ratio analysis
TRANSCRIPT
A SUMMER TRAINNING TRAINING PROJECT REPORT
ON
RATIO ANALYSISAT
AUSTIN ENGINEERING COMPANY LTD.(AEC)
PREPARED BY
GUJARATI ARVINDMBA – SEM 3ROLL NO. – 14
SUBMITTED TO,
GTU UNIVERSITY
GUIDED BY
PROF. Bhavik panchasara
COLLEGE
Marwadi education foundation group of institution
CERTIFICATE
PREFACE
This project report is containing in accordance with the Master of Business
Administration (M.B.A.) program, prescribed by Gujarat Technological University. Thus,
it is our morale and obligatory duty to take this part of our studies with great enthusiasms
and seriousness and give it the more importance.
The main objective of the project work training is to develop among the student a
feel that about industrial environment & business practice in order to develop a practical
basis in them as a supplement to theoretical study of the management.
The report is based on my elective subject of “A STUDY ON RATIO
ANALYSIS.” As a part of my project work, I had been departed to “The Austin
Engineering Company Pub. Ltd.”
I have mentioned all the information which is true and useful in some time
in business.
GUJARATI ARVIND B.
ACKNOWLEDGEMENT
I am pleased to present this report on industrial training undergone at Austin engineering
company ltd.
I hereby take this opportunity to express my gratitude to Mr. Amit Joshi who has guided
and cooperate me in each and every aspect of preparing this report.
I also express my gratitude to staff members of Austin Engineering company limited for
their valuable cooperation and guidance and sincere thanks to Mr. Amit Joshi, an ISO
coordinator for sharing his wonderful experience and give his kind guidelines during my
training.
Date: Signature
Place: (ARVIND B.GUJARATI)
DECLARATION
I, the undersigned GUJARATI ARVIND student of M.B.A. hereby declare that the project work presented in this report is my own work and has been carried out under the supervision of Prof BHAVIK PANCHASARA affiliated to Gujarat technological university.
I assure you that this work has not been submitted previously to any other university from any examination.
Date Yours faithfully GUJARATI ARVIND
INDEX
Executive summery
NO PARTICULAR Page no
1 EXECUTIVE SUMMARY
2 LITERATURE REVIEW
3 GENERAL INFORMATION
4 PRODUCTION DEPARTMENT
5 HUMAN RESOURSEMENT DEPARTMENT
6 MARKETING DEPARTMENT
7 FINANCE DEPARTMENT
8 RESEARCH METHODOLOGY
9 RATIO ANALYSIS
10 SUGGESTION
11 CONCLUSION
12 APPENDIX
13 BIBLIOGRAPHY
The project is about ratio analysis in Austin engineering company limited. In
project report, effect of source of the finance is studied specially the relationship of
different balancesheet and P/L ratio. The project report is also showing various
departments of “AEC” viz. Marketing Department, Finance Department, Service
Department and Human Resource Department. and its function.
The main research objective is to show that whether there is any relationship
between capital structure and earning of the company. The main financial goal of any
company is to maximize total profit and maximize the wealth of the share holder. But that
can be achieve only when company earn the sufficient amount of the profit. Ratio
analysis play important role in maximizing profit.
For the research purpose secondary data is used. And that is collected from the
annual report of the company and from the company’s manager some of the data also
collected from the internet from the company’s website.
The key finding of the report is that there is a relationship between different ratio
of the company.
One message from the report is that if company able to raise fund which fund’s
cost is less than rate of return on investment than company should go for it .
LITERATURE REVEIW
Acknowledgments: Our thanks are due to Manuel Garcia-Ayuso Covarsi of the University of Sevilla, McDonald and Morris Spain, Bird and McHugh (1977), for his constructive comments.
Published as Timo Salmi and Teppo Martikainen (1994), "A Review of the Theoretical and Empirical Basis of Financial Ratio Analysis", The Finnish Journal of Business Economics 4/94, 426-448. Also published on the World Wide Web as http://www.uwasa.fi/~ts/ejre/ejre.html
Financial ratios are widely used for modelling purposes both by practitioners and researchers. The firm involves many interested parties, like the owners, management, personnel, customers, suppliers, competitors, regulatory agencies, and academics, each having their views in applying financial statement analysis in their evaluations. Practitioners use financial ratios, for instance, to forecast the future success of companies, while the researchers' main interest has been to develop models exploiting these ratios. Many distinct areas of research involving financial ratios can be discerned. Historically one can observe several major themes in the financial analysis literature. There is overlapping in the observable themes, and they do not necessarily coincide with what theoretically might be the best founded areas, ex post. The existing themes include
McDonald and Morris (1984, 1985) : - present the first extensive empirical studies of the statistical validity of the financial ratio method. The authors use three models with two samples, one with a single industry the other with one randomly selected firm from each (four-digit SIC) industry branch to investigate the implications of homogeneity on proportionality. The first model is the traditional model for replacement of financial ratios by bivariate regression, with intercept Y(i) = a + bX(i) + e(i).
The above model is central in this area. It is characteristic that the testing for proportionality is considered in terms of testing the hypothesis H0: a = 0. Barnes (1986) points out for statistical testing that the residual is typically heteroscedastic. For a discussion also see Garcia-Ayuso
(1994). The second model in McDonald and Morris is Y(i) = b'X(i) + e'(i)
that is without the intercept to tackle heteroscedasticity. Dropping the intercept from the model is not always enough to treat the heteroscedasticity (see Berry and Nix, 1991). The
third model applies a (Box-Cox) transformation on the first model to tackle non-linearities. While they find support for financial ratio analysis for comparisons within industry branches, in inter-industry comparisons proportionality of financial ratios is not supported.
Bird and McHugh (1977) : - adopt an efficient Shapiro-Wilk small-sample test for the normality of financial ratios for an Australian sample of five ratios over six years. Like Deakin they find in their independent study that normality is transient across financial ratios and time. They also study the adjustment of the financial ratios towards industry means which is a different area of FRA research. Bougen and Drury (1980) also suggest non-normality based on a cross-section of 700 UK firms.
The results indicating non-normality of financial ratio distributions have led researchers into looking for methods of restoring normality to warrant standard parametric statistical analyses. Frecka and Hopwood (1983) observe that removing outliers and applying transformations in a large Compustat sample covering 1950-79 restored normality in the same financial ratios as tackled by Deakin (1976). They point out that if the ratios follow the gamma distribution, the square root transformation makes the distribution approximately normal. The gamma distribution is compatible with ratios having a technical lower limit of zero. There is, however, a certain degree of circularity in their approach, since instead of identifying the underlying causes of the outliers they employ a mechanistic statistical approach to identify and remove the outliers from the tails of the financial ratio distributions.
GENERALGENERAL INFORMATIONINFORMATION
INDEX
Sr. No. Particular Page No.
