Chapter 1

1.1Compa ny Profile
Name of Organisation:Kiran Machine Tools Ltd.(KMT)

KMT

Registed Office:-

6,Dhake Colony, Jilha Peth, Jalgaon 425001

Plant:-

I-1, MIDC Area, Ajanta Road,Jalgoan 425003

Telphone Number:-

91-0257-2211989

Fax:-

91-0257-2212869

Email ID:-

kmtlindia@sancharnet.in, chetarc@gmail.com

Website:-

www.kmtsprings.com

Nature of Production:-

All types of springs and tools required for automobile brakes.

1.2 Corporate Profile

Kiran Machine Tools Limited (KMT) believes

KMT
in delivering

performance to the Best level By maintaining top-notch quality product and service in consistent manner. That is way Kiran machine Tools Ltd team today is trusted by global brands such as Honda, Bosch, Renault, and Maruti etc. Till date, we have materialized our reputation by careful selection of material, state of the art production facility, continuous monitoring of production process, qualified and experience team, ISO9001 quality control procedures and our persistence to deliver customer satisfaction to the fullest extent. Ours is a public limited Company established in the year 1995, by founder and managing director Dr.Ramesh B Chaudhari (BE-Mech,UNO Hon

Doctorate) who has over thirty year of experience in engineering industry and is distinguished by many prestigious awards including International Quality

Excellence award by International Business Prod forum, India and many other KMTs highly professional and technocrat engineers team today is managing supply of 2,000,000 qty per month involving over three hundred spring designs on Direct Online (DOL) basis to existing customer, Recent addition of Mr. Chetan R Chaudhari as executive director (BE-Mech, MS-USA), who has received outstanding academic achievement award from IIT Chicago and having three years of experience as design engineer in USA, has further consolidated the promise for growth and companys ability to provide quality solutions. We are ISO 9001-2000 company manufacturing highly precision products. Our company is located on state high way at Jalgaon, Maharashtra, India, comprising Plot area 16225sq.m and built up area 1226.20sq.m in green environment. There are two major divisions:

I. II.

Springs Division: Tool Room Division.

KMT

I.

In Spring Division we are manufacturing all types of spring required for automobile brakes & for other assembly, Railways etc.

II.

A) In Tool Room Division we are manufacturing Die Pillar sets required for thermoplastics machine which are used to manufacture (use and throw ) cups, dish and containers for food packaging. B) Jig fixtures, gauges and SPM.

SPRING DIVISION:
In spring division, we are manufacturing compression, tension, torsion springs ranging from 0.2-8.0 mm used for applications such as two , three and four wheelers automobile brakes, rail ways, automobile suspension etc. we are sole suppliers to BOSCH CHASSIS SYSTEM INDIA LTD, Jalgaon and BOSCH CHASSIS SYSTEM INDIA LTD Chakan, Pune where in these brakes are used as OEM by automobile manufacturers like Maruti Udyog Ltd , M & M, Tata Motors, Bajaj Auto & Honda Motors etc. Our springs are supplied to BOSCH CHASSIS SYSTEM INDIA LTD on Direct Online (DOL) basis. We are also proud to inform you that our springs have been already approved by world leaders such as BOSCH-JAPAN and HONDA meeting their stringent quality norms. General Motors is also using our springs for Panther vehicle, after performing extensive testing and inspections, our springs etc. We have achieved the 100% schedule and 99.8% Vendor Rating with our existing suppliers. It demonstrates our commitment to Quality and timely service. For spring our sales is increasing by more than 25% every year. We are keen to collaborate with Multinational Company for spring production and marketing. Because of our in spring manufacturing, today we are sole supplier to BOSCH CHASSIS SYSTEM INDIA LTD. Very soon we are expanding our OEM customer base we are keen to be one of the national and international players, and feel confident to achieve our goals with key tools such as expert team, quality and cost advantage.

KMT
TOOL ROOM DIVISION:
In Tool room division we manufacture Die Piller Sets, Jigs, Fixtures, Gauges special purpose machines etc. we are a major supplier of M/s Wonder pack industries Pvt. Ltd. who has collaborated with American firm M/s IRWIN and is growing its markets very fast globally. The products of these machines are used in various applications such as Cups and Mugs Dishes and packaging Industries. There is a tremendous demand for these machine in India as well as overseas. We have supplied jigs, fixtures to M/s Bajaj Auto Ltd and attained 100% vendor rating. As we have now developed the skill and expertise for manufacturing world class quality spring fixtures, gauges and die sets and we feel confident to serve our customers to the global level.

EXPANSION PLANS:
Soon we are expanding our OEM customer base by implementing infrastructure, latest machinery and testing equipments to full fill the customer needs.

KMT
Valuable Customer:
1. BOSCH CHASIS SYSTEMS INDIA LTD.JALGAON 2. BOSCH CHASIS SYSTEMS INDIA LTD.CHAKAN 3. BOSCH CHASIS SYSTEMS INDIA LTD.MANESAR 4. BOSCH CHASIS SYSTEMS INDIA LTD.SITARGANJ 5. KBX MOTORBIKE 6. DEVLAL FLOWTECH, PUNE 7. VIRGO, PUNE 8. MODERN THERMOPLASTICS , MUMBAI 9. SUPRAJIT ENGINEERING , PUNE 10. JAIN IRRIGATION SYSTEMS LTD. 11. TATA AUTOCAMP SYSTEMS, PUNE 12. INDIAN RAILWAYS 13. WONDER PACK INDUSTRIES PVT LTD NASIK 14. BAJAJ AUTO AURANGABAD 15. SPECTRUM FABRICATORS

KMT
HIGHLIGHTS
y y

Almost 60% Vehicles in India are using our springs in their brake systems Honda, General motors, Renault, Toyota, Maruti-Suzuki, Tata, Bajaj, Piaggio, M&M , Railways etc. are our producers and users.

y y

Supplying on DOL (Direct Outline) basis to BOSCH Honored byGovt. Of India Ministry of company affairs with Quality Excellence Award, Hon.Doctiratr by UNO-Colombo Etc

y y y

Producing world class quality springs meeting BOSCH (global) norms. Fast product developments due toInhouse Standard Tool room setup Also Manufacturing Value springs, rectangular wire springs, SS springs etc.

