1.

INTRODUCTION OF SUBJECT

Finance is defined as the art and science of managing money. The major areas of
finance are:

 Financial services

 Financial management

While financial services is concerned with the design and

delivery of advice and financial products to individuals, businesses and governments
within the areas of banking and related institutions, personal financial planning,
investments, real estate, insurance and so on, financial management is concerned with
the duties of financial managers in the business firm. Financial managers actively
manage the financial affairs of any type of business, namely, financial and non-
financial, private and public, large and small, profit seeking and not-for-profit. They
perform such varied tasks as budgeting, financial forecasting, cash management,
credit administration, investment analysis, funds management and so on.

1.1 Financial Analysis and Review:-

Financial Analysis and Review involves the application of

analytical tools and techniques to the financial data to get information that is useful in
decision making. The foundation of any good analysis is a thorough understanding of
the objectives to be achieved and the uses to which it is going to be put. Such
understanding leads to economy of effort as well as to a useful and most relevant
focus on the points that need to be clarified and the estimates and projections that are
required.

Financial analysis is oriented towards the achievement of definite

objectives. There are three types of users to whom the financial analysis could be
useful. They are short-term lenders, long-term lenders and finally stockholders. The
process of financial analysis can described in various ways, depending on the
objectives to be obtained. Financial analysis can be used as a preliminary screening
tool in the selection of stocks in the secondary market. It can be used as a forecasting
tool of future financial conditions and results. It may be used as a process of
evaluation and diagnosis of managerial, operating and other problem areas. Financial

1
analysis reduces reliance on intuition, guesses and thus narrows the areas of
uncertainty that is present in all decision making process. Financial analysis does not
lessen the need for judgment but rather establishes a sound and systematic basis for its
rational application.

1.2 Sources of financial information:-

The financial data needed in the financial analysis come from

many sources. The primary source is the data provided by the firm itself in its annual
report and required disclosure. The annual report comprise of the income statement,
the balance-sheet and the statement of cash flows, as well as footnotes to those
statements. Besides this, information such as the market price of securities of publicly
traded corporations can be found in financial press and the electronic media daily. The
financial press also provides information on stock price indices for industries and for
the market as a whole.

1.3 Financial statement:-

Every financial manager is involved in financial decision making

and financial planning in order to take right decision at right time, he should be
equipped with sufficient past and present information about the firm and its operations
and how it is changing overtime. Much of this information that is used by financial
manager to take various decisions and to plan for the future is derived from the
financial statements. A financial statement is the compilation of data, which is
logically and consistently organized according to accounting principles. Its purpose is
to convey an understanding of some financial aspects of a business firm. It may show
a 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.
Financial statements are the major means through which firms present their financial
situation to creditors, stock-holders and general public. The majority of firms include
extensive financial statements in their annual reports, which are distributed widely
Financial analysis involves the use of various financial statements.
These statements do several things. First, the balance sheet summarizes the assets,
liabilities and owners equity of a business at moment in time, usually the end of a year

2
or a quarter. Next the income statement summarizes the revenues and expenses of the
firm over a period of time while balance sheet represents a snapshot of the firm s
financial position at a moment in time.
Financial management is planning and controlling of financial
resources of a firm with a specific objective. Since, financial management as a
separate discipline is of recent origin, it is still in a developing stage. It is very crucial
for an organization to manage its funds effectively and efficiently. Financial
management has assumed greater importance today as the financial strategies required
to survive in the competitive environment have become very important. In the
financial markets also new instruments and concepts are coming and one must say
that a finance manager of today is operating in a more complex environment. A study
of theories and concepts of financial management has therefore become a part of
paramount importance for academics as well as for practitioners but there are many
concepts and theories about which controversies exist as no unanimous opinion is
reached as yet.

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 2. INDUSTRY PROFILE

2.1 Introduction

The Auto Component Industry is surging ahead and India is emerging as the most
preferred Quality Manufacturing location for outsourcing by Global Auto Majors.
Exports of Auto components from India have grown at a compounded growth rate of
19% over the past six years. During the Financial Year 2003-04, the Industry
achieved a milestone of USD 1 Billion worth of Exports.

2.2 INDUSTRY SIZE:

The total size of the Indian auto component industry is USD 14 billion, out of which
USD 2.0 is direct export of components. The world production of auto components
is expected to reach USD 1.7 trillion by 2015. It is estimated that about 700 billion
worth of auto components would be sourced out from Low Cost Countries (LCCs) in
the next 7-8 years. If India targets to get 10% share of this potential, it would mean
USD 70 billion, nearly 5 times of the current size of the industry in India, giving a
huge business opportunity for the Indian auto component & ancillary industry.

The Indian auto component industry is highly fragmented in nature and has 416
players, employing 250,000 people. The output of the Indian auto component
segment, as per ACMA, was estimated at around $5.1 billion (Rs 245 billion) in
FY08.

2.3GROWTH TRENDS:

The auto components and ancillary sector are optimistic in achieving a 15-20 percent
growth year-on-year, in the next five years due to the current buoyancy in the Indian
automotive sector as well as major investment and expansion plans of automotive
manufacturers globally. An auto ancillary company can generate revenues from two
major sources, the first is from supplies to OEM (original equipment manufacturers)
and the second is through after market sales.

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2.4 Major Player and their Market share:

The following table lists the industry segmentation on the basis of components, their
contribution to the overall industry revenues and some of the leading players in those
segments.

Sub-groups Products % to total Leading

products companies

Engine Parts Pistons, piston rings, fuel 24.0% Ucal Fuel, MICO,
injection pumps Lucas

Transmission & Transmission gears, axles 16.0% Sona Kaya, ZF

Steering parts and wheels Steering

Suspension & Leaf springs, shock 12.0% Gabriel, Munjal

Braking parts absorbers Showa]

Electrical Spark plugs, batteries, 8.0% Exide], MICO,

starter motors

Equipment Dashboard instruments 7.0% Motherson Sumi,

Lumax

Others Fan belts, sheet metal parts 33.0% Rico Auto,

Sundram

2.5 Government policy and support :

• Exalt the sector as a lever of industrial growth and employment and to achieve a
high degree of value addition in the country.
• Promote a globally competitive automotive industry and emerge as a global
source for auto components.
• Establish an international hub for manufacturing small, affordable passenger cars
and a key center for manufacturing Tractors and Two-wheelers in the world.
• Ensure a balanced transition to open trade at a minimal risk to the Indian economy
and local industry. Conduce incessant modernization of the industry and facilitate
indigenous design, research and development.
• Steer India's software industry into automotive technology.
• Assist development of vehicles propelled by alternate energy sources.

