PROJECT REPORT MDL

GENERAL INTRODUCTION

Financial management is that managerial activity which is

concerned with the planning and controlling of the firm`s financial
resources. Though it was a branch of economics till 1980 as a separate
or discipline it is of recent origin.

Financial management is concerned with the duties of the

finance manager in a business firm. He perform such varied tasks as
budgeting , financial forecasting , cash management , credit administration ,
investment analysis and funds procurement. The recent trend towards
globalization of business activity has created new demands and
opportunities in managerial finance.

Financial statements are prepared and presented for the

external users of accounting information. As these statements are used by
investors and financial analysts to examine the firms performance in order
to make investment decisions , they should be prepared very carefully and
contain as much informa tion as possible. Preparation of the financial
statement is the responsibility of top management. The financial
statements are generally prepared from the accounting records maintained
by the firm.

Financial performance is an important aspect which influences

the long term stability , profitability and liquidity of an organization.
Usually , financial ratios are said to be the parameters of the financial
performance. The evaluation of financial performance had been taken up
for the study with Modern Distropolis Limited as the project.

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Analysis of financial performance are of greater assistance in

locating the weak spots at the Modern Distropolis Limited even though
the over all performance may be satisfactory.

This further help in

Financial forecasting and planning.

Communicate the strength and financial standing of the Modern
Distropolis Limited.
For effective control of business

SCOPE OF THE STUDY

The study was conducted in Modern Distropolis

Limited , anakkayam , this study was confined only 21 days , the data`s are
collected directly from the officials of the company , includes staffs and
other employees

This study was conducted with the purpose of getting some

valuable practical knowledge about the day to day activities taken place
in the organization and measure the level of performance of the company
through using various financial tools such as ratios , statements ,
comparisons etc.

OBJECTIVE OF THE STUDY

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1. Primary objective
To evaluate the financial efficiency of the Modern Distropolis
Limited
2. Secondary objective
a To study the current financial position of Modern Distrpolis
Limited.
b To offer appropriate suggestions for the better performance of
the organization.
c To understand the financial position of the company.
d To judge the financial (both liquidity and solvency) position and
financial performance of the concern.
e To determine the debt capacity of the concern

METHODOLOGY OF THE STUDY

The project evaluates the financial performance of the company with help
of the most appropriate tool of financial analysis like ratio analysis and
comparative balance sheet. Hence , it is essentially fact finding study.

Primary data :
Primary data is the first hand information that is collected during the
period of study. Primary data has been collected through discussions held
with the staffs in the finance department. Some types of information were
gathered from the company`s staffs.
Secondary data :
Secondary data were collected from company records and Balance
sheet in which the project work has been done. In addition to this a
number of reference books , journals , and reports were also used to
formulate the theoretical model for the study. And some information
collected from the websites.

Tools used in analysis :

Ratio analysis.
Comparative balance sheet

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Period of study :

The study covers the period of 2009 to 2013 in Modern

Distropolis Limited.

LIMITATIONS OF THE STUDY

The study has covered only to analyse the financial performance

of the Modern Distropolis Limited , Anakkayam.
The major limitation under the study was time. Since it was to
be completed with a short period of time.
Sufficient dada are not available

INDUSTRIAL PROFILE

The production of iron by human began probably sometime

after 2000 BCE in south west or south central Asia , perhaps in the
Caucasus region. Thus began the iron age , when iron replaced bronze in
implements and weapons. This shift occurred because iron , when alloyed
with a habit of carbon , is harder , more durable , and holds a sharper edge
than bronze. For over tree thousand years , until replaced by steel after
CE 1870 , iron formed the material basis of human civilization in
Europe , Asia and Africa.

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Iron is the fourth most abundant element and make up more

than 5% of the earth`s crust. Iron exist naturally in iron ore (sometime
called iron stone ). Since iron has a strong affinity for oxygen , iron ore
is an oxide of iron ; it also contain varying quantities of other elements
such as silicon sulfur , manganese and phosphorous. smelting is the
process by which iron is extracted from iron ore. When iron ore is
heated in a charcoal fire , the iron ore begins to release some of its
oxygen , which combine with carbon monoxide to form carbon dioxide. In
this way , spongy , porous , mass of relatively pure iron is formed ,
intermixed with bits of caracole and extra genius matter liberated from
one ore , known as slag.(the separation of slag from the iron is facilitated
by the addition of flux , that is , crushed sea shells of lame stone). The
formation of this bloom of iron was as far as the primitive blacksmith
got ; he would remove the furnace and hammer it on an anvil to drive
cut the cinders and slag and to compact the metallic particles. This was
wrought iron (wrought means worked that is , hammered ) and
contained generally from .02 to .08 percent of carbon, just enough to
make the metal both tough and malleable. Wrought iron was the most
commonly produced metal through most of the iron age.

At very high temperature a radical change take place . The

iron begins to absorb carbon rapidly , and the iron starts to melt , the
higher carbon content lowers the melting point of the iron , which contain
from 3 to 4.5% carbon. This high proportion of carbon makes cast iron
hard and brittle ; it is liable to crack or shatter under a heavy blow and
it cannot be forged at any temperature. By the late middle ages ,
European iron makers had developed the blast furnace , a tall chimney
lake structure in which combustion was intensified by a blast of air
pumped through alternating layers of caracole , flux and iron ore. Molten
cast iron would run directly from the base of blast furnace in to a sand

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through which fed a number of smaller lateral troughs ; this configuration

resembled a sow sapling a liter of piglets and cast iron produced in this
way thus came to be called pig iron. Iron could be directly into molds
at the blast furnace base or re melted from pig iron to make cast iron
stoves , pots , pans , fire backs , cannon , cannonballs , or bells. Casting is
also called founding is done in a foundry.

