sohail finance project.docx

7/25/2019 SOHAIL FINANCE PROJECT.docx

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A Project Report

On

RATIO ANALYSIS

(Ashok Leyland)

Su!"tted to SA#ITRI$AI P%&L' P&N'&NI#'RSITY

&nder The u"dance o

Pro*Snehal aur

Su!"tted $y+ ,oha!!ad Soha"l -hatr"

T*Y*$$A S',.#I

/0"nance1

STESs

S"n2had 3olle2e o 3o!!erce

-ondh4a ($k)5 P&N'.67

89:;.:ant.

Seal o or2an"sat"on S"2nature

Na!e o author"ty


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ACKNOWLEDGEMENT

It 4as a rare opportun"ty to prepare a project report o co!pan"es and that are 4ell kno4n

or the"r core corporate >alues and pract"ces that "t "!"es "nto all "nd">"duals 4ho5 no

!atter e>en or a short durat"on5 enter the pre!"ses o d"erent "ndustr"es

I a! 2rateul to our pr"nc"pal =r* ,*S* ?a@al and our 2u"de Pro* Snehal aur5 4hose

thorou2h 2u"dance and d"rect"on has helped !e acco!pl"sh the project 4"th !a"!u!

understand"n2*

I 4ould l"ke to epress !y 2rat"tude to4ards all o the! 4ho ha>e 2">en the"r earnest

support5 d"rectly or "nd"rectly or th"s report.

,oha!!ad Soha"l -hatr"


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DECLARATION

I5 ,oha!!ad Soha"l -hatr"5 a ona"de student o S"nh2ad 3olle2e o 3o!!erce5 Pune

herey declare that the Project Report ent"tled Study o rat"o analys"s o Ashok Leyland

4r"tten and su!"tted y !e to Sa>"tr"a" Phule Pune &n">ers"ty 5 "n part"al ul"ll!ent othe dra4n there"n are ased on "nor!at"on collected y !ysel*

I 4ould also l"ke to declare that "nd"n2s5 su22est"ons and conclus"on o th"s report are the

actual acts that ha>e een d"sco>ered dur"n2 the study* There "s no part"al"ty "n !ak"n2 th"s

report and "t "s true to the est o !y el"e and kno4led2e*

=ate+ S"2nature o the student

Place+ Pune


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Astract


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$I$LIORAP%Y

ANN'B&R'


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1. INTRODUCTION

Rat"o Analys"s "s a or! o 0"nanc"al State!ent Analys"s that "s used to ota"n a Cu"ck

"nd"cat"on o a "r!Ds "nanc"al peror!ance "n se>eral key areas* The rat"os are cate2or"@ed

as Short.ter! Sol>ency Rat"os5 =et ,ana2e!ent Rat"os5 Asset ,ana2e!ent Rat"os5

Pro"ta"l"ty Rat"os5 and ,arket #alue Rat"os* Thus5 "n th"s project the concept o rat"o

analys"s and the co!par"son o past ">e years "nanc"al peror!ance o Idea 3ellular "s

projected*

1.1 ABOUT THE STUDYThe report deals 4"th study"n2 the "nanc"al peror!ance o Ashok Leyland* The "nanc"al

peror!ance "s stud"ed y "nterpret"n2 the alance sheet and pro"t E loss account o the

co!pany* Also the report cons"sts o reason eh"nd any unusual eha>"or o the rat"os E

pred"ct"on o "ts eect on the co!pany "n near uture* The report "s d">"ded "n to s"

essent"al parts* The "rst part cons"sts o "ntroduct"ons to the project5 second part present

the pro"le o the or2an"@at"onsF th"rd part 2">es a re>"e4 o l"terature* 0orth chapter "s the

research !ethodolo2y* 0"th part conta"ns the data analys"s and "nterpretat"on* S"th part

conta"ns "nd"n2s5 su22est"ons and conclus"on* 0or th"s study o 0">e yearsG co!parat">e

State!ent o Pro"t E Loss E $alance Sheet has een taken or calculat"n2 rat"o analys"s*

1.2 STATEMENT OF PROBLEMStudy o rat"o analys"s and "nterpretat"on o "nanc"al state!ents o Ashok Leyland*


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1.3PURPOSE OF STUDY

:* To understand the "nanc"al syste! o ; years at Ashok Leyland*8* To understand the pro"ta"l"ty5 l"Cu"d"ty5 sol>ency5 turno>er rat"os*H* To 2et the deeper understand"n2 o the process o 0"nanc"al State!ent analys"s*6* To oer appropr"ate su22est"ons or the etter peror!ance o the or2an"@at"on*

1.4 OBJECTIVES OF STUDY

:* To understand and assess the "nanc"al rat"os ased on the "nanc"al state!ent o

Ashok Leyland o ; years5"*e* 89::589:8589:H589:6589:;*

8* The a"! o the project "s to reco2n"@e the pos"t"on o the co!pany throu2h

those rat"os and data a>a"lale* Th"s reco2n"t"on "s a lead"n2 actor "n chan2es o each

and e>ery year and the ase and root o !any !ana2e!ent dec"s"ons*

1.5 SIGNIFICANCE OF STUDY

:* The study has 2reat s"2n""cance and pro>"des ene"ts to >ar"ous part"es 4ho!

