INTRODUCTION

Instrumentation Limited (better known as IL) is Government Of India Enterprise set up in 1964 with the prime objective of attaining self reliance in the field of Control and Automation for process industry. Today IL is manufacturing and supplying state of the art control equipment on turnkey basis to various sector of Industry viz. Power, Steel, Fertilizer, Chemical, Petrochemical, Refineries, Pharmaceutical, Cement, Paper, Textile, Space, and Oil & Gas.

We have our registered and corporate office at Kota in state of Rajasthan. Manufacturing facilities are based at Kota and Palakkad in Kerala State. Flow elements, control valve and actuators are manufactured at Palakkad plant other items are manufactured at Kota plant. Our manufacturing facilities are accredited with ISO 9000 certification. The marketing network is widely spread all over India having Branch offices in major cities of Delhi, Kolkata, Chennai, Mumbai and Vadodara and Regional offices at Lucknow, Bokaro, Secunderabad for organizing installation and commissioning and related services. Site offices at many project sites are functioning under these regional offices. With over thirty years of experience and a competent and dedicated workforce, IL has mastered all complexities of control system requirement and can lead you through your project, from system design, detailed engineering, manufacturing, testing, system integration, installation, final commissioning to after sales service and customer training. IL has further diversified in the fields of Power electronics; Telecommunications, Railway Signaling systems, Defence electronics and Computer based application s to have comprehensive range of product and services. The present product handling of the company comprises of sophisticated Digital Distributed Control systems, high performance electronic transmitters, desk/panel mounted controllers, indicators, recorders and other hardware, liquid and gas analyzers, with sample handling and conditioning system, annunciation system, panels, instrument cabinet and racks, Flow elements, Computer based applications, Control valves, actuators in addition to Telecommunication systems, Defence electronics, Railway signaling Systems, Uninterrupted Power Supply Systems (UPS), Solar Dusk Dawn System (SDDS) etc. IL, after establishing itself as an undisputed leader has crossed the Indian borders to supply equipment on turnkey basis in International markets. IL has supplied instrumentation on turnkey basis to two thermal power stations in Malaysia, supplied instrumentation to Esfahan steel plant in Iran, Hima cement plant in Uganda to name few. A major breakthrough was achieved in export market when IL received large orders from Lisichansk Oil Refinery in the erstwhile USSR for supply of DDC system and other equipment on turnkey basis.

ORGANISATION STRUCTURE

Board of Director

Chairman-cum-Managing Director

Company Secretary Business Acquisition Group Procurement Manufacturing Facilities

Projects DDC Unit

Customer Services

CP & IT

Marketing Unit

Exports Division Corporate F&A

Regional & Site Offices

Branch Offices

Kota Unit

Palakkad Unit Subsidiary Unit REIL

Corporate P&A Corporate R&D

BOARD OF DIRECTORS OF IL Sh. Ramanand (Chairman-cum-Managing Director)

Sh. Shashank Goel (Director)

Sh. Amitabh Mandloi (Director)

SK GUPTA (Director Finance)

Sh. PM BHARDWAJ (Director Production)

Sh. A.K. Shringi (Company Secretary General Manager F&A)

Sh. RAJEEV KUMAR (Director Commercial)

FINANCE DEPARTMENT:

Finance department of the company is divided into 7 section : that are (a) (b) (c) (d) (e) (f) (g) Book Section Store section Vetting section Establishment section Costing section Cash section Billing section

Book Section : Book section receives information from various departments and records it into respective books. Major function of book section to prepare trail balance, profit & loss a/c and balance sheet of the company. Following books are maintain by book section : y y Journal Cash book

y y y y

Bank book General ledger Fixed assets register Sub ledger

Store Section

Store section deals with all the purchase, storage, maintenance and insurance of goods. Store section is further classified into following section : y y y y Import Indigenous Ancillary development Miscellaneous

Vetting cell section: This section receive comparative statement from purchase department and vet the CS. In order to calculate L1 (lowest price supplier) Vetting is done on following criteria : * * * * * * * Terms of delivery Discount Validity Delay period Terms of Payment P&F (Packing & Forwarding) Excise

* * * *

Sales Tax Freight Insurance Any other charges by supplied

Establishment section Establishment section mainly deals with the payment related to employees payment like : * * * * * * * * * * * * Salaries of Employees Advance given to employees Insurance of employee Conveyance Medical Expenses Local Journey Scholarship Interest Subsidy Bonus Staff Claim Rent Industry House Group Insurance

* * * *

Income Tax Marriage Advance Special Advance Medical Advance

Costing Section Costing section mainly deals with the calculation of * * Material consumption per unit Labour per unit : In this daily labour

Report is prepared on the basis of which worker is working on which order, on which day for how many hours. * * * Calculation of overheads Product costing Preparation of cost sheet

For the purpose of costing company follows the accounting rules 2001. Cash Section this section deals with all the transaction related to the payment and receipt of cash. Billing section

* * *

This section is controlled by SG-I This section deals with sales accounting related with servicing Maintenance of service debtor.

Import and Indigenous Section Import section deals with all the purchases made from outside the country whereas indigenous section deal with the purchase made within the country.

Ancillary development Sometime due to shortage of labour and time company is unable to completes its order in this situation company involve third party.

This involvement is classified into category : First, company send its raw material to third party and after some processing material come back to factory for further processing. Second, worker are hired from outside to work on the order within the company premises. Thirdly, workers are hired but they work outside the company premises, raw material is provided to them by the company. Miscellaneous section : This section is concern about the payment of : Telephone, electricity and water bills * * * * * Transport payment Contractors Quotation opening Department advances Interest

PRODUCT PROFILE:

PRODUCT FROM KOTA WORKS Instrumentation Limited, Kota is oldest unit. Main products from Kota unit are as follow: 1. Telecom circuits. 2. Microprocessor Based Controller and Recorder. 3. Electronic Transmitter. 4. Gas Analyses and pollution Monitoring Instruments. 5. Pneumatic Instruments and Transmitter Panel. 6. Annuciators. 7. Railways Signaling System.

PRODUCT FROM DIGITAL ELECTRONIC UNIT, KOTA: 1. Modern Distributed Digital Controls System. 2. Process and Power Simulator. 3. Triple Redundant Controller.

PRODUCT FROM JAIPUR UNIT: 1. Uninterruptible Power Supply System. 2. Mini U.P.S. 3. Digital Electronic Switching System. 4. Digital Moisture Tester. 5. Solar Photovoltaic (SPV) Module/ System

PRODUCT FROM PALGHAT UNIT: 1. Control Valves. 2. Safety Relief Valves 3. Large Size Soft seated butterfly valves. 4. Pneumatic Control Drives 5. Low noise valves 6. Control valves for high pressure drop. 7. Electrical Actuator 8. Tank Level Gauging syste

MAJOR CUSTOMERS OF IL Customers of IL, Kota in followings sector. 1 Power National Electricity Board (NEB), Malaysia.

National Thermal Power Corporation (NTPC) Ahmadabad Electricity Company (AECO) Rajasthan Rajya Vidyut Utpadan Nigam limited Steel Authority India Ltd. (SAIL) 2 Steel Steel Authority of India Ltd. Heavy Machine Building, (HEC) Malvika Steel, Jagdishpur Bharat Heavy plates & Vessels Ltd., Bokaro 3 Refineries India Oil Corporation Ltd., Mathura. Promautomatika Grozny, USSR Hungarian National Oil & Gas Corporation, Hungary. 4 Telecom Exchanges & Accessories West Bengal Telecom Circle. Karnataka Telecom Circle Rajasthan Telecom Circle Various BSNL Circle (through BSNL, H.O.) 5 Railway Signaling North Eastern Railway, Barauni Junction National Thermal Power Corporation Ltd. Central Railways 7 Core, Allahabad. 6 Atomic Energy Deptt. of Automic Energy (DAE), RAPP Kota.

Nuclear Power Corporation India Ltd., Tarapur Khammam Chemicals Refinery.

COLLABORATORS:

1 YAMAHA HONEYWELL, JAPAN 2 MANNESMANN HARTMANN& BRAUN 3 WEST GERMANY 4 FUJI ELECTRIC CO., JAIPAN 5 ABB KENT- TAYLOR, JAPAN 6 NUOVO PIGNONE, ITALY 7 TOSHIBA CORPORATION, JAIPAN 8 TOKYO KEISO, JAPAN 9 DR. THIEDIG, WEST GERMANY 10 KYOSAN ELECTRIC CO. JAPAN C- DOT, INDIA 11 SEGAULT, FRANCE

CHAPTER II PROJECT PROFILE

 Meaning of Financial Statement  Techniques of analysis of Financial Statement  Methods of Financial Analysis  Significance of Financial Analysis  Limitation of financial statement  Ratio analysis  Classification of ratio  Advantage of ratio analysis  Limitation of ratio analysis

Meaning of Financial Statement

Financial statements are the end products of the financial accounting process. These statements are nothing but the presentation of financial information in concise and capsule form. The financial information is that information which relates to the financial position at a moment in time and a series of activities over a period of time of the firm Thus financial statement mean the statements that shows the financial position and result of business activities at the end of the accounting period. These statements reveal the gross and net gross and net profits of the business carried on during a certain period and the financial position at the end of that period. The financial statement is prepared from the accounting records maintained by the firm and the generally accepted accounting principles and procedures are followed in preparing these statements. In the words of Kennedy & Mc. Muller The analysis and interpretation of financial statement results in the presentation of information that will aid in decision making by business managers investors and creditors as well as other groups who are investors and creditors as well as other groups who are interested in the financial status and operating results of the business.