Iron makers of the late middle ages also learned how to

transform cast pig iron into the more useful wrought iron by oxidizing
excess carbon out of pig iron in a charcoal furnace called finery. After
1784 , pig iron was refined in peddling furnace. The peddling furnace
required the stirring of the molten metal , kept separate from the charcoal
fire , through an aperture by highly skilled craftsman called a peddler ; this
exposed the metal evenly to the heat and combustion gases in the
furnace so that the carbon could be oxidized out. As the carbon content
decreases , the melting point rises , causing semi solid bits of iron to
appear in the liquid mass. The peddler would gather these in a single
mass and work them under a forge hammer , and then the hot wrought
iron would be run through rollers to form flat iron sheets of rails ;
slitting mils cut wrought iron sheet into narrow strips for making nails.

Steel has a carbon content ranging from .2 to 1.5 percentages

, enough carbon to make it harder than wrought iron , but not so much as
to make it as brittle as cast iron. Its hardness combined with its
flexibility and tensile strength make steel far more useful than either type
of iron it is more durables and holds a sharp edge better than the softer
wrought iron , but resists shock and tension better than the more brittle
cast iron. However , until the mid 1800s , steel was difficult to
manufacture and expensive. Prior to the invention of the Bessemer
converter , steel was made mainly by the so called cementation process.

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The mass production of cheap steel , made possible by the

discoveries and many others not mentioned , has revolutionized our world.
Consider a brief and incomplete list of the products made possible (or
better or more affordable ) by cheap, abundant steel : railroads , oil and gas
pipelines , refineries , power plants , power lines , assembly line ,
skyscrapers , bridges , reinforced concrete , trucks , buses , bulldozers,tractors,
implements , fences, knives , forks , spoons , scissors , razors , surgical
instruments , ball-bearings drill bits , saws , and tools of every sort.

They are heirs to thousands of years of technological progress

, and they benefit every day from the ingenuity and hard work of many
thousands of blacksmiths , iron workers engineers , inventors , chemists ,
metallurgists and entrepreneurs , long since deceased , one of whom was
Carnegie and few of whom were saints. Our standard of living today
owes much to Carnegie entrepreneurial drive , self education and genius
for efficiency. Carnegie embodied a type of human greatness that
deserves our appreciation and gratitude. Without forgetting the contribution
of others , we should make the same judgment about Carnegie that
Stephen Ambrose makes about the men who built the first
transcontinental railroad.Things happened as they happened. it is possible
to imagine all kinds of different routes across the continent , or a better
way for the government to help private industry , or may be to have the
government build and own it. But those things didn`t happen , and what
did take place is grand. So we admire those who did it even if they
were far from perfect for what they were and what they accomplished
and how much each of us owes them.

Another important discovery in the 1970s was that coke , or

coal baked to remove impurities such as sulfur could be substituted for
caracole in smelting. This was an important advance since caracole

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productions add led to severe deforestation across western Europe and

great Britain. Unlike many of his competitors, Andrew Carnegie was
quick to recognize the importance of the Bessemer, Thomas basic , and
open - Hearth processes. He was also among the first steel makers to
grasp the vital importance of chemistry in steel making. These became
keys to his success as a steel manufacture.

COMPANY PROFILE

Modern Distropolis Limited Commenced its operation as

Modern Engineering Works in 1993 as an SSI unit of making barbed
wires out of GI Wires. The firm achieved many milestones and received
accolades from customers and suppliers by sticking on value for money.
From the very inception itself we were ready to commit ourselves in
finding the needs of our customers and believed in the policy of
Customers are business, business is profit and profit is a satisfied

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customer. Management of Modern Engineering Works , which was

running as a partnership firm, decided to change the structure of the
organization into a public limited company and Modern Distropolis
Limited was came into existence under companies act of 1956 on
02.01.2013.

With in 20 years of its journey, the company earned the

confidence of major steel players like TATA Steel and became the
representing name of TATA in wire fencing and roofing segment. Awards
like Excellence in consistent performance Award 2008 from Tata Steel
are shining examples of our excellence in the distribution of wire
products and roofing materials. We are proud to announce that we have a
chain of loyal retailers throughout the state of Kerala to help us to
achieve further milestones.

Currently we are the distributors of Tata Wiron branded GI

Wires and Tata Shaktee branded GC sheets of Tata Steel Limited. We are
also entrusted with the distributorship of Durashine branded galvalume
roofing sheets of Tata Bluescope Steel Limited.

FORMATION AND ORIGIN:

Modern Engineering Works was started as an SSI unit in

1993 on a rented building. We made barbed wires out of GI wires with
an investment of just rupees one lakh only. Later , with our association
with TATA in the year 2003, we have been supplying the clients with
products of TATA Wiron, Durashine and others.

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By offering an impeccable range of products, we have

garnered a huge list of esteemed clients such as public sector
undertakings like KSEB, Plantation Corporation, Rehabilitation Plantation,
Steel Industrials kerala limited and private companies like Sark Cables,
Swadeshy Polimers, Zen Coirs and Cybex Cables. Moreover, we also sell
our materials to end users through the retailers in the state of Kerala.

Modern Distropolis Limited was came into existence under

companies act of 1956 on 02 - Jan - 2013 Now we do have the network
of retailers throughout the state of Kerala. Today, we have garnered a
huge list of prestigious clientely by offering world class range of
products. We supply our range of products across the nation and are
available in uniform rate throughout.