d"rectly or "nd"rectly "nteract 4"th the co!pany*

8* It "s ene"c"al to !ana2e!ent o the co!pany y pro>"d"n2 crystal clear p"cture

re2ard"n2 "!portant aspects l"ke l"Cu"d"ty5 le>era2e5 act">"ty and pro"ta"l"ty*

H* The study "s also ene"c"al to e!ployees and oers !ot">at"on y sho4"n2 ho4

act">ely they are contr"ut"n2 or co!panyGs 2ro4th*

6* The "n>estors 4ho are "nterested "n "n>est"n2 "n the co!panyGs shares 4"ll also 2et

ene"ted y 2o"n2 throu2h the study and can eas"ly take a dec"s"on 4hether to "n>est or not

to "n>est "n the co!panyGs shares*

;* It helps or2an"@at"on to kno4 aout the use o Rat"o analys"s "n the us"ness or

epans"on5 d">ers""cat"on and 2ro4th*

1.6 SCOPE OF STUDY


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:* The scope o study "s aout rat"o analys"s and also the past ; years peror!ance o

Ashok Leyland o ranch Auto!ot">es P>t*5Ltd*5 ,a2e 3antar Na2ar Patta5 Pune5

Sholapur Rd* %adapsar5 Pune5 ,aharashtra 6::987*8* Th"s project reers to an assess!ent o the >"a"l"ty5 sta"l"ty and pro"ta"l"ty o Ashok

Leyland*

1.7 AREA OF STUDYArea o study "s concerned 4"th the analys"s o "nanc"al state!ents throu2h rat"o analys"s

o Auto!ot">es P>t*5Ltd*5,a2e 3antar Na2ar Patta5 Pune5 Sholapur Rd* %adapsar5 Pune5

,aharashtra 6::987 ranch o Ashok Leyland*

1.8 LIMITATIONS OF STUDY:* T"!e allo4ed 4as not enou2h or throu2h co!plet"on o the study*8* The un co.operat">e att"tudes o !any e!ployees o the "r! under study 4ere not

encoura2"n2* Th"s resulted to the"r a"lure to pro>"de su"c"ent "nor!at"on reCu"red

or proper co!plet"on o the study*

2. PROFILE OF ORGANISATION

2.1 VISION AND MISSION,"ss"on

Ident"y"n2 4"th the custo!er

$e"n2 the lo4est cost !anuacturer

loal ench!ark"n2 our product5 processes and people


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#"s"onAch"e>"n2 leadersh"p "n the !ed"u!hea>y duty se2!ents o the do!est"c co!!erc"al

>eh"cle !arket and a s"2n""cant presence "n the 4orld throu2h transport solut"ons that est

ant"c"pate custo!er needs5 4"th the h"2hest >alue.to.cost rat"o

2.2 HISTORY OF ORGANIATION

Ashok Leyland "s anInd"an auto!o"le !anuactur"n2 co!pany ased "n 3henna"5 Ind"a*

0ounded "n :J675 "t "s the 8nd lar2est co!!erc"al >eh"cle !anuacturer "n Ind"a5 6th lar2est

!anuacturer o uses "n the 4orld and :eh"cle co!pany "n Ind"a "n the !ed"u! and hea>y

co!!erc"al >eh"cle (,E%3#) se2!ent 4"th a !arket share o 87 (899KM97)* ?"th

passen2er transportat"on opt"ons ran2"n2 ro! :J seaters to 79 seaters5 Ashok Leyland "s a

!arket leader "n the us se2!ent* The co!pany cla"!s to carry !ore than enture 4"th N"ssan ,otors o apan the co!pany !ade "ts presence "n the L"2ht3o!!erc"al #eh"cle (L3#) se2!ent (K*; tons)*

Ashok LeylandDs &- sus"d"ary Optare has shut do4n "ts us actory "n $lackurn5

Lancash"re* Th"s sus"d"aryDs trad"t"onal ho!e "n leads has also een >acated "n a>our o a

purpose u"lt plant "n Sherorn."n.'l!et*

In :J7K5 the o>erseas hold"n2 y Land Ro>er Leyland Internat"onal %old"n2s L"!"ted

(LRLI%) 4as taken o>er y a jo"nt >enture et4een the %"nduja roup5 the Non.Res"dentInd"an transnat"onal 2roup an I#'3O5 part o the0"at roup Ashok LeylandGs lon2.ter!

plan to eco!e a 2loal player y ench!ark"n2 2loal standards o technolo2y and Cual"ty

4as soon "r!ed up* Access to "nternat"onal technolo2y and a &S899 !"ll"on "n>est!ent

pro2ra!!e created a state.o.the.art !anuactur"n2 ase to roll out "nternat"onal class

products*


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In 899K5 the %"nduja roup also ou2ht out I#'3ODs "nd"rect stake "n Ashok Leyland* The

pro!oter sharehold"n2 no4 stands at ;:* Today the co!pany "s the la2sh"p o the

%"nduja roup a $r"t"sh.ased and Ind"an or"2"nated trans.nat"onal con2lo!erate ater

%"ndujas ou2ht I>ecoGs re!a"n"n2 o4nersh"p stakes*

2.3 PRODUCTS AND SERVICES

Trucks and $uses

'arly #eh"cles

Ind"aDs "rst Se!" .Tra"ler Ashok Leyland 3o!et (3a) on a ,ah"ndra O4en Se!" Tra"ler

