S.R.M.Alloys Private Limited: Project Study Report

S.R.M. ALLOYS (P) LTD.
A
Project Study Report
On
Summer
Training Undertaken at
S.R.M.ALLOYS PRIVATE LIMITED
Submitted in partial fulfillment for the

Award of degree of
Master of business Administration
From
RAJASTHAN TECHNICAL UNIVERSITY
KOTA
Titled
‘FINANCIAL ANALYSIS’
SUBMITTED TO SUBMITTED BY
HEAD OF DEPARTMENT PAVAN MUNDRA

M.B.A. II SEM
1
TO WHOM SO EVER IT MAY CONCERN

CERTIFICATE
This is to certify that PAVAN MUNDRA a student of M.B.A.

2nd semester. (finance) From JIET Group of Institutions has successfully completed
practical training in our organization.
Duration of Training period was from 21st June 2010 to 5th August 2010.
During training we found her sincere, hard working and her overall performance was
excellent.
Wishing her all the best for her prospective future.
For S.R.M.ALLOYS PVT.LTD.
KAILASH OJHA
Director
S.R.M. ALLOYS PVT. LTD.

E-75 M.I.D., Phase Second, Basni
JODHPUR-342005 INDIA
Tel. +91 291 2741490
Web side:- WWW.SRMGROUP.CO.IN
2
PREFACE
Management is an essential ingredient in every organized endeavor. Effective and

efficient coordination of human efforts and materials resources requires sound
management. In them turbulent socio-economics environment to today, the job of a
manager has become very challenging. There is no single universal technique of
management and the basic management principles have to be adapted to the
environmental demands.
As the part of my MBA curriculum I was required to undergo summer
training in a business organization. For this purpose, I approached to undergo summer
training in a business organization. For this purpose, I approached S.R.M. ALLOYS
PVT. LTD., Jodhpur.
The project has been designed keeping in view the financial nature of the
management of small scale industries. It seeks to provide a brief and concise view of
what Management is all about and how it can be applied to small industries.
India being a developing economy it is trying hard to promote this sector by
doing effective financial analysis.
In this report I have put my best efforts to analyze the data to the highest
level of accuracy and give my view to the best of my judgment.
This report includes my sincere efforts; I sincerely hope that this report proves
to be useful to its readers also.
INDEX
3
CERTIFICATE i)
PREFACE ii)
ACKNOWLEDGEMENT iii)
TABLE OF CONTENT
Serial No. Contents Page No.

1 INDUSTRY PROFILE
2 APPLICATION OF STEET
3 INTRODUCTION
4 S.R.M. GROUP
5 COMPANY PROFILE
6 FINANCIAL HIGHLIGHTS
7 ANALYSIS OF FINANCIAL STATEMENT
8 SIGNIFICANCE OF RATIO ANANLYSIS
9 LIMIATIONS OF RATIO ANALYSIS
10 CONCLUSION
11 SUGGESTIONS
12 LIMITATIONS
13 APPENDIX
14 BIBLOGRAPHY
ACKNOWLEDGEMENT
The report entitled ‘Financial statement Analysis ‘for financial year 2009-2010 is the
outcome of my interim Project (summer Training) at S.R.M.ALLOYS PVT.LTD.,
Jodhpur Rajasthan.
4
The completion of my training is not only the result of work of student but
includes the precious work, experience, advice, encouragement, guidance and
valuable support of associated persons.
I take this opportunity to convey my sincere thanks to the management of
S.R.M.ALLOYS PVT.LTD.JODHPUR for permitting me to conduct the present
studies. I really admire the level of perfection they have archived in manufacturing
bearings products following the international standard.
I would also like to convey my gratitude & sincere thanks to Mr. KAILSH
OJHA
Manager S.R.M.ALLOYS PVT.LTD. JODHPUR.
I am deeply indebt to HEAD of department Account for very cordially
providing me with conductive atmosphere and Facilities for completing my industrial
training satisfactory which can not only enriched my knowledge but also provided me
with an opportunity for taking up useful practical work.
Last but not the least I want to express my gratitude to bill Gates and his company
Microsoft, for giving me Microsoft Word which has made the entire process of
making a project. So very effortless and simple.
AN
INTRODUCTION
5
OF
S.R.M.
GROUP
S.R.M. GROUP
A highly experienced and professionally managed organization committed to

manufacturing of high precision world class Stainless steel. Organization has two
manufacturing companies for making Stainless steel sheets & strips.
S.R.M. ALLOYS Pvt. Ltd.
6
Our steel sheets are meant for enhancing the Quality, the Production and the cost
Effectiveness of steel making.
SHRI RAM METALS.
SHRI RAM METALS is an other steel manufacturing company promoted by

S.R.M.GROUP
The promoter is specialist & dedicated producer of high performance S.S.Patta

Rolling Machines with an experience backing of around 21 years and customers base
like whose who in steels & sheets.
SHRI RAM STEEL INDUSTRIES
SHRI RAM STEEL INDUSTRIES is another steel manufacturing company promoted by

S.R.M.GROUP
This company has started production of World class Stainless Steel sheets & strips. These
ready to assemble steel are meant for enhancing the quality, enhancing the Productivity
and enhancing the cost effectiveness at customer end.
COMPANY PROFILE
 Board of Director
 History
 Objective of S.R.M. ALLOYS Pvt.Ltd.
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 Principle of S.R.M. ALLOYS Pvt.Ltd.
 Values of S.R.M. ALLOYS Pvt.Ltd.
 Various Departments
 Management
 Product Profile
 Research & development
 Quality Control
S.R.M.ALLOYS Pvt.Ltd.
BOARD OF DIRECTORS
Managing Director : Ghanshyam Ojha

Ram Kishore Ojha
Executive Director : Kailash Ojha
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Shanti Ojha
OTHER HEADS
HRD Manager : Rakesh Ojha
Under workshop
Quality Assurance : Rakesh Ojha
Tool Room : Ajit Singh Shekhawat
Account HOD : Mahendra Ji
Dharamveer Soni
C.A. : Arun Rathi
• ABOUT THE COMPANY

Company Profile
Established in 1988 with an Paid-up capital of Rs. 2400400.00, S.R.M. ALLOYS
Private Limited is the small scale industry steel-making company in India. S.R.M.
ALLOYS Private Limited is a fully integrated iron and steel maker company,
9
producing both basic and special steels for domestic construction, engineering, power,
automotive and defense industries and it also produce steel for sale in export markets.
S.R.M. ALLOYS Private Limited is ranked IInd has assigned by SMERA amongst
private sector companies in India in terms of your units sensitivity towards
environment & action undertaken to become energy efficient & control emission is
high. S.R.M. ALLOYS Private Limited produces iron and steel at two integrated steel
plants, located principally in the eastern and central regions of India and situated close
to domestic sources of raw materials, including the Company's iron ore, limestone and
dolomite mines.
S.R.M. ALLOYS Private Limited Today
S.R.M. ALLOYS Private Limited today is one of the small scale industrial entities in
India. Its strength has been the diversified range of quality steel products catering to
the domestic, as well as the export markets and a large pool of technical and
professional expertise. Today, the accent in S.R.M. ALLOYS Private Limited is to
continuously adapt to the competitive business environment and excel as a business
organization, both within and outside India.
Net worth Statement of Promoters
Name of Promoter : GhanShyam Ojha
Relationship with Chief Promoter : Self
Date of Birth : 12/8/1954
Qualification & Experience : B.Sc. & Experience of over 21 years in
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Steel Business
Other Concern of Interest : 1) M/S ShriRam Metals
2) S.R.M. ALLOYS (P) Ltd.
3) SRM Steel Industries
Statement of Assets & Liabilities as on March 31st 2010
Assets
I) Immovable Assets
Present
Property Address Details Owner Market Share in
Value Property
Residential “Ramayan” 585.81 Self Rs.150 100%
House Pailink Sq.Mtrs laces
Road,
Jodhpur
Farm Gangani 25 Self Rs.40 100%