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• Development of domestic safety and environmental standards at par with
international standards.

SIAM welcomed the announcement of Auto Policy, and feels that the policy would
serve as a reference document for all stake holders and other interested parties.

The Auto Policy has spelt out the direction of growth for the auto sector in India and
addresses most concerns of the automobile sector, including-

• Promotion of R&D in the automotive sector to ensure continuous technology up

gradation, building better designing capacities to remain competitive.
• Impetus to Alternative Fuel Vehicles through appropriate long term fiscal
structure to facilitate their acceptance.
• Emphasis on low emission fuel auto technologies and availability of appropriate
auto fuels and encouragement to construction of safer bus/truck bodies-
subjecting unorganized sector also to 16% excise duty on body building activity
as in case of OEMs.
• The policy has rightly recognized the need for modernizing the part profile of
vehicles to arrest degradation of air quality. The terminal life policy for
commercial vehicles and move toward international taxing policies linked to age
of vehicles, are steps in the right direction.

SIAM has always been advocating encouragement of value addition within the
country against mere trading activity. However, this aspect has not been fully
addressed. The Auto Policy allows automatic approval for foreign equity investment
up to 100% in the automotive sector and does not lay down any minimum investment
criteria.

However, with the Auto Policy in place, the automotive industry would get further
fillip to become vibrant and globally competitive. The industry would get the required
support from other Ministries and departments of Government of India in achieving
the goals laid down in the auto policy.

3.COMPANY PROFILE

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3.1 Company Profile

Autoline Industries Limited is a manufacturer of sheet metal components

located in different parts of Pune, catering to the components and sub-assemblies
requirements of leading automobile manufacturers. A partnership firm in the name of
Autoline Pressings in 1995 was started with contract manufacturing of sheet metal
components in January 1995 from a 3000 sq.ft rented premises at Survey No. 825
Kudalwadi, near MIDC, Chinchwad Area, Pune. Subsequently, a Company by the
name of Autoline Stampings Private Limited was incorporated on December 16th;
1996. This Company was renamed as Autoline Industries Limited w.e.f. January 13 th,
2006.

The company purchased the premises at Kudalwadi, Pune including the land
measuring approx. 5500 sq.ft. In 1995. The manufacturing unit at Kudalwadi is
located about 3 Km from Tata Motors and 5 Km from Bajaj Auto Limited with
manufacturing facilities. Later on company set up another factory in 1997-98 at
MIDC Chakan, Pune with a built up area of 104,000 sq.ft. On a plot of land
admeasuring 114,000 sq. ft. The company set up 3rd manufacturing unit at MIDC,
Bhosari in 1999-2000 on a 54,000-sq.ft plot of land located near Tata Motors. Besides
this we are having no. of following other units

1) Detroit Engineering products, Inc USA (DEP)

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 2) Butler Indian Plant, USA
3) Nirmiti Autocomponents Pvt. Ltd (NIRMITI)
4) Union Autoline Spare Parts, LLC (Abu Dhabi UAE)

In November 2005 AIL acquired Western Pressing Private Limited, with facilities for
manufacturing Silencers and Exhaust Systems required for auto sector.

3.2COMPANY’S GOALS & VALUES

• Our goals at AIL are simple and they are accomplished by commitment from
every employee.
• Treat each employee with respect and provide him an opportunity for growth and
thereby continually improve our goals.
• Provide the most effective and efficient corrective action, to resolve customer
service issues, to ensure our customer’s satisfaction and that the problem not to be
repeated in future.
• Deliver competitive service to our customers and wherever possible, take all
necessary steps to improve the quality.
• Make “First time Right” our commitment as a team and our only way of doing
business. This commitment as a team will assure continued growth and prosperity.
3.3ACHIEVEMENT:

Sr.No Year Achievements

1 Feb. 2005 Bhosari Unit get ISO/TS 16949: 2002 certification from
TUV (Rh), Germany

2 Nov.2005 Acquired as a wholly-owned subsidiary Western Pressing

Pvt. Ltd., a company manufacturing tubular cross members,
silencers and Exhaust Systems thus is getting into
proprietary products. Turnover of Rs.140.00 million in
2005-06.

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3 Mar.2006 Acquired a 51% stake in Dimensions Engineering Software
Services Pvt. Ltd., a company with 40 people into CAD/
CAM/CAE & Design Engineering Services making AIL a
“Concept to Delivery” company.

4 Sept.2006 Filed Draft Red Herring Prospectus with Securities

Exchange Board of India

5 Nov 2006 Crossed Turnover of Rs. 111 corers achieved in full

financial year 2005-06.

6 Jan 2007 Made Initial Public Offering (IPO) and listed in Bombay

7 Mar 2007 Commenced commercial production of skin panel like door

assembly at Chakan Unit II

8 Mar 2007 100% acquisition of Autoline Dimensions Software Private

Limited

9 May 2009 Autoline got Techniquecal certificate.

10 Mar 2010 Autoline Industries, Inc. USA (a wholly owned subsidiary

of the Company) received the "Prestigious 2009 Supplier of
the Year Award" from General Motors, at a Ceremony held
at GM HQ at GM Dome, Warren, Michigan, USA on 11th
March, 2010, in recognition of its performance in brake and
clutch pedal product line.

11 May 2010 In May, 2010, Tata Motors Limited ranked Chakan plant -1
(located at S. Nos. 291-295, Nanekarwadi, Chakan, Tal-
Khed, Dist- Pune- 410 501) as "Number one in sheet Metal
family" and "4th among all Passenger Car Business Unit
suppliers."

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3.4The Autoline Group of Companies

MANUFACTURING FACILITIES

Autoline’s manufacturing operations are carried on from our facilities at the

following locations.

1. T-135, MIDC, Bhosari

Bhosari Unit is located in MIDC, Bhosari, very near to Telco’s main Entrance.
The production facilities here are housed in 30,000 sq.ft. Of built-up area on a
plot of land admeasuring 53,0000 sq.ft. With main roads on two sides of the
plot and other excellent infrastructure.