Financial statement is the only sources for drawing meaningful conclusion about the economic position of any business. Usually financial statement of a business concern comprises of two statements: 1. Profit and loss Account It is also known as income statement. It is a classified and short statement Of income and expenditure during a given period.

2.

Balance Sheet It is also known as Position statement. It shows the nature and amount of business assets, liabilities and owners equity. It represents a fair and true picture of the business position on a particular day. However in big concern two more statement are prepared. They are:

3.

Profit and loss appropriation It shows how the profit earned during the period has been distributed i.e., how much profits has been distributed as dividend on equity and preference share capital and how much balance of profit and loss account is transferred to the balance sheet.

4.

Cash flow Statement Cash flow statement is a statement setting out the cash under different heads of the sources and their utilization to determine the requirement of cash during the given period and prepare for its adequate provision.

Moreover to supplement the data contained in the above financial statement certain Schedule relating to fixed asset, investment and

inventories etc. are also prepared these schedule Directors report are some times also considered as part of the financial statement. Techniques of Analysis of Financial Statements: (1) Ratio Analysis- A ratio is simply one number expressed in relation to another And a study of the relationships between various items of groups of items is known as ratio analysis It simplifies and summaries a long array of accounting data to provide useful information regarding the liquidity solvency profitability, activity of any concern. (2) Cash flow Analysis- It shows the inflows and outflows of cash during a Particular period and analysis the reasons for changes in balance of cash between the two-balance sheet dates. A firm may earn huge profits yet it may have paucity of cash or when it suffered a loss it may still have plenty of cash. The reasons for these deviations can be analysed and understood by preparing cash flow statement. (3) Comparative financial statements Analysis- When financial statements Figures for two or more years are placed side to facilitate comparison, these are called comparative financial statement figures of production, sales, expenses, profits etc. are put side by side to draw conclusions about the profitability and financial health of the business.. (4) Common size Financial Statements- In these statements various figures are Converted into percentages to some common base. In profit and loss account sales figure is taken at 100 and all other figures are expresses as percentage of sale. Similarly, in balance sheet total assets are taken at 100 and all assets at 100 and all assets are expressed as percentage of the total.

(5) Trend Analysis- It is one the most useful form of horizontal analysis in Making comparative study of the financial statements for a number of years. For calculating trend percentages any year is selected as the base year each item of the base year is assumed to be equal to 100 and on that basis the percentage of each item of each year is calculated. (6) Break Even Point Analysis- Break-even point is the point where total costs are exactly equal to the total sales. At this point, there is neither any profit nor any loss. It can also be termed as No-profit no loss point.

Methods of Financial Analysis:

Financial analysis is an art and as such there are various approaches towards financial analysis. Two basic approaches or types of analysis are: (1) Horizontal Analysis- In such type of analysis, financial statements for a number of years are reviewed and analysed. Figures for two or more years are contained in such type of analysis and these figures are placed side by side to facilitate comparison. Thus, it involves making comparisons and establishing relationship among related items of an enterprise for a number of years when data about sales, cost of production, profits etc. are compared for two or more years of a firm, they indicate the areas of strength and weakness of the enterprise. It also helps in knowing the trend of the business. Since such type of analysis is based on the data from year to year rather than only one year, it is also called Dynamic Analysis. (2) Vertical Analysis- In such type of analysis, financial statements for a single year or on a particular date are reviewed and analyses with the help of proper devices like ratios. It involves a study of the quantitative relationship among various items of balance sheet or profit & loss Account of a single

period. The items in the financial statement are expressed as a percentage to total is taken as equivalent to 100 statements containing such analysis are termed as Common size statements.

Significance of Financial Statement Analysis:

The significance of the financial statement analysis may be studied from the point of view of various parties, which are as follows: (1) Significance for management Management of a firm is always interested in the solvency, profitability and the capital structure of the firm. They want to make sure that the business must be in solvent position to pay the debts as an when they fall due Similarly they are not interested not only current years profit but also in the capacity of the business to earn more profits in future. By comparing the financial statement of their business with the financial statement of other firms in the same trade, management can draw significant conclusion about the sales profits expenses of its own policies and decisions determine the advisability of adopting the result of their management efforts. (2) Significance for investors Investors and shareholders of the business are interested in longevity of the business enterprises and therefore they want to know the earning capacity of the business and its prospects for future growth and prosperity. Analysis of financial statement of company help them a great deal in assessing the capacity of the business to pay dividend at a higher rate and also the safety of their investments. (3) Significance for creditors There is two types of creditor a) short-

term creditors and the liquidity of the

b) long-term creditors. Short term creditors want to know business i.e. to know whether the company will have

sufficient calculated on the basis of financial statement help them in assessing this, long term creditors want to know two things mainly a) whether the company will be able to pay the interest consistently and b) whether the company will be able to pay their debt when they fall due. 4) Significance for the government- Government can judge on the basis of analysis of financial statement which industry is progressing on the desired lines and which industry needs the financial help. Government can increase the excise duty or can enforce the price regulations. (5) Significance for financial institutions- All the financial institutions which provides finance to the industries such as Banks, Inssurance companies, Unit Trust etc. want to know the profit earning capacity the business and its long term solvency. They want to assess not only the present position of the business and its long-term solvency. They want to assess not only the present position of the business enterprise but also its likely position of the business enterprise but also its likely position in the future. Financial statement analysis helps them in ascertain this. (6) Significance for employees- Financial statement analysis helps the

employees in determining the profitability of the business enterprise. They can ascertain as to how much bonus and increase in their wages is possible from the profits of the company. Analysis of financial statements also help the trade unions in negotiable wages agreements.

Objectives of Analysis of Financial Statements: The purpose of financial statement analysis on the needs of the person who is analyzing these statements. These varying needs may be: (1) To know the earning capacity of profitabilityAccording to Robert

Anthony, The overall objective of a business is to earn a satisfactory return on the funds invested in it, consistent with maintaining a sound financial position Financial analysis helps in ascertaining whether adequate profits are being earned on the capital invested in the business it is also disclosed by analysis of financial statement whether these profit are increasing or decreasing over the years. For this purpose, the financial statement of a few years is taken into account to compute the change in profit over the years. Such analysis helps in ascertaining the future profitability or earning capacity of the business.

(2) To know the solvency - It can be ascertained from the analysis of financial statements whether the business is in a position to pay its short term and long-term liabilities in time. For example, the liquidity ratios (current ratio and quick ratio) are calculated to ascertain whether the business enterprises has sufficient liquid funds to meet its short term liabilities and debt Equity ratio is calculated to ascertain whether the business enterprises has got the ability to repay the long term liabilities.

(3) To know the financial strength The purpose of financial analysis is to assess the financial potential of the business. Analysis helps in proceeding answer like (a) Funds required for the purchase of new machinery and equipments will be available from internal resources of the business or not? (b) Based on the current reputation of the business, how many funds can be raised from external sources?

(4) To make comparative study with other firms The purpose of financial statement analysis is to help the management to make a comparative study of the Profitability of various firms engaged in same trade. Such comparison helps the Management to study the position of their firm in respect of sales, expenses, Profitability and working capital etc. in comparison to other firms. (5) To know the efficiency of management The purpose of financial analysis is to Judge that the financial policies adopted by the management are proper or not. For example, if the actual ratios calculated on the basis of financial statements are in accordance with their standard ratios, the policies of the management may be said to be proper and efficient.

(6) To provide useful informations to the management -

The object of

financial Analysis is to find out the shortcomings of the business, So that the management can take remedial measures to remove those shortcomings.

Limitations of Analysis of Financial Statements: Financial analysis helps the interested parties to make an assessment of the earning capacity and financial soundness of a business enterprise. But such analysis has its own limitations. Such limitations should be kept in mind while using the informations provided by the financial analysis. Some of the limitations are as follows: 1) Limitations of Financial Statement Financial analysis are based on financial statement. But financial statement themselves suffer from certain limitations, hence the limitations of financial statement are also the limitations of their analysis.

2) Do not Reflect Changes in price level Figures given in financial statements Do not show the effect of changes in price level. As such, the comparison of past year figures with current year figures may lead to misleading conclusions. (3) Different Accounting Policies - If two firms adopt different accounting policies, The comparison between the two will be unreliable. For example, one firm may provide depreciation on original cost method, whereas the other firm may provide depreciation on original cost method, whereas the other firm may adopt the written-down value method for providing the depreciation. (4) Effect of personal ability and bias of the Analyst Figures given in financial Statements do not speak by themselves; hence, any conclusion can be drawn from these figures. Conclusions obtained from the analysis of these figures are effected to a great extent by the personal ability and knowledge of the analyst.