A INTRODUCTION
B HISTORY AND DEVELOPMENT OF COMPANY
C COMPANY PROFILE
D BOARD OF DIRECTORS
E ORGANIZATION CHART
F CORPORATION VISION
G SIZE AND FORM OF THE ORGANIZAION
H ACHIEVEMENTS OF ORGANIZATION
I CONTRIBUTION OF THE ORGANIZATION
A) INTRODUCTION
In India there are many industries which are producing bearing one of them is of which I
had undertaken the training of “Austin Engineering Co. Ltd.” it is on the top of bearing
producing company. It is most successfully unit in Gujarat as well as in India. This
company got ISO and TS this certificate was given by international organization such
certificate is given which company ‘s production material and quality of products are
standardized. It gives employment to so many people. It is a continuous raising unit
because of its sound financial condition and efficient management. The actual picture of
“Austin Engineering Co. Ltd.” can be analyzed with the help of four main departments
viz. production department, personnel department, financial department and marketing
department are as given in the report.
“AUSTIN ENGINEERING COMPANY LTD.”, is having the largest range of bearing
among the manufactures of it in Asia and i.e. 4000 types of bearings.
It has also the largest range in size of bearing. Among them, the smallest is having
10mm ID (Inner Diameter) and 2000mm OD (Outer Diameter). They are also developing
7-8 designs per month. The company’s turnover is 42-50 crores.
B) HISTORY AND DEVELOPMENT OF THE COMPANY
The firm was established in the year of 1973. at that time a turn of 5 top and qualified
engineers decided to produce a high quality bearing. It was started by Mr.
N.C.Vadgama, Mr. R.N.Bhambhania. Mr. S.M.Thanki, Mr. Bhogayta,
Mr. G,B.Modha partnership firm. At that time it’s name was “ACCURATE
ENGINEERING COMPANY as.”
On 27th July, 1978 due to continuous development and increment in demand of bearing, it was converted into Private Limited Company. The company at that time was located at G.I.D.C. Estate in Junagadh city.
The growth and development kept on increasing and on 2nd November, 1985 this company was converted into Public Ltd. Co. under the name “AEC Ltd.” and purchases the trademark “aec” in the year 1994.
Due to some problem such as inappropriate place for expansion, this company has established 2nd unit at Patla, a village which is 25 k.m. far away from Junagadh on 15 th
February, 1987. It was under developed industrial area so they decided to locate their industry at Patala.
In the very beginning the company was producing only 40 to 50 varieties of bearings. At present the company is producing 4500 varieties of bearings.
The initial company invest was 530794 and production capacity was 41900 piece p.a. At present, production achieved is 20,00,000 piece p.a. which was 18,50,000 piece in previous year. The present invest is 25,14,87,000.
C.) COMPANY PROFILE Name of the unit : - Austin Engineering Company Ltd.
Year of the Establishment :- 1973
Form of Organization :- Large Scale
Registered Office :- Austin Engineering Co. Ltd. Dist. : Junagadh Tal. : Bhesan Post : Hadmatiya Patala – 362 030Address of JunagadhOffice :- 101, G.I.D.C. Estate, Vadal Road, Junagadh – 362 003.
Phone Numbers :- (91-285) 2660144, 2660069
Fax Numbers :- (91-285) 2661505
E-mail Address :- [email protected]
Auditors :- Dhirubhai Dand & Co. Chartered Accountants Gokul Chamber, Junagadh – 362 001.
Cost Auditors :- S.B. Parikh & Co. Cost Accountants, Vadodara.
Bankers :- Bank of Baroda, Junagadh.Registrar & TransferAgent :- Sharepro Services, Satam Estate, 3rd floor, Above Bank of Baroda, Cardinal Gracious Road, Andheri (E) Mumbai – 400 099
D.) BOARD OF DIRECTORS
Mr. N.C.Vadgama : Chairman & Executive Director
Mr. S.M.Thanki : Managing Director
Mr. R.N.Bambhania : Joint Managing Director
Mr. J.R.Bhogayta : Executive Director
Mr. S.V.Vaishnav : Non Executive Director
Mr. B.R.Sureja : Non Executive Director
Mr. K.J.Mehta : Non Executive Director
Mr. D.B.Nakum : Non Executive Director
E) ORGANIZATION CHART
F.) CORPORATE VISION
1) Make AEC Limited a great place to work.
2) Effective boundary management.
3) Fulfill social responsibility.
4) Apply the best technology.
5) Be an ethical company.
6) Strong and dynamic system.
7) Establish first class brand and corporate image.
8) Sound business performance and operational efficiency.
9) Have excellent customer caring and customer service.
10) To be the best.
11) Make people a source of our improvement.
G.) SIZE AND FORM OF THE ORGANISATION
According to the definition given by Government of India, the size of the industry can be divided in three main types.
Small Scale Organization
Medium Scale Organization
Large Scale Organization
If company’s investment in plant & machinery is more than 3 crores, it is under the category of large scale organization.
The investment of “Austin Engineering Co. Ltd.” In fixed assets is Rs. 21, 82, 35,149-00. Therefore it is coming under the category of large scale organization. It also uses manpower, electronic equipment and machines and having 655 employers.
The total land area is 27,960 sq. meters; while total built up area is 7093 sq. meters and expansion are available for building is 6000 sq. meters (approx).
According to the form of organization, the organization can be divided as follows:
Private Sector Unit
Public Sector Unit
Joint Sector Unit
“Austin Engineering Co. Ltd.” is a Public Ltd.Company. A public company is a company where there are minimum seven members and maximum there is no limit. The company can invite general public to subscribe for its share or debentures and the shares are freely transferable. It has limited liability and wide distribution of risk.
H.) ACHIVEMENTS
Backup roller bearings for sendzimir Cold Strip Mills.
Multi-row cylindrical roller bearings and four row tapered roller bearings for roll neck applications in rolling mills.
Flush ground single row angular contact ball bearings.
Precision class cylindrical roller bearings for machine tool spindle applications.
Thin section series ball bearings:618.. and 619… series.
Engine crank and other application bearing for battle tanks and armored vehicles.
Flexible roller bearings.
Iso/TS certification for quality management
I.) CONTRIBUTION OF THE UNIT
To the industry
Austin Engineering Company Ltd. is having 15% to 20% market share.
So it contribute this much in the total production of the industry. Moreover, it scored 4th
rank in bearing industry.
To the society
The company provides employment to 655 workers of rural as well as
urban areas. The Austin Engineering Company Ltd. is situated in backward area and so it
is involved in the process of the development of the area. Thus, it contributes to the
society by providing employment and developing backward area.
To the country
It has trademark of ‘Austin Engineering Company Ltd.’ through which
they exports its products in USA, Italy, Sri Lanka, Argentina and Newzealand. Thus,
they earn the foreign exchange in this way it contribute to the country.
PRODUCTIONDEPARTMENT
INDEX
Sr. No. Particulars Page no.
1 Introduction
2 Organization structure
3 Products and its users
4 Raw material
5 Material storage
6 Production process
7 Production capacity
8 Machinery and equipment
9 Quality assurance
INTRODUCTION
There are four functional areas in a business organization, namely
finance, personnel, and marketing. Production is the basic activity of all industrial units.
All other activities revolving around this activity. The end of the production activity is
the creation of goods and services for the step conversion of one form of material into
another either chemically or mechanically.