KMT
Chapter 2 2.1Objective Of The Study

The major objectives of the resent study are to know about financial strengths and weakness of Kiran Machine Tools Ltd. through FINANCIAL RATIO ANALYSIS.

The main objectives of resent study aimed as :

To evaluate the performance of the company by using ratios as a yardstick to measure the efficiency of the company. To understand the liquidity, profitability and efficiency positions of the company during the study period. To evaluate and analyze various facts of the financial performance of the company. To make comparisons between the ratios during different periods.

OBJECTIVES
1. To study the present financial system of company. 2. To determine the Profitability, Liquidity Ratios. 3. To analyze the capital structure of the company with the help of Leverage ratio. 4. To offer appropriate suggestions for the better performance of the organization

KMT
2.2RESEARCH METHODOLOGY

The information is collected through secondary sources during the project. That information was utilized for calculating performance evaluation and based on that, interpretations were made.

Sources of secondary data:

1. Most of the calculations are made on the financial statements of the company provided statements. 2. Referring standard texts and referred books collected some of the information regarding theoretical aspects. 3. Method- to assess the performance of the company method of observation of the work in finance department in followed.

KMT
2.3LIMITATION OF THE STUDY

1. The study provides an insight into the financial, personnel, marketing and other aspects of Kiran Machine Tools. Every study will be bound with certain limitations. 2. The below mentioned are the constraints under which the study is carried out. 3. One of the factors of the study was lack of availability of ample information. Most of the information has been kept confidential and as such as not assed as art of policy of company. Time is an important limitation. The whole study was conducted in a period of 60 days, which is not sufficient to carry out proper interpretation and analysis.

2.4 RATIO ANALYSIS

FINANCIAL ANALYSIS

KMT

Financial analysis is the process of identifying the financial strengths and weaknesses of the firm and establishing relationship between the items of the balance sheet and profit & loss account. Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. The information in the statements is used by
y

Trade creditors, to identify the firms ability to meet their claims i.e. liquidity position of the company.

Investors, to know about the present and future profitability of the company and its financial structure.

Management, in every aspect of the financial analysis. It is the responsibility of the management to maintain sound financial condition in the company.

10

KMT
RATIO ANALYSIS
The term Ratio refers to the numerical and quantitative relationship between two items or variables. This relationship can be exposed as
y y y

Percentages Fractions Proportion of numbers Ratio analysis is defined as the systematic use of the ratio to interpret

the financial statements. So that the strengths and weaknesses of a firm, as well as its historical performance and current financial condition can be determined. Ratio reflects a quantitative relationship helps to form a quantitative judgment.

STEPS IN RATIO ANALYSIS

y

The first task of the financial analysis is to select the information relevant to the decision under consideration from the statements and calculates appropriate ratios.

To compare the calculated ratios with the ratios of the same firm relating to the pas6t or with the industry ratios. It facilitates in assessing success or failure of the firm.

Third step is to interpretation, drawing of inferences and report writing conclusions are drawn after comparison in the shape of report or recommended courses of action.

11

KMT
BASIS OR STANDARDS OF COMPARISON
Ratios are relative figures reflecting the relation between variables. They enable analyst to draw conclusions regarding financial operations. They use of ratios as a tool of financial analysis involves the comparison with related facts. This is the basis of ratio analysis. The basis of ratio analysis is of four types.
y y

Past ratios, calculated from past financial statements of the firm. Competitors ratio, of the some most progressive and successful competitor firm at the same point of time.

y y

Industry ratio, the industry ratios to which the firm belongs to Projected ratios, ratios of the future developed from the projected or pro forma financial statements

NATURE OF RATIO ANALYSIS

Ratio analysis is a technique of analysis and interpretation of financial statements. It is the process of establishing and interpreting various ratios for helping in making certain decisions. It is only a means of understanding of financial strengths and weaknesses of a firm. There are a number of ratios which can be calculated from the information given in the financial statements, but the analyst has to select the appropriate data and calculate only a few appropriate ratios. The following are the four steps involved in the ratio analysis.
y

Selection of relevant data from the financial statements depending upon the objective of the analysis.

y y

Calculation of appropriate ratios from the above data. Comparison of the calculated ratios with the ratios of the same firm in the past, or the ratios developed from projected financial statements or the ratios of some other firms or the comparison with ratios of the industry to which the firm belongs.
12

KMT
INTERPRETATION OF THE RATIOS
The interpretation of ratios is an important factor. The inherent limitations of ratio analysis should be kept in mind while interpreting them. The impact of factors such as price level changes, change in accounting policies, window dressing etc., should also be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in the following ways.
y y y y y

Single absolute ratio Group of ratios Historical comparison Projected ratios Inter-firm comparison

GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS

The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines or factors may be kept in mind while interpreting various ratios are
y y y y y

Accuracy of financial statements Objective or purpose of analysis Selection of ratios Use of standards Caliber of the analysis

13

KMT
IMPORTANCE OF RATIO ANALYSIS
y y y y y y y y y

Aid to measure general efficiency Aid to measure financial solvency Aid in forecasting and planning Facilitate decision making Aid in corrective action Aid in intra-firm comparison Act as a good communication Evaluation of efficiency Effective tool

LIMITATIONS OF RATIO ANALYSIS

y y y y y y y y y y

Differences in definitions Limitations of accounting records Lack of proper standards No allowances for price level changes Changes in accounting procedures Quantitative factors are ignored Limited use of single ratio Background is over looked Limited use Personal bias

14

KMT
CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only. There are different parties interested in the ratio analysis for knowing the financial position of a firm for different purposes. Various accounting ratios can be classified as follows: 1. Traditional Classification 2. Functional Classification 3. Significance ratios

1. Traditional Classification
It includes the following.
y

Balance sheet (or) position statement ratio: They deal with the relationship between two balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items must, however, pertain to the same balance sheet.

Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship between two profit & loss account items, e.g. the ratio of gross profit to sales etc.,

Composite (or) inter statement ratios: These ratios exhibit the relation between a profit & loss account or income statement item and a balance sheet items, e.g. stock turnover ratio, or the ratio of total assets to sales.

2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios and profitability ratios.

15

KMT

3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and secondary ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios that support the primary ratio are called secondary ratios.

IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE

1. Liquidity ratio 2. Leverage ratio 3. Activity ratio 4. Profitability ratio

16

KMT
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes due. The short term obligations of a firm can be met only when there are sufficient liquid assets. The short term obligations are met by realizing amounts from current, floating (or) circulating assets The current assets should either be calculated liquid (or) near liquidity. They should be convertible into cash for paying obligations of short term nature. The sufficiency (or) insufficiency of current assets should be assessed by comparing them with short-term current liabilities. If current assets can pay off current liabilities, then liquidity position will be satisfactory. To measure the liquidity of a firm the following ratios can be calculated
y y y

Current ratio Quick (or) Acid-test (or) Liquid ratio Absolute liquid ratio (or) Cash position ratio

17

KMT
(a) CURRENT RATIO:
Current ratio may be defined as the relationship between current assets and current liabilities. This ratio also known as Working capital ratio is a measure of general liquidity and is most widely used to make the analysis of a short-term financial position (or) liquidity of a firm.

Current assets Current ratio = Current liabilities

Components of current ratio CURRENT ASSETS

Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses

CURRENT LIABILITIES
Outstanding or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

18

KMT
(b) QUICK RATIO
Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid if it is converted into cash within a short period without loss of value.

Quick or liquid assets Quick ratio = Liquid liabilities

Components of quick or liquid ratio QUICK ASSETS

Cash in hand Cash at bank Bills receivable Sundry debtors Marketable securities Temporary investments

CURRENT LIABILITIES
Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable

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KMT
(c) ABSOLUTE LIQUID RATIO
Although receivable, debtors and bills receivable are generally more liquid than inventories, yet there may be doubts regarding their realization into cash immediately or in time. Hence, absolute liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude even receivables from the current assets and find out the absolute liquid assets.

Absolute liquid assets Absolute liquid ratio = Absolute liquid liabilities

Absolute liquid assets include cash in hand etc. The acceptable forms for this ratio is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are considered to pay Rs.2 worth current liabilities in time as all the creditors are nor accepted to demand cash at the same time and then cash may also be realized from debtors and inventories.

Components of Absolute Liquid Ratio ABSOLUTE LIQUID ASSETS

Cash in hand Cash at bank Interest on Fixed Deposit

CURRENT LIABILITIES
Out standing or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income tax payable

20

2. LEVERAGE RATIOS

KMT

The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations. Accordingly, long term solvency ratios indicate firms ability to meet the fixed interest and costs and repayment schedules associated with its long term borrowings. The following ratio serves the purpose of determining the solvency of the concern.
y

Proprietory ratio

(a) PROPRIETORY RATIO

A variant to the debt-equity ratio is the proprietory ratio which is also known as equity ratio. This ratio establishes relationship between share holders funds to total assets of the firm.

Shareholders funds Proprietory ratio = Total assets

SHARE HOLDERS FUND

Share Capital Reserves & Surplus

TOTAL ASSETS
Fixed Assets Current Assets Cash in hand & at bank Bills receivable Inventories Marketable securities Short-term investments Sundry debtors Prepaid Expenses

21

3. ACTIVITY RATIOS

KMT

Funds are invested in various assets in business to make sales and earn profits. The efficiency with which assets are managed directly effect the volume of sales. Activity ratios measure the efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are also called Turn over ratios because they indicate the speed with which assets are converted or turned over into sales.
y y y y

Working capital turnover ratio Fixed assets turnover ratio Capital turnover ratio Current assets to fixed assets ratio

22

(a) WORKING CAPITAL TURNOVER RATIO

KMT

Working capital of a concern is directly related to sales.

Working capital = Current assets - Current liabilities

It indicates the velocity of the utilization of net working capital. This indicates the no. of times the working capital is turned over in the course of a year. A higher ratio indicates efficient utilization of working capital and a lower ratio indicates inefficient utilization. Working capital turnover ratio=cost of goods sold/working capital.

Components of Working Capital CURRENT ASSETS

Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses

CURRENT LIABILITIES
Outstanding or accrued expenses Bank over draft Bills payable Short-term advances Sundry creditors Dividend payable Income-tax payable

23

(b) FIXED ASSETS TURNOVER RATIO

KMT

It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets.