The company earned the confidence of major steel players

like , TATA steel and became the representing name of TATA in wire
fencing and roofing segment. In 2003 , they were appointed as distributor
of Tata steel wire division for the state of Kerala and in 2006 , wire
division entrusted distribution of MS binding wire also for Kerala.MEW
obtain ISO 9001 2008 certification by WQA with UKAS. MEW was
started with a mission to provide world class quality product to
customers . the production activity involves purchasing , manufacturing and
marketing of wide range of iron and steel products and by products (by
using galvanized iron wires of Tata Wiron brand of GI wires supplied by
Tata Steel Limited (wire division Mumbai) and related business.

Currently they are the distributor of Tata wiron branded GI wires and
Tata Shakthee, branded sheets of Tata Steel Limited apart from this they
are planning to enhance their horizon by increasing their infrastructure by
adding new items in their product line.

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The management of MEW , which was running as a

partnership firm , decided to change the structure of the organization in to
a public Limited company

COMPANY AT GLANCE

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Corporate identification number U51909kl2012plco31679

Name Modern Distropolis Limited
Roc Roc Ernakulum
Registration number 31679
Company category Company limited by shares
Company sub category Indian non government company
Class of company Public company
Authorized capital 90,000,000
Paid up capital 68,724,000
Date of incorporation 19th July 2012
Address 1 A.P.IX /78B , Modern industrial
complex
Address 2 Cheppur , Anakkayam
City Malappuram
State Kerala
Country India
Pin 676 509
Whether listed or not unlisted
Date of last AGM 30th September 2013
Date of balance sheet 31 march 2013
Company status active
Website Connect modern.com
Initial capital 2 ,00,000
Raw material Galvanized iron
Working hours 9.00 AM to 5.00 PM
Total workers 32

PRESENT BUSINESS

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Sole distributer of Tata steel for Tata sheathe range of GI

sheets.
Sole distributor of Tata blue scope steel for Durashine range
of color coated sheets.
Sale of Tata wiron brand mug welding wire.
Manufacturing and distribution of products like barbed wire ,
PVC coated wire , chain link hanger.
Sole distribution of royal Jackson brand of welding electrodes
from royal welding PVT limited

FINANCIAL POSITION

The partners of MDL have a well financial background , they

have a banking arrangement with bank of Baroda and presently enjoy a
cash credit facility of 9 Crore which is under renewal and enhancing
stage.

The annual turnover for the last few years are ;

Year 2007- 2008 2008- 2009 2009- 2010 2010-2011 2011- 2012

Total sales 930 1284.23 1762 2223 3107.12

(in lakhs)

MISSION

To provide comprehensive fencing and roofing solution with almost

quality that leads to long lasting business relationships.

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VISSION

To be an iconic market leader with integrity , commitment and

values.

PLANNING

Addition of more products to reduce over head.

To have a yard in Trissur palakkad highway to
smoothen the supply process to dealers.
100% utilization of PPA provision.

AWARDS & H0NOURS

Excellence in consistence performance award 2008 by Tata

steel wire division.
Rajiv Gandhi youth entrepreneur award 2009 by Rajiv youth
foundation.
Best brand promotion award by Tata steel wire division.
Safety award 2009 by factories and boilers department.
Outstanding entrepreneur of the year 2009 2010 by Kerala
state small industries association.
Best distributor - south region FY 2012 by Tata bluescope
building products.
Young entrepreneur award 2010 by Calicut management
association and Excellency award by lions club.

INFRASTRUCTURE

Factory.
Godown.
Covered loading / un loading area with crane facility.
Office.
Conference hall.
Guest house.

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TURNNING POINTS

Implementation of ISO certification.

Infrastructure.
Own truck for easy and effective transportation.
Retail value management.
Sales force of seven members with 2 MMs.
Strict following of PJP(Permanent Journey Plan).
Daily report submission in their own websites.
Attractive salary and incentive package to the sales
team
One office cum showroom at the business hub of
kerala
Customer care number cell number of managing
partner

ORGANIZATIONAL CHART

MANAGING PARTNER

PURCHASE ACCOUNTS

MANAGER
PRODUCTION IN
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PRODUCTION SALES AND ADMINISTRATION

SUPERVISOR MARKETING AND HR IN
MANAGER CHARG

OFFICE

ASSISTANTS

DRIVERS

REVIEW OF LITERATURE

Financial statement analysis

The financial statements provide some extremely useful

information to the extent that the balance sheet mirrors the financial
position on a particular date in terms of the structure of assets, liabilities
and owners equity , and so on and the profit an loss account shows the
results of operations during a certain period of time in terms of the
revenues obtained and the cost incurred during the year. Thus, the
financial statements provide a summarized view of the financial position
and operations of a firm. Therefore, much an be learnt about a firm from

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a careful examination of its financial statements as invaluable documents

performance reports.

The focus of financial analysis is on key figures in the

financial statements and the significant relationship that exists between
them. The analysis of financial statements is a process of evaluating the
relationship between component parts of financial statements to obtain a
better understanding of the firms position and performance. The first task
of the financial analyst is to select the information relevant to the
decision under consideration from the total information contained in the
financial statements. The second step is to arrange the information in a
way to highlight significant relationships. The final step is interpretation
and drawing of inferences and conclusion. In brief, the financial analysis
is the process of selection, relation and evaluation.

