term solvency and survival. They analyze the companies
profitability over through ratio analysis.

Operating efficiency:
From the management point of view, ratio analysis is useful in
measuring the degree efficiency in the management and utilization of its
assets.

Profitability:
Through the profitability ratios one can be measure the
companies profitability.
1. Managerial uses of ratio analysis:
a) Helps in decision making :
Financial statements are prepared primarily for
decision making. But the information provided in
conclusions can be drawn from these statements alone.
Ratio analysis helps in making decisions from the
information provided in these financial statements.
26

b) Helps in financial Forecasting and planning:

Ratio analysis is of much help in financial forecasting and planning.
Planning is looking a head and ratios calculated for a number of years
work as a guide for the future. Meaningful conclusions can be drawn for
future from these ratios. This ratio analysis helps in forecasting and
planning.
c) Helps in Communicating :
The financial strength and weakness of a firm are
communicated in easy and understandable manner by the
use of ratios. The information contained in the financial
statements is conveyed in a meaningful manner to the
one for whom it is meant.

d) Helps in Control:
Ratio analysis even helps in making effective control of the business.
Standard ratios can be based upon perform financial statements and
variances or deviations, ill any, can be found by complaining the actual
with the standards so as to take corrective action at the right time.
e) Other Uses:
There are so many uses of the ratio analysis. It is a useful part of the
budget control and standard costing.
1. Utility to Share Holders:
27

An investor in the company will like to know the financial position

of the concern where is going to invest. Ratio analysis will be useful to
investors in making up his mind whether present financial position of the
concern warrants further investments or not .
2. Utility to Creditors :
The creditors or supplies extend short-term credit to the concern.
They are interested to know whether financial position of the concern
warrants their payments at a specified time or not.
3. Utility to Government :
Government is interested to know the overall strengths of the
industry. Government may base its future polices on the basis of
industrial information available from various units. The ratios may be
used as indicators of overall financial strength of public as well as private
sector.

CALASSIFICATION OF RATIOS:

CLASSIFICATON OF RATIOS

LIQUIDITY
RATIOS

LEVERAGE
RATIOS

ACTIVITY
RATIOS
28

PROFITABILIT
Y RATIOS

Classification of Ratios:
Ratios area variously classified into different types based upon the
endues as well as the nature of base adopted. Generally, ratios are
classified into four categories.
Liquidity Ratios:
It is extremely essential for a firm to be able to meet its
obligations as they become due. In fact analysis of liquidity needs the
preparation of cash budgets and cash and fund flow statements.
Liquidity ratios, by establishing a relationship between cash and
other current assets to current obligations, provide you a quick measure of
liquidity. A firm should, ensure that it does not suffer from lack of
liquidity, and also that it is not too much of high liquidity. High degree of
liquidity of liquidity also bad.
a) Current Ratio:
Current ratio is determined the ability of a firm to meet its current
obligations with a margin of safety. The current ratio shows the
proportion of current assets to current liabilities the assets which
constitute current assets are inventories, marketable securities, account
receivables, current assets in hand at the bank.
A current ratio or 2.1 considering as a norm but it depends on the
quality and character of the current assets .High current ratio is new to
itself a guarantee of the sound and reserve strength of the firm .
29

Current assets
Current ratio =
Current liabilities
a) Quick Ratio :
This ratio establishes a relationship between quick, or liquid, assets
and current liabilities. An asset is liquid if it can be converted into cash
immediately or reasonably soon without a loss of value. Cash is the most
liquid quick assets, are book debt (debtors and bills receivables) and
marketable securities (temporary quoted investments). Inventories are
considered to be less liquid. Inventories normally require some time for
realizing into cash: their value also has a tendency to fluctuate. The quick
ratio is found out by dividing quick assets by current liabilities.
Current assets-inventories
Quick ratio =
Current liabilities

1. Cash Ratio:
Since cash is the most liquid asset. A financial analyst may
examine the ratio of cash and its equivalent of cash; therefore, they be
included in the computation of cash ratio.
Cash +marketable securities
Cash Ratio =
Current liabilities
I.