House Jodhpur Bigha laces
II) Movable Assets (Rs. In Laces)
Description Amount Description Amount

Investment in Principle Firms 39.92 Balance with Banks 0.89
Investment in Others Firms 10.00 Life Insurance/PPF 19.69
Advance to Parties 4.00 Fixed Deposits 0.11
Share & Debenture 8.99 Investment in Mutual 3.42
Investment in Govt. 0.01 Fund
Securities Motor car/vehicles 6.73
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Other Assets 0.71
Total Assets = Rs.284.47
II) Liabilities
Description Amount
Due to Banks ----------
Sundry Creditors 27.99
Borrowing From Market ---------
Any Other Liabilities --------
Total 27.99
Net Worth = Rs.256.48
Net worth Statement of Promoters
Name of Promoter : Kailash Ojha
Relationship with Chief Promoter : Self
Date Of Birth : 14/8/1973
Qualification & Experience : MBA, B.COM & Experience
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of over 21 years in Steel Business
Other Concern of Interest : 1) M/S ShriRam Metals
2) S.R.M. ALLOYS (P) Ltd.
3) SRM Steel Industries
4) Mohit Impex
Statement of Assets & Liabilities as on March 31st 2010
Assets (Rs. In Laces)
I) Immovable Assets Nil
II) Movable Assets
Description Amount Description Amount

Investment in Principle Firms 41.00 Balance with Banks 1.95
Investment in Others Firms 35.14 Life Insurance/PPF 19.74
Advance to Parties 1.00 Fixed Deposits 3.11
Share & Debenture 9.75 Investment in MutualFund 3.68
Investment in Govt.Securities 0.06
Total Assets = Rs.115.43

III) Liabilities
Description Amount
Due to Banks ----------
Sundry Creditors 50.16
Borrowing From Market ---------
Any Other Liabilities --------
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Total 50.16
Net Worth = Rs. 65.27
Type of Organization:
S.R.M. ALLOYS Private Limited - a Private Enterprise and one of the small scale
industry and profit making public sector steel products manufacturing company.
S.R.M. ALLOYS Private Limited produces for both basic and special steels for
construction, engineering, power, automotive and defense industries and caters to
Indian and International markets. S.R.M. ALLOYS Private Limited has two special
steel plants,
Activities: S.R.M. ALLOYS Private Limited production lines are –
• Hot Rolled Coils, Sheets
• Cold Rolled Products.
• Semi-Finished Products.
• Plates.
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Moreover, S.R.M. ALLOYS Private Limited offers technological services in the
following
Domains –
• Know-how transfer of technologies developed by its R&D wing.
• Specialized testing services.
• Contract research.
• Training.
OBJECTION OF S.R.M.PRIVATE LIMITED

The company has following objectives:
1. Development of good people, good technique and good Environment

2. Quality, which means satisfying the stated and implied needs of the customer.
3. Adaptations to the changing needs of the customers.
4. Improvement of timely delivery.
5. Reversing the trends of import intensive to export potential business.
VALUES OF S.R.M.PRIVATE LIMITED
INTEGRITY: - We shall be honest in our dealing to earn the trust and loyalty of
others and our action must be just and ethical. Integrity must be an integral part of
every employee.
1. HARMONYNY & OPERATION: - Our people are the source of our strength.
Involvement and teamwork shall be our core human values. Alone we are
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weak, together as a team with mutual understanding, responsibility, trust,

respect & sincerity.
2. COURTESY AND HUMILITY:- We shall be courteous and modest in our
dealings both in business and private. We should not act arbitrarily or selfishly
with. We shall praise and encourage people freely. We shall always listen
respectfully to public opinion solicit customer’s suggestion and shall make
continuous efforts to make suggestion and shall make continues efforts to
make ourselves better. This will also help us to earn trust of society.
3. COMMUNICATION & OPENNES: - We shall communicate our policies,
goals,
objectives and expectations to get involvement of people. The information-shared
shall be within the limit of confidentiality. We shall share related information and date
to keep concerned people up-to-date to enable them to make right decision at right
time. We shall create an environment through effective listening where people are
encouraged their views freely and make contribution. We shall share feeling in
constructive manner and gain clear understanding of alternatives.
4. FAIRNESS-we shall be fair and just in our dealing. This spirit will helps us
earn respect and build our image in society. A fair person is one who is
conscientious; sincere has nothing to be ashamed of and acts above broad both
in public and in private.
5. ADJUSTMENT & ASSIMILATION- change is constant in markets, in ideas,
in people and in technology. Progress cannot be achieved unless we adjusted
to ever changing conditions around us. As the world moves forward, we must
assimilate, be decisive and adapt quickly to keep pace with changing
environment for this we shall have to keep in close touch with changing
Conditions government policies, public trends and demands to help us improve
all our aspects of our management. We must always striven for new and Vetter
way to make continuous improvement for advancement of company.
6. CUSTOMER FOCUS: - Our prime responsibility is towards our customer and
all other who are impacted by Products and services. We shall focus our
energies constantly in understanding anticipation and meeting customer
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demands. We shall consistently provide quality products of good values to

their satisfaction and earn their respect.
Functions of Company
a. Manufacturing
They are manufacturing the Stainless Steel Sheets & Strips. First they purchase the
Raw Material from open market and after that they put in the process of Heating, Hot
Rolling, Cold Rolling, Clearing & Acid Bath and cutting.
HEATING
HOT
ROLLING
b. Accounting
All the accounting transaction
were done only in cash book.(“MAHAJANI” it is a very old process of doing
accounting transaction.) All the inventory stocks are maintained in RG1 manual form,
Remaining all are transaction done through computer system. The company has their
own software for all accounting treatment.
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c. Billing / Cheque Collection

All the credit payment done by Cheque and company purchases any raw material &
other thing by cash only their daily continuous work .
There is some short term transaction are-
(i) Short Purchase
(ii) Transport system payment by cash.
d. Tally Calling
All the orders are done through phone calls according to the requirement of size &
gauge they prepared material.
e. Dispatching
After preparing all the material which was ordered by the other company they
dispatched and sent them safely.
FINISH
PRODUCT
SWOT ANALYSIS
STRENGTHS
• The diversified product mix and multi location production units are an area of
strength for the company.
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• S.R.M.ALLOYS Pvt. Ltd. as a single source is able to cater to the entire steel
requirement of any customer. Also it has a nation wide distribution network with a
presence in every district in India. This makes quality steel available throughout the
length and breadth of the country.
• S.R.M.ALLOYS Pvt. Ltd has the small captive iron ore operations in India,
which takes care of its entire requirement. With plans in place to expand the mining
operations, the company will continue to be self sufficient in iron ore after completion
of the present phase of expansion.
• S.R.M.ALLOYS Pvt. Ltd being a Private Sector unit has to follow set
procedures in conducting its business. On occasions, it fast down the decision making
with attendant fallout.
• S.R.M.ALLOYS Pvt. Ltd large skilled manpower base is a source of strength.
There is emphasis on skill based training in the company.
WEAKNESSES
• S.R.M.ALLOYS Pvt. Ltd is dependent on the market purchase for a key input
– coking coal. As India does not have sufficient coking coal deposits, most of the
supply is from external sources.
• A large manpower base results in higher manpower cost as a proportion of
turnover for the company. Although there has been significant reduction in manpower
through natural and voluntary separations, the manpower strength in S.R.M.ALLOYS
Pvt. Ltd is still higher than the industry average.
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OPPORTUNITIES
• The current per capita finished steel consumption in the country is approx. 44
kg as compared to the likely world average of around 190kg. There is a substantial
scope concern for smooth operations in remote areas.
S.R.M. ALLOYS Private Limited (FINANCE DEPATRMENT)
Duties of Officers and employees in Finance Section:

• Preparation of employee’s remunerations & benefits and payments thereof.
• Assessment of Income Tax of employees. Provisional estimate for recoveries & final
calculations for issuing certificates.
• Passing of contractors / parties bills and payments thereof including recoveries of
income tax from their bills.
• Passing of employee’s bills and advances and payment thereof.
• Accounting of all transactions, maintenance and scrutiny thereof.
• Closing of accounts and audit thereof.
• Dealing with Govt. and Internal Audits
• Preparation of budgets – Revenue and Capital after considering the requirement of
various departments/ Sub-centers/ Unit Offices.
• Periodic monitoring and control of all types of budgets.
• Issue of TDS certificates to employees and contractors.
Fixed and Variable Costs for Finance Department
It can be seen from the role and responsibilities of finance department that most of the
work done by the finance department involves preparation of remuneration of
employees. Even during the preparation of the budget about 85% of the costs are
attributed to employee remuneration which contains both executive pay and non
executive pay. It comes under fixed costs while other expenses like traveling
20
expenses, stationary expenses and other miscellaneous expenses which come under
variable costs.
OTHER THINGS LEARNED AT S.R.M. ALLOYS Private Limited
(FINANCE DEPATRMENT)
• To prepare engineering hour rate for S.R.M.ALLOYS (P) Ltd. employee.
• Preparation of vouchers.
• Preparation of T.A.BILLS (Traveling allowance)
• Preparation of revenue budget for S.R.M.ALLOYS Pvt. Ltd.
• Preparation of remuneration for employees’ remuneration & benefits budget.
PERFORMANCE HIGHLIGHTS OF S.R.M. ALLOYS Private Limited
(2009-2010)
HIGHLIGTS OF PERFORMANCE
TOTAL LIABILITIES: - 21162677.81
TOTAL ASSETS: - 21162677.81
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Sources of Funds
Paid-up capital 2400400.00

Reserve & Surplus 5832486.94
Secured Loans 10331390.87
Unsecured Loans 2050000.00
Deferred Tax Liabilities 548400.00
Application of Funds
Net Fixed Assets 7238294.64

Investment Nil
Net Current Assets 13924383.18
Misc. Expenditure Nil
PERFORMANCE OF THE COMPANY
Turnover & Other Income 290690417.70

Total Expenditure 289875673.84
Profit Before Tax 814743.86
Profit After Tax 546221.00
Earning Per Share (In Rs.) 2.28
Dividend Rate Nil
3. INTRODUCTION TO THE STUDY:
Finance is one of the most primary requisites of a business and the modern
management obviously depends largely on the efficient management of the finance.
Financial statements are prepared primarily for decision making. They play a
dominant role in setting the frame work of managerial decisions. The finance manager
has to adhere to the five R’s with regard to money. Whether owned or borrowed
22
funds. At the right time to preserve solvency from the right sources and at the right
cost of capital.
The term financial analysis is also known as ‘analysis and interpretation of financial
statements’ refers to the process of determining financial strength and weakness of the
firm by establishing strategic relationship between the items of the Balance Sheet,
Profit and Loss account and other operative data. The purpose of financial analysis is
to diagnose the information contained in financial statements so as to judge the
profitability and financial soundness of the firm.
OBJECTIVES OF THE STUDY

1. To study the financial position of the company.
2. To analyze the financial stability and overall performance of company in general.
3. To analyze and interpret the trends as revealed by various ratios of the company in
particular.
4. To analyze the profitability and solvency position of the unit with the existing tools
of financial analysis.
5. To study the changes in the assets, liabilities structure of the company during the
period of study.
IMPORTANCE OF THE STUDY
1. By “FINANCIAL PERFORMANCE ANALYSIS OF COMPANY” we would be

able to get a fail picture of the financial position of S.R.M.ALLOYS.PVT.LTD.
2. By showing the financial performance to various lenders and creditors it is possible
to get credit in easy terms if good financial condition is maintained in the
company
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with assets outweighing the liabilities.

3. Protecting the property of the business.
4. Compliances with legal requirement.
LIMITATIONS OF THE STUDY
1. The analysis and interpretation are based on secondary data contained in the
Published annual reports of company for the study period.
2. Due to the limited time available at the disposable of the researcher the study has
been confined for a period of 2 years (2008-2010).
3. Ratio itself will not completely show the company’s good or bad financial position.
4. The study of financial performance can be only a means to know about the
Financial condition of the company and cannot show a through picture of the
activities of the company.
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem. It may

be understood as a science of studying how research is done scientifically. So, the
research methodology not only talks about the research methods but also considers the
logic behind the method used in the context of the research study.
RESEARCH DESIGN
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Descriptive research is used in this study because it will ensure the

minimization of bias and maximization of reliability of data collected. The researcher
had to use fact and information already available through financial statements of
earlier years and analyze these to make critical evaluation of the available material.
Hence by making the type of the research conducted to be both Descriptive and
Analytical in nature.
From the study, the type of data to be collected and the procedure to be used for this
purpose were decided.
DATA COLLECTION
The required data for the study are basically secondary in nature and the data
are collected from the audited reports of the company.
SOURCES OF DATA
The sources of data are from the annual reports of the company from the
year 2008 to 2009 (Audit Report).
METHODS OF DATA ANALYSIS
The data collected were edited, classified and tabulated for analysis. The
analytical tools used in this study are:
ANALYTICAL TOOLS APPLIED
The study employs the following analytical tools:
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1. Comparative statement.
2. Common Size Statement.
3. Trend Percentage.
4. Ratio Analysis.
5. Cash Flow Analysis
ANALYSIS AND INTERPRETATION
Financial statement is an organized collection of data according to

logical and consistent accounting procedures. It purposes is to convey an
understanding of some financial aspects of a business firm. It may show a position at a
moment of time as in the case of a balance sheet, or may reveal a series of activities
over a given period of time, as in the case of an Income Statement. Thus the term
“Financial Statement “generally refers to two basic statements: (i) the Income
Statement and (ii) the Balance sheet.
ANALYSIS OF FINANCIAL STATEMENTS
INTRODUCTION
“Financial statement analysis is largely a study of relationship among

the various financial in a business, as disclosed by a single set of statement, and a
study of trends of these factors, as shown in a series of statements.”
Financial statements are major means through which firms present their financial
situation to creditors, stockholders and general public.
For this purpose various financial ratios are used in order to analyze liquidity
extensive financial statements in their annual reports, which receive wide distribution.
FINANCIAL STATEMENT:
26
Financial statement is a collection of data organized according to logical and

consistent accounting procedure to convey an under-standing of some financial
aspects of a business firm. It may show position at a moment in time, as in the case of
balance sheet or may reveal a series of activities over a given period of time, as in the
case of an income statement. Thus, the term ‘Financial statements’ generally refer to
the two statements.
(1) The position statement or Balance sheet.
(2) The income statement or the profit and loss Account
NATURE OF FINANCIAL STATEMENT:
The key features of the financial statements are as under
 They are financial in nature and expressed in monetary terms.