RATIOS:

Ratio analysis is a widely use tool of financial analysis. It can

be used to compare the risk and return relationships of firms of different
sizes. It is defined as the systematic use of ratio to interpret the financial
statements so that the strengths and weakness of a firm as well as its
historical performance and current financial condition can be determined.
The term ratio refers to the numerical or quantitative relationship between
two items and variables . These ratios are expressed as

(i)percentages , (ii) fraction and (iii) proportion of numbers. These

alternative methods of expressing items which are related to each other
are , for purposes of financial analysis , referred to as ratio analysis. It
should be noted that computing the ratios does not add any information
not already inherent in the above figures of profits and sales. What the
ratio do is that they reveal the relationship in a more meaningful way so

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as to enable equity investors , management and lenders make better

investment and credit decisions.

COMPARATIVE BALANCE SHEET:

Comparative balance sheets as on two or more different dates

can be used for comparing assets , liabilities , capital and finding out any
increase or decrease in those items. In the words of Foulke comparative
balance sheet analysis is the study of the trend of the same items , group
of items and computed items in two or more balance sheets of the same
business enterprise on different dates . Such analysis often yields valuable
information as regards progress of business concern. While the single
balance sheet represent balances of accounts drawn at the end of an
accounting period, the comparative balance sheet represent not nearly the
balance of accounts drawn on two different dates , but also the extent of
their increase or decrease between these two dates. The single balance
sheet focuses on the financial status of the concern as on a particular
date , the comparative balance sheet focuses on the changes that have
taken place in one accounting period. .

DATA ANALYSIS AND INTERPRETATION

Financial performance evaluation using ratio analysis :

Ratio analysis is a powerful tool of financial analysis. A ratio

is defined as The Indicated Quotient of Two Mathematical Expressions
and as The Relationship between Two or More Things . In financial
analysis, a ratio is used as a benchmark for evaluating the financial
position and performance of firm. The absolute accounting figures reported
in the financial statement do not provide a meaningful understanding of
the performance and financial position of a firm. The relationship between

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two accounting figures, expressed mathematically is known as a financial

ratio. Ratios help to summaries large quantities of financial data and to
make qualitative about the firms financial performance.

The point to note is that a ratio reflecting a quantitative

relationship helps to form a qualitative judgment. Such is the nature of all
financial ratios.

Significance of Using Ratios:

The significance of a ratio can only truly be appreciated when:

1. It is compared with other ratios in the same set of financial

statements.
2. It is compared with the same ratio in previous financial statements (
trend analysis).
3. It is compared with a standard of performance (industry average). Such a
standard may be either the ratio which represents the typical
performance of the trade or industry, or the ratio which represents
the target set by management as desirable for the business.

LIQUIDITY RATIOS
The two liquidity ratios , the current ratio and acid test ratio , are the
most important ratios in almost the ratio analysis they are also the
simplest to use. Liquidity ratios provide information about a firm`s ability
to meet its short term financial obligations. They are of particular interest
to those extending short term credit to the firm. Two frequently used
liquidity ratios are current and quick ratio.

1 CURRENT RATIO

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PURPOSE :

The Current Ratio expresses the relationship between the firms current
assets and its current liabilities. Current assets normally include cash,
marketable securities, accounts receivable and inventories. Current liabilities
consist of accounts payable, short term notes payable, short-term loans, current
maturities of long term debt, accrued income taxes and other accrued expenses
(wages).

FORMULA :

Current assets

Current Ratio = ________________

Current liabilities

IDEAL NORM 2 :1

TABLE SHOWING CURRENT RATIO

YEAR CURRENT CURRENT RATIO

ASSET LIABILITY
2009 4,O5,40,177 93,55,868 4.33 : 1
2010 6,32,58,000 85,97,000 7.43 : 1
2011 9,44,51,992 1,17,46,035 8.04 : 1
2012 14,09,57,890 1,47,99,485 9.52 : 1
2013 15,11,67,608 2,06,05,148 7.33 : 1

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GRAPH SHOWING CURRENT RATIO

10
9
8
7
6
5
4
3
2
1
0
2009 2010 2011 2012 2013

INTERPRETATION

The above represents the current ratio of the Modern Distropolis

limited for a period of 5 years from 2009 to 2013. The current liquidity
position of the company is satisfactory to meet its current obligations.
The company has to improve the financial performance for meeting the
working capital requirements . A low current ratio than the standard
indicates a bad liquidity, over trading, less working capital and
unsatisfactory debt payment capacity of firm.

SOLVENCY RATIOS

The term solvency refers to the ability of a firm to pay its

outside liabilities. Solvency or leverage ratios are used to analyze the
long term financial position of the business. In other words , these ratios
are used to analyze the capital structure of the firm. solvency may be
short term solvency or long term solvency.

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2 DEBT EQUITY RATIO

PURPOSE :

Debt equity ratio is the most important ratio to test the solvency of a
firm. This ratio indicates the relative proportion of debt and equity in
financing the asset of a firm. This ratio express the relationship between
total debt and equity. it is also used to measure the risk involved in
capital structure.

FORMULA : Long term debt

Debt equity ratio = _______________

Share holders fund

IDEAL NORM : 2 : 1

TABLE SHOWING DEBT EQUITY RATIO

year Long term Share holders fund ratio

debt
2009 2,36,00,504 1,01,61,308 2.31:1
2010 4,88,86,000 1,19,24,000 4.09:1
2011 7,23,47,660 1,76,51,471 4.09:1
2012 10,81,65,312 2,60,12,217 4.15:1
2013 16,20,50,947 5,10,55,836 3.17:1

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GRAPH SHOWING DEBT EQUITY RATIO

4.5

3.5

2.5

1.5

0.5

0
2009 2010 2011 2012 2013

INTERPRETATION

The long term debt equity ratio of the MDL is above the
ideal norm in every year . The long term debt equity ratio reveals more
investment of loan capital than equity capital in meeting the requirements
of finance of the firm. It is apparent that the higher the debt equity ratio
, the more is the risk and so also the profitability. If it so high then it
brings the firm in a risky position .