:9.:8 Ton 3apac"ty u"lt "n :J;J*

An Ashok Leyland $'ST us "n ,u!a"* Th"s us has the %"no 'n2"ne*

C!"#$

'arly products "ncluded the Leyland 3o!et us 4h"ch 4as a passen2er ody u"lt on atruck chass"s sold "n lar2e nu!ers to !any operators "n Ind"a* $y :Jery State Transport &ndertak"n2 "n Ind"a5 and o>er 75999 4ere "n ser>"ce* It

4as soon jo"ned "n product"on y a >ers"on o theLeyland T"2er*

T%$&'


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In :Je speed hea>y duty

constant.!esh 2earo 4as used to2ether 4"th the Ashok Leyland >ers"on o the O*ers"ons o %.ser"es en2"ne 4ere de>eloped 4"th 6 and < cyl"nders and also

conor!"n2 to $S85 $SH E $S6 e!"ss"on standards "n Ind"a* These en2"nes pro>ed to e

etre!ely popular 4"th the custo!ers pr"!ar"ly or the"r ecellent uel e"c"ency* ,ost

current !odels o Ashok Leyland co!e 4"th %.ser"es en2"nes* #ery successul and

cont"nued "n product"on or !any years*

H%'! E'(%'#

=ur"n2 early 79Ds Ashok Leyland

I)#*! P&+$'#+,-%

In late :J79Gs I>eco "n>est!ent and partnersh"p resulted "n Ashok Leyland launch"n2 the

D3ar2oD ran2e o trucks ased on 'uropean 0ord 3ar2o trucks* The 3ar2o entered

product"on "n :JJ65 at Ashok LeylandDs ne4 plant "n %osur5 southeast o $en2aluru. These

>eh"cles used I>eco en2"nes and or the "rst t"!e had actory."tted cas* Thou2h the

3ar2o trucks are no lon2er "n product"on and the use o I>eco en2"ne 4as d"scont"nued5 the

ca cont"nues to e used on the 'co!et ran2e o trucks as 4ell as or se>eral o Ashok

LeylandDs !"l"tary >eh"cles*

The 3ar2o 4as or"2"nally "ntroduced "n K and J lon2 tons (K5:99 and J5:99 k2) >ers"onsF

later on hea>"er.duty !odels ro! :; to 8< lon2 tons (:;5899 to 8


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Ashok LeylandDs ,odern Truck 4"th actory u"lt .J9 Ne4 en 3a*

Ashok LeylandDs entry "nto L"2ht 3o!!erc"al #eh"cle se2!ent 4"th =ost*

Ashok Leyland ST"L',P#

U0T+/*

Ashok Leyland5 announced sale o >eh"cles on the ne4 &.Truck plator! ro! No>e!er5

89:9 4"th the roll"n2 out o the "rst set o :9 !odels o t"ppers and tractor tra"lers "n the :eh"cle (L3#) that "s the "rst product to e

launched y the Ind"an.apanese co!!erc"al >eh"cle jo"nt >enture Ashok Leyland N"ssan

#eh"cles* =ost "s po4ered y a ;7 hp h"2h.torCue5 H.cyl"nder5 turo.char2ed 3o!!on Ra"l
https://en.wikipedia.org/wiki/Ashok_Leyland_STiLEhttps://en.wikipedia.org/wiki/Ashok_Leyland_STiLE


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="esel en2"ne and has a payload capac"ty o :*8; Tonnes* It "s a>a"lale "n oth $SH and

$S6 >ers"ons* The ody4ork and so!e o the underp"nn"n2s relate to N"ssanDs 388 #anette

o the :J79sF th"s "s !ost >"s"le "n the door des"2n* The L3# "s e"n2 produced "n Ashok

LeylandDs %osur plant "n Ta!"l Nadu* The L3# "s a>a"lale "n three >ers"ons 4"th the top.

end >ers"on eatur"n2 a"r.cond"t"on"n25 po4er steer"n25 dual.colour o a e"2e.2ray tr"! and

ar"c seats* ?"th the launch o =ost Ashok Leyland has no4 entered the L"2ht 3o!!erc"al

#eh"cle se2!ent "n Ind"a*

B!,,

$oss "s an Inter!ed"ate 3o!!erc"al #eh"cle launched y Ashok Leyland* Th"s "s a>a"lale

"n the ran2e o 7T to :6T* Th"s "s a>a"lale 4"th t4o en2"ne opt"ons :89 OIL (L') and

:H93RS (LB) en2"nes and oth are "rst t"!e such an en2"nes are oered "n th"s ran2e o

trucks* The LB >ar"ant "s a>a"lale 4"th A"r cond"t"on and Ley!at"c A,T 4h"ch are a2a"n

the "ndustry "rst*

M%'%)&'

ST"L'

ST"L' "s a ,ult".purpose >eh"cle4h"ch 4as !anuactured y Ashok Leyland* The >eh"cle