Intervals Measure:
Yet another ratio, which assesses a firms ability to meet its
regular cash expenses, is interval measure .Interval measure relates
liquid assets to average daily operating cash outflows. The daily
30

operating expenses will be equal to cast of goods sold plus selling ,

administrative and general expenses less deprecation (and other
non-cash expenditures ) dived by number of days in the year (say
360)
Current assets-inventory
Interval measure =
Average daily operating expenses
e) Net Working capital Ratio:
The difference between current assets and current liabilities
excluding short-term borrowing is called net working capital (NWC) or
net current assets considered that, between two firms, the one having the
larger net working capital has the greater ability to meet its current
obligations. This is not necessarily so the measure of liquidity is a
relationship, rather than the different between current assets and current
liabilities. Net working capital, however measures the firms potential
reservoir of funds. It can be related to net assets or capital employed.
Net working capital
Net working capital =
Net assets
2) Leverage Ratio:
The short-term creditors, like bankers and suppliers of raw
material, are more concerned with the firms current debt-paying ability.
On the other hand .Hand Long term creditors, like debenture holders,
financial institutions etc...Are more concerned with the firms long-term
financial position. To judge the long-term financial position of the firm,
financial leverage, or capital structure, ratios are calculated. These ratios
indicate mix of funds provided by owners and lenders. As a general rule,
31

there should be an appropriate mix of debt and owners equity in

financing the firms assets.
Leverage ratios may be calculated from the balance sheet to items
determines the proportion of debt ink total financing.
Many variations of these ratios exist but all these ratios indicate the
same thing the extent to which the firm has relied on debt in financing
assets. Leverage ratios are also computed form the profit is sufficient to
cover the fixed charges.

I .Debt equity ratio:

Debt equity ratio can also be computed by dividing total debt
by net worth .This relationship describing the lenders contribution for
each rupee of the owners contribution is called debt-equity ratio.
Total debt
Debt-equity ratio=
Net worth
i.

Interest coverage ratio :

Debt ratios described above are static in nature, and fail to indicate the
firms ability to meet interest obligations. The interest coverage ratio or
the times-interest-earned is one of the most conventional coverage ratios
used to test the firms debt-servicing capacity. The interests coverage
ratio is computed test the firms debt-servicing capacity. The interest
Coverage ratio is computed by dividing earnings before interest and taxes
(EBIT) by interest charges:
EBIT
32

Interest coverage =
Interest capital or net assets to net worth ratio.
ii.

Capital gearing ratio:

Capital gearing ratio indicates the degree of vulnerability of
earnings available for equity shareholders. This ratio signals the firm
which is operating on trading on equity .It also indicates the changes in
benefits accruing to equity shareholders by changing the levels of fixed
interest bearing funds in the organization.
Fixed interest bearing funds
Capital gearing ratio=
Equity shareholders funds

iii.

Proprietary ratio or net worth ratio :

Reserves earmarked specifically for a particular purpose should
not be included in calculation of net worth. A high proprietary ratio is
indicative of strong financial position of the business. The higher the ratio
Share holders net worth
Proprietary ratio=
Total assets

iv.

Share holders equity ratio :

It is assumed that larger the proportion of the shareholders

equity, the stronger is the financial position of the firm. This ratio will
supplement the debt-equity ratio .In this ratio, the relationship is
established between the shareholders funds and the total assets.
Shareholders funds represent equity and preference capital plus reserves
and surplus less accumulated losses. A reduction in shareholders the risk
of higher levels of gearing.
Shareholders equity
33

Share holders equity ratio =

Total assets (tangible)
v. Fixed assets to long-term funds ratio :
This ratio indicates the proportion of long-term funds deployed in
fixed assets. Fixed assets represents the gross fixed assets minus
depreciation provided on this the date of calculation. Long-term funds
include share capital, reserves and surplus and long-term loans. The
higher the ratio indicates the safer the funds available in case of
liquidation. It also indicates the proportion of long-term funds that is
invested in working capital.
Fixed assets
Fixed assets to long-term funds ratio =
Long-term funds
3. Activity Ratio:
Funds of creditors and owners are invested in various assets to
various assets to generate sales and profits. The better the management of
assets, the larger the amount of sales. Activity ratios are employed to
evaluate the efficiency with which the firm manages and utilizes its
assets. These ratios are also called turnover ratios because they indicate
the speed with which assets are being converted or turned over into sales.
Activity ratios, thus, involve a relationship between sales and assets.
i.