Sales Fixed assets turnover ratio = fixed assets

Cost of Sales = Income from Services

Fixed Assets = Fixed Assets - Depreciation

24

(c) CAPITAL TURNOVER RATIOS

KMT

Sometimes the efficiency and effectiveness of the operations are judged by comparing the cost of sales or sales with amount of capital invested in the business and not with assets held in the business, though in both cases the same result is expected. Capital invested in the business may be classified as long-term and short-term capital or as fixed capital and working capital or Owned Capital and Loaned Capital. All Capital Turnovers are calculated to study the uses of various types of capital.

Sales Capital turnover ratio = Capital employed

Sales = Income from Services

Capital Employed = Capital + Reserves & Surplus

25

(d) CURRENT ASSETS TO FIXED ASSETS RATIO

KMT

This ratio differs from industry to industry. The increase in the ratio means that trading is slack or mechanization has been used. A decline in the ratio means that debtors and stocks are increased too much or fixed assets are more intensively used. If current assets increase with the corresponding increase in profit, it will show that the business is expanding.

Current Assets Current Assets to Fixed Assets Ratio = Fixed Assets

Component of Current Assets to Fixed Assets Ratio CURRENT ASSETS

Cash in hand Cash at bank Bills receivable Inventories Work-in-progress Marketable securities Short-term investments Sundry debtors Prepaid expenses Machinery Buildings Plant Vehicles

FIXED ASSETS

26

4. PROFITABILITY RATIOS

KMT

The primary objectives of business undertaking are to earn profits. Because profit is the engine, that drives the business enterprise.
y y y y y y y

Net profit ratio Return on total assets Reserves and surplus to capital ratio Earnings per share Operating profit ratio Price earning ratio Return on investments

27

(a) NET PROFIT RATIO

KMT

Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the efficiency of the management in manufacturing, selling administrative and other activities of the firm.

Net profit Net profit ratio= Sales

Net Profit = Net Profit () Depreciation () Interest () Income Tax

Sales = Income from Services

It also indicates the firms capacity to face adverse economic conditions such as price competitors, low demand etc. Obviously higher the ratio, the better is the profitability.

28

(b) RETURN ON TOTAL ASSETS

KMT

Profitability can be measured in terms of relationship between net profit and assets. This ratio is also known as profit-to-assets ratio. It measures the profitability of investments. The overall profitability can be known.

Net profit Return on assets = Total assets

Net Profit = Earnings before Interest and Tax

Total Assets = Fixed Assets + Current Assets

29

(c) RESERVES AND SURPLUS TO CAPITAL RATIO

KMT

It reveals the policy pursued by the company with regard to growth shares. A very high ratio indicates a conservative dividend policy and increased ploughing back to profit. Higher the ratio better will be the position.

Reserves& surplus Reserves & surplus to capital = Capital

(d) EARNINGS PER SHARE

Earnings per share is a small verification of return of equity and is calculated by dividing the net profits earned by the company and those profits after taxes and preference dividend by total no. of equity shares.

Net profit after tax Earnings per share = Number of Equity shares

The Earnings per share is a good measure of profitability when compared with EPS of similar other components (or) companies, it gives a view of the comparative earnings of a firm.

30

(e) OPERATING PROFIT RATIO

KMT

Operating ratio establishes the relationship between cost of goods sold and other operating expenses on the one hand and the sales on the other.

Operating Profit Operation ratio = Net sales

However 75 to 85% may be considered to be a good ratio in case of a manufacturing under taking. Operating profit ratio is calculated by dividing operating profit by sales.

Operating profit = Gross Profit - Operating Expenses

Operating profit Operating profit ratio = Sales

31

(f) PRICE - EARNING RATIO

KMT

Price earning ratio is the ratio between market price per equity share and earnings per share. The ratio is calculated to make an estimate of appreciation in the value of a share of a company and is widely used by investors to decide whether (or) not to buy shares in a particular company. Generally, higher the price-earning ratio, the better it is. If the price earning ratio falls, the management should look into the causes that have resulted into the fall of the ratio.

Market Price per Share Price Earning Ratio = Earnings per Share

Capital + Reserves & Surplus Market Price per Share = Number of Equity Shares

Earnings before Interest and Tax Earnings per Share = Number of Equity Shares

32

(g) RETURN ON INVESTMENTS

KMT

Return on share holders investment, popularly known as Return on investments (or) return on share holders or proprietors funds is the relationship between net profit (after interest and tax) and the proprietors funds.

Net profit Return on shareholders investment= Shareholders funds

The ratio is generally calculated as percentages by multiplying the above with 100.

33

Chapter 3 3.1L T RAT

KMT
(Amount in Rs.) Current Ratio

1. CURRE T RAT

Year 2008 2009 2010 Table 1

Current Assets 12739426 18898733 21265913

Current Liabilities 4741815 5535069 5756315

Ratio 2.69 3.41 3.69

GRAPHICAL REPRE E TATION

Current Ratio
4 3 2 1 0 2008 2009 2010 Current Ratio

Chart 1

Interpretation
As a rul t current rati wit 2:1 (or) more is consi ered as

satisfactory position of t e firm.When compared with 2008, there is an increase in the provision for tax, because the debtors are raised and for that the provision is created.The sundry debtors have increased due to the increase to corporate taxes. In the year 2008, the cash and bank balance is reduced because that is used for payment of dividends. In the year 2010, the loans and advances include majorly the advances to employees and deposits to government. The loans and advances reduced because the employees set off their claims. The other current assets include

34

the interest attained from the deposits. The deposits reduced due to the declaration of dividends. So the other current assets decreased.

KMT

The huge increase in sundry debtors resulted an increase in the ratio, which is above the benchmark level of 2:1 which shows the comfortable position of the firm.