4as un>e"led dur"n2 89:8Auto 'poand 4as launched "n uly 89:H* ST"L' 4as !arketed

as a Q!ult".purpose >eh"cleQ or use as a hotel shuttle5 ta"5 a!ulance5panel >an5 and "n

cour"erser>"ce* In ,ay 89:;5 Ashok Leyland stopped product"on due to lo4 de!and*

2.4 MILESTONE OF ORGANIATION

,ajor ,"lestones "n Ind"aGs co!!erc"al >eh"cle "ndustry3ourtesy Ashok Leyland

:JJ< M Introduced ull a"r rakes:Jest"ule us:JJ8 M ?on sel.cert""cat"on status or deence suppl"es:JJH M Rece">ed ISO J998
https://en.wikipedia.org/wiki/Nissan_Vanette#C22https://en.wikipedia.org/wiki/Nissan_Vanette#C22https://en.wikipedia.org/wiki/Multi-purpose_vehiclehttps://en.wikipedia.org/wiki/Auto_Expohttps://en.wikipedia.org/wiki/Auto_Expohttps://en.wikipedia.org/wiki/Taxihttps://en.wikipedia.org/wiki/Ambulancehttps://en.wikipedia.org/wiki/Panel_vanhttps://en.wikipedia.org/wiki/Panel_vanhttps://en.wikipedia.org/wiki/Courierhttps://en.wikipedia.org/wiki/Courierhttps://en.wikipedia.org/wiki/Nissan_Vanette#C22https://en.wikipedia.org/wiki/Multi-purpose_vehiclehttps://en.wikipedia.org/wiki/Auto_Expohttps://en.wikipedia.org/wiki/Taxihttps://en.wikipedia.org/wiki/Ambulancehttps://en.wikipedia.org/wiki/Panel_vanhttps://en.wikipedia.org/wiki/Courier


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:JJK M Ind"aGs "rst 3N po4ered us jo"ned the $'ST leet899: M Rece">ed ISO :699: cert""cat"on or all !anuactur"n2 un"ts8998 M Launched hyr"d electr"c >eh"cle

2.5 PROGRESS OF ORGANIATION

:J67.:J7K5 the "rst our decades

P+!/*$, #&+' & +#/$&$%!' !+ +#%&%%$ &' /+&%%$

Pand"t a4aharlal Nehru persuaded Ra2hunandan Saran5 an "ndustr"al"st5 to enter

auto!ot">e !anuacture In :J675 Ashok ,otors 4as set up or the asse!ly o Aust"n cars* ?"th eCu"ty

part"c"pat"on y $r"t"sh Leyland5 Ashok Leyland co!!enced !anuacture o

co!!erc"al >eh"cles "n :J;;* Access to "nternat"onal technolo2y enaled the 3o!pany to "ntroduce a host o

trend.sett"n2* Products earn a reputat"on or rel"a"l"ty and dura"l"ty product

"nno>at"ons "n the country5 supported y product de>elop!ent and !arket"n2

capa"l"t"es ,ult".ale >eh"cles5 tractor tra"lers5 doule decker and >est"ule uses5 po4er

steer"n2 &n"ts at 'nnore5 %osur5 $handara and Al4ar eca!e part o a pan.Ind"a 2ro4th

plan o the Ind"an leadersh"p T"e.ups 4"th "nternat"onal technolo2y !ajors or en2"ne and 2earo technolo2y

$attled or!"dale co!pet"t"on5 2a"n"n2 and susta"n"n2 a 8; plus !arket share

?"thstood the unprecedented us"ness depress"on o the early 79s5 pro>ed "ts

res"l"ence M a Cual"ty that has stood the 3o!pany "n 2ood stead "n suseCuent try"n2

t"!es too* ,ade a ha"t o earn"n2 pro"ts and declar"n2 d">"dends

:J7K.!"d J9s t"ll no45 the 2ro4th ace

T-# &$!+" !+ G!& S$&'&+, G!& M&+#$,

Transnat"onal %"nduja roup took o>er the pr"nc"pal o>erseas sharehold"n2 o the

3o!pany "n :J7K5 "nus"n2 >"tal cap"tal and technolo2y* '!oldened5 Ashok


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LeylandGs lon2.ter! plan to eco!e a 2loal player y ench!ark"n2 2loal

standards o technolo2y and Cual"ty 4as soon "r!ed up A state.o.the.art !anuactur"n2 ase set up at %osur to roll out "nternat"onal class

products

Ant"c"pated 2ro4"n2 !arket de!and and p"oneered 3N technolo2y Product"on capac"ty up ro! 8H5999 un"ts "n :J7K to ;95999 un"ts "n :JJ7*

Internat"onal ual"ty 3ert""cat"ons+

0"rst auto!ot">e !anuacturer "n Ind"a to rece">e the ISO J998 3ert""cat"on

ISO J99:(:JJ6) and S J999 (:JJ7)

,"d J9s t"ll no45 the e"c"ency sta2e

M+%& %'%$%&$%)#, ,/++%'( & +!/' #%*%#'*%#,

'pans"on o "n.house RE= "nrastructure "nclud"n2 so!e "rst "n Ind"a ac"l"t"es5 "n

tande! 4"th cont"nuous stren2then"n2 o talent pool Took "n "ts str"de the accelerated e!"ss"on nor!s5 ut"l"@"n2 "n.house en2"ne RE=

capa"l"t"es 3o!pany.4"de IT "n"t"at">es r"n2 "n speed o operat"ons as 4ell as connect">"ty

Internal supply cha"n "n"t"at">e . Project OS3ARS . creates a UpullG en>"ron!ent

(rather than UpushG) a"d"n2 "n ust."n.T"!e culture #ar"ous shop loor "n"t"at">es5 a"!ed at e!ployee part"c"pat"on and e"c"ency

"!pro>e!ents5 create a le"le !anuactur"n2asse!ly net4ork tuned "n to

custo!er needs ,odel prol"erat"on M products that the custo!ersG un"Cue needs

'nlar2ed and deepened !arket co>era2e5 reach"n2 ne4 custo!er 2roups M 4"th"n

and outs"de Ind"a Set up a state.o.the.art =r">er Tra"n"n2 3entre at Na!akkal* Also "ntroduced

"nno>at">e custo!er support products that en2a2e the custo!er !oreco!prehens">ely (A,35 86K %elpl"ne)

,ana2e!ent =e>elop!ent 3entre set up at %osur

'#A pos"t">e s"nce 8998.899H+ created shareholder >alue y re2"ster"n2 returns

h"2her than cost o cap"tal


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The uture dec"s"on

A$&, ,-+/' S&% !'