5) Difficulties in Forecasting Financial statements are a record of past events and Historical facts. In the fast changing and developing modern business, the analysis of past information may not be of much use in future forecasting. Continuous changes take place in the demand of the product, policies adopted by the firm, the position of competition etc. As such, no estimate based on the analysis of historical facts can be made for future.

RATIO ANALYSIS

1. Meaning & Classification 2. Advantages & Limitations 3. Analysis

Meaning of Ratio Analysis: Absolute figures are valuable but they standing alone, convey no meaning unless Compared with another. These single figures become important when studied in relation to other figures. Such relationship of accounting information given in terms of money are commonly referred to as ratio so, ratio is one figure expressed in terms of another, it is an expression of relationship between one figure and the other figure which are mutuality interdependent. R.N. Anthony A ratio is simply one number expressed in terms of another it is found by dividing one number into another. Ratio may be expressed in the following three ways:(1) Pure Ratio Or Simple Ratio: In this form, the relationship between two figures is expressed in a common denominator. It is obtained by the simple division of one number by another so that the proportionate relationship becomes clear. For example- 2:1, 1:1, 5:6 etc.

(2) Rate Or So Many Times: In this form, a ratio is calculated between two numerical facts for which one item is divided by another and the quotient is taken as unit of expression when ratio is expressed in this form, it is called as turnover and is written in times. For example, 4 times, 5 times, 6 times etc. (3) Percentage: In this form, the relationship between two items is expressed in Percentage for which one item is divided by another and the quotient is multiplied by one hundred. For example, 25%, 50%, 75% etc. Classification of Ratios: According ratios or financial ratio have been classified in various ways according to different purposes in view. However, we shall discuss the classification according to annual financial statement and according to objectives. (1) Classification of ratio on the basis of financial statement: Ratio is

calculated on The basis of information given in the financial statement, which is as follows: (a) Balance sheets Ratios or position statement ratios: These are the ratios which Explain the numerical relationship between two figures in the balance sheet, e.g. the Ratio of current assets to current liabilities or the ratio between capital and total Assets, This is also called financial ratio. The most common amongst the balance Sheet ratios are: I II III IV V Current Ratio Liquid ratio or Acid Test Ratio Proprietary Ratio Capital gearing Ratio Fixed Assets to Current Assets Ratio.

(b) Income statement Ratio or profit and loss Account Ratios: These explain

the numerical relationship between two items of group of items of the profit and loss A/c. The items should refer to the same statement. The more common ratios under this head are: I. II. III. IV. V. (c) Operating Ratio Gross profit Ratio Net profit Ratio Expenses Ratio Stock Turnover Ratio. Composite Ratio: These ratio are based on the figures of positions

statement as well as income statement, e.g., I. II. III. (2) Classification of ratios on the basis of objective- Ratio can be classified into four groups on the basis of objective: i) Liquidity ratios iii)Activity ratios v) Ownership ratio ii) Solvency ratios iv) Profitability ratios Fixed assets Return on capital employed ratio, etc.

Ratio may also be classified into the five categories as follows:1. 2. 3. 4. 5. Liquidity Ratio Solvency Ratio Activity Ratio Profitability Ratio Ownership Ratio

1. Liquidity Ratio:

Liquidity is ability of the firm to meet its current obligations as they fall due. Accounting to Herbert B. Mayo, liquidity is the cash with which assets may be converted into cash without loss. Thus a liquidity ratio measures the firms ability to fulfill short-item commitment out of its liquid assets. The ratios are cold liquidity ratio because they give an indication of the degree of liquidity or money less of the current assets of the company. These ratios are calculated for the liquidity test of firm. (a) Current Ratio or Working Capital Ratio This ratio explains

the relationship between current Assets and current liabilities of a business. Current assets include those assets, which can be converted into cash within a years time, and Current liability includes those liabilities, which are repayable in a years time. The formula for calculating the ratio is: Current Assets Current Ratio = Current Liabilities

Significance This ratio is used to assess the firms ability to meet its short-term liabilities on time accounting-to-accounting principles, a current ratio of 2:1 is supposed to be an ideal ratio. It mean that current assets of a business should at least, be twice of its current liabilities The higher the ratio, the better it is, because the firm will be able to pay its current liabilities more easily. b. Quick Ratio Or Acid Test Ratio Or Liquid Ratio - Quick ratio indicates whether the firm is in a position to pay its current liabilities within a month or immediately. Liquid assets means those assets, which will yield cash very shortly. All current assets except stock and prepaid expenses are included in liquid assets.Liquid assets include cash debtors, bill receivable and short-term securities. As such the Quick ratio is calculated by dividing liquid (Quick current assets) by current liabilities:-

Liquid Assets Quick Ratio = Current Liabilities

Significance An ideal quick ratio is said to be 1:1. If is more it is considered to be better The idea is that for every rupee of current liabilities, there should at least be one rupee of liquid assets. Quick ratio is a more rigorous test of liquidity than the current ratio and when used together with current ratio, it gives a better picture of the short-term financial position of the firm. 2. Solvency Ratio: These ratios are calculated to assess the ability of the firm to meet its longterm liabilities as and when they become due.Solvency ratios disclose the firms ability to meet the interest costs regularly and long term indebtedness at maturity. Solvency Ratios include the following ratios: a. Debt-equity ratio This ratio expresses the relationship between external liabilities and shareholders funds. This ratio is calculated to ascertain the soundness of the long-term financial policies of the firm. External Equities These include all the long-term and short-term debts such as, Debenture, Mortgage Loan, Bank Loan, Public Deposits and all the Current Liabilities. Internal Equities- These includes Equity share capital, Preference Share Capital, Reserves and credit balance of Profit & Loss A/c. Debt Debt-Equity Ratio = Equity

Significance- this ratio is calculated to assess the ability of the firm to meet its long-term liabilities. Generally debt-equity ratio of 1:1 is considered safe. If the debt-equity ratio is more than that, it shows a

rather risky financial position from the long-term point of view.The lower this ratio, the better it is for outside creditors because they are more secure in that case. This ratio discloses the margin of safety available to outside creditors. The smaller this ratio, the more secured are the creditors. b) Proprietory Ratio This is the ratio, which shows the relationship of internal equity with the total assets. This ratio indicates the proportion of total funds provided by a firm from internal sources it is calculated as under Equity Funds) Proprietory Ratio = Equity + Debts or Total Equity or Total Assets Internal Equities (Shareholders

Significance This ratio should be more than 50% in other words the proportion of shareholders funds to total funds should be more than 50%. A higher proprietory ratio is generally treated an indicator of sound financial position from long term point of view. c) Debt to Total Fund Ratio This ratio shows the relationship of external equity and total equity while calculating External equities all short term and long term liabilities are included.This ratio indicates the proportion of total funds acquired by a firm by outside sources. It is calculated as under: -

Debt to Total Fund Ratio = Debt/ External Equities Liabilities) or

(Total outside

Equity + Debt/ Total Equity or Total Assets

Significance - This ratio should be less than 50% in other words the proportion of outside funds to total funds should be less than 50% A higher ratio than this is generally treated an indicator of risky financial position, because it means that the firm depends too much upon outside loans for its existence.The lower the ratio, the better it is from the long-term solvency point of view. 1. Activity Ratio or Turnover Ratios These ratios measure how well the facilities at the disposal of the being utilized. These ratio are known as turnover ratio as they indicate the rapidity with which the resources available to the concern are being used to product sales. In other, words these ratio measure the efficiency and rapidity of the resources of the company, like stock, fixed assets, working capital debtors etc. these ratio are generally calculated on the basis of sales or cost of sales some of the important activity ratios are discussed below: a. Stock Turnover Ratio or Inventory Turnover Ratio This ratio indicates the relationship between the cost of good sold during the year and average stock kept during that year. Cost of Goods Sold Stock Turnover Ratio = Average Stock

1) Cost of goods sold = Opening Stock + Purchase + Direct Exp. - Closing Stock Or = Sales Gross Profit 2) Average stock can be calculated as follows: -

Opening Stock + Closing Stock Average Stock = 2

Significance This ratio indicates whether stock has been efficiently used or not, it shows the speed with which the stock is rotated into sales or the number of times the stock is turned into sales during the year. The higher the ratio the better it is since it indicates that stock is selling quickly in a business where stock turnover ratio is high. Goods can be sold at a low margin of profit and even then the profitability may be quite high. This ratio can be used for comparing the efficient of sales policies of two firms doing same type of business. The stock policy of the management of that firm, whose stock turnover ratio is higher, will be treated as more efficient. b) Debtors Turnover Ratio or Receivable Turnover Ratio This ratio indicates the relationship between credit sales and average debtors during the year:-