Co. manufacture small sub-assemblies such as chain covers, front fork, wheel
rims for Bajaj Auto, outer shield of catalytic converters for Walker Exhaust
India (a subsidiary of Tenneco, a Fortune 500 US Company.

2. Kudalwadi/ Jadavwadi Units:

These Units at Survey No. 825 and Survey No. 712, Kudalwadi, Chikhali,
Pune 412114 are located near to Telco and Bajaj Auto Ltd in
Chinchwad/Pimpri area. The Production facilities here are housed in 12,000
sq.ft. Of built-up area, including 2,000 sq.ft. Office area with conference room
and Training facilities.

These units are predominantly single components such as door hinges various
types of brackets mainly for cars and is mostly supplied to Tata Motors.

3. FII Unit (Western Pressing Pvt. Ltd.,)

Company utilizing the facilities of the Western Pressing Pvt. Ltd for
manufacturing formed tubular products such as Silencers and exhaust systems
for Tata Motors commercial vehicles of all categories. It is located near
TELCO Material gate, Pimpari.

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4. Unit 1 Chakan
Unit-1 at Chakan is manufacturing load bodies and rear wall of driver’s cabin
for Tata Ace Mini-Truck, Front Floor Assemblies, Suspension Tower, and
heat shields etc for passenger cars, mudguards for SUVs (e.g. Tata Sumo), and
headlight assemblies for HCVs. It is located in MIDC Kuruli Nanekarwadi
(Chakan).

5. Unit II Chakan
This unit is a part of the expansion initiative and Phase-I of the expansion is at
an advanced stage of completion and has commenced commercial production
in November 2006.

Company have started manufacturing of aesthetic parts such as door

assemblies, bonnets, fenders and also tippers, tipper trailers, cement bulkers,
garbage extractors etc from this plant. It is also located in MIDC Kuruli
Nanekarwadi (Chakan). Besides this Manufacturing facilities are available at
following units

7. Unit III Chakan

8. Nirmiti Autocomponents Pune
9. Uttaranchal
10.Buttler Indian USA
11.Detroit Engineering Product Inc USA (DEP)

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 MANUFACTURING PLANTS

Bhosari Unit Western Pressing

Nirmiti Autocomponents Ltd. Kudalwadi

Unit

CHAKAN PLANT - I CHAKAN PLANT –

II

Union Autoline Spare Parts, LLC Butter Indian Ltd. USA

Abu Dhabi, UAE

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 3.5 Product Profile :
Autoline Industries Ltd., is a major supplier of sheet metal components, sub
assemblies and assemblies. Also manufacturing "A" class sheet metal dies, we
supply about 130 components to Tata Motor's prestigious INDICA, Car Project
and its mid-sized sedan INDIGO & MARINA mostly as single source supplier,
and about 400 components to its Auto Division for LCVs, MCVs and HCVs,
besides components for SUVs like Safari, Sumo and their variants. Various other
components numbering more than 150 are being supplied to Bajaj Auto Limited &
Kinetic Engineering Limited for 2 wheelers & 3 wheelers. Critical and prestigious
components are regularly supplied to Walker Exhaust (India) Pvt Ltd, a wholly
owned subsidiary of a Fortune 500 company. Besides these, we also supply
Tractor components to Mahindra & Mahindra Limited, Mumbai, and Fiat,
Mumbai, for their prestigious Palio Project. Exports of Brake shoes meant as
spares for Mercedes Trailers to Germany, Singapore, UAE, Saudi Arabia, etc. A
joint venture by the name of Union Autoline Spare Parts LLC, UAE has been set
up to promote exports of Auto Components for the Gulf and African Markets.

Product Range:

♦ Commercial Vehicles:

• Engine Hood

• Frame Parts

• Aesthetic Parts

 Front Grill

 Side Panel Assembly

♦ Three Wheelers:

• Frame Parts

• Upper Plate

♦ Two Wheelers:

• Frame parts
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 • Diaphragm Assembly

• Aesthetic Parts

• Swing Arm

• Petrol Tank

• Chain Cover

• Scooter Wheel Rim

• Silencer Guard

• Steering Tube Assembly

• Front Fork Assembly

• Bonnet Reinforcement Assembly

• Center Stand Assembly

• Side Stand Assembly

• Foot Stand Assembly

♦ Tractors:

• Front Panel Assembly

• Front Grill

• Side Panel Assembly

♦ Passenger Cars:

• Mudguard Assembly

• Pillar Top

• Cross Member

• Steering House

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 • Engine Parts

♦ Engine Cross Members

♦ Alternator Bracket Assembly

♦ Push Rod Chamber Cover.

♦ Assemblies:

• FIP Bracket Assembly

• Tailgate Assembly

• Front Panel Assembly

♦ Tailgate Panel Assembly

• Rear Wheel Assembly

• Axle Brake Assembly

• Mudguard Front Assembly

3.6Major Customers:

15
ORGANISATION CHART

16
 4.LITERATURE SURVEY

4.1INTRODUCTION:

A financial statement is an organized collection of data according to

logical and consistent accounting procedures. Its purpose is to convey an understanding
of financial aspect of a business firm. It may show a position at a moment of time, as in
the case of an income statement.

On the basis of information provided in the financial statement,

management make a review of the progress of the company and decides the future course
of action. The annual report constitute one if the major vehicles of corporate financial
reporting to shareholder. It is, therefore, essential that these report are elaborate,
standardized in terms of accounting treatment and provides details for analysis and
understanding of corporate performance by the shareholder.

4.2DIFFERENT TYPES OF FINANCIAL STATEMENT:

1) PROFIT AND LOSS ACCOUNT:

Income statement is considered as very useful statement of all financial
statement. It depicts the expenses incurred on production, sales and distribution, sales
revenue and the not profit or loss account for a particular period.

2) BALANCE SHEET:
Balance sheet is a statement which shows the financial position of a business
as on a particular date. .It depicts the expenses incurred on production , sales and
distribution , sales revenue and the net profit or loss for a particular period .

3) PROFIT AND LOSS APPROPRIATION ACCOUNT:

It is a link between the income statement and the balance sheet.