%a>"n2 !ade the !anuactur"n2 technolo2y and the "nnards o "ts >eh"cles

conte!porary5 catch"n2 the 4"nds o 2loal"@at"on5 Ashok Leyland "s on a U2loalGCuest+

:* AcCu"red the Truck $us"ness &n"t o A#IA As*5 ased "n Pra2ue

8* $us asse!ly un"t "n &A'

H* Asse!ly un"t "n South Ar"ca "n the on2

A 4hole ne4 ran2e o !odern5 ully u"lt5 h"2h peror!ance >eh"cles "n l"ne 4"th

e!er2"n2 !arket reCu"re!ents Plans or rap"d epans"on o capac"ty eyond one lakh >eh"cles per annu!

'ntry "nto ne4 areas that 2o eyond the core us"ness o co!!erc"al >eh"cles+

Ashley =es"2n and 'n2"neer"n2 Ser>"ces (A='S) "n the area o en2"neer"n2

ser>"ces (de>elop"n25 test"n2 and >al"dat"n2 >eh"cular des"2ns and co!ponents)

A3 Ashok Leyland (Auto 3o!ponents roup) tar2ets &S= :99 !"ll"on "n three

years


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3. REVIE9 OF LITERATURE

3.1 ANALYSIS OF FINANCIAL STATEMENTS0"nanc"al analys"s "s the process o "dent"y"n2 the "nanc"al stren2ths and 4eaknesses o

the "r! and estal"sh"n2 relat"onsh"p et4een the "te!s o the alance sheet and pro"t E

loss account*0"nanc"al rat"o analys"s "s the calculat"on and co!par"son o rat"os5 4h"ch are der">ed ro!

the "nor!at"on "n a co!panyGs "nanc"al state!ents* The le>el and h"stor"cal trends o

these rat"os can e used to !ake "nerences aout a co!panyGs "nanc"al cond"t"on5 "ts

operat"ons and attract">eness as an "n>est!ent* The "nor!at"on "n the state!ents "s used

y

Trade cred"tors5 to "dent"y the "r!Gs a"l"ty to !eet the"r cla"!s "*e* l"Cu"d"ty

pos"t"on o the co!pany*

In>estors5 to kno4 aout the present and uture pro"ta"l"ty o the co!pany and "ts

"nanc"al structure*

,ana2e!ent5 "n e>ery aspect o the "nanc"al analys"s* It "s the respons""l"ty o the

!ana2e!ent to !a"nta"n sound "nanc"al cond"t"on "n the co!pany*

3.2 MEANING OF RATIO ACCOUNTING RATIO AND RATIO

ANALYSIS

MEANING OFRATIOThe ter! Rat"o reers to the nu!er"cal and Cuant"tat">e relat"onsh"p et4een t4o "te!s

or >ar"ales*Rat"o analys"s "s de"ned as the syste!at"c use o the rat"o to "nterpret the

"nanc"al state!ents* So that the stren2ths and 4eaknesses o a "r!5 as 4ell as "ts

h"stor"cal peror!ance and current "nanc"al cond"t"on can e deter!"ned* Rat"o relects a

Cuant"tat">e relat"onsh"p helps to or! a Cuant"tat">e jud2!ent*

ACCOUNTING RATIO


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Rat"os ased on "nanc"al state!ent are called D0"nanc"al Rat"osD or DAccount"n2 Rat"os*D

Account"n2 rat"o "s thus5 an ar"th!et"cal relat"onsh"p et4een t4o account"n2 >ar"ales*Accord"n2 to * $etty5 QThe ter! account"n2 rat"o "s used to descr"e s"2n""cant

relat"onsh"p 4h"ch e"st et4een "2ures sho4n "n a $alance Sheet or "n a Pro"t and Loss

Account or "n a ud2etary control syste! or "n any part o the account"n2 or2an"sat"on*QIn r"e5 account"n2 rat"os "nd"cate a Cuant"tat">e relat"onsh"p 4h"ch the "nanc"al analyst

!ay use to !ake a Cual"tat">e jud2e!ent aout >ar"ous aspects o the "nanc"al pos"t"on

and peror!ance o a us"ness enterpr"se*

RATIO ANALYSIS

,ean"n2 and de"n"t"on o rat"o analys"s+

Rat"o analys"s "s a 4"dely used tool o "nanc"al analys"s* It "s de"ned as the syste!at"c use

o rat"o to "nterpret the "nanc"al state!ents so that the stren2th and 4eaknesses o a "r!

as 4ell as "ts h"stor"cal peror!ance and current "nanc"al cond"t"on can e deter!"ned*