This is done in the factories which have manufacturing process. The basic
input of the operation process are men, machines, plant, services and the methods. The
product if the mine, farm and forest are used as raw material on which the processing is
done to creat and enhance the firm utility.
PRODUCTS AND ITS USERS
Austin Engineering Company Ltd. now a days engaged in producing bearings near about
4500 varieties. The main product of Austin Engineering Company Ltd. are as follow :
Ball bearing
Cylindrical roller bearing
Tapered roller bearing
Spherical roller bearing
Flexible roller bearing
Special purpose bearing
Needle roller bearing
User industries
The company offers wide range of the different category of buyers like, automobiles
industries, defense, State Road Transport Corporation, steel plants, cement plants, sugar
and paper industries, fan and pump industries and material handling equipments.
RAW MATERIAL
The first matter related with production is the availability of raw material. For the
production of high quality bearing Austin Engineering Company Ltd. requires following
types of raw material.
Steel wire
Steel ball
Rollers
Races
Steel tube
This has to reach big order of export market and big original equipment manufacturers,
so company kept six month inventory for raw material to supply regularly.
Main suppliers in India are :
Mahindra and Mahindra ltd.
India steel less metal tube ltd.
Needumra industry ltd.
Specific steel ltd.
Austin Engineering Company Ltd. purchases its raw material from abroad also. They
purchase raw material from Germany and USA also.
MATERIAL STORAGE
Man, material, money etc. are the basic elements required to produce any product.
Among them, material i.e. raw material is the thing by which the whole production
process stats. So the procurement of raw material plays an important role here.
Here, when we talk about Austin Engineering Company Ltd. it purchases its raw material
from domestic as well as international units. The raw materials are bought from different
places of Junagadh,
They store these raw materials in store room and when required they inspect and test
them in terms fitness for further production process which are according to purchase
order.
PRODUCTION PROCESS
Manufacturing process is conducted to produce or manufacturing the product.
Followings are main stages of manufacturing process.
1. Material stage
Raw materials are steel bars, steel wire, steel tubes and rollers etc. This company has to
reach big orders of export market and big original equipment manufactures, so company
kept six month inventory for raw material and has make contract with their suppliers of
raw materials to supply regularly.
2. Turning, Races and Rollers
This is the second step for manufacturing the proper bearing from the raw material to
finished product. In this stage, trained workers turn races and rollers in required size and
then it is transferred to main unit.
3. Heat Treatment
This is the third stage where all the races and rollers are given heat through electric
furnace at 845c to 855c through which defective pieces are removed.
It means this testing are done to measure the capacity of the products.
4. Grinding of races and rollers
This is fourth step, after heat treatment, the part of races and rollers are refined. Inner
and outer part of races and rollers are given through the grinding machine.
5. Tapping, Happing and Super finished
In this stage, there are checking of rollers and races because it has single mistakes of
races and rollers. If any races and rollers are defective that piece is tapped and happed.
Then, the super finishing will be done these are done through their respective machine.
6. Inspection and Graiding
After the procedure of making the bearing, all the races are inspected by inspection
department and then after grade fixed by the company. The precious sample is gone for
mass production.
7. Assembling, Cleaning, Oiling, Packing
There are separate department for making of different kinds of bearings are managed its
size and quality and then this bearings are assembled.
After the assembling of the bearing is done, then the bearing finally goes at packing
department where it has given the “Trade mark” “Austin Engineering Company Ltd.”
8. Storage and Dispatch
After passing through all the above stage, the finished products are stores in godown,
from where they are dispatch as per the order.
PRODUCTION CAPACITY
Production capacity is defined as the maximum production rate of a facility or a
plant.
Capacity indicates the ability of a firm to meet market demand. Production
capacity of Austin Engineering Company Ltd. is as follows.
Installed capacity
At the time of installing plant, the capacity that is installed is called installed
capacity. It is determined by on the basis of capacity as indicated by suppliers plant and
machinery in technical quotient.
Austin Engineering Company Ltd.’s installed capacity: 3500 pieces per day.
Utilized capacity
This is the actual output achieved during a particular time period. The actual
output may be less than the rated output because of short range factors such as actual
demand, employee absenteeism, labour inefficiency and low productivity levels.
Austin Engineering Company Ltd.’s utilized capacity : 3500 pieces per day.
MACHINERY AND EQUIPMENT
Machinery and equipment plays an important role in any manufacturing company.
The advancement in the machinery makes the product more qualitative and it makes an
impact on the quality of the production.
Austin Engineering Company Ltd. is a reputed firm in the field of manufacturing
bearing. It is specially known for its maximum range of bearings in all over the Asia.
So, according to this range, it has also a big range of the machinery to produce the
bearings.
The total number of the machines are 215. moreover, apart from this, the
company has given extreme importance to quality maintenance and so it is having 48
testing instruments also.
These machines includes mainly grinding, lapping, furnace, air compressor,
drilling and packaging machines. Then different sizes of machines are there. The list of
machinery includes domestic as well as imported machines for better efficiency.
QUALITY ASSURANCE
Quality may be defined as the sum of total of features of a product which
influence its ability to satisfy given demand.
Basically the quality of product and service is not defined or determined by
production firms, it is determined by customers.
The quality of the product and service is a customers perception of the degree to
which the products or service meets his/her expectation.
At Austin Engineering Company Ltd. they focus in ensuring best in class quality
through
Commitment and investment in continuous research and development,
Facility for measuring and improving process performance,
Well entrenched HR program to provide adequate training.
Austin Engineering Company Ltd. bearings are designed, developed and
engineered using professional CADD and 3D modeling tools by their skilled engineers
and are backed by their highly experienced technocrats. The products are made from
high quality bearings steel from industry approved vendors with optimum dimensional
stability. The geometry and profile are in accordance with the international standard for
the highest quality. The company got certificate from the TUV Rhineland, Germany.
ISO/TS 16949 : 2002
ISO 9001 : 2008
HUMAN HUMAN
RESOURCERESOURCE DEPARTMENTDEPARTMENT
PERSONNEL DEPARTMENT
INDEX
Sr. no Particulars Page no.
1. Introduction
2. Organization structure
3. Recruitment, selection, and introduction
4. Training and development
5. Wages and salary administration
6. Promotion, Transfer and Demotion
7. Performance Appraisal
8. Employee’s Detail
9. Employee’s benefits and services
10. Grievance Handling System
INTRODUCTION
In the opinion of Dunn and Stiphen, “Personnel management is the process of
attraction “ holding and motivating people involving all managers line and staff.
Personnel management is the direction and co-ordination of human in business
organization. This obtaining maximum production with minimum afforts, stress and
strain on the individual workers and group of workers and without sacrifice genuine well
being of the employee. The objective of personnel management is to obtain maximum
individual development, desirable work, atmosphere and interpersonal relation. The
essence of personnel management the understanding as people at work and on the basis
of knowledge, formulate personal policies of the enterprise.
In short, personnel management is management tactful.