Inventory or stock turnover ratio:

This ratio indicates the efficiency of the firm in selling its

product .It is calculated by dividing the cost of goods sold by the average
inventory .The average inventory is the average of opening and closing
balances of inventory .In a manufacturing company inventory of finished
goods is used to calculate inventory turnover.
Cost of goods
34

Inventory turnover =
Average inventory
i.

Debtors Turnover Ratio:

A firm sells goods for cash and credit. Credit is used as a

marketing tool by a number of companies. When the firm extends credits

to its customers, book debts (debtors or receivables) are created in the
firms accounts. Book debts are expected to be converted into cash over a
short period and therefore are included in current assets .The liquidity
position of the firm depends on the quality of debtors to a great extent.
Financial analysts apply three ratios to judge the quality or

liquidity

of debtors: a) debtors turnover b) collection period, and c) again schedule

of debtors. Debtors turnover is found out by diving credit dales by
average debtors
Credit sales
Debtors turnover =
Average debtors

I.Total assets turnover:

Some analysis likes to compute the total assets turnover in
addition to or instead of the net assets. This ratio shows the firms ability
in generating sales from all financial resources committed total assets.
Sales
Total assets turnover =
Total assets
i.

Current assets turnover:

35

Current asset are used to generate sales. Therefore a firm

should manage its assets efficiency to maximum sales. The firm may
which to know its efficiency of utilizing current assets.
Sales
Current assets turnover =
Current assets
ii.

Fixed assets turnover:

Fixed asset are used t generate sales. A firm should manage its fixed
assets efficiency to maximize sales. The relationship between sales and
fixed assets is called fixed assets turnover ratio.
Sales
Fixed asset turnover =
Net fixed assets.

iii.

Creditors turnover ratio:

The measurement of the credit turnover period shows the average time
taken to pay for goods and services purchased by the company.
Net credit purchase
Creditors turnover ratio =
Average creditors

iv.

Working capital turnover ratio:

36

A firm may also like to relate net current assets or net working capital
gap to sales. It may thus computer net working capital turnover by
dividing sales by net working capital.
Sale
Working capital turnover ratio =
Net working capital
v.

Bad debts to sales ratio :

Bad debts to sales ratio indicate the efficiency of the credit control

procedures of the company. Its level will depend on the type of

business .Mail order companies have to accept a fairly high level of bad
debts, while retailing organizations should maintain very low levels of
ratio

Bad debts
Bad debts to sales ratio =

*100
Sales

vi.

Debtors collection period or debtors velocity ratio:

It helps to monitor credit and collection policies. It can signal the need
for corrective action particularly if compared with a norm. It ratio

37

Highlights the impact of management policies on the liquidity of the

enterprise as well as its profitability. It is a barometer of the general state
of health of an
Average debtors /credit sales*365 (in days)

vii.

Average collection period ratio:

The collection period ratio thus helps an analyst in two respects. In
determining the collectibles of debtors and thus, the efficiency of
collection efforts , and in ascertaining the firms comparative strength and
advantage relative to its credit policy and performance vis--vis the
competitors credit polices and performance.

360
Average collection period =
Debtors turnover

viii.

Day of inventory holding ratio:

The reciprocal of inventory turnover gives average inventory holdings
in percentage term. When the number of days in a year is divided by
inventory turnover, we obtain days of inventory holdings.
38

4. Profitability ratios:
A company should earn profits to survive and grow over a long
period of time. Profits are essential, but it would be wrong to assume that

Every action initiated by management of a company should be aimed at

maximizing profits, irrespective of social consequences. It is unfortunate
that the word profit is looked upon as a term of abuse since some firms
always want to maximize profits at the cost of employees, customers and
social. Except such infrequent cases, it is a fact that sufficient profits must
be earned to sustain the operations of the business to be able to obtain
funds from investors for expansion and growth and to contribute towards
the social overheads for the welfare of the society.
Generally two major types of profitability ratios are
calculated:
o Profitability in relation to sales
o Profitability in relation to investment
A) General profitability ratios
i.