4) FUND FLOW STATEMENT:

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 The fund flow statements describe the sources from which additional funds
were derived and the use to which these funds were put.

5) CASH FLOW STATEMENT:

A cash flow statement depicts the change in cash position from one period to
another. It shows the inflow and outflow of the cash.

6) SCHEDULES:

These are the statements which explain the item given in income statement
and balance.

4.3MEANING OF FINANCIAL STATEMENT ANALYSIS:

Financial statement analysis is defined as the process of identifying

financial strengths and weaknesses of the firm by properly establishing relationship
between the items of the balance sheet and the profit and loss account.

There are various methods or techniques that are used in analyzing financial
statements, such as comparative statements, schedule of changes in working capital,
common size percentages, funds analysis, trend analysis, and ratios analysis.

Financial statements are prepared to meet external reporting obligations and

also for decision making purposes. They play a dominant role in setting the framework of
managerial decisions. But the information provided in the financial statements is not an
end in itself as no meaningful conclusions can be drawn from these statements alone.
However, the information provided in the financial statements is of immense use in
making decisions through analysis and interpretation of financial statements.

Nature of financial statement Analysis: -

Financial Statement Analysis consist of the application of analytical tools and

techniques to the data in financial statements in order to derive from them measurements
and relationships that are significant and useful for decision making. The process of
financial analysis can be described in various ways, depending on the objectives to be

18
obtained. Financial analysis can be used as a preliminary screening tool in the selection of
stocks in the secondary market. It can be used as a forecasting tool for future financial
conditions and results. It may be used as a process of evaluation and diagnosis of
managerial, operating or other problem areas. Above all, financial analysis reduces
reliance on intuition, guesses and thus narrows the areas of uncertainty that is present in
all decision making processes. Financial analysis does not lesson the need for judgment
but rather establishes a sound and systematic basis for its rational application.

What is financial statement analysis?

Financial statements are means through which companies present their
financial situation to shareholders, creditors and general public.

Analysis of financial statement means finding out the current position of the company
through various tools like ratio analysis, fund flow analysis. It also involves comparing
the company figures with regard to industry standards or over a period of time.

Importance of the Financial Statement Analysis:

1) It helps in diagnosis of financial health of the firm for the management, creditors,
lending institutions and finally the investors.
2) It helps in evaluation of the financial performance of the company of past, present
and anticipated future.
3) It tries to identify the firm's financial strengths and weaknesses and provides the
essential foundation for financial decision making and planning.
4) Investors are guided in their decisions on the basis of analysis which helps them to
know the earnings potential of the company and the safety of their investments.
5) Lending organization is more interested in knowing whether the company would
be able to honor its financial commitments. Thus creditworthiness can be easily
judged through financial analysis.
6) It helps in judging the liquidity position and the solvency of the business
enterprise.

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Advantages of Financial Statement Analysis:

There are various advantages of financial statements analysis. The major

benefit is that the investors get enough idea to decide about the investments of their funds
in the specific company. Secondly, regulatory authorities like International Accounting
Standards Board can ensure whether the company is following accounting standards or
not. Thirdly, financial statements analysis can help the government agencies to analyze
the taxation due to the company. Moreover, company can analyze its own performance
over the period of time through financial statements analysis.

Although financial statement analysis is highly useful tool, it has two

limitations. These two limitations involve the comparability of financial data between
companies and the need to look beyond ratios.

4.4RATIO ANALYSIS
Ratio analysis is widely used-tool of financial analysis. It can be
used to compare the risk and return relationship of firms of different sizes. It is
defined as the systematic use of ratio to interpret the financial statements so that the
strength and weakness of the firm as well as its historical performance and current
financial condition can be determined. Trend ratios involve a comparison of the ratios
of a firm over time, that is, present ratios are compared with past ratios for the same
firm. The comparison of the profitability of a firm, say, year 1 through 5 is an
illustration of a trend ratio. Trend ratios indicate the direction of change in the
performance-improvement, deterioration or constancy over the years.

Ratio analysis is the process of determining and interpretation

mathematical relationship based on financial statement. The comparison of financial
ratios against the norms established helps to diagnosis the financial condition and
arrive at conclusions.

The comparison of financial ratios is done against the following:-

 Standard set
 Historical figures
 Inter-firm analysis (head hunting)

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 Ratio analysis is considered as a powerful tool of financial analysis
through which economic and financial position of the business can be fully X-rayed.
They provide a coordinated frame of reference for judging financial performance.
They convey the entire story of the ‘financial adventure’ of the enterprise. They
comprehend and simplify a heap of financial data through one particular figure which
conveys the complete meaning. They focus on the specific relationship in the
financial statements.

• Basis of comparison: -

Ratios are relative figures reflecting the relationship between

variables. This enables the analysis to draw conclusion regarding financial
operations. The use of ratio as a tool of financial analysis involves their comparison,
for a single ratio, like absolute figures, fails to reveal the true position. For example,

P /E ratio (price/earnings ratio for a particular script) should be compared over a

period of time to get a true picture of company performance.

Thus comparisons with related facts is the basis of ratio analysis

In ratio analysis, four types of comparisons are involved.

 Trend Ratio
 Inter firm comparisons
 Comparisons of items within a single year s financial statement of a firm.
 Comparisons with standard or plans

Uses of ratio analysis:-

 It helps to understand the efficiency and performance of the firm as a whole.

 Its main purpose is to gain insights into the operating and financial problems
confronting the firm.

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  It helps to identify the trouble or potential trouble spots of the firm. This would
impel the management to investigate those areas more thoroughly.
 It helps to pinpoint relationship that is not obvious from the financial statements.
 It helps to highlight the factors responsible for the present state of financial
statements.
 It helps the shareholders in evaluating the firm’s activities and policies that affect
the profitability, liquidity and ultimately the market price of the shares
 It helps to examine the adequacy of funds, the solvency of the firm and its ability to
meet the financial obligations as and when they become due.
 It is very useful in inter-firm and intra-firm analysis.
 A trend can be established by calculating ratios for number of years.