3 PROPRIETARY RATIO

PURPOSE :

This ratio is also known as owners fund ratio or shareholders equity

ratio or equity ratio. This ratio establishes the relationship between
shareholders fund and total assets. It is used in the analysis of long term
solvency and financial stability of the firm. the proportion of a total asset
s of a firm collected through proprietors fund can be understood from

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this ratio and shows the extend to which the owners fund sunk in assets
or different kind of it. A high ratio will indicate high financial strength
but a very high ratio will indicate that the firm is not using external
funds adequately.

IDEAL NORM : 1.3 or 33.33%.

FORMULA :

Proprietors fund

Proprietary ratio = _______________

Total asset

TABLE SHOWING PROPRIETARY RATIO

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year Proprietors fund Total asset ratio

2009 1,01,61,308 4,31,46,580 0.235:1

2010 1,19,24,000 6,93,46,055 0.179:1

2011 1,76,51,471 10,17,74,066 0.173:1

2012 2,60,12,217 14,90,05,914 0.174:1

2013 5,10,55,836 23,37,11,932 0.218:1

GRAPH SHOWING PROPRIETARY RATIO

0.25

0.2

0.15

0.1

0.05

0
2009 2010 2011 2012 2013

INTERPRETATION

This ratio is particularly important to the creditors and it

indicate on the general financial strength of the business . The proprietary
ratio of the MDL is below the ideal norm indicates less use of
proprietary fund and more use of debt funds in financing the asset
structure of the firm . this situation speak of the high risk , poor
solvency , and unstable financial position of the firm and so obviously
discourages the long term creditors and investors.

4 SOLVENCY RATIO

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PURPOSE :

This ratio expresses the relationship between total asset and total debt of
a business. The term solvency means the ability of a firm to pay off the
outside liabilities out of total assets. The main use of solvency ratio is to
test or measure the solvency of a firm. That is why this ratio is called
solvency ratio. This ratio is generally expressed as a proportion.

IDEAL NORM : Not fixed . generally , higher the solvency ratio the
stronger is its financial position and vice versa.

FORMULA : Total asset

solvency ratio = _____________

Total debt

TABLE SHOWING SOLVENCY RATIO

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year Total asset Total debt ratio

2009 4,31,46,580 3,29,56,372 1.31:1

2010 6,93,46,055 5,73,93,086 1.21:1

2011 10,17,74,066 8,40,93,596 1.21:1

2012 14,90,05,914 12,29,64,797 1.21:1

2013 23,37,11,932 18,26,56,095 1.27:1

GRAPH SHOWING SOLVENCY RATIO

1.32
1.3
1.28
1.26
1.24
1.22
1.2
1.18
1.16
1.14
2009 2010 2011 2012 2013

INTERPRETATION

The solvency ratio indicates the degree of solvency of a

business. The MDL has a solvency ratio of 1.31 times in 2009 , and
1.21 times in 2010,2011,2012 and 1.27 times in 2013. The company is
solvent because assets are sufficiently more than the liabilities . the higher
solvency ratio indicates that the solvency and the financial positions are
strong and satisfactory. Therefore the firm is financially sound.

5 FIXED ASSET RATIO

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PURPOSE :

A fundamental principle of sound financing policy is that all fixed asset

must be financed out of long term funds. short term funds should not be
used for purchasing fixed assets. If short term funds are used in the
purchase of fixed assets , it will affect liquidity position .to whether the
fundamental principle is followed or not , fixed asset ratio is calculated .
It is the ratio of fixed assets to long term funds or capital employed .

IDEAL NORM : The fixed asset ratio should not exceed 1:1 or 100%

FORMULA :

fixed asset

(after depreciation)

Fixed asset ratio = _______________

Long term fund

TABLE SHOWING FIXED ASSET RATIO

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year Fixed Asset Long term fund ratio

2009 21,64,181 1,84,90,712 0.11 :1
2010 58,87,986 2,14,52,815 0.27:1
2011 59,22,377 3,19,62,641 0.18:1
2012 65,13,140 4,40,01,404 0.14:1
2013 7,01,43,699 9,08,28,449 0.77:1

GRAPH SHOWING FIXED ASSET RATIO

0.9

0.8

0.7

0.6

0.5

0.4

0.3

0.2

0.1

0
2009 2010 2011 2012 2013

INTERPRETATION

A higher ratio indicates that the financial position is not

sound . Lower the ratio better is that financial position . The fixed asset
ratio is lower than the 1:1 which indicates that all fixed assets are
purchase out of its long term fund .the ratio is below the standard , it is
having better and sound financial position.

6 INTEREST COVERAGE RATIO

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PURPOSE :

It is used for measuring long term solvency and the effect of fixed
interest charges on profit earned . it explains the relation with the earning
before interest & tax and interest paid on debt capital. This ratio
measures the capacity of the firm to pay interest on loans and debentures
regularly .it establishes the relationship between operating profit and
interest charges . from the lenders view point it is used to measure the
safety of return on investment.