 They relate to past period and are historical in nature.
 They indicate financial position and profitability
OBJECTIVESS OF FINANCIAL STATEMENT
According to accounting Principal Board of America (APB) states

The following objectives of financial statements
1. To provide reliable financial information about economic resources and

obligation of a business firm.
2. To provide other needed information about charges in such economic
resources and obligation.
3. To provide reliable information about change in net resources (resources
less obligation) missing out of business activities.
27
4. To provide financial information that assets in estimating the learning

potential of the business.
SIGNIFICANCE OF FINANCIAL ANALYSIS
 It judges the earning capacity or profitability of the concern.

 It judges the managerial efficiency and areas of inefficiency.
 It judges the short term and long term solvency of the concern.
 A comparative study may under taken for comparing various firms or various
points of view.
 It helps a great deal in making forecast and preparing budgets.
SOURCES OF FINANCIAL INFORMATION
The primary source is data provide by the firm itself in its annual report(Audit Report)
and required disclosures. Beside this information such as markets prices of securities
of publicity traded companies can be found.
PARTIES INTERSTED IN FINANCIAL STATEMENTS
The information given in financial statements is of much interested of external parties.

They include investor, lenders, suppliers, trade creditors, potential investors,
employees and trade unions, customers, government and their agencies, public,
taxation authorities, stock exchange etc.
LIMITATIONS OF FINANCIAL STATEMENTS:
Though financial statements are relevant and useful for a concern, still they do not
present a final picture a final picture of a concern. The utility of these statements is
dependent upon a number of factors. The analysis and interpretation of these
statements must be done carefully otherwise misleading conclusion may be drawn.
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Financial statements suffer from the following limitations:-
1. Financial statements do not given a final picture of the concern. The data given
in these statements is only approximate. The actual value can only be
determined when the business is sold or liquidated.
2. Financial statements have been prepared for different accounting periods,

generally one year, during the life of a concern. The costs and incomes are
apportioned to different periods with a view to determine profits etc. The
allocation of expenses and income depends upon the personal judgment of the
accountant. The existence of contingent assets and liabilities also make the
statements imprecise. So financial statement are at the most interim reports
rather than the final picture of the firm.
3. The financial statements are expressed in monetary value, so they appear to

give final and accurate position. The value of fixed assets in the balance sheet
neither represent the value for which fixed assets can be sold nor the amount
which will be required to replace these assets.
The balance sheet is prepared on the prepared on the presumption of a going concern.
The concern is expected to continue in future. So fixed assets are shown at cost less
accumulated deprecation. Moreover, there are certain assets in the balance sheet
which will realize nothing at the time of liquidation but they are shown in the balance
sheets.
4. The financial statements are prepared on the basis of historical costs or

original costs. The value of assets decreases with the passage of time current
price changes are not taken into account. The statement are not prepared with a
the keeping in view the economic conditions. The balance sheet loses the
significance of being an index of current economics realities. Similarly, the
29
profitability shown by the income statements may be representing the earning

capacity of the concern.
5. There are certain factors which have a bearing on the financial position and
operating result of the business but they do not become a part of these
statements because they cannot be measured in monetary terms. The basic
limitation of the traditional financial statements comprising the balance sheet,
profit & loss A/c is that they do not give all the information regarding the
financial operation of the firm. Nevertheless, they provide some extremely
useful information to the extent the balance sheet mirrors the financial position
on a particular data in lines of the structure o assets, liabilities etc. and the
profit & loss A/c shows the result of operation during a certain period in terms
revenue obtained and cost incurred during the year. Thus, the financial
position and operation of the firm.
FINANCIAL STATEMENTS ANALYSIS
The financial statements are indicators of the two significant factors:
1. Profitability
2. Financial soundness
Analysis and interpretation of financial statement therefore, refers to such a treatment

of the information contained in the Income Statement and Balance Sheet so as to
afford full diagnosis of the profitability and financial soundness of the business.
30
Balance Sheet
A balance sheet is the basic financial statement. It presents
data on a company’s financial conditions on a particular date, based on conventions
and generally accepted principles of accounting. The amount shown in the statements
on the balances, at the time it was prepared in the various accounts listed in the
company’s accounting records, is considered to be a fundamental accounting
statements. The income statement summarizes the business operations during the
specific period and shows the results of such operations in the form of net income or
net loss. By comparing the income statements of successive periods, it is possible to
determine the progress of a business. A statement is supplemented by a comparative
statement of the cost of goods manufactured and sold. It is prepared at regular
intervals and shows what a business enterprise owns and what it owes. It provides
information which helps in the assessment of the three main aspects of an enterprises
position – its profitability, liquidity and solvency. Of these, the later two are
concerned with an enterprises ability to meet its liabilities, while profitability is most
useful overall measure of its financial conditions, the balance sheet is a statement of
assets, liabilities capital on specified date.
It is therefore a static statement, indicating resources and the allocation of these
resources to various categories of asset. It is so to say financial photography finance.
Liabilities show the claims against its assets. The shareholders equity comprises the
total owner ship claims in a firm. This claim includes net worth of shareholders equity
and preferred stock. The traditional company balance sheet statement of assets valued
on the basis of their original cost and the means by which they have been financed by
its shareholders, lenders, suppliers and by the retention of income.
This tool suffers from the following limitations:
1. A balance sheet gives only a limited picture of state of affairs of a company,

because it includes only those items which can be expressed in monetary terms.
31
2. The values shown on the balance sheet for some of the assets are never accurate
3. A balance sheet assumes that the real value of money remain constant.
4. On the basis of balance sheet, it is not possible to arrive at any conclusion about the
success of an enterprise in the future.
5. It is a detailed statement of the financial structure of a business.
Income statement
The results of operations of a business for a period of time are
presented in the income statement. From the accounting point of view, an income
statement is subordinate to the balance sheet because the former simply presents the
details of the changes in the retained earnings in balance sheet accounts. However, if
vital source of financial information an income statement summarizes the results of
business operations during specific period and shows in the form of net income or net
loss by comparing income statements for successive periods, it is possible to observe
the progress of the business the statement is supplemented by a comparative statement
of cost of goods manufactured and sold. It summarizes firms operating results for the
past period.
Comparative balance sheet

Financial statements are sometimes recast for facility
of scrutiny. The effects of the conductor businesses are reflected in its balance sheet
by changes in assets and liabilities and in its net worth.
The comparative income statement presents a review of operating activities in
business. A comparative balance sheet shows effect of the operations on the assets and
liabilities. The practice of presenting comparative statement in the annual report is
now becoming wide spread because it is a connection between balance sheet and
income statement. Considerations like price levels and accounting methods are given
due weight at the time of comparison.
32
Common-size statements
The percentage balance sheet is often known as the
common size balance sheet. Such balance sheet are, in a broad sense ratio analysis
general items in the profit and loss accounts and in the balance sheet are expressed in
analytical percentages when expressed in the form, the balance sheet and profit and
loss account are referred to as a common size statement. Such statements are useful in
comparative analysis of the financial position in operating results of the business.
Cash flow statement