Limitations of ratio analysis:-

 There may be a difference between the inventory methods followed by

various firms or different method in the same firm.
 Firms follow various methods of depreciation.
 There may be a difference between the capital structures of the firms.
 Window dressing, which means artificially improving the financial
statements is another major drawback
 Inflationary factors are not taken into consideration. Thus when the past
performance is analyzed, the figures may have become outdated.

Classification of ratios:-

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  LIQUIDITY RATIOS:-

The importance of adequate liquidity is the ability of a firm to

meet current or short term obligations when they become due for payment can hardly
be overstressed. Liquidity is the prerequisite for the survival of the firm. A proper
balance between the two contradictory requirements, that is, liquidity and
profitability, is required for efficient financial management. Liquidity ratios indicate
the financial strength or solvency of a firm.

 PROFITABILTY RATIOS:-
The creditors, shareholders and management are eager to
measure its efficiency and financial soundness. The shareholders invest their funds in
the expectation of reasonable returns. The profitability ratios can be determined on the
basis of either sales or investments

 ACTIVITY RATIOS:-
Activity ratios are concerned with measuring the efficiency in asset
management. The efficiency with which the assets are used would be reflected in the
speed and rapidity with which the assets are converted into sales. The greater the rate of
conversion, the more efficient is the utilization of assets, other things being equal.

 MARKET VALUE RATIOS:-

Market Value ratios are those ratios which are measured by using
market value of the shares. This ratio is calculated to know the returns the
shareholders as compared to the amount invested in market value of the shares.

23
  CAPITAL STRUCUTRE:-
The long term lenders would judge the soundness of a firm on the
basis of the long term financial strength measured in terms of its ability to pay the
interest regularly as well as repay the installment of the principal on due dates. The
long term solvency is examined by the capital structure ratio

These ratios are further divided into:-

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25
 5] OBJECTIVE

5.1 PRIMARY OBJECTIVE

To study the Financial Statement Analysis.

5.2 SECONDARY OBJECTIVE

- To obtain a true insight into financial position of the company.

- To make comparative study of financial statements of different years.

- To study various ratios to determine the relationship of different factors which have
impact on the financial position of the company.

5.2 SCOPE:

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 The scope of ratio analysis is particularly relevant for interpreting financial
Statement. It is highly useful to the internal management, prospective investors, and
creditors and outside consultants for anlysing and interpreting the financial health of a
concern.

Ratio analysis gives the exact facts and figures of the financial position of the firm
which is very much help to take proper decisions and analyzing the financial statements
by various methods theoretical, statistical etc. for example, interested parties like debtors,
creditors, outsiders, shareholders etc.

Ratio analysis has some of the opportunities to make organization at right track.
Ratios are the arithmetical calculations of two figure which are to be useful to take proper
or correct decisions regarding financial planning of a firm. Ratio analysis has some of the
classifications which are as below which are showing the range of the ratio analysis:

1) Liquidity Ratios.
2) Turnover Ratios.
3) Solvency Ratios.
4) Profitability Ratios.
5) Overall Profitability Ratios .
6) Miscellaneous Ratios.

6.RESEARCH METHODOLOGY

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6.1Research: Introduction
Research is a purposive investigation of hypothetical propositions
. Research as a process involves defining and redefining problems, hypothesis formulation,
organizing and evaluating data, deriving deductions, inferences and conclusion, after
careful testing.
Research: Definition
“Research concerns itself with obtaining information empirical observation that can used to
systematically develop logically related propositions so as to attempt to establish casual
relationship among variables.”

-Black and Champion

Steps in Research Methodology:
Step 1: To decide Objective of the study
 Study the constituents and the concept of Financial Analysis and Review.
 Analyze and interpret Financial Position of the autoline indutriesLtd.
Step 2: To decide Research Design

 What is Research Design?

Research Design is a logical and systematic planning and directing of

piece of research. Research design attempts to integrate various aspects of research

study. Such as what, where, when, how, etc. It is a plan structure and strategy of

investigation.

Research Design used for project:

Descriptive Research:

Descriptive study determines the frequency of occurrence of phenomenon of interest or of

its association with something. Descriptive study narrates facts or characteristics. Descriptive
study often helps the researcher to do a lot of spade work and act as launch pads of further
researchers.

28
Descript studies usually employ the principle of sampling as they attempt to make certain
generalizations. They also provide valuable information for policy formulation (Annual Reports).

Characteristics:
 They are well structured.
 The approach cannot be changed every now and then.
 Primary data is collected.

- Exploratory Research:
Exploratory design aims at discovering more about various dimensions of the research
\ problem and associated aspects. The first level of exploratory research aims at discovery
of significant variables involved in the situation. The second level focuses on relationship
among variables.

Characteristics:
 Focus is to discover ideas.
 Based on secondary data.
 Researcher has to change his focus depending on the availability of new ideas.
Step 3: To determine Sources of Data
What are Sources of Data?
A data source is used to carry out or research or to collect fresh data for obtaining results.
There are two sources of data:
 Primary Data
 Secondary Data
6.2 Primary Data: Data that is collected for the specific purpose at hand is Primary Data.
Characteristics:
 It is expensive mode of data collection.
 Lot of time is spent.
 It gives accurate results if sample is efficiently selected.
 Data used is original in nature.

29
Primary data sources used in this project:
 Observation Method
 Questionnaire Method

6.3 Secondary Data: Data that has been collected earlier for some purpose other than the
purpose for present study.
Characteristics:
 It is economical as the cost of collecting original data is saved.
 Time involved is comparatively less than primary data.
Secondary data sources used in this project:
 Books
 Journals
 Website of Company

Step 4: To design Data Collection Forms

There are three types of modes to collect data:
 Observatory Method
 Survey Method
 Questionnaire Method
As far as my data collection method is concerned used ‘Observational Method’ initially
and survey method was used for the study of project.

Step 5: To determine Sampling Design

Sampling is the process of obtaining information about an entire population by examining
only part of it.
The items selected constitute what is technically called as Sample.
Their selection process or technique is called as Sample Design.
Survey conducted on the basis of sample is Sample Survey.

30
Step 6: To organize and conduct field survey
The survey was done with the help of non-structured questionnaire, by interviewing the
Corporate Manager to get the feedback.

Step 7: To Process and Analyze collected data

The study and access of the Financial Position of the company as well as the procedure of
the Treasury Management process data collected by survey.