FORMULA : PBIT

Interest coverage ratio = _______________

INTEREST

TABLE SHOWING INTEREST COVERAGE RATIO

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year PBIT Interest ratio

2009 48,74,329 33,96,204 1.43:1
2010 70,24,415 45,79,097 1.53:1
2011 1,06,78,261 91,44,054 1.16:1
2012 93,49,120 77,38,008 1.20:1
2013 1,99,56,125 1,73,20,215 1.15:1
GRAPH SHOWING INTEREST COVERAGE RATIO

1.6

1.4

1.2

0.8

0.6

0.4

0.2

0
2009 2010 2011 2012 2013

INTERPRETATION

The higher the ratio , the stronger is the ability of a company

to pay interest. A low ratio may indicate excessive use of debt and the
inability to offer assured payment of interest to creditors . The interest
coverage ratio of the MDL is below the standard . it is also unfavorable
to the firm because in such case the firms profitability in relation to its
interest payment commitment is low and it is not in a position to take
resource to further debt financing in case of any need .

PROFITABILTY RATIO

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This ratio calculated to determine profitability of the firm.

The ultimate aim of any business is to earn maximum profit which is
essential for survival of the business. A business needs profit not only for
its existence but also for its expansion and diversification . the investor
want an adequate return on their investments , worker want higher wages ,
creditors want higher security for interest and loan.

7 GROSS PROFIT RATIO

PURPOSE :

This is the ratio of gross profit to sales expressed as a percentage. The

main objective of computing this ratio is to determine the efficiency in
trading or production activity. The relation between sales and gross
earnings is explained through this ratio . it shows the profit earned after
matching direct expenses. A higher gross profit ratio indicates more
profitability and managerial efficiency . A low gross profit ratio reveals
the weak profitability and managerial efficiency .

FORMULA :

Gross profit

Gross profit ratio = _______________ 100

Net sales

Gross profit Net sales Ratio(%)

year

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2009 1,24,39,194 17,61,53,524 7.06

2010 1,56,37,582 22,33,93,953 7.00
2011 2,90,00,011 31,07,11,567 9.33
2012 4,07,28,178 50,62,26,034 8.05
2013 6,31,34,461 76,61,19,756 8.24
TABLE SHOWING GROSS PROFIT RATIO

GRAPH SHOWING GROSS PROFIT RATIO

10
9
8
7
6
5
4
3
2
1

0
2009 2010 2011 2012 2013

INTERPRETATION

This ratio is to determine the efficiency in trading or

production activity . This ratio measures the margin of profit available on
sales. Gross profit indicates that for every 100 0f sale , the firm has
earned a gross profit of 7.0 % in 2009 , 7.00% in 2010 , 9.33 % in
2011 , 8.05 % in 2012 , and 8.24 % in 2013 . Here company achieved
good efficiency in 2011 as compared to other financial year . But these
ratios are below in industrial standard it indicates the sign of inefficient
production or purchase management

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8 NET PROFIT RATIO

PURPOSE :

Net profit ratio is the ratio of net profit earned b y a business and its
net sales. It measure the over all profitability and the efficiency of the
management in generating additional reserve over and above the total
operating costs . This shows the portion of sales available to owners after
all expenses .A high profit ratio is higher profitability of the firm .it
shows the relationship between net sales and net profit

FORMULA :

Net profit

Net profit ratio = _______________ 100

Net sales

TABLE SHOWING NET PROFIT RATIO

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year Net profit Net sales Ratio(%)

2009 10,43,386 17,61,53,524 0.59
2010 18,64,410 22,33,93,953 0.83
2011 11,34,207 31,07,11,567 0.36
2012 11,91,712 50,62,26,034 0.23
2013 18,74,117 76,61,19,756 0.24

GRAPH SHOWING NET PROFIT RATIO

0.9
0.8
0.7
0.6
0.5
0.4
0.3
0.2
0.1
0
2009
2010
2011
2012
2013

INTERPRETATION

MDL earned a net profit of 0.59 % in 2009 , 0.83 % in 2010 ,

0.36 % in 2011 , 0.23 % in 2012 and 0.24 % in 2013. The net profit
ratio is decreasing year after year . which may due to excessive selling
and distribution expenses. After 2010 the firm is not having further
improvement in its operational efficiency.

9 RETURN ON INVESTMENT

PURPOSE :

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This ratio establishes the relationship between profit or return and

investment. It is used to measure the profitability of the firm from the
view point of funds employed and to evaluate the efficiency of
management .This ratio is the real test of the profitability and managerial
efficiency .The objective of computing return on investment is to know
how much profit is earning on capital employed. This ratio can also be
seen as representing the efficiency which capital is being utilized to
generate revenue .

FORMULA :

PBIT

RETURN ON INVESTMENT = _______________ 100

Net capital employed

TABLE SHOWSING RETURN ON INVESTMENT

year PBIT Net capital employed Ratio(%)

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2009 48,74,329 1,84,90,712 26.36

2010 70,24,415 2,14,52,815 32.74

2011 1,06,78,261 3,19,62,641 33.40

2012 93,49,120 4,40,01,404 21.24

2013 1,99,56,125 9,08,28,449 21.97

GRAPH SHOWING RETURN ON INVESTMENT

40

35

30

25

20

15

10

0
2009 2010 2011 2012 2013

INTERPRETATION

The MDL has a good return on investment ratio of 26.36 %

in 2009, 32.74 % in 2010 , 33.40 % in 2011 , 21.24 % in 2012 and 21.97 %
in 2013. So in c0nsecutive years the firm is able to earn moderate profit
on capital employed the higher the capital employed the higher is the
profitability . The high return on capital employed achieved for a
consecutive years indicates that the firm has a stable financial position
and has good future prospects .