A cash flow statement is the financial analysis of the net
income or profit after including book expense items which currently do not use cash;
for example, depreciation, depletion and amortization. Revenue items, which do not
currently provide funds, are to be deducted. A gross cash flow is net profit after tax
plus provision for depreciation. A net cash flow is arrived after deducting dividends
from the gross cash flow. The cash flow is very significant because it represents the
actual amount of cash available to the business.
Ratio Analysis
Ratio are a very useful tool to analyze the companies working
by the data available by it’s balance-sheet and P. & L. a/c, by the ratio we can
compare company’s financial condition with the other industry player, all the external
persons from the company can view company’s financial condition only by these
ratios.
Meaning of Ratio: - A ratio is simple arithmetical expression of the relationship of

one number to another. It may be defined as the indicated quotient of two
mathematical expressions.
According to Accountant’s Handbook by Wixon, Kell and Bedford, ”a ratio is
an expression of the quantitative relationship between two numbers.”
33
Ratio Analysis: - Ratio analysis is the process of determining and presenting the
relationship of items and group of items in the statements.
According to Batty J. Management Accounting “Ratio can assist management
in its basic functions of forecasting, planning, coordination, control and
communication”. It is helpful to know about the liquidity, solvency, capital structure
and profitability of an organization. It is helpful tool to aid in applying judgment,
otherwise complex situations.
OBJECTIVES OF RATIO ANALYSIS
The primary objectives include judging the earning capacity or profitability of the
firm, short term and long term solvency, the performance of the company as compared
to its past and making inter firm comparisons.
The secondary objectives are to changes that could be implemented in order to
improve future performance.
Finance ratios allow a financial analyst to:
• Standardize information from financial statements across multiple financial

years to allow comparison of a firm’s performance over time in a financial
model.
• Standardize information from financial statements from different companies to
allow to apples comparison between firms of different size in a financial
model.
• Measure key relationships by relation inputs (costs) with outputs (benefits)
and facilitates comparison of these relationships over time and across firms in
a financial model.
34
RATIO MAY BE EXPRESSED IN THE FOLLOWING THREE WAYS
1. PURE RATIO OR SIMPLE RATIO: - It is expressed by the simple

division of one number by another. For Example, It the current assets of a
business are Rs. 200000 and its current liabilities are Rs. 100000, the ratio
of ‘Current assets to current liabilities will be 2:1.
2. ‘RATE’ OR ‘SO MANY TIMES :- In this type , it is calculated how
many times a figure is , in comparison to another figure, For example , if a
firm’s credit sales during the year are Rs. 200000 and its debtors at the end
of the year are Rs. 40000 , its Debtors Turnover Ratio is 200000/40000= 5
times . It shows that the credit sales are 5 times in comparison to debtors.
3. PERCENTAGE: - In this type , the relation between two figure is
expressed in hundredth. For Example, it a firm’s capital is Rs.1000000 and
its profit is RS. 200000 the Ratio of Profit capital , in terms of percentage
is 200000/1000000 = 20%
CLASSIFICATION OF RATIOS
Ratios can be classified in to different categories depending upon the basis of
classification.
Several ratio can be grouped various classes according to function to be
evaluated. They can be classified from various points of view. The financial ratio may
be broadly classified into four major categories i.e., Liquidity Ratio, Performance
Ratio, Profitability Ratio and leverage Ratio.
These four financial ratios allow a good financial analyst to quickly and
efficiently address the following questions or concerns.
Performance ratios
• What return is the company making on its capital investment ?
35
• What are its profit margin ?
Working capital Ratios

• How quickly are debts paid?
• How many times is inventory turned?
Liquidity ratios
• Can the company continues to pay its liabilities and debts?
Solvency ratios (Longer terms)

• What is the level of debt in relation to other assets and to equity?
• Is the level of interest payable out of Profits?
OBJECTIVE OF THE PROJECT
 To judge the earning capacity or profitability of the firm.

 To judge short term and long term solvency.
 To judge the performance of the company as compared to it’s past.
 How successfully does the firm complete in its industry , and how well
positioned is the company to hold or improve its competitive position.
 What change should be implemented in order to improve future performance?
 How well has the firm performed and what operation areas have contributed to
success and which have not.
ANALYSIS
Financial Analysis is done to identify the strengths and weakness of a firm by

the way of properly establishing relationship between the items of the balance sheet
36
and the profit and loss account. The study was conducted in order to enable S.R.M.(P)
Ltd. to identify its financial strength and weakness through financial ratio analysis.
Ratio Analysis:- It is a powerful tools of financial analysis. A ratio is an
arithmetical relationship between two related or inter depended items. The
relationship two accounting figure, expressed mathematically, is known as “financial
Ratio”. Ratio helps to summarize large quantities of financial data and to make
qualitative judgment about the firm’s financial performance.
Classification of Ratios
Financial ratio analysis involves the calculation and
comparison of ratios which are derived from the information given in the company's
financial statements. The historical trends of these ratios can be used to make
inferences about a company’s financial condition, its operations and its investment
attractiveness.
Financial ratio analysis groups the ratios into categories that tell us about the different
facets of a company's financial state of affairs. Some of the categories of ratios are
described below:
•
Liquidity Ratios give a picture of a company's short term financial situation or
solvency
•
Turnover Ratios show how efficient a company's operations and how well it is using
its assets.
•
Solvency Ratios show the long term profitability of the company.
Liquidity Ratios
Liquidity Ratios are ratios that come off the Balance Sheet and
hence measure the Liquidity of the company as on a particular day i.e. the day that the
37
Balance Sheet was prepared. These ratios are important in measuring the ability of a
company to meet both its short term and long term obligations.
1. Current Ratio
2. Liquid Ratio
3. Net working capital ratio
1. Current Ratio:
An indication of a company's ability to meet short-term debt

obligations; the higher the ratio, the more liquid the company is. Current ratio is equal
to current assets divided by current liabilities. If the current assets of a company are
more than twice the current liabilities, then that company is generally considered to
have good short-term financial strength. If current liabilities exceed current assets,
then the company may have problems meeting its short-term obligations.
Current Ratio = Current assets / Current liability
Current Assets – 50653329.34
Current Liabilities – 36728946.16
2. Quick Ratio:
Liquid ratio is also known as ‘quick’ or ‘Acid test ‘ratio. Liquid

assets refer to assets which are quickly convertible into cash. Current Assets other
stock and prepaid expenses are considered as quick assets. The ideal liquid ratio
accepted ‘norm’ for liquid ratio ‘1’.
38
Quick Ratio = Total Quick Assets/ Total Current Liabilities
Quick Assets = Total Current Assets (minus) Inventory
Quick Assets - 32798481
Current Liabilities - 36728946.16
QUICK RATIO
38000000
37000000
36000000
35000000
34000000
33000000
32000000
31000000
30000000
Q.A. C.L.
3. Net Working Capital Ratio
Working Capital is more a measure of cash flow than

a ratio. The result of this calculation must be a positive number. Companies look at
Net Working Capital over time to determine a company's ability to weather financial
crises. Loans are often tied to minimum working capital requirements.
Net working capital ratio = Net Working Capital / Capital Employed
Turnover Ratios
The turnover ratio is also known as activity or efficiency ratios.

They indicates the efficiency with which the capital employed is rotated in the
business (i.e.) the speed at which capital employed in the business rotates. Higher the
rate of rotation, the greater will be the profitability. Turnover ratios indicate the
number of times the capital has been rotated in the process of doing business.
39
•
Fixed Asset Turnover Ratio
•
Working Capital Turnover Ratio
•
Debtor Turnover Ratio
• Fixed Assets Turnover Ratio
Fixed asset turnover is the ratio of sales (on your Profit

and loss account) to the value of your fixed assets (on your balance sheet). It indicates
how well your business is using its fixed assets to generate sales.
Generally speaking, the higher the ratio, the better, because a high ratio indicates the
business has less money tied up in fixed assets for each dollar of sales revenue. A
declining ratio may indicate that you've over-invested in plant, equipment, or other
fixed assets.
Fixed Assets Turnover Ratio = Gross Sales / Net Fixed Assets
Gross Sales -
Net Fixed Assets -
• Working Capital Turnover Ratio
Working capital refers to investment in

current assets. This is also known as gross concept of working capital. There is
another concept of working capital known as net working capital. Net working capital
is the difference between current assets and current liabilities. Analysts intend to
establish a relationship between working capital and salsas the two are closely related.
Through this ratio we are attempting to see that one rupee blocked by the organization
in net working capital is generating how much sales. Higher the ratio better it is. So,
the working capital can be defined either as a gross working capital, which include
funds invested in all current assets, or as net working capital, which denotes the
difference between the current assets current liabilities of an organization.
40
Working Capital Turnover Ratio = Net Sales / Net Working Capital
• Debtors Turnover Ratio
Debtor’s turnover ratio measures the efficiency with

which the debtors are converted into cash. This ratio indicates both the quality of
debtors and the collection efforts of the business enterprise. This ratio is calculated as
follows:
I. Debtors’ turnover ratio
II. Debt collection period.
The numerator of this ratio should preferably be credit sales.