35

2. QUICK RATIO

KMT
(Amount in Rs.) Qui Ratio
Liquid Liabilities 4741815 5535069 5756315 Ratio 1.57 2.42 2.69

Year 2008 2009 2010 Table 2

Liquid Assets 7438505 13391615 15482024

GRAPHICAL REPRE ENTATION

Series 1
3 2

0

S ri s

Chart 2

Interpretation
Quick assets are those assets which can be converted into cash with in a short period of time, say to six months. So, here the sundry debtors which are with the long period does not include in the quick assets. Compare with 2007, the Quick ratio is increased because the sundry debtors are increased due to the increase in the corporate tax and for that the provision created is also increased. So, the ratio is also increased with the 2007.

36

200

200

20 0

3. ABOSULTE LIQUIDIT

RATIO

KMT
(Amount in Rs.)
Current Liabilities 4741815 5535069 5756315 Ratio 0.30 0.19 0.27

Absolute Cash Ratio

Year 2008 2009 2010 Table 3 Absolute Liquid Assets 1436023 1079066 1596026

GRAPHICAL REPRESENTATION

Liq id Ra i
0.35

0.3
0.25

0.2

0.15 Liquid Rati

0.1
0.05

37

Chart 3

Interpretation
The current assets which are ready in the form of cash are considered as absolute liquid assets. Here, the cash and bank balance and the interest on fixed assts are absolute liquid assets. In the year 2008, the cash and bank balance is decreased due to decrease in the deposits and the current liabilities are also reduced because of the payment of dividend. That causes a slight increase in the current years ratio.

200

200

2010

3.2LE ERAGE RATIOS 4. PROPRIETORY RATIO

KMT
(Amount in Rs.) Proprietory Ratio

Year 2008 2009 2010 Table 4

Share Holders Funds 12767683 14527055 15913727

Total Assets 27698067 32614743 42779327

Ratio 0.46 0.45 0.37

GRAPHICAL REPRESENTATION

Pr perie ry Ra i

Chart 4

Interpretation
The proprietary ratio establishes the relationship between

shareholders funds to total assets. It determines the long -term solvency of the firm. This ratio indicates the extent to which the assets of the company can be lost without affecting the interest of the company. Higher the proprietary ratio better for the company. In case of Kiran machine tools ltd. proprietary ratio is not favorable to the company. It shows the solvency position of the firm. Here the ratio is in decreasing trend. It is as 0.46, 0.45, and 0.37 respectively. It shows poor working conditions.

200

200

2010

38

  

0.5 0. 0.3 0.2 0.1 0

Pr p ri t ry Rati

KMT
3.3ACTIVITY RATIOS 5. WORKING CAPITAL TURNOVER RATIO (Amount in Rs.) Working Capital Turnover Ratio
Year
2008 2009

Turnover 24213468 27398567 35344784

Working Capital 7997490 13363664 15509598

Ratio 3.03 2.05 2.28

2010 Table 5

GRAPHICAL REPRESENTATION

Activity Rati
3.5 3
2.5

2


.5


Activit Ratio

0.5 0
  

Chart 5

Interpretation
Income from services is greatly increased due to the extra invoicefor Operations & Maintenance fee and the working capital is also increased greater due to the increase in from services because the huge increase in current assets. The income from services is raised and the current assets are also raised together resulted in the decrease of the ratio of 2007 compared with 2008.

200

200

20 0

39

6. FIXED ASSETS TURNOVER RATIO

KMT
(Amount in Rs.)
Net Fixed Assets 24747316 25452609 27432500 Ratio 0.98 1.08 1.29

Fi ed Assets Turnover Ratio

Year
2008 2009

Income From Services 24213468 27398567 35344784

2010 Table 6

GRAPHICAL REPRSENTATION

Fixed Assets T r
.
 

ver Rati

0
" ! !
008 009 0 0

Chart 6

Interpretation
Fixed assets are used in the business for producing the goods to be sold. This ratio shows the firms ability in generating sales from all financial resources committed to total assets. The ratio indicates the account of one rupee investment in fixed assets. The income from services is greaterly increased in the current year due to the increase in the Operations & Maintenance fee due to the increase in extra invoice and the net fixed assets are reduced because of the increased charge of depreciation. Finally, that effected a huge increase in the ratio compared with the previous years ratio.

40

#% $

0.

Fix d Ass ts Turn

r Rati

7. CAPITAL TURNOVER RATIO

KMT
(Amount in Rs.)
Capital Employed 12767683 14527055 15913727 Ratio 1.89 1.88 2.22

Capital Turnover Ratio

Year
2008 2009

Income From Services 24213468 27398567 35344784

2010 Table 7

GRAPHICAL REPRESENTATION

Capital T r
2.3

ver Rati

2.2
2.1

2 1.
' ( & &
1.

1.7

200

200

2010

Chart 7

Interpretation
This is another ratio to judge the efficiency and effectiveness of the company like profitability ratio. The income from services is greaterly increased compared with the previous year and the total capital employed includes capital and reserves & surplus. Due to huge increase in the net profit the capital employed is also increased along with income from services. Both are effected in the increment of the ratio of current year.

41

10)

Capital Turn

r Rati

KMT
8. CURRENT ASSETS TO FIXED ASSETS RATIO (Amount in Rs.) Current Assets To Fi ed Assets Ratio
Year
2008 2009

Current Assets 7997490 13363664 21265913

Fixed Assets 19700577 19251079 27432500

Ratio 4.05 0.69 0.77

2010 Table 8

GRAPHICAL REPRESENTATION

Curre t Assets T Fixed Assets Rati

5

4
3 2 Curr nt Ass ts T Fix d Ass ts Rati

1
0

Chart 8

Interpretation
Current assets are increased due to the increase in the sundry debtors and the net fixed assets of the firm are decreased due to the charge of depreciation and there is no major increment in the fixed assets. The increment in current assets and the decrease in fixed assets resulted an increase in the ratio compared with the previous year

200

200

2010

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5 4

3.4 PROFITABILITY RATIOS GENERAL PROFITABILITY RATIOS 9. NET PROFIT RATIO

KMT
(Amount in Rs.)