Gross profit ratio :

The first profitability ratio in relation to sales is the gross profit
margin ratio. It is calculated by dividing the gross profit by sales. The
gross profit margin reflects the efficiency with which management
39

produces each unit of product. This ratio indicates the average spread
between the cost of goods sold and the sales revenue.
Gross profit ratio = gross profit /sales *100
ii.

Net profit ratio:

Net profit is obtained when operating expenses, interest and taxes are
subtracted from the gross profit. The net profit margin ratio is measured
by dividing profit after tax by sales.
Profit after tax
Net profit ratio =

*100
Sales

iii.

Operating ratio :
Operating ratio indicates the operating efficiency of the company. It
depicts the cost picture or the debit aspect of the profit margin ratio.
Higher the operating ratio, given a level of sales, lower will be the profit
margin or the net profit ratio.
Operating cost
Operating ratio =

*100
Net sales
Or
Cost of goods sold+ operating expenses

Operating ratio =
Net sales
iv.

Expense ratios :
Expense ratios or otherwise called cost ratios, show relationship

between operating costs and expenses on the one hand and volume of
sales on the other. In other words, these ratios express each element of
cost and expenses as percentage of sales.
Expenses
Expense ratio =

*100
Net sales
40

B) Overall profitability ratios:

i.

Return on capital employed (ROCE)or ROI:

This ratio is also called return on investment (ROI). The strategic aim
of a business enterprise is to earn a return on capital. If in any particular
case, the return in the long-term is not satisfactory, then the deficiency
should be corrected or the activity be abandoned for a more favorable
one. The rate of return on investment is determined by dividing net profit
or income by the capital employed or investment made to achieve that
profit.
ROI consists of two component viz, a) profit margin, and b)
investment turnover, as shown below.
Return on capital employed = Net profit /capital employed OR net
profit/sales * sales /capital employed

ii.

Return on proprietors funds ratio :

Return on proprietors fund ratio represents the ratio of net profit to
proprietors funds. Here, it is essential to provide an explanation about
proprietors funds.
Net profit (PIT)
Returnonproprietorsfunds=
Shareholders funds
41

(P.I.T. profit after interest and taxes)

iii.

Return on equity capital ratio:

Return on equity capital is the ratio of net profit to equity share
capital. Return on capital employed and advantages a business would
derive by adopting the return on capital employed method for measuring
the overall profitability of the business.
Return on equity capital = net profit-dividend due to preference share
holders/equity share capital *100

iv.

Earnings per share (EPS):

The EPS is one of the important measures of economic performance

of a corporate entity. The flow of capital to the companies under the

present imperfect capital market conditions would be made on the
evaluation of earnings per share
A higher EPS means better capital productivity. Earnings per share are
one of the most important ratios which measures the net profit earned per
share. EPS is one of the major factors affecting the dividend policy of the
firm and the market process of the company.
Net profit after tax and preference dividend
EPS=
No. of equity shares

42

CHAPTER-IV
DATA ANALYSIS & INTERPRETATION

CURRENT RATIO:
Current ratio is determined the ability of a firm to meet is current
obligations with a margin of safety. A current ratio or 2:1 considering as a
norm but it depends on the quality and character of the current assets.

43

Current ratio = current assets /current liabilities

NAME

CURRENT
ASSETS
RS.

CURRENT
LIABILITIES
RS.

RATIO

2009-

8914260

2010
2010-

4
29347503 3.04
1108460

2011
2011-

38
46026089 2.41
1494402

2012
2012-

14
32812704 4.55
1633738

2013
2013-

21
59734985 2.73
1664283

2014
66
Diagrammatical Representation:

75913860 2.19

INTERPRETATION:
A relatively high current ratio and indication that the firm is liquid ash
has ability to pay its current obligation in time as and when they become
due. A low ratio represents that the liquid position of the firm is not good.
From table 4.1, we can say that the current ratio of vamshadhara Paper
44

Mill Limited is considered good and the years 2009-2010, 2010-2012, but
in the year 2011-2012, 2012-2013 & 2013-2014 was not considered good
because the ratios is less than two to one (2:1).
Working capital turnover:
This ratio indicates the extent of working capital turned over in
achieving sales of the firm
Sales
Working capital turnover =
Working capital