This is so because the denominator is logically related to credit sales as it arises from
credit sales only. Cash sales do not generate debtors. However, as the information
related to credit sales is not separately available in corporate accounts, so total sales
could be taken in the numerator. Average debtors are calculated by dividing the sum
of beginning-of-year and end-of-year balance of debtors by 2.
Debtor’s Turnover Ratio = Credit sales / Average accounts receivables
Debt collection period:
The ratio indicates the extent to which the debt has been collected
in time. It gives the average debt collection period. The ratio is very helpful to lenders
because it explains to them whether their borrowers are collecting money within a
reasonable time. An increase in the period will result in greater blockage of funds in
debtors.
Debt collection period = Months/Days in a year/ Debtor’s turnover ratio
4. Stock Turnover Ratio:
41
This ratio indicates whether investment in inventory is

efficiently used or not. It is therefore explains whether investment in inventories is
within proper limits or not. The Inventory turnover ratio signifies the liquidity of the
Inventory. A high inventory turnover ratio indicates brisk sales. The ratio is, therefore
a measure to discover the possible trouble in the form of over stocking or over
valuation. It is difficult to establish a standard ratio of inventory because it will differ
from industry to industry.
Stock Turnover Ratio = Sales / Average Inventory
Profitability Ratios
Profitability is an indication of the efficiency with which the

operation of the business is carried on. Poor operational performance may indicate
poor sales and hence poor profits. A lower profitability may arise due to lack of
control over the expenses. Bankers, financial institutions and other creditors look at
the profitability ratios as an indicator whether or not the firm earns substantially more
than it pays interest for the use of borrowed funds.
• Return on Investment
• Return on Shareholders’ fund
• Return on total asset
• Earnings per Share
• Net profit Ratio
• Operating ratio
• Payout ratio
• Dividend yield ratio
• Return on Investment:
42
It is also called as “Return on Capital Employed”. It

indicates the percentage of return on the total capital employed in the business.
The term ‘operating profit ‘ means ‘profit before interest and tax’ and the term ‘capital
employed ‘ means sum-total of long term funds employed in the business. i.e. Share
capital + Reserve and surplus + long term loans – [non business assets +fictitious
assets]
Return on investment = Operating profit/ Capital employed X 100
• Return on Shareholder’s Fund:
In case it is desired to work out the productivity

of the company from the shareholder’s point of view, it should be computed as
follows:
Return on shareholder’s fund =
Net profit after Interest and Tax/Shareholders’ fund*100
The term profit here means ‘Net Income after the deduction of interest and tax’. It is
different from the “Net operating profit” which is used for computing the ‘Return on
total capital employed’ in the business
• Return on Total Assets:
This ratio is computed to know the productivity of the

total assets. The term ‘Total Assets’ includes the fixed asset, current asset and capital
work in progress of the company. The above table clearly reveals the relationship
between the net profit and Total Assets employed in the business.
Return on Total Assets = Net profit after Tax/Total Assets* 100
• Earnings per Share:
43
In order to avoid confusion on account of the varied

meanings of the term capital employed, the overall profitability can also be judged by
calculating earnings per share. The earnings per share of the company helps in
determining the market price of the equity shares of the company. A comparison of
earning per share of the company with another will also help in deciding whether the
equity share capital is being effectively used or not. It also helps in estimating the
company’s capacity to pay dividend to its equity shareholders.
Earning Per Equity Share =
Net Profit after Tax / Number of Equity Shares X 100
• Net Profit Ratio:
This ratio indicates the Net margin on a sale of Rs.100.This

ratio helps in determining the efficiency with which affairs of the business are being
managed. An increase in the ratio over the previous period indicates improvement in
the operational efficiency of the business. The ratio is thus on effective measure to
check the profitability of business. However, constant increase in the above ratio after
year is a definite indication of improving conditions of the business.
Net Profit Ratio =Net Operating Profit/Net Sales*100
• Operating Ratio:
This ratio is a complementary of Net Profit ratio. In case the net

profit ratio is20%. It means that the operating profit ratio is 80%.It is calculated as
follows:
Operating Ratio =Operating Cost/Net Sales X 100
The operating cost include the cost of direct materials, direct labor and other
overheads, viz., factory, office or selling.
Direct Material cost to sales =Direct Material/Net Sales X 100
44
This ratio is the test of the operational efficiency with which the
business is being carried. The operating ratio should be low enough to leave a portion
of sales to give a fair to the investors.
• Payout Ratio:
This ratio indicates what proportion of earning per share has been
used for paying dividend. The payout ratio is the indicator of the amount of earnings
that have been ploughed back in the business. The lower the payout ratio, the higher
will be the amount of earnings ploughed back in the business and vice versa.
Payout Ratio =Dividend per equity share/Earning per equity share X 100
• Dividend Yield Ratio
This ratio is particularly useful for those investors who are

interested only in dividend income. The ratio is calculated by comparing the ratio of
dividend per share with its market value.
Dividend yield =Dividend per Share/Market price per share X 100
And Dividend per share = Dividend paid/ Number of shares.
Long Term Financial Position or Solvency Ratios
The term ‘solvency’ refers to the ability of a

concern to meet its long term obligations. The long term indebtedness of a firm
includes debenture holders, financial institutions providing medium and long term
loans and other creditors selling goods on installment basis. So, the long term
Solvency ratios indicate a firm’s ability to meet the fixed interest and costs and
repayment schedules associated with its long term borrowings. Two types of ratios are
there:
45
• Capital structure ratios-ex. Debt equity ratio
• Coverage ratios-ex. Debt service ratio or Interest coverage ratio
• Debt-Equity Ratio
Debt –Equity ratio also known as External- Internal Equity

Ratio is calculated to measure the relative claims of outsiders and the owners against
the firm’s assets.
The ratio is calculated as:
Debt equity ratio = Outsider’s funds / Shareholder’s funds
Outsiders fund includes all debts/liabilities to outsiders, whether long term or short
term or whatever in the form of debentures bonds, mortgages or bills. The
shareholders fund consist of equity share capital, preference share capital , capital
reserves, revenue reserves, and reserves representing accumulated profits and
surpluses.
• Interest Coverage Ratio
This ratio is used to test the debt servicing capacity of a

firm. The ratio is calculated as:
Interest coverage ratio = EBIT/Fixed interest charge
USE OF SIGNIFICANCE OF RATIO ANALYSIS
1. Useful in analysis of financial statement :-

Accounting ratio simplifies and systematizes a
long array of accounting figure to make them understandable. The importance of ratio,
that is relationship worked out among various accounting data which are mutually
dependent and which influence each other, arises form the fact that often absolute
figure standing alone convey no meaning . They become significant only when
considered along with other figure.
2. Useful in simplifying accounting figures:-
46
Accounting ratio simplifies summaries and

systematizes a long array of accounting figure to make them understandable. The
importance of ratio, that is relation ship worked out along various accounting data ,
which are mutually dependent and which influence each other arise from the fact that
often –absolute figure standing alone convey no meaning. They become significant
only when considered along with each other.
3. Useful in judging the operating efficiency of business:-