Net Profit Ratio

Year
2008 2009

Net Profit After Tax 2147828 2547217 2077933

Sales 24213468 27398567 35344784

Ratio 8.87 9.30 5.88

2010 Table 9

GRAPHICAL REPRESENTATION

Net Pr fit Rati

10 8

6
8 8 7
4 N t Pr fit Rati

2
0

Chart 9

Interpretation
The net profit ratio is the overall measure of the firms ability to turn each rupee of income from services in net profit. If the net margin is inadequate the firm will fail to achieve return on shareholders funds. High net profit ratio will help the firm service in the fall of income from services, rise in cost of production or declining demand. The net profit is increased because the income from services is increased. The increment resulted a slight increase in 2008. It decreases in current year, which may create problem for the company in future.
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2008

200

2010

KMT
10. OPERATING PROFIT (Amount in Rs.) Operating Profit
Year
2008 2009

Operating Profit 3312579 3069468 3025655

Sales 24213468 27398567 35344784

Ratio 0.13 0.11 0.085

2010 Table 10

GRAPHICAL REPRESENTATION

Operati g Pr fit
0.15

0.1
B A
0.05 Op rating Pr fit

0
@ 9
200 200 2010

Chart 10

Interpretation
The operating profit ratio is used to measure the relationship between net profits and sales of a firm. Depending on the concept, it will decide. The operating profit ratio is decreased compared with the last year. The earnings are decreased due to the decrease in the income from services because of Recessioin. So, the ratio is decreased slightly compared with the previous year.

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KMT
11. RETURN ON TOTAL ASSETS RATIO (Amount in Rs.) Return on Total Assets Ratio
Year
2008 2009

Net Profit After Tax 2147828 2547217 2077933

Total Assets 36522353 42779327 43188593

Ratio 5.88 5.95 4.81

2010 Table 11

GRAPHICAL REPRESENTATION

Retur
7

T tal Assets Rati

5
3 2 1 0

2008

2009

2010

Chart 11

Interpretation
This is the ratio between net profit and total assets. The ratio indicates the return on total assets in the form of profits. The net profit is increased in the 2008 because of the increment in the income from services. The fixed assets are reduced due to the charge of depreciation and no major increments in fixed assets but the current assets are increased because of sundry debtors and that effects an increase in the ratio compared with the last year i.e. 2007.

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R turn n T tal Ass ts Rati

KMT
12. RESERVES & SURPLUS TO CAPITAL RATIO (Amount in Rs.) Reserves & Surplus To Capital Ratio
Year
2008 2009

Reserves & Surplus 5267683 7027055 8413727

Capital 7500000 7500000 7500000

Ratio 0.70 0.93 1.12

2010 Table 12

GRAPHICAL REPRESENTATION

Reserves & Surplus T Capital Rati

1.2 1

0.8
Q R IP I I H G

0. 0.

R s r s & Surplus T Capital Rati

0.2 0

2008

2009

2010

Chart 12

Interpretation
The ratio is used to reveal the policy pursued by the company a very high ratio indicates a conservative dividend policy and vice -versa. Higher the ratio better will be the position. The reserves & surplus is decreased in the year 2007, due to the payment of dividends and in the year 2008 the profit is increased. But the capital is remaining constant from the year 2007. So the increase in the reserves & surplus caused a greater increase in the current years ratio compared with the older.
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3.5OVERALL PROFITABILITY RATIOS

KMT
(Amount in Rs.)

13. EARNINGS PER SHARE

Earnings Per Share

Year
2008 2009

Net Profit After Tax 2147828 2547217 2077933

No of Equity Shares 7500000 7500000 7500000

Ratio 0.29 0.34 0.27

2010 Table 13

GRAPHICAL REPRESENTATION

Ear i gs Per Share

0.4
S

0.

0.2 0.1

0 2008 2009 2010

Chart 13 Interpretation
Earnings per share ratio are used to find out the return that the shareholders earn from their shares. After charging depreciation and after payment of tax, the remaining amount will be distributed by all the shareholders. EPS is small variant of return on equity capital. It gives a view of comparative earnings of firm. High ratio is favorable to the shareholders of company. In case of Kiran machine tools ltd. it is very poor. In two years it in increasing trend, but in year 2009. It shows fluctuations in ratio. EPS in Kiran machine tools ltd. is not favorable to the shareholders.
47

Earnings P r Shar
T

KMT
14. PRICE EARNINGS (P/E) RATIO (Amount in Rs.) Pri e Earning (P/E) Ratio
Year
2008 2009

Market Price Per Share 17.023 19.36 21.21

Earnings Per Share 4.05 4.69 3.14

Ratio 4.20 4.12 6.75

2010 Table 14

GRAPHICAL REPRESENTATION

Price Ear i g (P/E) Rati

8 7
5

4
2

1 0
2008 2009 2010

Chart 14

Interpretation
The ratio is calculated to make an estimate of application in the value of share of a company. The market price per share is increased due to the increase in the reserves & surplus. The earnings per share are also increased greaterly compared with the last year because of increase in the net profit. So, the ratio is increased compared with the previous year.