The ter! rat"o reers to the nu!er"cal or Cuant"tat">e relat"onsh"p et4een t4o >ar"ales*Accord"n2 to ,yers5 QRat"o analys"s "s a study o relat"onsh"p a!on2 >ar"ous "nanc"al

actors "n a us"ness*Q%ence5 Rat"o Analys"s "s a techn"Cue o analys"n2 the "nanc"al state!ents y co!put"n2

account"n2 rat"os and "nterpret"n2 "t to dra4 !ean"n2ul conclus"ons*

3.3 IMPORTANCE OF RATIO ANALYSIS

It helps "n e>aluat"n2 the "r!sG peror!ance*

It helps "n "nter."r! co!par"son*

It s"!pl""es the "nanc"al state!ents*

It helps "n co!par"n2 co!pan"es o d"erent s"@e 4"th each other*

It helps "n trend analys"s 4h"ch "n>ol>es co!par"n2 a s"n2le co!pany o>er a

per"od*

It h"2hl"2hts "!portant "nor!at"on "n s"!ple or! Cu"ckly*

3.4 LIMITATIONS OF RATIO ANALYSIS

Lack Standard #alues

No Standard 3o!par"son

">es only relat"onsh"p

=o not cons"der !arket chan2e

Ora2n"@at"onal en>"ron!ent !ay d"er co!pany to co!pany

="erent account"n2 pol"c"es y or2an"sat"on


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Inor!at"on o past years*

3.5 OBJECTIVES OF RATIO ANALYSIS

,easur"n2 the pro"ta"l"ty =eter!"n"n2 operat"onal e"c"ency

,easur"n2 "nanc"al pos"t"on

0ac"l"tat"n2 co!parat">e analys"s

Ind"cat"n2 o>erall e"c"ency

$ud2et"n2 and orecast"n2

3.6 CLASSIFICATION OF RATIO ANALYSIS

3lass""cat"on o rat"os depends on the oject">es and a>a"la"l"ty o data* Rat"os !ay e

ased on "2ures 2">en "n the $alance Sheet5 or "n the Pro"t and Loss Account or "n oth

the state!ents* On the as"s o data 2">en "n the "nanc"al state!ents5 rat"os !ay e

class""ed as ollo4s+o Inco!e State!ent Rat"os:These rat"os are calculated on the as"s o the "te!s o Pro"t and

Loss Account5 e*2* ross Pro"t Rat"o5 Net Pro"t Rat"o5 etc*

o Pos"t"on State!ent Rat"os+These rat"os are calculated on the as"s o the "te!s o $alance

Sheet5 e*2* 3urrent Rat"o5 =et.'Cu"ty Rat"o5 etc*

o Inter.State!ent Rat"os+These rat"os are ased on oth the "te!s o Pro"t and Loss

Account and $alance Sheet5 e*2* 0"ed Assets Turno>er Rat"o5 =etors Turno>er Rat"o5

3red"tors Turno>er Rat"o5 Stock Turno>er Rat"o5 etc*

$ut the ao>e class""cat"on "s not o !uch use ecause analys"s o "nanc"al state!ents

cannot e carr"ed out "n "solat"on* Rat"os are used or the ach"e>e!ent o spec"al oject">es*

0ro! the >"e4po"nt o >ar"ous users o rat"os5 these are calculated to ser>e the d"erent

oject">es or purposes* Thereore5 class""cat"on on the as"s o purpose "s !ore !ean"n2ul

and s"2n""cant* On the as"s o purpose5 rat"os !ay e class""ed as under+

L"Cu"d"ty Rat"o

Sol>ency Rat"o

Turno>er Rat"o

Pro"ta"l"ty Rat"o


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3.6.1 L%;/%%$ R&$%!

L"Cu"d"ty rat"os pro>"de "nor!at"on aout a "r!Ds a"l"ty to !eet "ts short.ter! "nanc"alol"2at"ons* They are o part"cular "nterest to those etend"n2 short.ter! cred"t to the "r!*

T4o reCuently.used l"Cu"d"ty rat"os are the current rat"o and the Cu"ck rat"o*

3.6.1.1 CURRENT RATIO

Short.ter! cred"tors preer a h"2h current rat"o s"nce "t reduces the"r r"sk* Shareholders

!ay preer a lo4er current rat"o so that !ore o the "r!Ds assets are 4ork"n2 to 2ro4 the

us"ness* Typ"cal >alues or the current rat"o >ary y "r! and "ndustry*

One dra4ack o the current rat"o "s that "n>entory !ay "nclude !any "te!s that are

d""cult to l"Cu"date Cu"ckly and that ha>e uncerta"n l"Cu"dat"on >alues*It "s de"ned as C/++#'$ R&$%! < C/++#'$ A,,#$,= C/++#'$ L%&%%$%#,

3urrent asset "ncludes "n>entory5 sundry detors5 cash and ank alance and other 3A3urrent l"a"l"ty "ncludes sundry cred"tors and other l"a"l"t"es*3.6.1.2 >/%* R&$%!