Net Credit Sales Debtors Turnover Ratio = Average Debtors + Average B/R

Bills receivable are added in Debtors for the purpose of calculation of this ratio. Average debtors are calculated by adding the debtors and B/R at the beginning of a period as well as at the end of the period and by dividing the total by 2. While calculating this ratio provision for bad and doubtful debts is not deducted from total debtors so that it may not give a false impression that debtors are collected quickly. Significance This ratio indicates the speed with which the amount is collected from debtors. The higher the ratio the better it is since it indicates that amount from debtors is being collected more quickly. The more quickly the debtors pay the less the risk from bad debts and so the lower the expenses of collection and increase in

the liquidity of the firm. A lower debtor turnover ratio will indicate the inefficient credit sales policy of the management

(c) Average Collection Period This ratio indicates the time within which the amount is collected from debtors and bills receivables. Average collection period may be calculated alternatively as follows:Average Debtors x 365 Average Collection Period = Total Credit Sales

Significance This ratio shows the time in which the customers are paying for credit sales. In the above example the average collection period is 30 days. It means that on an average if sales is made today, the cash will be collected actually after 30 days, i.e.,30 days credit sales are locked up in debtors.

d) Creditors Turnover Ratio This ratio shows the relationship between net credit purchases for the year and Total payables. Credit purchase means all credit purchase minus purchase returns average payables refer to the one half of opening and closing balances of trade creditors which include sundry creditors and bills payable. If opening & closing balances of creditors are not given may be taken to find out the ratio. But the amount of provision for discount on creditors will not be deducted from the amount of creditors. Net Credit Purchases Creditors Turnover Ratio =Total or Average Payable (Creditors + B/P)

Significance The creditors or payables turnover ratio indicates the number of times the creditors are turned over in relation to purchase. A high turnover Ratio or shorter payment period shows the availability of less credit or early payment.

e)

Average payable period This ratio indicates the frequency with which the debts are paid by a business enterprise it shows the velocity with which the payments for credit purchases are made to suppliers and other creditors. This ratio may be used to find out the average age of payables by using the following formula: Days in a year Average Payble Period =Creditors Turnover Ratio

Significance If the suppliers are providing lesser credit period than the calculated as above by the company, it will indicate the loss of the credit by the company in the market or the credit facilities are not being properly utilized by the company. e) Capital Turnover Ratio This ratio indicates the relationship between capital employed and cost of goods sold. This ratio shows how many times capital has been rotated for generating sales. The ratio is calculated as under: Net Sales Capital Turnover Ratio = Capital Employed Significance This ratio measures the effectiveness with which a concern is using capital (or rescues) at its disposal. It indicates how many times the capital is turned over into sales. The higher the ratio the better it is for the

business because a higher ratio indicates the quicker rotation of capital to generate higher sales which leads to higher profitability.

h) Total assets Turnover Ratio This ratio expresses the relationship between total assets (fixed assets less depreciation & current assets) and net sales. It is calculated using the following formula:Net Sales Total Assets Turnover Ratio = Total Assets Significance This ratio measures the efficiency and profit earning capacity of the firm. The higher the ratio, the greater is the intensive utilization of Total assets. Lower ratio means under utilization of Total assets and actual investment in these assets. i) Fixed assets Turnover Ratio This ratio expresses the relationship between fixed assets less depreciation and net sales or cost of goods sold. This formula used for calculating this ratio is as follows:Net Sales or cost of goods sold Fixed Assets Turnover Ratio = Net Fixed Assets Net Fixed Assets = Fixed assets Depreciation. Significance This ratio is of particular importance in manufacturing concerns where the investment in fixed assets are being utilized Compared with the previous year, if there is increase in this ratio, it will indicate that there is better utilization of fixed assets.? j) Working capital Turnover Ratio: - This ratio establishes the relationship between net working capital and net sales or cost of good sold. It is

calculated by dividing the net sales by net working capital. This is expressed by the following formula: Net Sales Working capital Turnover Ratio = Working Capital

Working capital = Current Assets-Current Liabilities.

Significance- This ratio is of particular importance in non-manufacturing concerns where current assets play a major role in generating sales. This ratio reveals how efficiently working capital has been utilized in making sales. In other words it shows the number of times working capital has been rotated in producing sales. A high working capital turnover ratio shows efficient use of working capital and quick turnover of current assets like stock and debtors. 4) Profitability Ratio or income Ratios :The main object of every business concern is to earn profits. A business must be able to earn adequate profits in relation to the capital invested in it. The efficiency and the success of a business can be measured with the helps of profitability ratios. We can understand more about these ratios by categorized it into the following two: I) Ratios calculated on bases of salesfrom Service)} these are as follows: {Net Sales means (sales + Income

Net profit ratio This ratio measured the relationship net profits and sales of a firm. Net profit is the excess of revenue over expenses during a particular accounting period. The net profit ratio is determined by dividing the net profit by sales and expressed as percentage. The formula used is as follows:

Net Profit after Interest & Tax Net Profit Ratio = Net Sales

x100

Significance This ratio is the indication of overall profitability and efficiency of the business. This ratio not only reveals the recovery of costs and expenses from the revenue of the period but also to leave a margin of reasonable compensation to the owners for providing capital at their risk a high net profit ratio would only mean adequate returns to the owners. This also enable a firm to withstand in cut throat competition when the selling price is declining or cost of production is rising. A low net profit ratio on the other hand, would only indicate inadequate returns to the owners. II) Ratio calculated on based of Capital These are as follows: a) Return on Investment or R.O.I. :- This ratio reflects the overall profitability of the business. It is calculated by comparing the profit earned and the capital employed to earn it. This ratio is usually in percentage and is also known as Rate of Return or Return on Capital Employed or Yield on Capital. The term Investment here refers to long-term funds deployed in the enterprise. Net Profit before Interest and Tax Return on Investment = Capital Employed x 100

Here, Capital Employed = Total Assets Current Liabilities Significance The return on capital employed provides a test of profitability related to the long-term funds. The higher the ratio the more effective and efficient would be the utilization of capital or vice-versa. The higher the ratio the more effective and efficient would be the utilization of capital or

vice-versa. The comparison of this ratio with that of similar firms and with industry average over a period of time would disclose as to how effectively the long terms funds provided by owners and creditors have been used.

b) Return on equity or net worth (ROE) This ratio expresses the percentage relationship between net profit after interest and tax and proprietors funds or shareholders investment. This is also known as Return on proprietors funds. It is used to ascertain the earning power of shareholders investment.. The ratio is calculated by using the following formula: Net Profit after Interest and Tax Return on Proprietors Fund = Shareholders Fund x 100

Significance The return on Equity provides a test of profitability related to the long-term funds. The higher the ratio the more effective and efficient would be the utilization of equity or vice-versa. The comparison of this ratio with that of similar company and with industry average over a period of time would disclose as to how effectively the long terms funds provided by equity holders have been utilized. c) Return on Total assets Profitability can also be measured by establishing relationship between net profit and total assets. This ratio is computed by dividing the net profits after tax by total funds invested or total assets. Net Profit after Interest and Tax Return on Total Assets = Total tangible assets x 100

Significance This ratio measures the profitability of investments, which reflects managerial efficiency. The higher the ratio the better is the profit earning capacity of the firm or vice versa. Technically, this ratio is not sound as total assets are financed by funds provided by owners and creditors. The basic objective of this ratio is to measure the effectiveness of the use of these funds.

Ratio of current liabilities to proprietors funds This ratio shows the relationship of current liability with the proprietors funds of the company. Proprietors fund includes equity share capital, preference share capital, reserve and surplus and miscellaneous expenditure. This ratio tells us that how much unsecured creditors are secured in against of proprietors funds. Current Liabilities Ratio of current liabilities to proprietors Funds =Proprietors Funds Significance Generally, 0.3:1 is the ideal ratio for any concern. If the ratio is more than this than the unsecured creditors feel unsecured in against of these repayments. Reserve to capital Ratio This ratio explains the profit allocation policy of a company. It is calculated by dividing reserves by equity shares capital thus. Reserve Reserve to Capital Ratio = Equity Share Capital

Significance This ratio depicts the progress or development made by a company when it follows conservative policy in dividend distribution then ratio will be high. A high ratio reveals sounds financial position and the capacity of the company to absorb losses arising in future it also indicates that the prices of its shares have gone up.

d) Book value per share- This ratio expresses the relationship of shareholders fund and number of share. Indirectly this ratio tales us at the time of wound-up of the company, the company will pay how much of the amount to their equity share holders in against of there investment in the company. Shareholders funds Book Value per share = Number of shar

Significance Higher the ratio means higher the profit for the equity shareholders. Generally, if the share is higher than the nominal value of the share than it is better for the company, it also represents the goodwill of the company in the market.

Advantages of Ratio Analysis: Financial statement like profit and Loss account and balance sheet are prepared at the end of the year do not always conveys to the reader the real profitability and financial health of the business. They contain various facts and figures and it is for the reader to conclude, whether these facts indicate a good or bad managerial performance. Ratio analysis is the most important tool of analysis these financial statement. The figures then speak of liquidity, solvency by a profitability etc. of the business enterprises. Some important object and advantages derived by a firm by the use of accounting ratios are:1. Helpful in analysis of financial statement- Ratio analysis is an extremely useful device for analysis the financial statement, it helps the bankers, creditors, investors, shareholders etc. in acquiring enough knowledge about the profitability and financial health of the business in the light of the knowledge so acquired by them they can take necessary decision about their relationships with the concern.