10 WORKITAL CAPITAL TURNOVER RATIO

PURPOSE :

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This ratio shows the number of times the working capital results in sales.
In other words, this ratio indicates the efficiency or otherwise in the
utilization of short term funds in making sales. Working capital means the
excess of current assets over current liabilities. In fact , in the short run , it
is the current assets and current liabilities which pay a major role. A
careful handling of the short term assets and funds will mean a reduction
in the amount of capital employed , thereby improving turnover. This ratio
is used to assess the efficiency with which the working capital has been
utilized in a business. A higher working capital turnover indicates either
the favorable turnover of inventories and receivables and/or the inadequate
of net working capital accompanied by low turnover of inventories and
receivables.

FORMULA:

Net sales

Working capital turnover ratio = _____________________

Net Working Capital

TABLE SHOWING WORKING CAPITAL TURNOVER RATIO

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year Net sales Net working capital Ratio

(in times)
2009 17,61,53,524 3,11,84,309 5.64

2010 22,33,93,953 5,47,51,000 4.08

2011 31,07,11,567 8,27,05,957 3.75

2012 50,62,26,034 12,61,58,405 4.01

2013 76,61,19,756 13,05,62,460 5.86

GRAPH SHOWING WORKING CAPITAL TURNOVER RATIO

0
2009 2010 2011 2012 2013

INTERPRETATION

The working capital turnover ratio is fluctuating year after

year . it can be noted that the change is due to the fluctuating in sales
or current liabilities. The higher ratio are indicators of lower investment
of working capital and more profit

Thus , working capital turnover ratios for the five years are
satisfactory .

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COMPARATIVE STATEMENT
Comparative study of financial statement is the comparison of
the financial statement of the business with the previous years financial
statements and with the performance of other competitive enterprises, so
that weaknesses may be identified and remedial measures applied.

Comparative statements can be prepared for both types of

financial statements i.e., Balance sheet as well as profit and loss account.
The comparative profits and loss account will present a review of
operating activities of the business. The comparative balance shows the
effect of operations on the assets and liabilities that change in the
financial position during the period under consideration.

Comparative analysis is the study of trend of the same items

and computed items into or more financial statements of the same
business enterprise on different dates.

The presentation of comparative financial statements, in annual

and other reports, enhances the usefulness of such reports and brings out
more clearly the nature and trends of current changes affecting the
enterprise.

While the single balance sheet represents balances of accounts

drawn at the end of an accounting period, the comparative balance sheet
represent not nearly the balance of accounts drawn on two different dates,
but also the extent of their increase or decrease between these two dates.
The single balance sheet focuses on the financial status of the concern as
on a particular date, the comparative balance sheet focuses on the changes
that have taken place in one accounting period. The changes are the
direct outcome of operational activities, conversion of assets, liability and
capital form into others as well as various interactions among assets,
liability and capital.

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COMPARITIVE BALANCE SHEETS

AS ON 31st MARCH 2009 2010

31st march 31st Change in Percentage

particulars 2009 march absolute Increase
in lakhs 2010 figure Or
in in lakhs decrease
lakhs
Assets
Fixed assets 25.49 58.88 33.39 130.99

Current assets 405.4 632.58 227.18 56.03

Advance & deposits 0.58 2.00 1.42 244.82

Total assets 431.47 693.46 261.99 60.72

Liabilities
Partners capital 101.61 119.24 17.63 17.35

Loans and cash 236.01 488.86 252.85 107.13

credit

Investment subsidy .289 .289 - -

Current liability 93.56 85.07 (8.49) 9.07

Total liability 431.47 693.46 261.99 60.72

INTERPRETATION

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The comparative balance sheet of the company reveals during

2010 , that there has been a increase in fixed assets of 33.39 lakhs .
which indicates purchase of fixed assets .

The current asset has increased from 405.4 lakhs to

632.58 lakhs ; which indicate the current asset has been properly made.

The over all financial position of the company for the year
(2009 2010) is satisfactory

COMPARITIVE BALANCE SHEETS

AS ON 31st MARCH 2010 2011

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31st 31st march Change in Percentage

Particulars march 2011 absolute Increase
2010 in lakhs figure Or
in in lakhs decrease
lakhs
Assets
Fixed assets 58.88 70.84 11.96 20.31

Current assets 632.58 944.51 311.93 49.31

Advance &deposit 2.00 2.37 0.37 18.5

Total assets 693.46 1017.72 324.26 46.75

Liabilities
Partners capital 119.24 176.51 57.27 48.02

Loans and cash 488.86 723.47 234.61 47.99

credit

Investment .289 .289 - -

subsidy

Current liability 85.07 117.46 32.39 38.07

Total liability 693.46 1017.72 324.26 46.75

INTERPRETATION

The comparative balance sheet of the company reveals during

2011 , that there has been a increase in fixed assets of 11.96 lakhs .
which indicates purchase of fixed asset.

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The current asset has increased from 632.58 lakhs to

944.51 lakhs ; which indicate the current asset has been properly made.

The over all financial position of the company for the year
(2010 2011) is satisfactory

COMPARITIVE BALANCE SHEETS

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AS ON 31st MARCH 2011 2012

31st march 31st Change in Percentage

particulars 2011 march absolute Increase
in lakhs 2012 figure Or
in lakhs in lakhs decrease
Assets
Fixed assets 70.84 74.56 3.72 5.25

Current assets 944.51 1409.57 465.06 49.23

Advance and 2.37 5.91 3.54 149.36
deposits

Total assets 1017.72 1490.05 472.33 46.41

Liabilities
Partners capital 176.51 260.12 83.61 47.36

Loans and cash 723.47 1081.65 349.18 47.67

credit

Investment .289 .289 - -

subsidy

Current liability 117.46 147.99 30.53 25.99

Total liability 1017.72 1490.05 472.33 46.41

INTERPRETATION

The comparative balance sheet of the company reveals during

2012 , that there has been a increase in fixed assets of 3.72 lakhs .
which indicates purchase of fixed asset and out flow of cash.