YEAR

WORKING
CAPITAL

SALES

RATIO

15459797
2009-2010 9
17696954

19786097

7.81

2010-2011 2
14024900

28667222

6.17

2011-2012 3
25095647

27794538

5.04

2012-2013 5
25776204

27509095

9.12

23561809

10.93

2013-2014 5
Diagrammatical Representation:

45

INTERPRETATION
From the above table. It is observed that the net working
capital ratio is decreases by a 1% in 2009-2010 same in 2011-2012, but
there is a huge increased in the ratio 4% in the year 2013-2014 and a
managerial increase in the next year. It would be difficult for the
organization to maintain funds when taken huge fluctuations.
Debt equity ratio:
Debt equity ratio can also be computed by dividing total debt by
net worth.
Total debt
Debt equity ratio =
Net worth
YEAR

2009-

TOTAL
DEBT

NET
WORTH

RATIO

2191556 2427752

2010
2010-

6
304743

5
297181

2011
2011-

24
850159

46
336264

1.03

2012
2012-

86
529248

11
371362

2.52

2013

34

78

1.43

46

0.90

2013-

440062

2014

35

401824
50

1.09

Diagrammatical Representation:

INTERPRETATION
From the above table it is observed that the ratio of debt in 20092010. Has a marginal increase of 0.13%, in 2011-2012 there is huge
increases in debt by 1.5%. Where as in 2012-2013 and 2013-2014 the
ration decreasing which is a good sign for the organization as it is closer
to the ideal debt equity ratio.

Propriety ratio:
It expresses the relationship between shareholders net worth and
total assets.
Shareholder funds
Propriety ratio=
Total assets
47

YEAR
20092010
2010-

SHAREHOLDER
FUNDS

TOTAL
ASSETS
461930

24277525

91
0.53
601924

RATIO

2011
2011-

29718146

70
886423

0.49

2012
2012-

33626411

92
900611

0.38

2013
2013-

37136278

12
841886

0.41

2014

40182450

84

0.66

Diagrammatical Representation:

INTERPRETAION:
The ratio also known as equity ratio as represent the relationship of
owners funds to total assets, higher the long-term solvency position of the
company. This ratio indicates the extent to which the assets of the
company can be lost without affecting the interest of creditors of the
company.
The equity ratios of the company are considered well through out of
the project period because it was more than 0.8
48

Capital turnover ratio:

This ratio indicates efficiency in utilization of capital employed in
generating revenue.
Sales
Capital turnover ratio =
Capital employed
YEAR

SALES

CAPITAL
EMPLOYED

1545979

2640699

RATIO

2009-2010

79
4
5.85
1769695 3152524

2010-2011

42
8
1402490 6084785

5.61

2011-2012

03
9
2509564 6255201

2.30

2012-2013

75
7
2577620 6062687

4.01

2013-2014

45

4.25

Diagrammatical Representation:

INTERPRETATION:
The capital turnover ratio of the company is satisfactory
because the ratio is decreasing from 5.80 to 5.61 in the year 2010-2011
compared with 2011-2012 and also it was decreased in to next year but in
49

the next year it was increasing from 2.30 to 4.01 in the year 2012-2013 to
2013-2014. In the last year also increased in the above year.
Total asset turnover ratio:
This ratio indicates the number of times total assets are being
turned over in a year.
Sales
Totalassetturnoverratio =
Total assets

YEAR

2009-

SALES

TOTAL
ASSETS

1545979

4619309

RATIO

2010
2010-

79
1
1769695 6019247

3.35

2011
2011-

42
0
1402490 8864239

2.94

2012
2012-

03
2
2509564 9006111

1.58

2013
2013-

75
2
2577620 8418868

2.78

2014
45
Diagrammatical Representation:

50

3.06

INTERPRETATION:
From the above table it is observed that the total asset turnover
ratio in the 2009-2010 has been increased by 0.41 % when the compared
with 2010-2011, in 2011-2012 it is reduced by 1.32, in 2012-13 it was
increased by 1.2% and in 2013-2014 it was increased by 0.28%
Current asset turnover ratio:
Current asset are used to generate sales. Therefore a firm should
manage its assets efficiency to maximum sales.
Sales
Current asset turnover ratio =
Current assets