2. Simplification of accounting data - Accounting ratio simplifiers and summaries long arrays of accounting data and make them understandable. It discloses the relationship between two such figures, which have a cause and effect relationship with each other.

3. Helpful in Comparative Study - With the help of ratio analysis comparison of profitability and financial soundness can be made between one firm and another in the same industry. Similarly, comparison of current year figures can also be made with those of precious year with the help of ratio analysis.

4. Helpful in locating the weak spots of the business - Current years ratios are comparing with those of the previous year and if some weak spots are thus located, remedial measures are taken to correct them.

5. Helpful in forecasting - Accounting ratios is very helpful in forecasting and preparing the plans for the future. Other estimates for future can be worked out by establishing a relationship between capital and sales, debtors and sales, expenses and sales etc.

6. Estimation of ideal standards - If accounting ratios are prepared for a number of years they will reveal the trend of costs, sales profits and other important facts.

7. Fixation of ideal Standards - Ratio help us in establishing ideal standards of the different items of the business. By comparing the actual ratios calculated at the end of the year with the ideal ratio, the efficiency of the business can be easily measured.

8. Study of financial soundness - Ratio analysis discloses the position of business with different viewpoints. It discloses the position of business with the liquidity point of view, solvency point of view, profitability point of view etc. Limitations of Ratio Analysis: Ratio analysis is a very important tool of financial analysis. But despite its being indispensable, the ratio analysis suffers from a number of limitations. These limitations should be kept in mind while making use of the ratio analysis:1) False accounting data gives false ratios Accounting ratios are calculated

on the basis of data given in profit and loss account and balance sheet. Therefore they will be only as correct as the accounting data on which they are based. For example, if the closing stock is over-valued, not only the profitability will be overstated but also the financial position will appear to be better. 2) Comparison not possible if different firms adopt different accounting policies- There may be different accounting policies adopted by different firms with regard to providing depreciation creation of provision for doubtful debts, method of valuation of closing stock etc. for instance, one firm may adopt the policy of charging depreciation on straight line basis, while other may charge on written down value method. Such differences make the accounting ratio incomparable. 3) Ratio analysis becomes less effective due to price level changes- Price level over the years goes on changing, therefore, the ratios of various years cannot be compared. For example, one firm sells 1,000 Machines for Rs. 10 Lakhs during 1992; it again sells 1,000 machines of the same type in 1993 but owing to rising prices the sale price was Rs. 15 lakhs on the basis of ratios it will be concluded that the sales have increased by 50% whereas in

actual, sales have not increased at all. Hence, the figure of the past years must be adjusted in the light of price level changes before the ratios for these years are compared.

4)

Ratio may be misleading in the absence of absolute data - For example, X Company produces 10 lakh meters of cloths in 1992 and 15 lakh meters in 1993, the progress is 50% Y company raises its production from 10 thousand meters in 1992 to 20 thousand meters in 1993, the progress is 100% Comparison of these two firms made on the basis of ratio will disclose that the second firm is more active than the firm. Such conclusion is quite misleading because of the difference in the size of the two firms.

5)

Limited use of a single Ratio - The analyst should not merely rely on a single ratio he should study several connected ratios before reaching a conclusion. For example, the current ratio of a firm may be quite satisfactory whereas the quick ratio may be unsatisfactory.

6)

Lack of proper standards - Circumstances differ firm to firm hence no single standard ratio can be fixed for all the firm against which the actual ratio may be compared. For example the current ratio of 2:1 is generally accepted as an ideal ratio, which means that the current assets should be at least twice in comparison to the current liabilities but if a firm has such type of arrangement with its bankers that the bankers will provide necessary credit to the firm in case of need the ideal current ratio for such a firm may be less then 2:1.

CHAPTER - 3 RESEARCH METHODOLOGY

 Defination  Objective of study  Data collection  Types of research  Research methodology use for project

Definition of Research: Research In Common Parlance Refers To Search For Knowledge. Data had been collected by primary and secondary methods. Research Methodology is a way to systematically solve the research problem. It may be understood as a science of studying how research is done scientifically. The study of research methodology gives the student the necessary training in gathering material and arranging them. According to Hudson Maxim, All progress is born of inquiry. Doubt is often better than overconfidence, for it leads to inquiry, and inquiry leads to invention Research is an academic activity and as such the term should be used in technical sense. Research is, thus an original contribution to the existing stock of knowledge making for its advancement.

OBJECTIVES OF STUDY Every study has some objectives while pursuing MBA degree we are required to go for a practical training in order to have some work experience, to learn the process & procedure, to understand the work processes & to expose our creativity. Keeping this perspective in mind, I was offered training in INSTRUMENTATION LIMITED, KOTA an organization of Govt. of India Enterprise. The objectives of study : 1. To have the knowledge about Accounting system of the

industry. 2. To understand the business dynamics of the concern from history to what is today. 3. To study about working environment, planning & strategies, business policy, various methods & technologies for better output & optimum utilization of resources. 4. To analyze the financial competency of the organization to execute the routine operations and meet for contingencies. 5. To understand the management of human assets, finance, marketing & production for achieving the desired goals. 6. To have depth study regarding Analysis of the financial statement of Instrumentation Limited, Kota.

STEPS IN RESEARCH METHODOLOGY Specifying research objectives

Preparing the list of needed information

Design the data collected

Sample design

Analyzing the collected data and reporting findings

Preparing a project report

DATA COLLECTION The task of data collection begins after a research problem has been defined and research design/ plan chalked out. While deciding about the method of data collection to be used for the study, the researcher should keep in mind two types of data. There are two types of data: 1 Secondary data 2 Primary data Collection of primary data It is collected afresh and for the first time, thus happens to be original in character. Primary data is collection of data through questionnaire, interview method, observation method, etc. Collection of secondary data These are those data which have been already been collected by someone else and which have already been passed through the statistical process. When the researcher utilizes secondary data, then he has to look into various sources from where they can obtain them. Secondary data may either be published data or unpublished data.

Published data are available in: a) b) Various publications of the central, state and local govt. Books magazines and newspapers

c) Reports and publications of various associations connected with Business and industry, Banks, Sock Exchanges. d) Reports prepared by research scholars, universities, economist etc. in different fields.

Unpublished data are available from: Dairies, letters, unpublished biographies and autobiographies and also may be available with scholars and research workers, trade associations, labour bureaus and other public/ private individuals and organizations. Secondary data was collected through annual reports and the brochures of I.L.

Types of research:
1). Descriptive vs. Analytical: Descriptive include survey and fact-finding of different kinds. The major purpose of descriptive research is description of the state of affair, as it exists at present. In analytical research, on the other hand, the research has to use facts or information already available, and analyze these to make critical evaluation of the material. 2.)Applied vs. Fundamental: Research can either be applied research or fundamental (or basic or pure). Applied research aims at finding a solution for an immediate problem facing a society or an industrial/business organization, whereas fundamental research is mainly concern with generalizations and with the formulation of a theory. Gathering knowledge for knowledge s sake is termed as pure or basic research. 3).Quantitative vs. qualitative: Quantitative research is based on the measurement of quantity or amount. Qualitative research, on the other hand is concern with qualitative phenomenon that is phenomena relating to or involving quality or kind.

4).Conceptual vs. Empirical: Conceptual research is that related to some abstract idea (s) or theory. On the other hand, in empirical research realize on inexperience or observation alone, often without due regard for system and theory.  .The type of research I have used in my project is an Analytical type of research. y Analytical research uses facts or information already available, and analyze these to make critical evaluation of the material. y On the basis of available facts & figures Balance sheet and profit and loss account have been made in the project by using Analytical type of research. y Current baIance sheet is not available due to some security reasons that is why i have used analytical type of research on the basis of available facts.

RESEARCH METHODLOGY USED FOR PROJECT:

Research Type

Analytical research

Data Resources

Secondary Data

CHAPTER - IV Results and Discussions

 Balance sheet of IL  Profit &loss account of IL  Comparative profit &loss account of IL  Comparative balance sheet of IL  Ratio analysis

1. Final Accounts 2. Accounting Policies Final Account BALANCE SHEET OF INSTRUMENTATION LIMITED AS at As at As at Particulars March 31, 2006 Sources of funds: Shareholders funds Share capital Reserves and surplus Total (A) 897849000 10142031 Loan funds Secured Loa Unsecured Loan Total (B) 894208297 Total Fund Employed (A+B) 2837674215 1088954074 2245826296 1278120656 1479064727 907991031 837749000 10142031 847891031 782949000 10142031 793091031 Rs. March 31, 2005 Rs. March 31,2004 Rs.