ORGANIZATION STRUCTURE
GENERAL MENAGER
PERSONAL MANAGER
PUBLIC RELATION OFFECER PERSONAL
TIME KEEPER
TIME CLERKS
RECRUITMENT, SELECTION AND INDUCTION
Recruitment
According to Flippo defines recruitment , as “A process of searching for
prospective employee and simultaneously applying them for jobs.”
Recruitment is the process of discovering potential applicants and stimulating and
encouraging them applying for jobs in organization.
In Austin Engineering Company Ltd. they are using internal as well as external
sources. The policy for recruiting the person through external sources in such that,
1. Advertisement in the newspapers.
2. Applications are collected form the sources.
3. Scrutiny of applications.
4. Interview call is sent.
Selection
The main purpose of selection procedure is to eliminate excess or unnecessary
candidate and to select the most appropriate one for the particular job. Different
industrial concern undertake different selection procedure. It is depend on the jobs for
which appointment is to be made.
Thus, selection policy passes through following steps in Austin Engineering
Company Ltd.
1. Formation of selection committee,
2. Selection committee conducts interview
3. Checking of references
4. Physical checking
5. Placement
Induction
When a candidate is finally selected, he/she is issued with appointment letter and
is asked to join the organization on a specific date. Induction is follow up action of hiring
and concerned with the problem of introducing or oriented a new employee to the
organization.
After, appointing new candidate, he/she is being introduced with staff and make
aware about rules and regulations of the company.
TRAINING AND DEVELOPMENT
Training and development is another important function which become some
what compulsory for the modern business. It is inevitable function of the organization.
It is an important aspects of personnel which increase the knowledge of workers for
doing specific works.
In Austin Engineering Company Ltd. no special training program is conducted
because, they select mostly trained and experienced employees. But, in case of fresh
candidate on the job training is provided by the senior officer and experience manager.
This company gives the training duration of six months by the experts of experienced
engineers.
In the company there is no separate department for training, only on the job
training is provided to middle and bottom level employees. Besides, the seminars and
conferences are also held and group discussion is also arranged for the top level officers
for the solving particular problem.
WAGES AND SALARY ADMINISTRATION
Wages and salary administration is concerned with establishment and
implementation of sound policies and practices to employee compensation. It involves
the areas or relevant organizational problems, administrating wages, wage payment,
profit sharing, wage cages and adjustment, supplementary payments, control of
compensation cost and other related items. A sound wage and salary administration tries
to achieve objectives which are beneficial for both employees and employers.
In Austin Engineering Company Ltd. wages are determined on the basis of job
and as per the government rules and regulation while salary is determined on the basis of
competitive rates.
Employees wages and salary are fixed but increment is given on their basis of
performance and efficiency. From their wages some amount of provident fund which is
12%, income tax and ESI scheme is deducted and wages and salary paid on the date 7th
and 8th every month.
Normal figures of wage and salary :
1. Workers (per month)
Minimum - Rs. 5000
Maximum- Rs. 8000
2. Officers (per month)
Minimum – Rs. 10000
Maximum- Rs, 25000
PROMOTION, TRANSFER AND DEMOTION
Promotion
Austin Engineering Company Ltd. is having the promotion policy based on both
merit as well as seniority. If vacancy arises in the company firstly selection is being
made from internal source. If any qualified employee is found there, he is given
promotion. While giving promotion, management has to check work performance,
regularity and seniority of such employee.
In Austin Engineering Company Ltd. promotion for the lower level is made for
operative to supervisory level and that to the officer clerks. The company only give
promotion to their employees when any person resign from his post or retires. Thus,
there is less chance of promotion.
Transfer
A transfer is horizontal movement of an employee from one job, section,
department, shift, plant or position to another at the same or another place where his
salary, status and responsibility remain same. The company has two units so as per
requirements transfer is done from one unit to another.
Demotion
It is downward movement of the employees post. The Austin Engineering
Company Ltd. used demotion as a disciplinary measure. Due to misbehavior of any
employee at managerial level, warning is given and if it is repeated demotion given to
that employee. But, still the firm do not adopt this policy as the workers are co-operative
and well qualified.
PERFORMANCE APPRAISAL
Performance appraisal means valuation of the personality and performance of
each employee by the supervision. It is the step where the management finds out how
effective it has been hiring and placing employees.
Austin Engineering Company Ltd. has adopted a systematic appraisal system
according to which;
First, work given to the employee is properly observed.
Second, they have to see whether the employee is superior to complete the job
entrusted to him/her and if able, he/she is appraised. They have kept secret records for
the workers to avoid disturbance. This system is useful to take the decision regarding
promotion and other rewards for the work done by the employees.
In this company, there are three criteria for performance appraisal,
1. Production
2. Attitude
3. Attendance
EMPLOYEE’S DETAIL
Number of employees
Among the all employees all are not even as far as the skills are concerned. In
Austin Engineering Company Ltd. There are total 655 workers are working so the
distribution of the workers according to their skills are as under :
Administrative staff 80
Engineers 28
Supervisors 20
Quality assurance 70
Direct manufacturer 207
Indirect manufacturer 250
Personal records
In Austin Engineering Company ltd. personal records are kept by personnel department.
In this records, employees’ performance, attitude, his contribution
to the unit etc. are record. They include information regarding job analysis, evaluation,
while for recruitment and selection test records are used.
EMPLOYEES’ BENEFITS AND SERVICES
Facilities provided by the company
12% provident fund
Yearly bonus 20%
15 days gratuity
30 days leave per year
5 days medical leave
Dearness allowance
House rent allowance
Medical allowance
Attendance bonus
Free transportation service
Educational facilities for the employees children upto 12th standard.
GRIEVANCE HANDLING SYSTEM
A grievance is any discontent or dissatisfaction, whether express or not, arising out of
anything connected with the company which on employee thinks, belief or even feel to be
unfair, unjust or inequitable. Grievance generally give rise to unhappiness, frustration,
indifference work, poor morale and they ultimate lead to the inefficiency of workers low
production.
Grievance handling procedures :
Any aggrieved employee may approach first supervisor is concerned. Answer from
supervisor is given within 3 days.
If employees are not satisfied then he may approach to the departmental head. He will
investigate the matter and give opinion within a week.
He may approach factory manager or he may approach personnel manager.
If a grievance arises out of any order given by the management then send the order shall be complained before concerned involve the procedure laid down for
redressal of grievance.
MARKETINGMARKETING DEPARTMENTDEPARTMENT
A.) INTRODUCTION
Marketing is the performance of the business activities that directs the flow of goods and services from producer to the consumer in the process of distribution.
According to CUNDIFF and STEEL,
“Marketing is the managerial process by which products are matched through which consumer is enable to use and enjoy the product.”
According to Paul mazur,
“Marketing as the creation and delivery of standard of leaving to the society.”
Here in AEC LIMITED, there is a separate marketing department at head office. The study of marketing management is essential for concern responsible officer or every organization for successful operation because without effective management of marketing, organization goal can’t be achieved.
In AEC LIMITED marketing department is managed by experience manager, officers and staff. There are presently two divisions for marketing.