Step 8: To prepare Research Report

The culmination of the entire research process is “Research Report.”
Definition:
“To convey to the interested persons the whole result of the study in sufficient detail and so
arranged as to enable each reader to comprehend the data and to determine for himself the
validity of conclusions.:
-American Marketing Society.

The research report has been prepared according to the report writing principles. I have
tried my best to maintain the objectivity, coherence and clarity in the presentation of the
ideas. The essence of good report is that it effectively communicates its research findings.

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  LIQUIDITY RATIOS:-

CURRENT RATIO :-
CURRENT ASSETS
CURRENT RATIO = -----------------------------
CURRENT
LIABILITIES

Rs. In millions
Table no :1

YEAR 2006 2007 2008 2009 2010

CURRENT 228.43 789.400 1042.53 1784.86 2148.83

ASSETS

CURRENT 142.72 298.92 582.84 858.59 1006.07

LIABILITIES

RATIO 1.60 2.62 1.78 2.07 2.13

Graph no :1

INTERPRETATION :This ratio indicates the solvency of the company. It shows

the proportion of current assets to current liabilities. Normally, it is expected that current
ratio should be 2: 1, which indicates that current assets should be twice as compared to
current liabilities. In 2007,2009,2010 current ratio is more than ideal ratio and 2006
&2008 less than ideal ratio.

PROPREITORY RATIOS :-

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 PROPREITORY FUNDS
PROPREITORY RATIO=
------------------------------------
TOTAL ASSETS

Rs. In millions
Table no :2
YEAR 2006 2007 2008 2009 2010

PROPREI 35.12 1177.97 1251.81 1490.49 122.49

TORY
FUNDS
TOTAL 53.87 1717.51 3750.54 4855.31 552.26
ASSETS
RATIO 0.65 0.68 0.33 0.30 0.22

Graph no:2

Propreitory Ratio

0.8
Propreitory Ratio
0.7
0.6
Ratio
0.5

0.4

0.3

0.2
0.1

0
2006 2007 2008 2009 2010

Year

INTERPRETATION :
This ratio indicates the proportion of proprietors funds used for
financing the total assets. Ideally 2/3rd of assets should be financed through proprietors’
funds while balance should be financed through borrowed funds. In 2008,2009 and 2010
the ratio is favorable but in 2006, and 2007 the ratio is quite high hence the firm is not
using external funds adequately.

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 CURRENT ASSETS TO FIXED ASSETS :-

CURRENT ASSETS
CURRENT ASSETS TO FIXED ASSETS =
-----------------------------

FIXED ASSETS

Table no :3 Rs. In millions

Graph no:3
YEAR 2006 2007 2008 2009 2010

CURRENT 189.49 789.40 1042.53 1784.86 2148.83

ASSETS
FIXED 463.62 9263.54 2567.83 2845.23 3129.90
ASSETS
RATIO 0.40 0.85 0.41 0.62 0.68

INTERPRETATION :
This ratio indicates the proportion of current assets to fixed assets. Current
assets are held for short-term purpose while fixed assets are held for long-term purpose.
In 2006, 2007, 2008,2009 and 2010 current assets are not more than fixed assets it
enhance the earning capacity of the firm.

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 PROFITABILITY RATIOS :-

GROSS PROFIT RATIO :-

GROSS PROFIT
GROSS PROFIT RATIO = ------------------------ x 100
NET SALES

Table no:4 Rs. In millions

YEAR 2006 2007 2008 2009 2010

GROSS 115.67 261.57 491.14 290.56 545.01

PROFIT
NET 967.05 1868.37 3412.77 3504.57 4510.64
SALES
RATIOS 11.96% 13.99% 14.39% 8.29% 12.08%

Graph no:4

INTERPRETATION :
This ratio shows the margin left after meeting the purchase and
manufacturing costs. It measures the efficiency of production as well as pricing. A high
gross profit ratio means a high margin for covering other expenses like administrative,
selling and distribution expenses. In 2006 gross profit is less which increased in 2007 and
again came slight downward in 2009 and 2010 which should be increased.

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 NET PROFIT RATIO:-

NET PROFIT

NET PROFIT RATIO = -------------------- x 100

NET SALES

Table no:5
Rs. In millions
YEAR 2006 2007 2008 2009 2010

NET 70.12 151.97 316.72 66.24 216.96

PROFIT
NET 967.05 1868.37 3412.77 3504.57 4510.64
SALES
RATIO 7.25% 8.13% 9.28% 1.89% 4.81%

Graph no:5

INTERPRETATION : This ratio shows the earnings left for share-holders as

percentage of net sales. It measures the overall efficiency of all the functions of business
firm like production, administrative, selling, financing, pricing, tax management etc.
Higher the ratio the better it is because it gives an idea of overall efficiency of the firm.
As we see the trend in this ratio it is decreased from 2009.in this year sales for the
company is very less as compared to 2008 & 2010 and ultimately reduction in the profit.

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 OPERATING NET PROFIT RATIO :-
OPERATING
NET PROFIT
OPERATING NET PROFIT RATIO =
------------------------------------- x 100

SALES

Table no :6 Rs. In millions

YEAR 2006 2007 2008 2009 2010

OPERATING 57.92 54.62 129.69 173.67 200.6

NET PROFIT
SALES 967.054 1868.37 3412.77 3504.57 4510.64

RATIO 5.99% 2.92% 4.09% 4.95% 4.44%

Graph no:6

INTERPRETATION :
This ratio establishes the relationship between the net sales and the
operating net profit. Operating net profit is the profit arising out of business operations
only. Higher the ratio the better it is because it gives an idea of overall efficiency of the
firm. In 2006 the ratio is highest but in 2007, 2008,2009 and 2010 it should be increased
to increase the profitability.