3731882512 Application of funds: 4639873543 Fixed assets Gross block Less: Depreciation Net block Capital work in progress Total (C) 674803864 543650664 131153220 Investment (D) 866275 132019495 Current assets, loans & advances

3334780370

2757185383

4182671401

3550276414

672307820 528645974 143661846 866275 144528121

665223427 511010047 154213380 3658085 157871465

17457290

12357290

7257290

Inventories System work (At sites) Sundry debtors Cash & bank balances Other assets Loan & advances 585215869 21084829 1060399300 611343004 19509272 1039415569 386021186 16394750 836769169

Total (E)

425318930 266609228

175366915 224772149 207048527

104828960 186271946 160924806 1691210817

Less: Current liabilities & provisions Current liabilities Provision Total (F) Net current assets (G=E-F)

263546516 2622174672

2277455436

745126611 969617644 Miscellaneous expenditure (I) (to the extent not written off or adjusted) Deferred Revenue Exp. Proft&Loss Account Less: Transferred from Reserves&Surplus Total funds utilized (C+D+G+H+I) 1626683481 1386268495 25873547 995491191 860730006 30456935 891186941 915190688 30893518 776020129

224904537 203794889 2659918388 2245052434 224683594 _ 2414833901 _

4639873543

_ 3550276414 4182671401

PROFIT AND LOSS ACCOUNT OF INSTRUMENTATION LIMITED AS at Particulars March 31, 2006 Rs. INCOME TURNOVER Jobs done for internal use TOTAL Less: Excise Duty 2199832187 5466609 2205298796 135330942 2069967854 TOTAL Accretion / (Decretion) to stock Other Revenues Dividend (54441328) 158847979 1275526 2175650031 1758520239 1532477334 5467116 4705643 As at March 31, 2005 Rs. As at March 31,2004 Rs.

1763987355 1537182977 129584700 137620744

1634402655 1399562233 208239838 163002614 956775 (26976123) 49888765 1275000

2006601882 1423749875

TOTAL EXPENDITURE Expenditure on materials Employees Remuneration and Benefits Services & Sub- Contracting Other Expenses Depreciation Interest Loss on Sale of Fixed Assets Provisions

1298895519

1206792057 736053706

374158948 222429705 164817079 15258123 297563120 793 5394479 2378517766

356268806 182997465 160000962 18110939 210176403 33196 8793240

335978217 202597959 161631104 19228242 211649529 2300 4393851

2143173068 1671534908

TOTAL

(202867735) _ Profit/ (Loss) before tax Income Tax Fringe Benefit Tax Profit/ (Loss) after tax Deferred Revenue Exp. Written Off (30595540) 5500000 (208367735)

(136571186 (247785033 ) ) _ _ _ _

(136571186 (247785033 ) )

(29791100) (26834086) (6121212)

Prior Period and Other Adjustment (Net) Credit/ (debit)

(245084487)

(3419181)

(15608227)

(2414833901)

(169781467 (290227346 ) )

TOTAL Balance brought from previous year Balance of profit / (Loss) carried to balance sheet Earning performance Equit Share (of Rs.1000/- each) Basic Rs. (2659918388)

(224505243 (195482508 4) 8)

- 1019 -273

(241483390 (224505243 1) 4)

-706 -203

-1207 -371

Diluted Rs.

COMPARATIVE PROFIT AND LOSS ACCOUNT OF INSTRUMENTATION LIMITED

AS at Particulars March 31, 2006

As at March 31, 2005

Increase Or Decrease over 2005

% Of Increa se or Decrea se

Rs. INCOME TURNOVER Jobs done for internal use TOTAL Less: Excise Duty 2199832187 5466609 2205298796 135330942 2069967854 TOTAL Accretion / (Decretion) to stock (54441328) 158847979

Rs.

Rs.

1758520239 441311948 5467116 (507)

25.09 (.0092) 25.01 4.43 25.6

1763987355 441311441 129584700 5746242

1634402655 435565199 208239838 163002614

(262681166 (126.14 ) )

Other Revenues Dividend

1275526 2175650031

956775

(4154635)

(2.5) 33.3 8.42

2006601882 318751 169048149

TOTAL EXPENDITURE Expenditure on materials Employees Remuneration and Benefits Services & Sub- Contracting Other Expenses Depreciation Interest Loss on Sale of Fixed Assets Provisions

1298895519

1206792057 92103462 7.6

374158948 222429705 164817079 15258123 297563120 793 5394479 2378517766

356268806 182997465 160000962 18110939 210176403 33196 8793240 17890142 39432240 4816117 (2852816) 87386717 (32403) 5.02 21.5 3.01 (15.75) 41.57 (97.6) (38.65) 10.98

2143173068 (3398761) 235344698

TOTAL

(202867735) _ Profit/ (Loss) before tax Income Tax Fringe Benefit Tax 5500000 (208367735)

(136571186 ) _ --

(66296549) _

(48.5)

(52.57)

(136571186 5500000 )

Profit/ (Loss) after tax Deferred Revenue Exp. Written Off Prior Period and Other Adjustment (Net) Credit/ (debit)

(30595540) (29791100) (6121212) (245084487) (3419181)

(71796549) (2.7) (804440) (79.02) (44.35)

(2414833901) TOTAL Balance brought from previous year Balance of profit / (Loss) carried to balance sheet . (2659918388)

(169781467 (2702031) ) (75303020)

(7.56) (224505243 (169781467 4) )

(10.14)

(241483390 (245084487 1) )

COMPARATIVE BALANCE SHEET OF INSTRUMENTATION LIMITED AS at Particulars March 31, 2006 As at March 31, 2005 decrease over 2005 Increase or % Of Increase or Decreas e Over 2005 Sources of funds: Rs. Rs. Rs.

Shareholders funds

Share capital Reserves and surplus Total (A)

897849000 10142031 907991031

837749000 10142031 847891031

60100000 0 60100000

7.17

7.08

Loan funds 894208297 Secured Loan Unsecured Loan Total (B) 4639873543 4182671401 457202142 10.9 2837674215 3731882512 1088954074 2245826296 3334780370 (194745777) 591847919 397102142 (17.8) 15.85 11.9

Total Fund Employed (A+B)

Application of funds: Fixed assets Gross block Less: Depreciation Net block Capital work in progress Total (C)

674803864 543650664 131153220 866275 132019495

672307820 528645974 143661846 866275 144528121

2496044 15004670 (12508626) 0 (12508626)

.37 2.8 (8.706) 0 (8.65)

17457290

12357290

5100000

41.27

Investment

(D)

Current assets, loans & advances

585215869 21084829 1060399300

611343004 19509272 1039415569 175366915 224772149 207048527 2277455436

(26127135) 1575557 20983731 249952015 41837079 56497989 344719236

(4.27) 8.07 2.01 142.5 18.6 27.28 15.13

Inventories System work (At sites) Sundry debtors Cash & bank balances Other assets Loan & advances Total (E)

425318930 266609228 263546516 2622174672

Less: Current liabilities & provisions

969617644 25873547 995491191

860730006 30456935 891186941 1386268495

108887638 (4583388) 104304250 240414986

12.6 (15.04) 11.70 17.3

Current liabilities Provision Total (F) Net current assets (G=E-F) Miscellaneous expenditure (I) (to the extent not written

1626683481

203794889 2659918388 224683594 2414833901 (20888705) 245084487

(9.29) 10.14

off or adjusted) Deferred Revenue Exp. Profit & Loss Account Less: Transferred from Reserves & Surplus

_ _ _ 10.93

4639873543 4182671401 457202142

Total funds utilized (C+D+G+H+I)

Ratio Analysis Ratio may be classified into the five categories as follows:6. 7. 8. 9. 10. Liquidity Ratio Solvency Ratio Activity Ratio Profitability Ratio Ownership Ratio

1. Liquidity Ratio: (a) Current Ratio or Working Capital Ratio Current Assets Current Ratio = Year Current Assets Current Liabilities Current Ratio 2.63:1 2.55:1 2.18:1 (Rs.Lakh ) Comment - From the above calculation we can say that the short-term solvency position of the company is solid. In year, 2004 the current ratio was 2.18:1 and it has increasing trend year 2006. Ideal current ratio is suppose to be 2:1 and 2006 26221.7 9954.9 Current Liabilities 2005 22774.55 8911.86 2004 16912.10 7760.20

company has higher ratio in each year for last three year so it is good from the creditors point of view but extremely high current ratio is not good from the managements view. Above calculation shows that company has more funds of pay current liabilities. b. Quick Ratio Or Acid Test Ratio Or Liquid Ratio (Rs.lakh) Year Liquid Assets Current Liabilities Quick Ratio 2.04:1 1.87:1 1.68:1 2006 20369.58 9954.9 2005 16661.12 8911.86 2004 13051.89 7760.20

Comment After seeing the above table we can say that the company is in a position for paying their current debts hand to hand. Ideal Quick Ratio for any concern is 1:1 but in this concern this ratio is 2.04:1 which is much higher than that and it is good from the creditors point of view. We can also say that the company has an ability to meet its unexpected demand for working capital. 2. b. Solvency Ratio: Debt-equity ratio Debt Debt-Equity Ratio Year Debt 2006 37318.82 = Equity 2005 33347.80 ( Rs.lakh) 2004 27571.85

Equity Debt-Equity Ratio

-17519.27 -2.13:1

-15669.43 -2.13:1

-14519.61 -1.89:1

Comment- From the above table we can reach on the conclusion that long-term debt feel unsecured as the ratio of debt and equity is all three year. it also shows the risk for dealing in long term. b) Proprietory Ratio Equity Funds) Proprietory Ratio = Equity + Debts or Total Equity or Total Assets (Rs.lakh) Year Proprietary Fund Total Tangible Proprietary Ratio 27716.51 -.632:1 24343.41 -.644:1 18563.39 -.782:1 2006 -17519.27 2005 -15669.43 2004 -14519.61 Internal Equities (Shareholders

Comment - Such that this ratio is less than 0.5 we reach on the conclusion that it is not good for the owners point of view. The capital of owner is not safe as they have less fix assets but this ratio is increase year by year very slowly, which is good for the organization.