YEAR

2009-

SALES

CURRENT
ASSETS

1545979

8914260

RATIO

2010
2010-

79
4
1.73
1769695 1108460

2011
2011-

42
38
1402490 1494402

1.59

2012
2012-

03
14
2509564 1633738

0.93

2013
2013-

75
21
2577620 1664283

1.54

2014

45

1.55

36

Diagrammatical Representation

51

INTERPRETATION:
It is observed that the current asset turnover ratio in the 2009-2010
has been increased by 0.14% when compared with 2010-2011, in 20112012 it is reduced by 0.66 %, in 2012-2013 it was increased by 0.61 and
in 2013-2014 it was increased by 0.01%
Gross profit ratio:
This ratio measures the efficiency of the companys operations and
this can also be compared with the previous years results to ascertain the
efficiency.
Gross profit
Gross profit ratio =

*100
Sales

YEAR

2009-

GROSS
PROFIT

640572

SALES

RATIO

1545979

2010
2010-

9
79
4.14
750686 1769605

2011
2011-

0
42
853882 1402490

4.24

2012
2012-

9
03
131420 2509564

6.08

2013
2013-

6
75
110467 2577620

0.52

2014

21

4.28

45
52

Diagrammatical Representation:

INTERPRETATION:
From the above table it is observed that the gross profit ratio in the
first three years have a marginal increase , but there is a huge fall in
sation by 5.6 and there is a immediate reap in the next year by over 3% .
It would be better for the organization to maintain a stable ratio or else it
would affect the entire organizational operations.
Operating ratio:
Operating ratio express the relationship of cost of goods sold plus
expenses to net sales.
Operating cost
Operating cost =

*100
Net sales

YEAR

2009-

OPERATING
COST

NET SALES

RATIO

15289330 1549797

2010
2010-

2
1732901

9
1769605

986.53

2011
2011-

03
1392295

42
1402490

97.92

2012
2012-

95
2461991

03
2509564

99.27

2013
2013-

16
75
254234253 2577620

98.10

2014

94

98.63

45

Diagrammatical Representation:

INTERPRETATION:
It is observed that the operating ratio once the years have shown a
sequence of up and. There is no sign constant increase of decrease all
though out the period the percentage is around 97% above only. It the
year 2010-2011 the operating ratio have crossed 99%.
Net profit ratio:
This ratio indicates the profitability and efficiency of the business.
Net profit
Net profit ratio =

*100
Net sales

YEAR

NETPROFIT

SALES

RATIO

1549797
2009-2010
2010-

903346

9
1769605

0.58

2011
2011-

2478621

42
1402490

1.40

2012
2012-

955265
3114866

03
2509564

0.68

75
2577620

1.24

45

0.96

2013
20132014

7
2464172

54

Diagrammatical Representation:

INTERPRETATION:
It is observed that the net profit ratio in the 2009-2010 has been
increased by 0.88%, when compared with 2010-2011, in 2011-2012 it is
reduced by 0.72%, in 2012-2013 it was increased by 0.52% and in 20132014 it was reduced by 0.28%.
Return on proprietors funds ratio:
Return on proprietors funds ratio represents the ratio of net profit
to proprietors funds .Here, it is essential to provide an explanation about
proprietors funds
Net profit (PIT)
Return on proprietors funds ratio=
Shareholders funds
NET PROFIT
AFTER TAX

SHAREHOLDERS
FUNDS

RATIO

2010
2010-

903346

24277525

0.04

2011
2011-

2478621

29718146

0.08

2012
2012-

955265
3114867

33626411
37136278

0.03
0.08

YEAR

2009-

55

2013
20132014

2464172

40182450

0.06

Diagrammatical Representation:

INTERPRETATION:
It is observed that the return on proprietors funds ratio in the
2009-2010 has been increased by 0.04%. When compared with 20112012, in 2012-2013 it is reduced by 0.05%, in 2013-2014it was increased
by 0.05 % and in 2011-2012 it was reduced by 0.02%.
Return on total assets:
This ratio indicates the efficiency of utilization of assets in
generating revenue.
Net profit after tax
Return on total assets =

*100
Total assets

YEAR

NET
PROFIT
AFTER TAX

TOTAL
ASSETS

RATIO

461930
2009-2010

903346

91
601924

1.96

2010-2011

2478621

70
886423

4.12

2011-2012
2012-2013

955265
3114867

92
900611

1.08
3.46

56

12
841886
2013-2014

2464172

84

2.93

Diagrammatical Representation:

INTERPRETAT
ION:
It is observed that the return on total assets in the 2010-2011 has
been increased by 2.16% when compared with 2011-2012, in 2012-2013
it is reduced by 3.04% in 2013-2014 it was increased by 2.38% , and in
2011-2012it was reduced by 0.53%
Return on capital employed ratio:
Return on capital employed is the ratio of adjusted net profit to
capital employed. It is expressed in percentage. It may be based on gross
capital or net capital employed.
Profit
YEAR
Return 2009ratio = 2010
2010-

PROFIT

CAPITAL
EMPLOYED

RATIO

2640699
903346

4
3152524

3.42

2011
2011-

2478621

8
6084785

7.86

2012
2012-

955265

9
6255201

1.57

2013
2013-

3114867

57

7
6062687

4.98

2014

2464172

4.06

on capital
employed
*100
Capital
employed

Diagrammatical Representation:

INTERPRETATION:
It is observed that the return on capital employed ratio in the 20092010 has been increased by 4.44% when compared with 2010-2011, in
2011-2012 it is reduced by 6.29% , in 2012-2013 it was increased by
3.41% . And in 2013-2014it was reduced by 0.92%
Solvency ratio:
The Solvency ratio is a way investors can measure the companys
ability to meet its long term obligations. Obviously if the company is
going to go bankrupt you do not want to invest in it.
Total assets
Solvency ratio =
Total liabilities

YEAR

TOTAL
ASSETS

TOTAL
LIABILITIES
58

RATIO

2009-

4619309

2010
2010-

1
64659331
6019247

0.71

2011
2011-

0
57431992
8864239

1.05

2012
2012-

2
76228787
9006111

1.16

2013
2013-

2
81583799
8418868

1.10

2014

71854993

1.17

Diagrammatical Representation:

INTERPRETATION
It is observed that the solvency ratio in the 2007-2008 has been
increased by 0.34% when compared with 2008-2009, in 2009-2010 it is
increased by 0.11%, in 2010-2011 it was reduced by 0.06% and in 20112012 it was increased by 0.07%
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CHAPTER-V
SUMMERY
FINDINGS
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SUGGESTIONS

SUMMARY
One is naturally interested to know how it had all started, for the
invention of paper, marks an important in the chronicles that log the
achievements of the ever striving human kind and its ever expanding
forms of creativity. Indians who in verity a rich cultural heritage that
dates backs to nearly 3000 BC are particularly aware of the literature and
inscriptions of the centuries before Christ which were written on pottery .
Until 05 AD leaves, sand bricks clothes etc played the paper role.
A Chinese scholar succeeded in making rough sheet of paper form
the pulp of sodden back. However the Egyptians in 2600 BC were
believed to have manufactured writing material similar per has to out
paper today by their discovery of the need papers. The English paper
itself comes to us from the same papyruses. Arabs learned the art of
making paper through the prisoner taken from china in 751 AD at latter
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paper making found its way to India through the North-East i.e., Tibet ,
Kashmir and Nepal form China . Through it had not be used widely
before the European domination, history has it that Indians used paper
even at the time when Europe and America where in a primitive stage.
The first ever paper machine was the result of experiment done by
john Gamble Henry Sealy for Drieneer, Bryan Dankin and Hall. Their
first machine worked at Hertford shore in 1803 and john Dickenson
patented a cylinder machine in 1809, which showed better results. The
modern paper making industry is one of the myriad gifts on the industrial
revolution of Europe.
The Vamshadhara Paper Mills Ltd was established at
Madapam on the banks of river Vamshadhara in Srikakulam District , a
centrally declared backward area as an agro based industry in the year
1980 for manufacture of KRAFT PAPER using PADDY STRAW and
GUNNY as the main raw materials supported by waste paper as
secondary raw material with a licensed capacity ; of 7500 tons per annum
with the assistance of state level financial institutions and banks and seed
capital assistance of equity participation form IDBI and ICICI.
To carry on the business of manufactures buyers. Sellers.
Importers and exporters and dealers in all kinds and classes of paper
board, card board and pulp.
To carry on the business of manufacture using purchasing. Selling or
otherwise. Delaying in cartons fibber-boxes, corrugated wrapper.
Corrugated papers and other packing materials products and like.
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The unit into went into commercial production towards end of