37
 OPERATING RATIO:-
COST OF GOODS
SOLD+OPERATING EXPENSES
OPERATING RATIO =
------------------------------------------------------------------ x 100
NET
SALES

Table no :7 Rs. In millions

YEAR 2006 2007 2008 2009 2010

COST OF 852.22 1572.63 2767.49 2998.02 3642.6

GOODS
SOLD+OPER
ATING
EXPENSES
NET SALES 967.05 1868.63 3412.77 3504.57 4510.64

RATIO 88.10% 84.17% 81.09% 85.54% 80.75%

Graph no;7

INTERPRETATION :
This ratio indicates the proportion of cost of goods sold and operating
expenses to net sales. The higher the ratio lower margin is left for operating profit hence

38
the ratio should be low. This ratio can be further analyzed to find out the percentage of
each type of expenses to sales

RETURN ON CAPITAL EMPLOYED:-

EBIT
RETURN ON CAPITAL EMPLOYED =
----------------------------- x 100

CAPITAL EMPLOYED

Table no :8 Rs. In millions

YEAR 2006 2007 2008 2009 2010

EBIT 215.82 239.40 440.97 88.92 266.65

CAPITA 115.68 1030.64 1669.96 2133.36 2268.23
L
EMPLOY
ED
RATIO 18.66% 23% 26% 4% 12%

Graph no ;8

INTERPRETATION :
This ratio indicates the percentage of earnings before interest and tax to
total capital employed. This ratio is considered to be very important because it reflects the
overall efficiency with which capital is used. This ratio is highest in 2008as compared to

39
2006, 2007,2009 and 2010.In 2008 capital employed uses optimum level.basicaly this
ratio find out to compared other business firm.

NOTE: EBIT - EARNINGS BEFORE INTEREST & TAXES.

RETURN ON TOTAL ASSETS:-

NET
PROFIT AFTER TAX
RETURN ON TOTAL ASSETS =
-------------------------------------- x 100

TOTAL ASSETS
Table no:9 Rs. In millions

YEAR 2006 2007 2008 2009 2010

NPAT 70.12 151.97 316.72 66.24 216.96

TOTAL 53.87 1715.75 3610.36 4630.10 5278.73

ASSETS
RATIO 1.30% 8.89% 8.65% 1.43% 4.11%

Graph no :9

INTERPRETATION :

40
Returns on assets crudely reflect how well the firm uses its assets in total. The higher the
ratio is favorable as it indicates that the firm is utilizing its assets profitably. In 2006 &
2009 company low utilized assets profitably and In2007,2008,2010 company more
utilized assets profitably.

EARNINGS PER SHARE:-

OWNERS
EARNINGS
EARNINGS PER SHARE =
-----------------------------------
NO. OF EQUITY
SHARES
Table no :10 Rs. In millions

YEAR 2006 2007 2008 2009 2010

OWNERS 81.05 117.79 125.18 149.04 122.04

EARNINGS

NO. OF 6.94 10.95 10.95 12.20 12.20

EQUITY
SHARES

RATIO 11.67 10.75 11.42 12.21 10

Graph no:10

41
INTERPRETATION: It indicates the amount of profit distributed among the
share holders. Higher ratio indicates the higher return on equity. Market price of the
company’s shares is directly proportional to earnings per share of the company. In the
above chart it shows consistency except the last year.

DIVIDEND PER SHARE:-

PROPOSED
DIVIDEND
DIVIDEND PER SHARE =
-----------------------------------
NO. OF EQUITY
SHARE
Table no :11 Rs. In millions

YEAR 2006 2007 2008 2009 2010

PROPOSED 13.31 24.25 71.39 14.27 28.55

DIVIDEND

NO. OF 6.94 10.95 10.95 12.20 12.20

EQUITY
SHARES

RATIO 92.37 265.53 781.72 174.09 348.31

Graph no: 11

42
 INTERPRETATION:
This ratio indicates the dividend declared per share. This ratio should high as
it indicates the returns to the shareholders. In the above chart dividend per share is highest
in 2008 as compared to 2006, 2007, 2009 and 2010

DEBTORS TURNOVER RATIO:-

CREDIT SALES
DEBTORS TURNOVER RATIO =
-----------------------------------------
AVERAGE
ACCOUNTS RECEIVABLE

Table no :12 Rs. In millions

Graph no:12
YEAR 2006 2007 2008 2009 2010

CREDIT 141.99 2133.32 3814.49 3831.57 4747.46

SALES

AVERAGE 18.98 113.25 394.97 487.69 802.20

DEBTORS

RATIO 7.48 18.83 0.97 7.86 5.92

43
 Debtors Turnover Ratio

20
18 Debtors Turnover Ratio
16
14
Ratio
12
10
8
6
4
2
0
2006 2007 2008 2009 2010

Year

INTERPRETATION :This ratio indicates that the total credit given to the customers.

1) In the year 2007 ratio increased by 94.27 % because the credit given to the
customer was higher.
2) In the year 2008 it goes down by 281.72 % therefore it was not favorable for the
organization.
DEBTORS COLLECTION PERIOD:-
12MONTHS
DEBTORS COLLECTION PERIOD =
-------------------------------------
DEBTORS
TURNOVER RATIO

Table no :13 Rs. In millions

YEAR 2006 2007 2008 2009 2010

MONTHS 12 12 12 12 12

DEBTORS 7.48 18.83 0.97 7.86 5.92

TURNOVER
RATIO

DEBTORS 1.66 0.63 12.37 1.52 2.02

COLLECTION
PERIOD

Graph no ;13

44
INTERPRETATION :
This ratio indicates the efficiency of the firm in collecting its
receivables from its customers to whom the firm has sold on credit. It also indicates how
quickly the debtors are turned into cash. The higher the ratio lower is the collection
period, on the other and lower the ratio higher will be the collection period. In the above
charts the debtors turnover ratio should be increased to reduce the collection period.

CREDITORS TURNOVER RATIO: -

CREDIT PURCHASES
CREDITORS TURNOVER RATIO =
--------------------------------------------
AVERAGE
ACCOUNTS PAYABLE
Table no:14 Rs. In millions

YEAR 2006 2007 2008 2009 2010

CREDIT 86.24 1224.91 2044.16 2098.04 2700.05

PURCHASES

AVERAGE 24.19 160.75 380.55 757.33 847.84

CREDITORS

RATIO 3.56 7.62 5.37 2.77 3.18

Graph no :14

45
INTERPRETATION :

This ratio indicates the credit period allowed by the creditors to the firm.

1) In the year 2007 the ratio was increased suddenly because the credit purchases
was increased as double of average creditors. Therefore the ratio was favorable for
the organization .