(d) Debt to Total Fund Ratio Debt to Total Fund Ratio = Debt/ External Equities (Total outside Liabilities) or Equity + Debt/ Total Equity or Total Assets ( Rs.lakh) Year Debt Equity + Debt Debt To Total Fund Ratio 2006 37318.82 27716.51 1.34:1 2005 33347.80 24343.41 1.37:1 2004 27571.85 18563.39 1.48:1

Comment This Ratio is more than 0.5, which means it is risky for the long-term debt in future. The change in this ratio is very big between the years 2004 to 2006 which means there is heavy change in the debt of the organization.

2. Activity Ratio or Turnover Ratios Stock Turnover Ratio or Inventory Turnover Ratio Cost of Goods Sold Stock Turnover Ratio = Average Stock

1) Cost of goods sold = Opening Stock + Purchase + Direct Exp. - Closing Stock Or = Sales Gross Profit 2) Average stock can be calculated as follows: -

Opening Stock + Closing Stock Average Stock = 2 (Rs.lakh) Year Cost of Goods Sold Average Inventory Stock Turnover Ratio 2006 21998.32 2005 17585.20 2004 15324.77

5730.33

4725.15

3837.44

3.8

3.72

4.0

Comment Stock Turnover Ratio in year 2004 is 4.0 and at in the year 2005 it was decrease 3.72 but in the year 2006 it was increase to 3.8 compare to 2005.Low stock turnover Ratio shows that company maintain more stock that means it need more working capital and thus can earn less available W.C. (i.e. by reaction W.C. less number of times).

b) Debtors Turnover Ratio or Receivable Turnover Ratio

Net Credit Sales Debtors Turnover Ratio = (Rs.lakh) Year Net Credit Sales Average Receivable Debtors Turnover Ratio 2006 21998.32 2005 17585.20 2004 15324.77 Average Debtors + Average B/R

10499.07

9380.92

7722.17

2.09

1.87

1.98

Comment This ratio is decrease from 2004 to 2005. In the year 2004 the ratio is 1.98 times which decrease to 1.87 times in 2005, and again debtor turnover ratio increase 2.09 times in 2006. It means it increases by 022 times, which is very good for the organization point of view. An increase in debtors turnover ratio indicates that debts work collected more promptly in 2006 in comparison to other last two years.

d)

Average Collection Period Average Debtors x 365 Average Collection Period = Total Credit Sales (Rs.lakh) Year Days in Year Debtors Turnover Ratio Average Collection Period 2006 365 2.09 2005 365 1.87 2004 365 1.98

175 Days

195 Days

184 Days

Comment We can easily see from the above table that where the company collect the money from its debtors in 2004 in 184 days and than it increase to 195 days in 2005,and than it falls up 175 days in 2006 which indicates debts are collected more promptly in current year in comparison to other following years. This also helps the company in maintaining his working capital.

e) Capital Turnover Ratio Net Sales Capital Turnover Ratio = Year Net Sales Net Worth Net worth Turnover Ratio 2006 21998.32 15210.30 1.45 Capital Employed 2005 17585.20 13542.05 1.30 ( Rs.lakh) 2004 15324.77 9430.31 1.6

Comment capital turnover Ratio is in 2004 was 1.6 which falls up to 2005 on 1.30 than it increasing in year 2006 . Generally, no ideal standard can be fixed for this ratio because the rate of capital turnover ratio is different in different types of industries. Since both the sales and net worth is increasing and the ratio is also increasing which means the companies percentage of investment in fixed assets is less than the percentage of increasing in sales and it is not good for the company but in 2005 sales and net worth is increasing & the ratio decreasing, it is good for company.

f) Total assets Turnover Ratio Net Sales Total Assets Turnover Ratio = Total Assets (Rs.lakh) Year Net Sales Total Assets Total Assets Turnover 2006 21998.32 27716.51 .793 2005 17585.20 24343.41 .722 2004 15324.77 18563.40 .825

Comment Total assets Turnover Ratio .825 in 2004. And ratio falls up .722 in 2005. And again this ratio increase to 0793 in 2006. Decrease in the ratio by 3.87% which shows that the funds of the company are not properly utilized and it is a bad sign for the future of the concern. This is also bad for the both the owners and outsiders point of view.

g) Fixed assets Turnover Ratio Net Sales or cost of goods sold Fixed Assets Turnover Ratio = Net Fixed Assets

Net Fixed Assets = Fixed assets Depreciation. (Rs.lakh) Year Net Sales Fixed Assets Fixed Assets Turnover Ratio 2006 21998.32 1320.19 16.66 2005 17585.20 1445.28 12.167 2004 15324.77 1578.71 9.707

Comment Increasing trend of this ratio shows him-self the good investment policies of the company in their fixed assets. We can see from the above table the fixed assets were increase between the years 2004 to 2006 which indicates the good financial position of this concern.

h) Current Assets Turnover RatioSales Current Assets Turnover Ratio= Current Asset

(Rs.lakh) Year Sales Current Assets Turnover Ratio 2006 21998.32 23586.28 .933 2005 17585.20 20704.06 .849 2004 15324.77 15302.86 1.00

Comment- This ratio is increases year by 2004 which is a very good indignation for the company. This also means the funds were promptly utilized in 2004 is compare to 2005. It also indicates that company invests in fixed assets as well as in the current assets, which helps them in solve the problems regarding the working capital.

i) Working capital Turnover Ratio: Net Sales Working capital Turnover Ratio = Working Capital

Working capital = Current Assets-Current Liabilities.

(Rs.lakh) Year Net Sales Net Working Capital Working Capital Turnover Ratio 2006 21998.32 13890.10 2005 17585.20 12096.76 2004 15324.77 7851.59

1.58

1.45

1.95

Comment- Ratio in 2004 was 1.95 which is decrease to 1.45 in 2005 and this ratio is increase to 1.58 in 2006. that means working capital has not been properly utilized in 2005 is compare to 2004 and 2006 respectively. The region for increase in the ratio in year 2004 and 2006 is only the sales of unsold stock of finished goods by the company.

4)

Profitability Ratio or income Ratios :I) Ratios calculated on bases of salesfrom Service)} these are as follows: {Net Sales means (sales + Income

Net profit ratio Net Profit after Interest & Tax Net Profit Ratio = Net Sales x100

(Rs.lakh) Year Net profit after Interest & Tax Net Sales Net profit Ratio 2006 -2450.84 2005 -1697.81 2004 -2902.27

21998.32 -11.14%

17585.20 -9.65%

15324.77 -18.94%

Comments The Net profit ratio is decrease in 2004 to 2005, which is bad indignation for the company.

II) Ratio calculated on based of Capital These are as follows: a) Return on Investment or R.O.I. :Net Profit before Interest and Tax Return on Investment = Capital Employed x 100

Here, Capital Employed = Total Assets Current Liabilities (Rs.lakh) Year Net profit before interest & tax Capital employed Return on Capital Employed Ratio 2006 -2028.67 2005 -1365.71 2004 -2477.85

-8375.98

-7162.02

-5872.55

-24.22%

-19.068%

-42.19%

Comment This ratio is 42.19% in the year 2004, which increase in 2005, and than it decrease in 2006 and This ratio can be used to judge the boring policy of the company. If any company having the ratio of return of

investment of 50% boras at 60% it would indicate that it is borrowing at a rate higher than its earning rate.

b) Return on equity or net worth (ROE) Net Profit after Interest and Tax Return on Proprietors Fund = Shareholders Fund (Rs. lakh) Year Net profit after interest & tax Shareholders fund Return on Proprietors fund Ratio 9079.91 8478.91 7930.91 2006 -5059.30 2005 -3467.47 2004 -4594.34 x 100

-55.72%

-40.89%

-57.92%

Comment This ratio is the most important ratio among all the profitability ratios. We can see from the above table that this ratio is higher in 2005 and this is very low in 2006. Higher the ratio, grater the safety of return to the shareholder. Is the ratio is 55.72 in the current year shows lower return to the shareholders.

c) Return on Total assets Net Profit after Interest and Tax Return on Total Assets = Total tangible assets x 100

(Rs. lakh) Year Net profit Tax & interest Total tangible assets 2006 -2083.67 2005 -1365.71 2004 -2477.85

27716.51

24343.40

18563.40

Comments Technically only few companies are calculating this ratio. This ratio is 13.34% in 2004, which increase 5.6% in 2005, and than decrease in 2006 which indicates the earning capacity of the company in current year is bad.