The Cu"ck rat"o "s an alternat">e !easure o l"Cu"d"ty that does not "nclude "n>entory "n the

current assets* The Cu"ck rat"o "s de"ned as ollo4s+ >/%* R&$%! < >/%* A,,#$,= C/++#'$ L%&%%$%#,u"ck asset "ncludes detors5 cash and ank alance and "nterest accrued*3urrent l"a"l"ty "ncludes sundry cred"tors and other l"a"l"t"es*

3.6.2 SOLVENCY RATIOThe rat"os co!puted under th"s 2roup "nd"cate the lon2 ter! "nanc"al prospects o the

co!pany* The shareholder5 deenture holders and other lenders o lon2 ter! "nance ter!

loans !ay e as"cally "nterested "n the rat"os all"n2 under th"s 2roup*

3.6.3 TURNOVER RATIO

Turno>er rat"os "nd"cate o ho4 e"c"ently the "r! ut"l"@es "ts assets* They so!et"!es are

reerred to as e"c"ency rat"os5 asset ut"l"@at"on rat"os5 or asset !ana2e!ent rat"os* The

reCuently.used Turno>er rat"os are+


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3.6.3.1DEBTOR?S TURNOVER RATIO @RECEIVABLES TURNOVER

Rece">ales turno>er "s an "nd"cat"on o ho4 Cu"ckly the "r! collects "ts accounts

rece">ales and "s de"ned as ollo4s+

D#$!+, T/+'!)#+ R&$%! < N#$ C+#%$ S,= A)#+&(# D#$!+,The rece">ales turno>er oten "s reported "n ter!s o the nu!er o days that cred"t sales

re!a"n "n accounts rece">ale eore they are collected* Th"s nu!er "s kno4n as the

collect"on per"od*

3.6.3.2 FIED ASSETS TURNOVER

It "s de"ned as F%# A,,#$ T/+'!)#+ < N#$ S,=N#$ F%# A,,#$,

Net "ed asset or a part"cular year "s the assets ater deduct"n2 deprc"at"on*

A h"2h "ed asset turno>er rat"o "nd"cates the capa"l"ty o the or2an"@at"on to ach"e>e

!a"!u! sales 4"th !"n"!u! "n>est!ent "n "ed assets* It "nd"cates that the "ed assets

are turned o>er "n the or! o sales !ore nu!er o t"!es* As such h"2her the "ed assets

turno>er rat"o etter 4"ll e s"tuat"on*

3.6.3.3 9ORING CAPITAL TURNOVER RATIO

It "s de"ned as9!+%'( C&%$& T/+'!)#+ R&$%! < N#$ S,= 9!+%'( C&%$&

9!+%'( C&%$&entory5 sundry detors5 cash and ank alance and other 3A3urrent l"a"l"ty "ncludes sundry cred"tors and other l"a"l"t"es*

A h"2h 4ork"n2 cap"tal turno>er rat"o "nd"cates the capa"l"ty o the or2an"@at"on to ach"e>e

!a"!u! sales 4"th !"n"!u! "n>est!ent "n 4ork"n2 cap"tal* It "nd"cates that 4ork"n2

cap"tal "s turned o>er "n the or! o sales !ore nu!er o t"!es* As such5 h"2her th"s rat"o

etter 4"ll e s"tuat"on*

3.6.3.4 CURRENT ASSETS TURNOVER RATIO

It "s de"ned as

CA T/+'!)#+ < N#$ S,= C/++#'$ A,,#$,

3urrent asset "ncludes "n>entory5 sundry detors5 cash and ank alance and other 3A*


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A h"2h current assets turno>er rat"o "nd"cates the capa"l"ty o the or2an"@at"on to ach"e>e

!a"!u! sales 4"th the !"n"!u! "n>est!ent "n current assets* It "nd"cates that the current

assets are turned o>er "n the or! o sales !ore nu!er o t"!es* As such5 h"2her the

current asset turno>er rat"o etter 4"ll e the s"tuat"on*

3.6.3.5 CAPITAL TURNOVER RATIO

It "s de"ned as

C&%$& T/+'!)#+ R&$%! < N#$ S,= C&%$& E"!# C&%$& E"!# < S-&+#-!#+,? F/' L!'(0$#+" L%&%%$%#,

Th"s rat"o "nd"cates the e"c"ency o the or2an"@at"on 4"th 4h"ch the cap"tal e!ployed "s

e"n2 ut"l"@ed* A h"2h cap"tal turno>er rat"o "nd"cates the capa"l"ty o the or2an"@at"on to

ach"e>e !a"!u! sales 4"th !"n"!u! a!ount o cap"tal e!ployed* It "nd"cates that the

cap"tal e!ployed "s turned o>er "n the or! o sales !ore nu!er o t"!es* As such h"2her

the cap"tal turno>er rat"o etter 4"ll e the s"tuat"on*

3.6.4 PROFITABILITY RATIOAs the na!e su22ests5 the "ntent"on or calculat"n2 these rat"os "s to kno4 the pro"ta"l"ty

o the or2an"@at"on* Pro"ta"l"ty rat"os oer se>eral d"erent !easures o the success o

the "r! at 2enerat"n2 pro"ts*

0ollo4"n2 rat"o !ay e calculated under th"s 2roup*

3.6.4.1 NET PROFIT RATIO

It "s calculated as

N#$ P+!%$ R&$%! < N#$ +!%$= N#$ S, 1

The net pro"t rat"o "nd"cates that port"on o sales a>a"lale to the o4ners ater the

cons"derat"on o all types o epenses and costs. e"ther operat"n2 or non operat"n2 or

nor!al or anor!al* A h"2h net pro"t rat"o "nd"cates h"2her pro"ta"l"ty o the us"ness*

As such a h"2h net pro"t rat"o 4"ll e des"rale*


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6* R'S'AR3% ,'T%O=OLOY

6*: Type o Research

Type o research used or th"s project "s analyt"cal research*

6*8 =ata Sources

The "nor!at"on "s collected throu2h secondary sources dur"n2 the project* That

"nor!at"on 4as ut"l"@ed or calculat"n2 peror!ance e>aluat"on and ased on that5

"nterpretat"ons 4ere !ade.