Marketing division Sales division.
Marketing is a social and managerial process that involves identifying unsatisfied need or wants of consumer, producing goods or services to satisfy those needs or wants, determining appropriate price, promotion and distribution and maintaining relation with market.
In today’s modern era each & every firm gives priority to have a different marketing department.
Marketing involves the activities such as advertising, publishing, market research, distribution aspect, sales promotion etc.
B.) PRODUCT PLANNING The base of any product before launching into market is its marketing strategies, which depends on the analytical survey of the similar kind of product with the competitive companies.
In “AEC” whether they want to take any decision regarding products, they always perform product research and accordingly they formulate strategies.
A well planned product strategy depends on the analytical data from the market which in turn give the benefit to both the customer & the sellers along with the stock holder of the company, in consideration.
C.) PRICING POLICY
Price is the exchange value of the product and services expressed in terms of money. Decision about pricing is considered important aspect for success of marketing of any product for an organization. Various factors are taken into consideration while pricing.
Objective of the business Estimated demand Cost of production Competition Distribution policy
D.) CHANNEL DISTRIBUTION POLICY
Distribution channel is the combination and sequence of agencies through which one or more of marketing flows move. The most important factor for channel choice and channel management is economic criteria i.e. cost & profit. There are two types of channels.
Direct Indirect
In “AEC”, they are producing bearing & i.e. industrial goods. So in this case, direct channel will be more effective than indirect channel. So the company use direct channel of distribution & i.e. manufacturer to consumer.
E.) ADVERTISING AND SALES PROMOTION
Now a days marketing plays an important role for all the organizations. Marketing is very necessary for all the products, as without marketing the consumer will have lack of information about the products. Thus to make the consumers aware of the products marketing is done.
AEC generally does not require advertising its product as it has some really loyal customers (buyer) who are customer from many years. But still company does some advertising through cost media, poster and pamphlet with the trade-mark of AEC.
AEC’S SLOGEN
“Buy the Best, Leave the Rest.”
The slogan gives us idea about company’s confidence in their products.
Sales promotion refers to the other than personal selling, advertising and publicity which stimulates consumers purchasing, dealer’s effectiveness, free sample, exhibition and free offers.
Promotional tools such as free sample, coupons etc. are used in AEC to attract the buyers to buy their product to increase selling efforts by the dealer’s. This company gives sales promotion at both the level, consumer as well as dealer’s level. F.) MARKET SEGMENTATION
Marketing segmentation is based upon market oriented strategy and philosophy segmentation gives special emphasis on the demand side of the market.
“Market segmentation is a method of achieving maximum market response from limited marketing resources.” By market segmentation tries to identify the target customer. Generally there are two type of market segmentation.
1. People oriented approach.2. Consumer demand or product oriented approach.
AEC has accepted the consumer demand market segmentation. National and international marketing is also done.
The dealer’s through which this company marketed its products are in India and its original equipment manufacturers are:-
Bharat Heavy Electric Ltd. Tata Electric & Locomotive Co. Ltd. Voltas Ltd. Kirloskar Electric Co. Ltd.
G.) MARKET RESEARCH
Market research is very important for most of the organizations due to the increasing competitiveness in the present market. If an organization wants to survive than it has to introduce some new products which are latent needs of the consumer. Thus market research is the systematic and intelligent investigation about unsatisfied needs & wants of potential buyers.
With the market research the “AEC” finds out the demand of bearings in different regions through surveys. South India is the best marketing field of automobile in India so AEC adopted market research in South region and company finds out the golden opportunity or possibility of development in that field.
Therefore, the technique of survey and observation is adopted by AEC to allocate the data.
H.) COMPETITION
Competition has increased in almost every field now days. A healthy competition may beneficial but cut throat competition may create hazardous effect on the company. Competition affects the customers, sales figures & other aspects of marketing.
As far as “AEC” faces no close competition because it is having the largest range of bearings in Asia. . The competitors are:-
SKF NBC FAG KOYO RHP NTN
I.) INTERNATIONAL MARKETING
Austin Engineering Co. Ltd. Has got customer from some international market also. The company exports about 20% to 25% of its total production into different countries. All the trading activities between the AEC and foreign customers are carried out through sea way of transportation.
AEC helps in bringing foreign exchange in India through exports which is beneficial for India. In the year 2006-2007 Rs. 2855.97 (in lacks) where earned by AEC as foreign exchange.
The foreign customers of AEC are mainly from following countries:- U.S.A. U.K. Italy Sudan Pakistan Shrilanka Nether land Bangladesh South Arabia
There are some problems which are faced by AEC while exporting as:-
1. Difficulty of dispatch2. High cost of transport3. Problem of currencies4. Difficult & complex custom formalities
J) SOCIAL RESPONSIBILITY
Each and every unit is responsible towards the society. Since business operates in society, it cannot survive and grow unless it meets the need of the society. It is an important part of its objectives to fulfill its obligations to the society.
“AEC” is also responsible to the society. It has accepted the objective of avoidance of antisocial practices. The company also provides employment to the unemployed persons. Under antisocial practice it does not overcharge its customers and its products do not pollute the environment.
SWOT ANALYSIS
SWOT is a good tool for a manager, like a thermometer and a stethoscope for a doctor.
The SWOT analysis for AEC Limited is:
S - Concentrates on your STRANGTH.
It enables to put your best foot forward.
STRENGTH:
Good brand image. Large scale refining. Fast development Diversified and top quality asset base. Associated with Consultant University involved in R n D department. Consumer satisfaction. Dedicated workforce. Single source of all types of bearings.
W - Recognize your WEAKNESS.
Who doesn’t have them? Only when you recognize them can you do something to correct them.
WEAKNESS:
Interference of the government. Transportation cost. Heavy import of raw-material. Raw material prices.
O - Evaluate your OPPORTUNITIES.
“Opportunities are plenty even in adversity. Only one has to evaluate them for what they are.”
OPPORTUNITIES:
Advertising to increase sales. expansion
T - Research your THREAT.
“Threat are like tickling time bongs, defuse them by anticipating and taking preventive actions.”
THREATS:
Increase price of raw material in inter national market, causes variation in domestic market.
Competition from the multinational companies. Fixed financial charges.
COMPANY’S FUTURE PLANS
R & D (Research & Development) efforts are being planned as a continuous exercise to improve quality, reduce costs and try for import substitution as far as possible.
The company is striving to focus on sharpening its competitiveness, and for offering a product mix which is totally market driven in order to create a competitive advantage over players in the market.
Increasing manufacturing capacity. Making unit totally machine based for the some of the products manufacturing.
A.) INTRODUCTION
All the functions of management like personnel, production; marketing etc. requires finance for implementation. Financial management is that activity which is concerned with planning, improving and controlling of the firms financial resources.
Prof. DHAVAL has rightly said “Money is the pivot around which all economic activities cluster” Finance in the modern business world is the life of blood of a business. it is said that :-
“Businessman takes money to make money”
From the above statement one question raised, how the business man make money? And there is only one answer by the extra ordinary management of finance. Finance management is that management activity which is concern with planning and controlling of the firm’s financial resources.