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XW

Pri

Earning (P/E) Rati

KMT
15. RETURN ON INVEST ENT (Amount in Rs.) Return on Investment
Year
2008 2009

Net Profit After Tax 2147828 2547217 2077933

Share Holders Fund 36522353 42779327 43188593

Ratio 5.88 5.95 4.81

2010 Table 15

GRAPHICAL REPRESENTATION

Retur
7 5 4 2 1

I vestme t

0
2008 2009 2010

Chart 15

Interpretation
This is the ratio between net profits and shareholders funds. The ratio is generally calculated as percentage multiplying with 100. The net profit is increased due to the increase in the income from services and the shareholders funds are increased becau of reserve & surplus. So, se the ratio is decreased in the current year due to recession.

49

bd

a
R turn n In stm nt

KMT
Chapter 4 4.1FINDINGS OF THE STUDY
1. The current ratio has shown in a fluctuating trend as 3.69, 3.41, and 2.69 during 2009 of which indicates a continuous increase in both current assets and current liabilities. 2. The quick ratio is also in a increasing trend throughout the period 2009 10 resulting as 1.57, 2.42 and 2.69. The companys present liquidity position is satisfactory. 3. The absolute liquid ratio has been decreased from 0.30 to 0.19.the period 2008 07. 4. The proprietary ratio has shown a fluctuating trend. The proprietary ratio is decreased compared with the last year. So, the long term solvency of the firm is satisfactory. 5. The working capital increased from 2.05 to 2.28 in the year 2009 10. 6. The fixed assets turnover ratio is in increasing trend from the year 2008 10 (0.98,1.08 and 1.29). It indicates that the company is efficiently utilizing the fixed assets. 7. The capital turnover ratio is increased form 2008 10 (1.89, 1.88, and 2.22) and decreased in 2009 to 1.88, It increased in the current year as 0.34. 8. The current assets to fixed assets ratio is increasing gradually from 2009 10 as 0.69 and 0.77. It shows that the current assets are increased than fixed assets. 9. The net profit ratio is in fluctuation manner. It decreased in the current year compared with the previous year form 9.30 to 5.88. 10. The net profit is decreased greaterly in the current year. So the return on total assets ratio is decreased from 5.95 to 4.81.

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11. The Reserves and Surplus to Capital ratio is increased to 0.70 from 1.12. The

KMT

capital is constant, but the reserves and surplus is increased in the current year. 12. The earnings per share was very high in the year 2009 i.e., 0.34. That is decreased in the following years because number of equity shares are increased and the net profit is decreased. 13. The operating profit ratio is in fluctuating manner as 0.13, 0.11,and 0.085, from 2008 10 respectively. 14. Price Earnings ratio is increased when compared with the last year. It is increased from 4.12 to 6.75. 15. The return on investment is decreased from 5.95 to 4.81 compared with the previous year. Both the profit and shareholders funds decrease cause an decrease in the ratio.

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4.2SUGGETIONS
1. The company should productively utilize the funds.

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2. Debt equity ratio has not satisfactory for the past two years. So the company has enough scope for the more long-term borrowings from the outsiders as its current ratio is also good and has a sufficient amount of current assets. 3. Company having a significant portion of slow paying debtors, company should take necessary actions so that to improve the debtors position. 4. Issue the fresh equity shares to reduces the debt burden. 5. The low fixed assets turnover ratio indicates declining trend in capacity utilization, company should take it seriously. 6. Net profit margin of company is deteriorating in the year 2009-10, The company activities to turn around its operations. 7. Adoption of profit planning and control techniques such as marginal costing, cost volume- profit analysis, activity based system. 8. Steps to expand the existing market.

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Chapter 5

KMT

5.1SUMMARY
1) After the analysis of Financial Statements, the company status is better, because the Net working capital of the company is increased from the last years position. 2) The company profits are huge in the current year; it is better to declare the dividend to shareholders. 3) The company is utilising the fixed assets, which majorly help to the growth of the organisation. The company should maintain that perfectly. 4) The company fixed deposits are raised from the inception, it gives the other income i.e., Interest on fixed deposits.

5.2CONCLUSION
Financial ratio analysis is the calculation and comparison of ratios, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. So after studying the companys overall position it come to conclusion as at a particularly the current years company is in decreasing trend. So it is advised to the company reduce expenses. It is better for the organization to diversify the funds to different sectors in the present market scenario. It was observed that ratio analysis is one of the best tools for analyzing financial statements.

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ANNEXURE

KMT

Kiran Machine Tools LTD. 1-1 MIDC Jalgon BALANCE SHEET AS ON 31st March 2008
Sr . Particulars I Sources of Funds 1 Shareholders Funds A) Share Capital B) Reserve & Surplus 2 Loan Funds Secured Loans 3 Deferred Tax Liability Sch No. As on 31.03.2008 As on 31.03.2007

I II

7500000 5267683

7500000 3986819

III

22310203 1444466 36522352

25814158 1552039 38853016

II

Application Funds 1 Fixed Assets A) Gross Block B) Less: Depreciation C) Net Block 2 Investments 3 Current Asset, Loans & Advances A) Inventories B) Sundry Debtors C) Cash & Bank Balance D) Loans & Advances Less: Current Liabilities & Provisions Net Current Assets 4 A) Miscellaneous Expenses

IV V

24747316 5046739 19700577 8819710

19705318 4141641 15563704 15688403

VI

VI VII VIII IX

5218888 4712329 1436023 1372186 12739426 4741936 7997490 4576 36522353

3974064 6720518 503045 401014 11598641 4006887 7591754 9156 38853017

X XI

54

KMT
Profit & Loss Account
Sr . 1 Particulars Income Sales & Exceis Other Income Increase / Decrease in Stock Sch No. XII XIII XIV As on 31.03.2008 24213468 540237 1244824 25998529 As on 31.03.2007 23645854 2259150 (1,023,591) 24881413