CREDITORS PAYMENT PERIOD:-

12MONTHS
CREDITORS PAYMENT PERIOD =
--------------------------------------------
CREDITORS
TURNOVER RATIO
Table no :15 Rs. In millions

Graph no :15

46
YEAR 2006 2007 2008 2009 2010

MONTHS 12 12 12 12 12

CREDITORS 3.56 7.62 5.37 2.77 3.18

TURNOVER
RATIO
CREDITORS 3.37 1.57 2.23 4.33 3.77
PAYMENT
PERIOD

INTERPRETATION : The Creditors Turnover Ratio indicates the credit

period allowed by the creditors to the firm. A high turnover ratio indicates that the
payment to the creditors is quite prompt but it also implies that the firm is not taking full
advantage of the credit allowed by the creditors. A lower ratio indicates that there is not
much promptness in payment made to creditors and needs to be improved. In the above
charts creditors turnover ratio and creditors payment period is favorable for the firm.

SALES TO CAPITAL EMPLOYED :-

NET SALES
SALES TO CAPITAL EMPLOYED =
-------------------------------
CAPITAL
EMPLOYED
Table no :16 Rs. In millions

47
YEAR 2006 2007 2008 2009 2010

NET SALES 144.56 1868.37 3412.77 3504.57 4510.64

CAPITAL 25.91 1030.64 1871.89 2513.76 2655.56

EMPLOYED

RATIO 5.57 1.81 1.82 1.40 1.76

Graph no :16

INTERPRETATION : It indicates the frequency with which

sales are generated in relation to capital employed. Higher the ratio, the better it is as it
will indicate better utilization of capital employed, which will result in higher amount of
turnover. In the above chart the ratio should be increased.
NOTE: -NET SALES= TOTAL SALES – RETURN INWARD

CAPITAL EMPLOYED = SHARE HOLDERS FUNDS + LONG TERM

LIABILITY

 CAPITAL STRUCTURE RATIOS:-

CAPITAL GEARING RATIO:-

FIXED CHARGES
BEARING SECURITIES
CAPITAL GEARING RATIO =
-----------------------------------------------------
48 EQUITY
SHAREHOLDERS FUNDS
 Table no :17 Rs. In millions

YEAR 2006 2007 2008 2009 2010

INTEREST 1.15 22.16 50.16 80.25 110.08

EQUITY 32.12 117.79 125.18 149.09 122.04

SHAREHOLD
ERS FUNDS
RATIO 0.035 0.18 0.40 0.53 0.90

Graph no :17

INTERPRETATION :
This ratio indicates the proportion between fixed charge bearing securities
and equity capital. A firm raises finance through owned funds and borrowed funds. A
firm will be considered to be highly geared, if the major portion of total capital is raised
through fixed charges bearing securities. In the above chart the ratio should be increased.

DEBT-EQUITY RATIO:-
LONG-TERM
DEBT
DEBT-EQUITY RATIO =
---------------------------------
SHARE-
HOLDERS FUNDS
49
Table no :18 Rs. In millions

YEAR 2006 2007 2008 2009 2010

LONG- 71.30 288.56 806.82 1039.52 1530.54

TERM
DEBT

SHARE- 351.29 117.79 125.18 149.04 122.04

HOLDERS
FUNDS

RATIOS 0.20 2.44 6.44 6.97 12.54

Graph no :18

INTERPRETATION : This ratio indicates the proportion of borrowed funds to

proprietor’s funds. Ideally this ratio should be 2:1 which means that the debt should be
twice the owned capital, if it is less than 2:1 will indicate that firm is not taking any risk.
As Debt Equity Ratio is less than the ideal ratio hence it is advisable to increase this ratio
to be in a more favorable position.

OBSERVATION & FINDING

50
OBSERVATION

-Form the overview the financial position of the company seems to be a good.

- The financial results shown by the company is at the satisfactory level as per company.

-In adequate policy of average collection period from debtors and average payment to
creditors

FINDING

-According to the current ratio we can observe that solvency of the company is good in
the year 2007 as compared to all other years.

-According to the net profit ratio we can see that the efficiency of the firm in the year
2009 is decreased as compared to the all years

-The company sales increase and expenditure decreased, this helped to improve its
profitability as well as earning per share. The EPS ratio shows that the performance of the
company.

-The capital gearing ratio indicates the capital generation for the company, and it
indicates that there is steady increase y-o-y.

LIMITATIONS

The analysis in all the research programmers’ and conclusion are extremely crucial.
Therefore, earnest of efforts were made to extract the true information and present them

51
in a comprehensive manner, yet the findings are tied up within the following boundaries:
-

 As our project is based on the data recorded by the company, we face the
limitation of extracting that particular data because our access is limited for the
sake of confidential information of the company.

 The grouping of different items in the balance sheet also created hindrances, as it
is very difficult to identify which item is clubbed with which head. But thanks to
finance personal who made it easy to understand these clubbing.

 The interpretation of finanacial statement have been completed with the help of
ratio analysis.

CONCLUSION

52
 After the analytical study of financial statements i.e. Balance Sheet I have
come to the conclusion that analysis of financial statement is very important for any
business organisation. As it reveals the financial position of the company, which is very
useful for different interested parties like Investors, & Government etc.

 The business environment of the company is reasonably good. The company s track
record is always oriented towards profitable growth and with strong fundamentals.

 The financial position of the company has improved year by year

 The company is heading towards becoming a Debt free company by repaying its high
cost debts which is reducing its indirect expenses.
 Company’s sales are increasing year by year this way company in profit. So company
is showing its right financial position or maintaining the right investment of its
money.

SUGGESTION

53
 It is advisable to the company to increase its current ratio to be in a
favorable position

 Considering the cash management the company should maintain a cash

flow budget every year, considering monthly or quarterly. During the
preparation of the cash budget the credit period should be below 90 days
allowed to the customer.

 Considering the inventory management, there should be a fast movement

of inventory, by taking efforts in increment of the sales.

BIBLIOGRAPHY

54
 FINANCE MANAGEMENT by I.M. PANDEY, VIKAS PUBLICATIONS.

 FINANCIAL MANAGEMENT by N.M.VECHALALEKAR,NIRALI PRAKASHAN

 RESEARCH METHODOLOGY by C.R.KOTHARI

 ANNUAL REPORT OF COMPANY

 WWW.AUTOLINEIND.COM.

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