Accounting ratios are helpful for diagnosis of
the financial health of a business concern. This is a done by evaluating liquidity
solvency, profitability etc. Such an evaluation enables management to assess financial
requirement and the capabilities of various business units.
4. Useful for forecasting purpose:-

Accounting ratios are also like for
forecasting purpose suppose sales data, which are mutually dependent and which
influence each other arise from the fact that often –absolute figure standing alone
convey no meaning. They become significant only when considered along a for the
future.
5. Useful in Locating the weak spots of the business:-

Accounting ratio is of a great assistance in
location the weak spots in the business even through the overall performance may be
quite good. For example if the firm find that the increase distribution expenses is more
than proportionate to the result achieved, these can examined in detail and depth to
remove any wastage that may be there.
6. Useful in comparison of performance :-

A firm would like to compare its
performance with that of other firm and of industry I general. This is called inter form
comparison. If the performance of different units belonging to the same firms to be
compared , it is called intra firm accounting ratio.
7. Estimate about the trend of the business.

LIMITATION OF RATIO ANALYSIS
Though ratios are simple to calculate and easy to understand , they suffer from some
Limitation.
1. Limitation use of a single ratio:-

A single ratio does not convey much of a server.
To make a better interpretation , a number of ratio have to be calculated which is
likely to confuse the analyst rather than help him in making any meaningful
conclusion.
2. Inherent limitation of accounting:-
47
Like financial statement ratios also suffer from

the inherent weakness of the accounting records such as their historical nature. Ratios
of the past are not necessary true indicators of the future.
3. Change of Accounting procedure:-

Frequent changes in accounting procedure by a
firm often make ratio analysis misleading i.e. a change in the valuation methods of
inventories from FIFO to LIFO increasing the cost of sales and reduce considerably
the value of closing stock turnover ratio to be lucrative and an unfavorable gross profit
ratio.
4. Window dressing:-
Financial statement can easily be window
dressed to present a better picture of its financial, one has to be very careful in making
decision from ratio calculated from such financial statement.
5. Incomparable:-
Not only industries different in their nature but
also the firm of the similar business. Widely procedure etc. It makes comparison of
ratio difficult and misleading.
5. DATA ANALYSIS AND INTERPRETATION
48
Balance Sheet as on March 31st 2009
Particulars Schedule As on 31/3/2009 As on 31/3/2008

Share Holders Fund
Capital A 2400400.00 2400400.00
Reserve & Surplus B 5832486.94 5332747.09
Deferred Tax Liabilities 548400.00 548400.00
Loan Fund
Secured Loans C 1033139.87 9979099.11
Unsecured Loans D 2050000.00 2050000.00
TOTAL 21162677.81 20310646.20
Application Of Funds
Fixed Assets D
Gross Block 24923948.87 24833048.89
Less: Deprecation 17685654.23 16840386.39
Net Block 7238294.64 7992662.56
Current Assets ,Loan &

Advance
E 11925819.19 10837337.00
Inventories
F 32014264.00 29905976.62
Sundry Debtors
G 784217.00 2763905.82
Cash & Bank Balance
H 5929029.15 3301596.55
Loan & Advance
Less: Current Liabilities I 36728946.16 34490832.35
TOTAL 21162677.81 20310646.20

PROFIT & LOSS A/C FOR YEAR ENDED ON MARCH 31ST 2009
49
Particular Sch. As on 31/3/2009 As on 31/3/08
Income
Sales & Other Income J 290690417.70 401740937.32
Increase/decrease in stock K (1941908.81) (176256.00)
Total (A) 288748508.89 401564681.32
Expenditure
Raw Material L 243634237.29 341003988.31
Manufacturing M 35227732.91 49736.619.35
Personal N 2531602.45 2873866.45
Administrative O 3380979.16 2965512.77
Selling & Distribution P 979976.30 1199789.13
Financial Q 1333969.00 1499135.00
Total (B) 287088497.11 399278911.01
Profit before depreciation (A-B) 1660011.78 2285770.31

Less: Depreciation 845267.92 1051915.73
Net Profit During the Year
Less: Provision for Income Tax 814743.86 1233854.58
Add: Deferred Tax Reserve 268500.00 375000.00
Add: Balance From Previous Year -------- 48985.00
Less: Income Tax & TDS A/c 4929359.09 4228669.51
Less: Fringe Benefit Tax 10759.00 179775.00
35745.00 27375.00
Balance Carried to Balance Sheet 5429098.94 4929359.09
EPS of Rs.10 each 2.08 2.92
499739.86 700689.58
FUND FLOW STATEMENT (Rs. in Laces)
50
As Per Balance Sheet As At
Particular 31..0.2008 31.03.09

1.SOURCES
a) Net Profit (after tax) 8.59 7.89
10.52 11.87
b) Depreciation
0.00 0.00
c) Increase in Capital -46.46 2.20
d) Increase in Term Liab. (Including deposits) 0.00 0.00
e) Decrease in Fixed & Current Assets 0.00 0.00
f) other
TOTAL -27.35 21.96
2. USES
a) Net Loss 0.00 0.00
0.00 0.00
b) Decrease in Term Liab. (Including deposits)
4.20 1.45
c) Increase in Fixed & Current Assets 0.00 0.00
d) Dividend Payment 0.00 0.00
e) other
Total 4.20 1.45
3.Long-term Surplus(+)/ Deficit(-) (1 minus 2) -31.55 20.51
Working Capital Statement (Compare with Last years)
A. Increase/Decrease in Current Assets -103.96 27.90

B. Increase/Decrease in Current Liabilities -63.79 19.82
Increase/Decrease in Working Capital (A-B) -40.17 8.08
Description of Increase/Decrease in Current Assets
Particular 31.03.2008 31.03.2009

i) Increase/Decrease in Raw Material -88.92 23.59
ii) Increase/Decrease in Stock-in-process 0.00 0.00
iii) Increase/Decrease in Finished Goods -2.28 -1.56
iv) Increase/Decrease in Receivables -1.89 4.78
v) Increase/Decrease in Stores & Spares 0.23 -0.07
vi) Increase/Decrease in Other Current Assets -11.10 1.16
TOTAL -103.96 27.90
51
WORKING CAPITAL ASSESSMENT & ASSESSED BANK FINANCE

(Rs. in laces)
As Per Balance Sheet As At
Particular 31.03.200 31.03.2009

8
1. Total Current Assets (TCA) 459.91 487.81
2. Other Current Liabilities (OCL) 344.90 364.72
3. Working Capital (TCA-TCL) 115.01 123.09
4. Net Working Capital 88.27 105.78
5. Bank Finance 26.74 17.31
6. Bank Finance/Total Current Assets 5.81% 3.55%
7. Other Current Liabilities/Total Current Assets 74.99% 74.77%
8. Inventory to Net Sales(Month) 0.32 0.54
9. Receivables to Gross Sales (Month) 0.89 1.26
10. Sundry Creditors to Purchase (Month) 1.08 1.48
PROFITABILITY STATEMENT
Particular 31.03.200 31.03.2009

8
Net Sales 4017.41 2898.67
Less: Cost of Goods Sold 3990.08 2874.20
Operating Profit Before Interest & tax (EBIT) 27.33 24.42
Less: Interest 14.99 13.58
Operating Profit After Interest & Before Tax 12.34 10.89
Less Provision For Taxes 3.75 3.00
Net Profit & Loss 8.59 7.89
Less: Equity dividend 0.00 0.00
Retained Profit 8.59 7.89
Retained Profit/Net Profit 100% 100%
COMPARATIVE STATEMENT OF CURRENT ASSETS &