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Current asset have been increased by 465.06 lakhs, which

indicates thay its working capital is good , but the current liabilities have
increased by 30.53 lakhs, which indicates that the liability have not paid
with in the stipulated period .

The over all financial position of the company for the year
(2011 2012) is satisfactory

COMPARITIVE BALANCE SHEETS

AS ON 31st MARCH 2012 2013

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31st 31st Change Percentage

particulars march march in Increase
2012 2013 absolute Or
in in figure decrease
lakhs lakhs in
lakhs
Assets
Fixed assets 74.56 712.65 638.09 855.80

Current assets 1409.5 1563.76 154.19 10.93

7
Advance and 5.91 60.67 54.76 926.56
deposits

Total assets 1490.0 2337.1 847.04 56.84

5
Liabilities
Partners capital 260.12 510.55 250.43 96.27

Loans and cash 1081.6 1620.50 538.85 49.81

credit 5
Investment .289 - (.289) 100
subsidy
Current liability 147.99 206.05 58.06 39.23

Total liability 1490.0 2337.1 847.04 56.84

5

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INTERPRETATION

The comparative balance sheet of the company reveals during

2013 , that there has been a increase in fixed assets of 638.09 lakhs .
which indicates purchase of fixed asset and out flow of cash.

Current asset have been increased by 102.1 lakhs, which indicates firms
better credit policy

The over all financial position of the company for the year
(2012 2013) is satisfactory

OBSERVATIONS AND FINDINGS

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1. The current ratio is above 2 in all the five years. The same level
of current asset and liabilities may be maintained since the current
asset are less profitable , when compared to fixed asset.
2. The firm fails to increase its profitability . it is also fails to give
satisfactory rate of return in the 4 years as compared to 2011
3. The proprietary ratio of Modern Distropolis Limited indicates less
use of proprietors fund and more use of debt funds in financing
the asset structure of the firm.
4. The firm has high debt equity ratio reveals more investment of
debt capital in meeting the requirements of finance of the firm.
This situation is high risky because of a higher claim of the
outsiders to the firm.
5. The high return on investment indicates that efficient utilization of
capital employed and has a stable financial position and has good
future prospects.
6. The fixed asset ratio has also shown good improvement over last 3
years. The current level of 0.77 : 1 is good given the level of the
company.
7. The net working capital has been increased steadily and it reaches
a level of 13.05 crores.
8. The interest coverage ratio has also decreased during the last years.
9. Comparative balance sheet proves that the financial performance for
each succeeding year is very much satisfactory as compared with
its previous year during the period of 2009 2013

SUGGESTIONS

1. The net profit of the firm is not in a good position for that firm
has to take alternative action such as increasing the efficiency of
the purchase management, control in fixed expenses etc

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2. The firm should increase its current asset to meet the current
obligations trough making credit sales and also improve the
liquidity position .
3. The company has to maintain the existing profit in the future too.
4. Efforts should be taken to increase the over all efficiency in return
out of capital employed by making use of the available resource
effectively.
5. The company can increase its source of funds to make effective
research and development system for more profits in the years to
come.

CONCLUSION

"FINANCE IS THE LIFE BLOOD OF EVERY INDUSTRY AND AS

WELL AS ECONOMIC ACTVITIES" "PROFIT IT IS ACONDITION OF
SURVIVAL. IT IS COST OF SURVIVAL.IT IS THE COST OF

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STAYING IN BUSINESS". The study is made on the topic financial

performance using ratio analysis with five years data in MDL. When we
analyze its financial performance through ratio there the MODERN
DISTROPOLIS LIMITED is making profit in every year. The firm is
enjoying monopoly in Kerala . there is an increment in its financial
performance but it is not enough , because the firm has 20 years
experience and it has greate potential to increase its profit . By
calculating the financial ratio we see the financial performance of MDL
is recovering.

The financial performance of the company for the five years

is analyzed and it is proved that the company is financially sound.

BIBLIOGRAPHY

BOOKS

A . VINOD , Accounting for management , university of Calicut.

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S.M. MAHESWARI Management Accounting , sultan chand & sons

educational publishers , New Delhi .

WEBSITES

www.encyclopedia.com

www.connectmodern.com

BALANCE SHEET AS ON

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31st MARCH 2009 2013

particulars schedule Amount (in lakhs)
Assets 2009 2010 2011 2012 2013

25.49 58.88 70.84 74.56 712.65

Fixed asset E
Current asset
F 405.4 632.58 944.51 1409.57 1511.67

Advance & G 0.58 2.00 2.37 5.91 58.39

deposits

Partners current G - - - - 52.09

account

Staffs and H - - - - 2.28

drivers loans
Total assets 431.47 693.46 1017.72 1490.05 2337.1

Liabilities
A 101.61 119.24 176.51 260.12 510.55
Partners capital

Loans and B 236.01 488.86 723.47 1081.65 1620.50

cash credit

Investment C 0.289 0.289 0.289 0.289 -

subsidy

Current D 93.56 85.07 117.46 147.99 206.05

liabilities

Total liability 431.47 693.46 1017.72 1490.05 2337.1

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