Ratio of current liabilities to proprietors funds Current Liabilities Ratio of current liabilities to proprietors Funds = Proprietors Funds

Reserve to capital Ratio Reserve Reserve to Capital Ratio = Equity Share Capital

(Rs.lakh) Year Reserve Equity share capital Reserve to capital ratio 2006 101.42 8978.49 2005 101.42 8377.49 2004 101.42 7829.49

.0113:1

.0121:1

.0129:1

Comment This ratio is .013in 2004 and .0121 in 2005 and than it decrease in 2006, which is very bad for the company, it is also true that this ratio is very bad in against of any other company.

d) Book value per share-

Shareholders funds Book Value per share = Number of share

(Rs. lakh) Year Equity Shareholders fund No. Of Shares Book value per share 2006 48119.00 2005 41126.00 2004 34734.08

17370332

17370332

17370332

277.01

236.76

199.96

Comment This ratio is continuously an increase which is very good news for the equity shareholders. By this we can usually say that the interest of equity shareholders in the company is safe and it is increases year by year.

CHAPTER- V FINDINGS & CONCLUSION

 Finding
 Conclusion  Limitation  Swot analysis

Findings
While studying Industrial Relation in Instrumentation Limited, I came across some facts and finding. Some of them are listed below: Industrial Relation System is followed in the organization with the objective: j To improve Industrial peace. j To create awareness of law and order situation. j To provide natural justice to all. j To issue the awards/punishment To Improve Industrial Peace: Industrial Dispute Act is the foundation for the improvement of Industrial Peace. Its object is the proper adjustment of relations between labour class and capitalist class. White at the same time law and order is also maintained and there must also be the increase in the industrial production, thus it maintains industrial harmony. Awareness of law and order situation: Law and order situation is a critical component of the system. This gives timely feedback to management. Situation mid-term review of laws enables the organization to provide justice to the employees. It gives the individual an opportunity to improve his behaviour or character and to take at the areas of improvement. Effective law and order system forces on results on the behaviour that facilitate the achievement of desired results.

CONCLUSIONS After the ratio analysis of last three years it was found that: 1.A quick ratio of 1:1 is considered as an ideal ratio. If the liquid ratio is more then 1:1 the financial position of the firm seems to be sound and good. 2.In debtor Turnover ratio a turnover of 2 signifies that debtors get converted into cash 2 times in from 2004 to 2006. Which that lower ratio indicates inefficiency of management in collection of payment against credit sales in time or payment by debtors are delayed. 3.The company has been successful in achieving multifold increase in operating profit in the year 2006 the company has an operating profit of Rs. 1305 lakhs as compared to operating profit of 1092 lakh in the 2005 and 2004 of operating profit of 21 lakh. 4.net profit ratio in year 2004 to2006 continuously net loss. Which is bad from the company s point of view. A net loss ratio would only indicate inadequate returns to the owners. Net loss for the year 2005-06 was Rs. 2451 lakhs as compared to loss of 1698 lakh in the last financial year taking into account government of India (GOI) interest.. Company closing balance 4253 lakhs in the current year. That is good for paying off the current liabilities. After the analysis of comparative final statement of last three year.: 1. Share capital of the company has been only increase by approx. 7% in year 2006 from share 8377 to 8978. 2. In company continusaly year 2006 till only net loss, which is, bad from company point of view. 3. Continued enhanced performance over last three year resulting in highest ever turnover of Rs. 219.98 crores and order booking of Rs. 236.84 crores 4. achieved in 2005-06 since inception.

5. High performance high capacity specialty flow products which will help us gain new customers and retain the confidence of existing ones. 6. The company is not dealing or trading in shares, securities debentures and other investment. 7. According to information and explanations given to us, the company has not given any guarantee for loan taken by other form banks and financial institutions.

LIMITATIONS OF PROJECT
Any project assignment, even if is done with best of intentions and input may be contained through certain assumptions and resource limitation. The following are the aspects, which need to be considered with analyzing the suggestions of the project :-

1.

CO-OPERATION: General co-operation of the employee is to be achieved in the organization is one of the major limitations of the project.

2.

DISCIPLINE: Discipline on the part of employee s and enquiry on the part of management, require a great sense of moral and discipline.

3.

ADVISORY: The findings of the Enquiry Officer are just advisory and not orders.

4. 5.

DELAY: Justice Delay is justice denied . There is delay in deciding the cases. TIME CONSTRAINT: The most glaring of any constraints is the short time from within which a certain objective has to be achieved. There is no time frame for finalizing of findings.

6.

LAW OF EVIDENCE: There is a major limitation of imposing law of evidence in domestic enquiry.

7.

GENERAL: Relationship between the employer and employee gets disturbed and there is a great deal of interference of Trade Unions.

8.

CONTRADICTION: In the expressions and wrong data feedback and decisions on the part of employee s and management can also be stated as limitation at this project.

9.

Balance Sheet of 2009-2010 is not available due to some security reason.

SWOT ANALYSIS
The abbreviation SWOT stands for: S: STRENGTHS

W: WEAKNESS O: OPPORTUNITIES T: THREATS So the SWOT analyses of the company reflect efficiency & inefficiency and its external favorable or unfavorable atmosphere within which it operates. The strength and weakness are concerned with the operation of the company, where as the opportunities and threats are the business environmental factors that are beyond the control of company. After observing the company during training and has collected information from management of IL, following analysis has been done: -

STRENGTHS: 1.Infrastructure is excellent. 2. The company is providing quality products like Telecom circuits, Mini UPS Digital Electronic Switching System. Digital Moisture Tester. Solar Photovoltaic (SPV) Module/ System etc. to its esteem customer. 3.The company is using latest available technologies in its plants and offices. 4. Company has received ISO 9000 certificate for its all product. 5. Man power is excellent and high qualified. 6.Well established and documented procedure with well define delegation of Power. 7. Effectiveness of trade union. 8. Motivate industrial. Weakness: 1. A high level of inventory in stores and spares. 2. Lengthy procedure. 3. Conditionings of machines are poor due to high expenditure on maintenance. 4. Improper utilization of tools like more and more proper work. 5. Workers are misuse the all facilities, which is provided by management.

Opportunities: 1. Procurement needs change in electronic media. 2. New machine purchase can improve product quality as well as low

expenditure on maintenance. 3. The company is planning to diversify to other sectors too.

Threats: 1. 2. 3. Financial position is weak. Not able to change the technology because of financial problems Poor incentive given by company compare to other.

CHAPTER- VI RECOMMENDATIONS

SUGGESTIONS: 1. The company has achived highest ever turnover in future as compared to previous turnover. 2. Company should have awareness all facilities no misuse the all facilities by worker. 3. Proper utilization all resource. 4. The company should moving ahead with strong performance and well conceived strategies for expansion, diversification and corporate transformation. 5. Company should provide an enabling climate for future growth and profitability of the company. 6. The company could achieve this performance by expanding existing business lines and deepening the relationship with existing customers by providing value added services. 7. The company continuously redesigned itself by balancing customer expectations, customer satisfaction quality products with best after sales services. 8. The company continued to face stiff competition in all areas of its operations. 9. All manufacturing units of Kota and palakkad maintained ISO-9000 series accreditation. Because this has imparted status of quality product and service supplier much needed in contemporary business for domestic as well as expert markets. 10. For better utilization of human resources and improvement in work culture and productivity. 11. Employees were motivated through competition, prizes and incentives declared by the company from time to time. 12. Company is committed to transparency in all it s dealing with its shareholder and other.

BIBLIOGRAPHY:
The datas are obtained from various sources like y Companys Brochures y Websites of Export-Import and Company website http://www.ilkota.com y Magazines BOOKS: y Kothari, C.R Research methodology 2nd revised edition Methods Techniques New Age international publishers y Khan M.Y and Jain P.K Financial Management Text Problem and cases Fifth edition Tata Mc Graw-Hill publishing company Ltd. (New Delhi) y CHANDAR PRASANNA FINANCIAL MGMT, THEORY AND PRACTICE. NEW DELHI, 4TH EDITION.

WEBSITES: http://www.google.com http://www.fita.org http://www.wikipedia.com http://www.exporterindia.net gmmarketing@ilkota.in (Marketing Unit Head Quarter) coord-mktg@ilkota.in

Annual Reports:
Annual Report of Instrumentation Limited 2006. Annual Report of Instrumentation Limited 2005. Annual Report of Instrumentation Limited 2004.

Business Magazine:  Business-India, 2002, Vol.7

APPENDIX:

AWARDS & ACHIEVEMENTS: 1 IL is an ISO- 9002 certified company. 2 Development of sophisticated noise fuse for defence project, which required very high mechanical engineering skills. 3 Highest order booking of over Rs.236crores and highest ever turnover of Rs. 219.98 crore in four decades of existence. 4 Large order secured in Nuclear power, Thermal Power and steel sector apart from Telecom and Defense Electronics. It received the following award: 1 International Export Awards. 2 Top Export Award. 3 National Safety Award. 4 Pollution Control Award

TELECOMMUNICATION

Power Electronics & Energy Conservation Devices