CURRENT LIABILITIES
52
Particulars 31.03.2008 31.03.2009

CURRENT ASSETS
1. Raw Material Indigenous 59.97 83.56
(Months’ Consumption) 0.21 months 0.41 months
2. Other Consumable Spares Indigenous 0.43 0.36
(Months’ Consumption) 0.02 months 0.03 months
3. Finished Goods (Months’ Cost of Sales) 47.98 46.42
0.15 months 0.20 months
4. Receivables ( Months’ Domestic Sales 299.06 303.84
Excluding Deferred Payment Sales) 0.89 months 1.26 months
5. Advance to Suppliers Of Raw Material 4.66 4.54
6. Other Current Assets Including Cash &Bank 47.81 49.09

Balance
Total 459.91 487.81
CURRENT LIABILITIES
1. Creditors for Purchase of Raw Materials 324.56 326.49
( Months’ Purchases) 1.08 months 1.48 months
2. Advance From Customers 0.00 0.00
3. Statutory Liabilities 10.75 9.61
4. Other Current Liabilities

a) Provision for tax 3.75 3.00
b) Term Loans Payable 0.00 0.00
c) Dividend Payable 0.00 0.00
d) Other 0.00 0.00
Total 339.06 339.10
RATIO ANALYSIS
53
Particular 31.03.2008 31.03.2009
Paid-up Capital 24.00 24.00
Total Net Worth(TNW) 77.32 82.21
Net Working Capital 88.27 105.78
TOL/TNW 6.09 5.88
Net Sales 4017.41 2898.67
` increase as per last year 37.71% -27.85%
Cost of Production 3946.67 2840.77
Operating Profit 12.34 10.89
Profit before tax 12.34 10.89
Net Profit 8.59 7.89
Depreciation 10.52 11.87
Retained Profit 8.59 7.89
Cash Accruals After dividend 19.11 19.76
Net Profit/Net Sales 0.21% 0.27%
Net Sales/Total Current Assets 8.74 5.94
EBIT 37.85 36.34
EBT/Net Sales 0.31 0.38
RECOMMENDATION AND SUGGESTION
54
• S.R.M.ALLOYS (P) LTD. should always try to maintain an adequate quantum of
net current assets in relation of current liabilities as to keep a good amount of
liquidity throughout the year.
• The company should tighten the debt collection efforts and should reduce the
amount tied up in debtors. In order to improve the quality of debtors and also to
bring down the amount tied-up in debtors, a periodical report of the overdue may
be prepared and effective action may be taken by the management time to time to
expedite the collections.
• Inventory turnover ratio is lesser in S.R.M.ALLOYS (P) LTD. compared to other
competitors which indicates inefficient management of inventories. So it is
advisable to keep fewer inventories to minimize costs and improve efficiency.
• The management of S.R.M.ALLOYS (P) LTD. should also try to maintain a
definite proportion among various components of working capital in relation to
overall current assets to keep an adequate quantum of liquidity all the times.
CONCLUSION
55
On the basis of analysis of financial statements of S.R.M.ALLOYS (P) LTD. we may
conclude that the overall working stability – soundness have improved over the years.
Sales turnover of S.R.M.ALLOYS (P) LTD. decreases by 27.85% i.e. Rs. 2898.67
laces in the Financial Year 2008-09 from Rs. 4017.41 laces in the FY 2007-08
whereas profit before tax has decreased by 11.75% i.e. Rs. 10.89 laces in the FY
2008-09 from Rs. 12.34 laces in the FY 2007-08 indicating impact of recession in the
economy.
The debtors’ turnover ratio is lower for S.R.M.ALLOYS (P) LTD. compared to its
competitors which shows that the debtors are less liquid implying inefficient
management of debtors/sales.
The proportion of current assets to total assets has increased comparing to current
liabilities which serve as an evidence for good working capital position of the
company.
The current ratio for S.R.M.ALLOYS (P) LTD. is more than other competitors which
shows that it has enough liquidity in comparison to other competitors.
S.R.M.ALLOYS (P) LTD. is more efficient and effective to utilize its fund.
56
BIBLIOGRAPHY
BOOKS:
• Financial management by M.R.Agarwal

• Annual Audit Report of S.R.M.ALLOYS(P)
LTD.of last three year
INTERNET WEB SITES:
• www.google.co.in
• www.moneycontrol.com
• www.scribd.com
• www.wikipedia.com
• www.srmgroup.co.in
57

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S.R.M. ALLOYS (P) LTD.

S.R.M.ALLOYS PRIVATE LIMITED

Submitted in partial fulfillment for the

HEAD OF DEPARTMENT PAVAN MUNDRA

TO WHOM SO EVER IT MAY CONCERN

This is to certify that PAVAN MUNDRA a student of M.B.A.

For S.R.M.ALLOYS PVT.LTD.

S.R.M. ALLOYS PVT. LTD.

Management is an essential ingredient in every organized endeavor. Effective and

Serial No. Contents Page No.

A highly experienced and professionally managed organization committed to

S.R.M. ALLOYS Pvt. Ltd.

SHRI RAM METALS.

SHRI RAM METALS is an other steel manufacturing company promoted by

The promoter is specialist & dedicated producer of high performance S.S.Patta

SHRI RAM STEEL INDUSTRIES

SHRI RAM STEEL INDUSTRIES is another steel manufacturing company promoted by

 Objective of S.R.M. ALLOYS Pvt.Ltd.

 Principle of S.R.M. ALLOYS Pvt.Ltd.

 Values of S.R.M. ALLOYS Pvt.Ltd.

 Research & development

Managing Director : Ghanshyam Ojha

HRD Manager : Rakesh Ojha

Quality Assurance : Rakesh Ojha

Tool Room : Ajit Singh Shekhawat

Account HOD : Mahendra Ji

C.A. : Arun Rathi

• ABOUT THE COMPANY

Established in 1988 with an Paid-up capital of Rs. 2400400.00, S.R.M. ALLOYS

private sector companies in India in terms of your units sensitivity towards

S.R.M. ALLOYS Private Limited Today

professional expertise. Today, the accent in S.R.M. ALLOYS Private Limited is to

continuously adapt to the competitive business environment and excel as a business

organization, both within and outside India.

Net worth Statement of Promoters

Name of Promoter : GhanShyam Ojha

Relationship with Chief Promoter : Self

Date of Birth : 12/8/1954

Qualification & Experience : B.Sc. & Experience of over 21 years in

Other Concern of Interest : 1) M/S ShriRam Metals

2) S.R.M. ALLOYS (P) Ltd.

3) SRM Steel Industries

Statement of Assets & Liabilities as on March 31st 2010

Farm Gangani 25 Self Rs.40 100%

Description Amount Description Amount

Other Assets 0.71

Total Assets = Rs.284.47

Net Worth = Rs.256.48

Net worth Statement of Promoters

Name of Promoter : Kailash Ojha

Relationship with Chief Promoter : Self

Date Of Birth : 14/8/1973

Qualification & Experience : MBA, B.COM & Experience

of over 21 years in Steel Business

Other Concern of Interest : 1) M/S ShriRam Metals

2) S.R.M. ALLOYS (P) Ltd.

3) SRM Steel Industries

Statement of Assets & Liabilities as on March 31st 2010

Assets (Rs. In Laces)

I) Immovable Assets Nil

II) Movable Assets

Description Amount Description Amount