Expenditure Raw Material Purchases Manufacturing & Other Expenses Payments & Previsions for Employees Administration & Selling Expenses Financial Charges

XV XVI XVII XVIII

9045337 5051347 788833 6355070 812561 22053148 3945381 905126 3040255 892427 970000 -107573 30000 877463 750000 127463 1270365

7657199 4865426 839994 4777409 669125 18809153 6072260 723216 5349044 2300772 825000 1433072 42700 855188 750000 105188 2193084

Profit(Before Depreciation) Less: Depreciation Profit(After Depreciation) Less: Tax Provisions Current Tax Deferred Tax FBT Less: Appropriation of Profits Proposed Dividend Tax on Dividend Net transferred to B/S

55

KMT
Kiran Machine Tools LTD. 1-1 MIDC Jalgaon BALANCE SHEET AS ON 31st March 2009
Sr . Particulars I Sources of Funds 1 Shareholders Funds A) Share Capital B) Reserve & Surplus 2 Loan Funds Secured Loans 3 Deferred Tax Liability Sch No. As on 31.03.2009 As on 31.03.2008

I II

7500000 7027055

7500000 5267683

III

26173626 2078646 42779327

22310203 1444466 36522352

II

Application Funds 1 Fixed Assets A) Gross Block B) Less: Depreciation C) Net Block 2 Investments 3 Current Asset, Loans & Advances A) Inventories B) Sundry Debtors C) Cash & Bank Balance D) Loans & Advances Less: Current Liabilities & Provisions Net Current Assets 4 A) Miscellaneous Expenses

IV V

25452609 6201530 19251079 10164584

24747316 5046739 19700577 8819710

VI

VI VII VIII IX

5415663 9920197 1079066 2483807 18898733 5535069 13363664 0 42779327

5218888 4712329 1436023 1372186 12739426 4741936 7997490 4576 36522353

X XI

56

KMT
Profit & Loss Account
Sr .
1

Particulars
Income Sales & Exceis Other Income Increase / Decrease in Stock

Sch No.
XII XIII XIV

As on 31.03.2009
27398567 1621628 196,775 29216970

As on 31.03.2008
24213468 540237 1244824 25998529

Expenditure Raw Material Purchases Manufacturing & Other Expenses Payments & Previsions for Employees Administration & Selling Expenses Financial Charges XV XVI XVII XVIII 8941272 8413487 2429058 3587266 1169700 24540783 Profit(Before Depreciation) Less: Depreciation Profit(After Depreciation) Less: Tax Provisions Current Tax Deferred Tax FBT Profit After Tax Less: Appropriation of Profits Proposed Dividend Tax on Dividend Net transferred to B/S 4676187 1154791 3521396 974179 300000 6347179 40000 2547217 877463 750000 127463 1669754 9045337 5051347 788833 6355070 812561 22053148 3945381 905126 3040255 892427 970000 -107573 30000 2147828 877463 750000 127463 1270365

57

KMT
Kiran Machine Tools LTD. 1-1 MIDC Jalgon BALANCE SHEET AS ON 31st March 2010
Sr. Particulars I Sources of Funds 1 Shareholders Funds A) Share Capital B) Reserve & Surplus 2 Loan Funds Secured Loans 3 Deferred Tax Liability Sch No. As on 31.03.2010 As on 31.03.2009

I II

7500000 8413727

7500000 7027055

III

24915219 2359647 43188593

26173626 2078646 42779327

II

Application Funds 1 Fixed Assets A) Gross Block B) Less: Depreciation C) Net Block 2 Investments 3 Current Asset, Loans & Advances A) Inventories B) Sundry Debtors C) Cash & Bank B balance D) Loans & Advances Less: Current Liabilities & Provisions Net Current Assets 4 A) Miscellaneous Expenses

IV V

27432500 7431092 20001408 7677587

25452609 6201530 19251079 10164584

VI

VI VII VIII IX

5783889 11418699 1596026 2467299 21265913 5756315 15509598 0 43188593

5415663 9920197 1079066 2483807 18898733 5535069 13363664 0 42779327

X XI

58

KMT
Profit & Loss Account
Sr.
1 Income Sales & Exceis Other Income Increase / Decrease in Stock XII XIII XIV 35344784 772835 368226 36485845 2 Expenditure Raw Material Purchases Manufacturing & Other Expenses Payments & Previsions for Employees Administration & Selling Expenses Financial Charges XV XVI XVII XVIII 11174956 9378438 2987472 7916927 1439555 32897348 Profit(Before Depreciation) Less: Depreciation Profit(After Depreciation) Less: Tax Provisions Current Tax Deferred Tax FBT Profit After Tax Less: Appropriation of Profits Proposed Dividend Tax on Dividend Net transferred to B/S 3588497 1229562 2358935 281002 0 281002 0 2077933 877463 750000 127463 1200470 8941272 8413487 2429058 3587266 1169700 24540783 4676187 1154791 3521396 974179 300000 6347179 40000 2547217 877463 750000 127463 1669754 27398567 1621628 196,775 29216970

Particulars

Sch No.

As on 31.03.2010

As on 31.03.2009

59

KMT
Bibliography
 Annual Reports of Kiran Machine Tools Ltd.  IM .Pandey, Financial Management 8 th Edition, Vikas Publishing house Pvt Ltd, 6th Reprint -2006- New Delhi.


Ravi M. Kishore, Financial Management, 6 Edition Reprint 2007, TAXMANNS Allied Services (P) Ltd. New Delhi.

WEB SITES
y www.kmtsprings.com y www.wikipedia.com

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