Finance function means procurement of find and their effective utilization in the business. In other word, the finance function is concerned with solution of three major problem relations to the financial operation of the firm and i.e. investment, financing and dividend decision.
We know from the above fact that all activities require finance for their implementations. So finance function is the most important for every organization.
In AEC there is a separate financial department and manage all the financial activities like,
Estimating the requirements of capital for company. Distribution of the profit. Determining the capital structure. Find out new sources of finances. Working of cash and bank management. Control overall financial activities. Recording of transactions. Maintenance of accounts.
Finance plays a very important role in any type of firm. From the initial stage onwards money is needed for the formation registration of the firm, listing of firm. Finance is needed for making many necessary documents.
Finance consists of procuring funds, managing and utilizing them efficiently in order to maximum the profit which is the ultimate goal of any organization.
In Austin Engineering Co. Ltd., the capital is procured by issuing equity shares. The authorized capital is 40,00,000 equity shares of Rs. 10 each. Out of which issued, subscribed and paid up shares are 35,11,250 equity shares of Rs. 10 each fully paid up.
The secured loan of AEC is of Rs.29,348,582 from deferred payment loan from Bank Of Baroda and Rs. 25,055,433 from working capital loan from Bank of Baroda for year 2008-2009.
B) FINANCIAL PLANNING
Financial planning refers to the planning regarding procurement, utilization and control of funds required by the firm. The decisions regarding planning of these inter related financial areas are taken under this. The areas are:
Investment decision – long term as well as current assets Financing decision Dividend Policy decision
The planning is the first step and so other steps in financial management are dependent in it. So it is very important to plan it efficiently so that it will be beneficial for the firm in future.
In Austin, the financial planning is done on the basis of time period. Thus, there are three types of financial planning in the company: short term, medium term and long term. Short term planning is done for one year, medium term is for five years and ling term is for ten years. Short term planning is used to fulfill the requirements of day to day expenses and production, medium term is used to increase working capital and funds to replace the machines and long term planning is used for expansion and modernization.
C.) CAPITAL STRUCTURE
Capital structure refers to the mix of sources from which the term funds required by a business are raised. As a company, the capital structure should be examined from the view point of its impact on the value of the firm. A firm should select such a financing mix as will maximize the shareholder’s wealth.
Such a capital structure is referred to as the optimum capital structure. The importance of an appropriate capital structure is referred to as the optimum capital structure is thus, obvious. It is necessary to keep in mind the various internal and external factors that
Planning Period Purposes
Short term 1 Production and day to day expenses
Medium term 5 To increase working capital and funds to replace machines
Long term 10 Expansion and modernization
affect the capital structure and i.e. cost of capital, risk factor, and control factor general economic conditions, level of interest rates, taxation policy etc.
Austin is having a capital structure which is not rigid and simple to understand. It includes the equity share capital i.e. owned capital and on the other hand, it is having loan funds also i.e. borrowed capital. It has not preference shares and debentures in its capital structure.
D.)SOURCES OF FINANCE
Financial management involves the three important areas: investment decision, financing decision and dividend policy decision. Among them, the investment decision is the first step to be taken up by the owners. This involves the decisions regarding the procurement of funds. So it is necessary to study the different sources of finance available. This decides the cost of capital. So the sources you select to procure the funds should be such that they would minimize the cost of capital. The terms and conditions of different institutions should be studied and compared while taking the decision about borrowed capital. The balance between owned and borrowed capital should also be kept in mind at that time.
At the initial stage of business firm, generally capital is brought by the owner and some outside institutions, banks etc. But when the business starts growing, the reinvestment of profits becomes also an important source of capital.
Here, Austin is a public limited company. So it is having share capital as a major source of finance. Some borrowed capital is also brought in the company. Moreover, now the retained earnings have also become an important source of finance for the company. The sources of finance are as under:
Equity Share Capital Bank of Baroda ICICI Bank Retained earnings HDFC Bank CHOLAMANDALAM DBS Fin. Ltd.
E.)CAPITALIZAITON
Capitalization means total among of long term funds available to the company which includes shares and debentures, issued by the company and also long term loans taken from financial institutions. As far as earned profits remained to be distributed are concerned or it is necessary to classify them as either capital surplus or revenue surplus. The amount of capitalization should be only that much which can be justified by the profits and by the normal rate of return for the industry.
Over Capitalization:
A company is said to be over capitalized if its earnings are less in relation to its capital investment. The company may be having a low earning capacity. Thus, it results in over capitalization.
Under Capitalization:
A company is said to be undercapitalized if its earnings are more in relation to its capital investment. Under capitalization is an indication of effective and proper utilization of funds employed in the business. Under capitalization indicates sound financial position and good management of the company.
Austin’s earnings are Rs. 3, 73, 10,646 and investment is Rs. 12, 47, 61,492. Thus, earnings are less than investment. So we can say that the company is over capitalized.
F.)MANAGEMENT OF FIXED ASSETS
Assets, representing economic resources, are the valuable possessions owned by the firm. These possessions owned by the firm should be capable of being measured in monetary terms. Assets are of two types:
TANGIBLE ASSETS:
They are the assets which have physical existence and generate goods and services. It includes land, machinery, equipment, furniture etc
METHODOLOGY/ FOCUS/ SCOPE & LIMITATIONS
RESEARCH METHODOLOGY
PROJECT OBJECTIVE
The project is aimed at evaluating the financial position of Austin Engineering Company limited.
Computing the financial ratios of the company and doing its analysis.
To simplifies and summarizes a long array of accounting
data and makes them understandable.
To discloses the liquidity, solvency and profitability of business
enterprise.
To provide useful information to the management.
METHODOLOGY
The methodology to be adopted for the project is explained as under:1. The initial step of the project was studying about the company and then
evaluating the financial position of the company on the basis of ratio analysis.
2. Comparing the firm’s financial position with respect to its previous years performance with the help of following ratios-
Return on investment ratios.
Liquidity ratios.
Resources efficiency or turnover ratios.
Profitability ratios
Du Pont analysis.
Valuation or capital market ratios.
3. The project will focus on the study of overall performance analysis at the
organizations, for which the following study and analysis will be undertaken:
i) This project is aimed to calculating the financial ratios of the company ii) It would include the ratio analysis of the financial statement so that the profitability and liquidity trade off can be analyzed.
Information of the present study has been collected from secondary sources of data.
SECONDARY SOURCES:
Data was collected from documents, records and files of the company.
Data was gathered from the annual reports of the company.
Data was collected from company website.
SCHEDULE
The complete project will be for duration of 6 weeks. The project has been divided into 2 stages with approximate time period allotted to each stage. Both the stages along with their approximate timelines are as follows:
STAGE 1 (APPROX 3 WEEKS)The study of company’s financial position by doing ratio analysis of the financial statement so that the profitability and liquidity condition of the organization can be studied closely. STAGE 2 (APPROX 3 WEEKS)The study of the overall financial performance of the company and analysis of the findings and interpreting thereof.