6*H Secondary =ata

Secondary data "s data 4h"ch has een collected y "nd">"duals or a2enc"es or

purposes other than those o our part"cular research study* Secondary data !ay e

a>a"lale 4h"ch "s ent"rely appropr"ate and 4holly adeCuate to dra4 conclus"ons and

ans4er the Cuest"on or sol>e the prole!* So!et"!es pr"!ary data collect"on s"!ply "s

not necessaryThe secondarydata4h"ch 4as already prepared5 so these data 4as only

used to reach the a"!s and oject">es o th"s project*

4.3.1 T!!, !+ *!#*$%'( S#*!'&+ D&$&

A/%$ +#!+$,. The aud"torDs report "s a or!al op"n"on5 or d"scla"!er thereo5

"ssued y e"ther an "nternal aud"tor or an "ndependent eternal aud"tor as a result


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o an "nternal or eternal aud"t or e>aluat"on peror!ed on a le2al ent"ty or

sud">"s"on thereo (called an Qaud"teeQ)*

P/%,-# +#!+$,.An unsustant"ated state!ent5 account5 or report pul"shed as " "t 4ere

actual*

J!/+'&,. $us"ness d"ary "n 4h"ch all "nanc"al data (taken usually ro! a journal >oucher)

perta"n"n2 to the day to day us"ness transact"ons o a "r! "s recorded us"n2 doule.entry

ookkeep"n2 syste!*

B/,%'#,, "&(&%'#, ! !+(&'%&$%!'. ,a2a@"nes are pul"cat"ons5 usually per"od"cal

pul"cat"ons5 that are pr"nted or electron"cally pul"shed (the onl"ne >ers"ons are called

onl"ne !a2a@"nes*) They are 2enerally pul"shed on a re2ular schedule and conta"n a >ar"ety

o content* They are 2enerally "nanced y ad>ert"s"n25 y a purchase pr"ce5 y prepa"d

suscr"pt"on*

F%'&'*%& ,$&$#"#'$,. A "nanc"al state!ent (or "nanc"al report) "s a or!al record o the

"nanc"al act">"t"es and pos"t"on o a us"ness5 person5 or other ent"ty*

Rele>ant "nanc"al "nor!at"on "s presented "n a structured !anner and "n a or! easy to

understand* They typ"cally "nclude as"c "nanc"al state!ents5 acco!pan"ed y a

!ana2e!ent d"scuss"on and analys"s*


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5. DATA ANALYSIS AND INTERPRETATION

5.1 C/++#'$ R&$%!

I'$#++#$&$%!'As a rule5 the current rat"o 4"th 8+: (or) !ore "s cons"dered as sat"sactory pos"t"on o the

"r!*?hen co!pared 4"th a>era2e "*e*5 9*J6+:F

3urrent rat"o "n year 89:: "s h"2h "*e*5 :*8H+:* Ite!s o current assets "*e*5 "n>entor"es and

sundry detors are h"2h 4hereas pro>"s"ons5"te! o current l"a"l"t"es "s less*

3urrent rat"o "n year 89:H "s less "*e*5 9*78+:* 3urrent l"a"l"t"es are h"2h due to the non.

pay!ent o trade payales and cashEank alances e"n2 lo4 "n current assets*

5.2 L%;/% A,,#$,


29/40

I'$#++#$&$%!'?hen co!pared 4"th a>era2e l"Cu"d rat"o "*e*5 9*;8+:F

L"Cu"d rat"o "n year 89:; "s h"2h "*e*59*


30/40


31/40

5.5 C+#%$!+, T/+'!)#+ R&$%!

I'$#++#$&$%!'?hen co!pared 4"th a>era2e cred"tors turno>er rat"o "*e*5 H*6J T"!esF

3red"tors turno>er rat"o "n year 89:: "s h"2h "*e*5 H*er rat"o "n year 89:6 "s "s lo4 "*e*5 H*86 T"!es* A>era2e accounts payalesare lo4 "n th"s year 4h"ch leads to the lo4est cred"tor turno>er "n co!par"son to a>era2e

turno>er rat"o*

5.6 S$!* T/+'!)#+ R&$%!


32/40

I'$#++#$&$%!'

?hen co!pared to stock turno>er rat"o "*e*5 ;*78 T"!es*

Stock turno>er rat"o "n the year 89:; "s h"2h "*e*5 K*:8 T"!es*

Stock turno>er rat"o "n the year 89:H "s lo4 "*e*5 6*7: T"!es*

5.7 F%# A,,#$, T/+'!)#+ R&$%!

I'$#++#$&$%!'


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5.8 C&%$& T/+'!)#+ R&$%!

I'$#++#$&$%!'


34/40

;*J Propr"etary Rat"o

I'$#++#$&$%!'

5.1 G+!,, P+!%$ R&$%!


35/40

I'$#++#$&$%!'

5.11 N#$ P+!%$ R&$%!

I'$#++#$&$%!'


36/40

5.12 C/++#'$ A,,#$, T/+'!)#+ R&$%!

I'$#++#$&$%!'


37/40

Anneure

3o!parat">e $alance sheet o ; years


38/40

3o!parat">e State!ent o Pro"t And Loss Account


39/40

B%%!(+&-


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sohail finance project.docx

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