January 1983-84 and went for an expansion cum balancing program and
they have been production floating media. Semi virgin (medium) and
high strength Kraft
Paddy straw or rice straw is the main raw material for the unit. The
company producing other materials like waste gunny degasses. Waste
paper is importing from Singapore, Netherlands, USA, Switzerland,
Malaysia .Through the channel of Vizag, Chennai & Mumbai etc.
Vijayawada, Cuttack, Calcutta etc.
It is also purchasing packaging materials like Hessian clots. Reel cores,
wooden flogs and others.
Organization set up in Vamshadhara paper mills is functional headed
by managing director who assist by joining managing director and
executive director i.e. group activities in accordance with the functions.
Here the basic enterprise functions are personnel production, finance,
commercial (purchases) and marketing coordination among these
different function an activities has been achieved successfully as so far.

FINDINGS
The main purpose of the present study is the analysis of ratio
analysis of Vamshadhara Paper Limited, an attempt has been made to
examine the practice of working capital management of Vamshadhara
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Paper Mill Ltd and its evaluation during the period covered under study,
The study was undertaken using basically the financial statement of
Vamshadhara Paper Mills Limited for 5 financial years (with data
modified to maintain confidentiality).
1. According to current ratio there is gradual increment in every year
due to following inventory, sundry debtors and cash.
2. In quick ratio also there is a same process of increment was
maintained, but there is vast changes comparing to first and last
years.
3. In cash ratio there are different values are showing in the process of
increase and decrease, because due to the lack of current liabilities.
4. Net ratio analysis in Vamshadhara Paper Mills Ltd showing the
values in random series.
5. In ratio analysis turnover ratio there is continuous descending order
in first there years and there is vast change in last year.
6. The net working capital ratio is decreases by a 1% in 2007-2008
same in 2008-2009, but there is a huge increased in the ratio 4% in
the year 2009-10 and a managerial increase in the next year. It
would be difficult for the organization to maintain funds when
taken huge fluctuations.
7. The capital turnover ratio of the company is satisfactory because
the ratio is decreasing from 5.80 to 5.61 in the year 2006-2007
compared with 2007-2008 and also it was decreased in to next year
but in the next year it was increasing from 2.30 to 4.01 in the year
2008-2009 to 2010-2011. In the last year also increased in the
above year.

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8. The total asset turnover ratio in the 2006-2007 has been increased
by 0.41 % when the compared with 2007-2008, in 2008-2009 it is
reduced by 1.32, in 2009-10 it was increased by 1.2% and in 20102011 it was increased by 0.28%

SUGGESTION
1. Ratios analysis is the technique to know the financial position of
the company. Through this study we can know the liquidity,
solvency and profitability position of Vamshadhara Paper mill.
2.

Even though the liquidity ratios are not the up to thumb rule the
company has been able to met all its commitment and managing
its obligations. And the company should try to increase its current
assets to meet its current obligations efficiently

3. The company has more investment of loan capital than equity

capital in meeting the requirements of the firm. The situation is
little bit risky. To avoid that the company prefers equity capital
than debt.

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4. The company has to check the external environment from time to

time. Because most of the operations are based on the external
environment like climate, foreign exchange markets, competitor.
5.

The organization as a measure of cost reduction the production

capacity was increased. But if the plant was not utilized for major
extent then it will become an expensive for the organization.

BIBLIOGRAPHY
BOOKS
Pandey, I.M.

Financial management
Vikas publishing house
New Delhi
2nd edition, 1997

Ali, Kurshed

Fundamentals of Financial Management

Himalaya publication house
New Delhi, first edition 1997

Baneerjee,

Financial Management
Subir Kumar

S.chand &co.Ltd, New Delhi 1997

Kothari, C.R.

Research methodology
Methods and techniques
Wishwa prakashan,
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 Second edition, 1997

ANNUAL REPORTS
Annual reports of Vamshadhara Paper Mills Limited.
Finance and Accounts Department of Vamshadhara Paper Mills
Limited.
Web-Sites: www.ask.com
www.wikkypedia.com

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