SCOPE OF THE STUDY
Studying the financial performance of Austin Engineering Company ltd and comparing it with previous year’s performance.
It become quite difficult rather impossible to make judgment about the position of any business by way of analyzing the financial statements of one year.
To get a view about the business happiness, the past data of some year relating to the problem are studied and trend is determined. The present study covers a period of years from 2006 – 2010. A large period may prove inconvenient while a short period would not give desired results. A period of four to six years is to be considered to be the optimum one. The present study has been undertaken to analyze the Ratio analysis is being managed in the company and how far it contributes to the overall objective of maximization of shareholders wealth and the organization wealth.
LIMITATIONS
In spite of my continued efforts to make the project as accurate and wide in scope as possible, certain limitations are becoming evident while implementing the project. These limitations cannot be removed and have to be accepted as permanent constraints in implementing the project.Some limitations, which have been identified, by me are:
1. Generalizations and calculated assumptions had to be made in some areas while analyzing the financial statements, ratios etc. due to non-availability of complete information.
2. The segment wise and product wise study of the various product segments and units of the company have been excluded from the scope of the project due to data and time constraints.
3. The study is limited to the five years review period from 2006-2010
4. Time is one of the limiting factors of the study. The duration of the
training is only 6 weeks which is too short to study the organization.
5. The executives were hesitant to reveal complete information since it was
confidential.
6. Executives were unaware of many terms related to Financial Analysis
while asking to them.
RATIO ANALYSIS
INTRODUCTION
Ratio analysis is a widely used tool of financial analysis. It is defined as
the systematic use of ratio to interpret the financial statement so that the strengths and
weaknesses of a firm as well assist historical performance and current financial condition
can be determined. The term ratio refers to the numerical or quantitative relationship
between two items/variables.
Ratio analysis is an important and age old technique of financial analysis.
The data given in financial statements, in absolute form, are dump and are unable to
communicate anything. Ratios are relative from of financial date and very useful
technique to check upon the efficiency to a firm some ratio indicates the trend or progress
or downfall of the firm.
IMPORTANCE OF RATIO ANALYSIS: -
Ratio analysis of a firm’s financial statements is of interest to a number of
parties, mainly, shareholders, creditors, financial executive etc. the importance of ratio
analysis are discussed below in brief:
They act as an index of the efficiency of the enterprise. As such
they serve as an instrument of management control.
Ratio analysis helps in making effective control of the business
measuring performance control of cost etc.
Ratio analysis is an effective instrument which, when properly
used, is useful to assess important characteristics of business liquidity, solvency,
profitability.
The communications by the use of simplified and summarized
ratios are more easy and understandable.
It throws light on the degree of efficiency of the management and
utilization of the assets and that is why it is called surveyor of efficiency. They
help management in decision making.
Ratio highlights the factors associated with successful and
unsuccessful firms. If comparison shows an unfavorable variance, corrective
action can be initiated. Thus, it helps the management to take corrective action.
Ratio analysis is an invaluable aid to management in the discharge
of its basic function such as planning, forecasting, control etc.
They point out firm’s liquidity position to meet its short term
obligations and long term solvency.
It facilitates the management to know whether the firm’s financial
position is improving or deteriorating by setting a trend with the help of ratios.
LIMITATIONS OF RATIO ANALYSIS
Different firms may use these terms in different senses or the same firm
may use them to mean different things at different times. Some of the limitations of the
ratio analysis are given below.
Ratio are tools of quantitative analysis only and normally
quantitative factors which may generally influence the conclusions derived, are
ignored which computing ratios.
A signal ratio would not be able to convey anything. Ratio can be
useful only when they are computed in a deficient large number.
When inter firm comparison is made they differ substantially in
age, size, nature of product etc. At inter firm comparison, these factors are not
considered. Therefore, ratio analysis cannot give satisfactory results.
Ratio analysis is use for limited purpose i.e.
o For applying judgment
o For indicators of bad or good management
o For decision making etc.
Ratio are only means of financial analysis but not and end in
themselves.
Window dressing means manipulation of accounts in a way so as
to conceal vital facts and present the statements in away to show better position
than what it actually is by doing so, it is possible to cover up bad financial
position. Therefore, ratios based on such figures are nor reliable.
It should be clearly noted that ratio are only tools and personal
judgment of analyst is more important.
Ratios are computed on the bias of past result. Past is not indictor
of future. Ratios computed from historical data are used for predicting and
projecting the likely events in the future.
Ratios are only post mortem of what has happened between two
balance sheet dates. The position in the interim period is not reveled by ratio
analysis.
Due to changes in price level of various years, comparison of ratios
of such years cannot give correct conclusions.
Classification by
Profitability ActivitySolvency
Short term Long term
- Current Ratio- Cash position Ratio
- Proprietary Ratio- Debt – Equity Ratio
- Gross profit Ratio - Net profit Ratio- Expense Ratio- Operating profit Ratio- Return on capital
employed Ratio- Return on Equity
Ratio
- Capital turnover Ratio
- Creditor Turnover- Debtor Turnover- Fixed Assets
CLASSIFICATION BY PURPOSE: -
The modern approach of classifying the ratio is according to purpose or
object analysis. Normally, ratio is used for the purpose of assessing the profitability and
sound financial position. Thus, ratios according to the purpose are more meaningful.
Purpose
Solvency ratio
(1)
Short-term
I. Current Ratio
II. Cash position Ratio
CURRENT RATIO :
Meaning:
Current ratio is the most common ratio for measuring liquidity. Being related to working
capital analysis it is also called the working capital ratio. Current ratio expresses
relationship between current assets and current liabilities.
Purpose:
The current ratio of a firm measures in short term solvency. i.e. its ability to meet short
term obligation. As a measure of short term current financial liquidity.
It is calculated by dividing current asset by current liabilities.
Solvency ratio
Short term Long tern
Current ratioCash position ratio
Proprietary ratioDebt-equity ratio
Current Ratio = Current Assets Current Liabilities
Year 2007-08 = 544854318 = 2.6:1 209011368
Year 2008-09 = 534102425 = 2.47:1 215455422
Year 2009-10 = 524544889 = 2.98:1
176139161
Particulars 2007-2008 2008-2009 2009-2010
Current assets
Inventories 284664968 285516305 254321914
Sundry debtors 179198533 164825535 151569700
Cash & Bank Balance 17883875 19178538 64391467
Loans & Advances 63106942 64582047 54261808
Total 544854318 534102425 524544889
Current Liabilities
Liabilities 160455232 169730997 132349343
Provision 48556136 45724425 43789818
Total 209011368 215455422 176139161
Interpretation:
An ideal current ratio is 2:1 considered as a safe margin of solvency 2:1 i.e. the
current assets are two times the current liabilities. When ratio is 2:1. The creditors will be
able to get their payments in full.
The ideal ratio considered to be 2: 1. The above calculation shows that the
current ratio of the company is 2.6:1, 2.47:1,2.98:1, in the year March 2008, March 2009
& March 2010 respectively. Here companies good position in all three years.
QUICK RATIO:
Meaning:
When liquidity is highly restricted in terms of cash and cash equivalent,
this ratio should be relationship between cash and near cash items on the one hand.
Purpose:
The purpose of computing the ratio to measure e more rigorous of a firm’s liquidity position
Quick Ratio = Quick Assets Quick liabilities
Year 2007-08 = 260189350 = 3.25: 1 209011368
Year 2008-09 = 248586120 = 2.22:1 215455422
Year 2009-10 = 270222975 = 1.53:1 176139161
Interpretation:
A quick ratio 1:1 is good in business. Here in this company this ratio is grater than this norms. But last three years it is decreasing , yet it is not need to worry about it is, because it is yet above norms.
Long-term
I. Proprietary Ratio
II. Debt-Equity Ratio
I. Solvency Ratio
PROPRIETARY RATIO:
Meaning:
This relates the shareholders fund to total assets. It is a variant of the debt equity ratio.
This ratio shows the long term or future solvency of the business. It is calculated by
dividing shareholders funds by the total asset.
Purpose:
The purpose of proprietary ratio is indicating available to creditors and general financial
strength of the firm.
Particulars 2007-08 2008-09 2009-10
Shareholders Fund
Capital 35310000 35112500 34778000
Reserve 266960564 304198833 367104781
Total 302270564 339311133 401882781
Total Assets 683193923 698415831 678351780
Proprietary Ratio = Shareholders Fund Total Asset
Year 2007-08 = 302270564 = 0.44:1
683193923
Year 2008-09 = 339311133 = 0.49:1 698415831
Year 2009-10 = 401882781 = 0.59:1 678351780
Interpretation:
This ratio shows the general strength of the company is very important to
creditors as is help them to find out the proportion of share holder fund in the total asset
used in business. Higher ratio indicates a secured position to creditor i.e. 0.59 and lower
ratio indicates greater risk to creditor i.e. 0.44. From 2008 to 2010, the ratio is increase.
DEBT EQUITY RATIO:
Meaning:
The financing of total asset of a business concern is done by owner’s
equity as well as outside debts. This ratio indicates the relative proportions of debt and
equity in financing the asset of a firm.
It is also known as external internal equity ratio. Debt equity ratio is determined
to ascertain soundness of the long term financial policies of a firm.
Particulars 2007-08 2008-09 2009-10
Long Term Debt
Secured loan 164715322 135446717 93064494
Shareholders Fund 260189350 248586120 270222975
Debt Equity Ratio = Long Term Debt Shareholders Fund
Year 2007-08 = 164715322 = 0.63:1
260189350
Year 2008-09 = 135446717 = 0.54:1
248586120
Year 2009-2010 = 93064494 = 0.34:1 270222975
Interpretation:
Debt -equity ratio measures the ratio of long term or total debt to shareholder
equity. A High Ratio shows a large share of financing by the creditor of the firm a low
ratio implies smaller claim of creditor.
If the Debt-equity ratio is high the owners are putting up relatively less money of
their own. It is dinger signal for the creditors.
Here, Debt equity Ratio is 63% in 2008 and 54% in 2009 and 34% in 2010,
which shows good financial position of company.
Profitability ratio
I. Net profit Ratio
II. Raw material consumed Ratio
III. Operating Profit Ratio
IV. Return on capital employed ratio
V. Return on equity shareholder’s funds.
NET PROFIT RATIO :
Meaning:
It is also called net profit to sales ratio. The profit margin is indicative of
management’s ability to operate the business with sufficient success not only to recover
from revenue of the period, the expense of operating the business and the cost of
borrowed fund.
Net Profit Ratio = Net Profit X 100Net Sales
Year 2007-08 = 65061293 = 8.91% 729950074
Year 2008-09 = 51404613 =6.29% 816685475
Year 2009-2010 = 71507713 =10.69% 669249073
Interpretation:
Net profit Margin measure the percentage of each sale Rupee remaining after all cost and expenses including interest & taxes have been deducted a high net profit margin would ensure adequate return to the owner as well as enable firm. Here , Net profit Ratio is 8.91% in 2008 & 6.29% in 2009 &10.69% in 2010. This shows a profit is more in 2010 compare to last two year.
Other income to PBT Ratio:
This ratio measures the relationship between other income to profit before tax.
The main purpose of computing this ratio is to determine the company’s
efficiency of investment in other industries.
Other income to PBT : other income X 100
PBT
Year 2007-08 = 16981569 = 18.27%
92945565
Year 2009-10 = 15761610 =16.64%
94702783
Year2010-11 = 16194030 = 24.92%
64980616
Here this ratio is more , which shows company is more earning from other
sources. In 2011 company’s income is more from other sources.
SYNOPSIS
1. Introduction
Name of the company :
AUSTIN ENGINEERING COMPANY LTD
Title of the Project:
“RATIO ANALYSIS OF AustIn engineering company Ltd.
.”
2. Statement of the problem
There is need of evaluating the fundamental strength of Austin engineering
company Ltd.
3. Scope of the Study:
Scope of project for studying the Fundamental strength & liquidity position of the
company with reference to .Austeen engineering company Ltd.
4. Objective of the Study:
To know the fundamental strength of the Austeen engineering company Ltd.
To study whole system of infolw and outflow of cash in an organisation.
To know the liqudity level of the company
5. Significance of the study:
By this project, we can get the information regarding company’s liquidity and
profitability.
.
6. Source of Data:
1. Balance sheet of the company
2. Website of company.
3. Annual Report Of company (2007-08)4. Annual Report Of company (2008-09)5. Annual Report Of company (2009-10)
7. Limitation of Study:
1. Time provide for the study is limited.
2. Analysis of 3 year company can be done.
3. There is inadequacy of some data for preparation of project.
4. The financial position of the company is affected by several factors like
economic, social.
5. The balance sheet or other financial statement given for analysis may be
wrong in figure.
SUGGESTION
From the research I have drawn some suggestion that are as under.
First of all the current ratio of company is very lower than other companies so one
recommendation to company is to purchase the assets because ideal ratio is 2:1 but the
company has not achieved this ratio.
In resent era, the investors are interested in dividend but the dividend pay out ratio
of company is very low so one suggestion to company that to increase the ratio of payout
So that the interest of the investors an be protected.
Company should invest their surplus into other companies or to expand their
business because dividend pay out ratio is very low.
CONCLUSION
A student of MBA, this summer training helps me to increase my knowledge and skills. In classroom, we only study the books but in the training one can know that how to apply these theories in practice. So this summer training helped me in gaining such knowledge of practical life.
The summer training help in future. In summer training I have learnt many aspects like how to handle the workforce, how to interact with workers and colleagues, how to plan about any thing, management of production procedure, etc.
During this summer training, I have got full co-operation from the managers, officers and workers of the AUSTIN ENG.CO. LTD. And also they provide their valuable time as well as precious suggestions about practical business.
Appendix
Balance sheet
Profit and loss A/c.
BIBLIOGRAPHY
Financial Accounting for Management by Ambrish Gupta.
Company’s annual report (29th, 30th and 31st annual report)
Reference report
www.aec-bearing.com