the mysore paper mills limited project draft final

1. INTRODUTION

PART A: THE PAPER INDUSRTY

HISTORY

Paper industry is of ancient origin the first paper was manufactured in china in 2nd

century BC.

The pulp papermaking process is ascribed to Cai Lun, a 2nd century AD Han court

eunuch.[1] With paper an effective substitute for silk in many applications, China

could export silk in greater quantity, contributing to a Golden Age.

Paper spread from China through the Middle East to medieval Europe in the 13th

century, where the first water-powered paper mills were built.[2] In the 19th century,

industrial manufacture greatly lowered its cost, enabling mass exchange of

information and contributing to significant cultural shifts. In 1844, Canadian

inventor Charles Fenerty and German F.G. Keller independently developed

processes for pulping wood fibers.

A Typical Modern Paper Manufacturing Plant

SSMRV DEGREE COLLEGE 1

http://en.wikipedia.org/wiki/Charles_Fenerty

http://en.wikipedia.org/wiki/Paper#cite_note-Burns_1996.2C_417f.-2

http://en.wikipedia.org/wiki/Paper_mill

http://en.wikipedia.org/wiki/Medieval_Europe

http://en.wikipedia.org/wiki/Middle_East

http://en.wikipedia.org/wiki/Golden_Age

http://en.wikipedia.org/wiki/Paper#cite_note-Tsien1985-1

http://en.wikipedia.org/wiki/Han_Dynasty

http://en.wikipedia.org/wiki/Cai_Lun

The word “paper” is derived from the “Papyrus” which means a substance

Composed of fibers interlaced into a compact web, which can then be macerated into

pulp, dried and pressed. Today, paper includes wide range of products with various

different applications in the fields of communication, cultural, education,

Artistic, hygiene, and sanitary it has other applications in storage and transportation

as well it almost to imagine life without paper in the 21st century.

Brief Introduction:

India is the fastest growing paper market in the world, growing at a CAGR

of 6.7% over FY06-11. Indian paper industry demand is closely linked to economic

activity as demand has grown at an average 0.9x multiple of GDP in the past 5 years.

Indian Paper industry demand recovered strongly in FY11 compared to weak

previous corresponding period (impacted by financial crisis) mainly due to

government favourable excise policy, increased government spending on education

and improved activity from service, print media, FMCG, consumer durables and

pharmaceutical sector.

India paper industry is broadly classified into three segments – namely Printing &

Writing (P&W), Newsprint and Paperboard & Industrial Packaging (Paperboard).

Paperboard is the largest segment, accounting for 45% of total domestic paper

demand, followed by P&W (35%) and Newsprint (20%). The industry is further

categorized on the basis of raw-material used for manufacturing paper into forest

based (with a share of 21%), agro-based (23%) and recycled fibre-based paper

(56%).

While the industry demand outlook looks positive in the near-term, margin is

expected to remain under pressure due to a) surge in raw-material costs and


b) significant capacity additions in the recent past will limit domestic

producers’ ability to pass on the full rise in raw-material cost to end

consumers. However, slowdown in future capacity additions and positive

demand outlook will improve the industry demand supply equilibrium and

increase the bargaining power of producers over the medium term. CARE

Research study indicates that many paper companies have

abandoned/temporarily deferred their paper capacity expansion plan on

account of funding issues, significant increase in domestic supply due to

recent capacity additions, delay in procuring environmental clearances, etc.

Size of the industry:

Indian Paper Industry accounts for about 1.6% of the world's production of

paper and paperboard. The estimated turnover of the industry is Rs 25,000 crore

(USD 5.95 billion) and its contribution to the exchequer is around Rs. 2918

crore. The industry was delicensed effective from July 1997 by the Government

of India & foreign participation is permissible. Most of the paper mills are in

existence for a long time and hence present technologies fall in a wide spectrum

ranging from oldest to the most modern. Paper in India is made from 40% of

hardwood and bamboo fibre, 30 % from agro waste and 30 % from recycled

fibre. Newsprint and publication paper consumption account for 2 million

tonnes, of which 1.2 million tonnes of newsprint paper is manufactured in India

and the remaining 0.8 million tonnes is imported.

As per industry estimates, paper production are likely to grow at a CAGR of

8.4% while paper consumption will grow at a CAGR of 9% till 2012-13. The

import of pulp & paper products is likely to show a growing trend. During last

few years, the Indian paper market witnessed a five-fold jump in the import of


coated paper. The total import of this paper rose to 10,000 tons in 2008 from

2,000 tones.

Total contribution of paper industry to the Indian economy :

Demand of Paper has been around 8% and during the years 2007-2012

while newsprint registered a growth of 13% and Writing & Printing,

Containerboard, Cartonboard and others registered growth of 5%, 11%, 9% and

1% respectively. So far, the growth in paper industry has mirrored the growth in

GDP and has grown on an average 6-7 % over the last few years. India is the

fastest growing market for paper globally and it presents an exciting scenario and

paper consumption is poised for a big leap forward in sync with the economic


Size of the Industry

Indian Paper Industry accounts for about 1.6% of the world's production of paper and paperboard. The estimated turnover of the industry is Rs 25,000 crore (USD 5.95 billion) and its contribution to the exchequer is around Rs. 2918 crore.

Output per annum

Demand of paper has been around 8% and during the years 2007-12 newsprint registered a growth of 13%

Percentage in world market

Newsprint and publication paper consumption account for 2 million tonnes, of which 1.2 million tonnes of newsprint paper is manufactured in India and the remaining 0.8 million tonnes is imported.

growth and is estimated to touch 13.95 million tons by 2015-16. The futuristic

view is that growth in paper consumption would be in multiples of GDP and hence

an increase in consumption by one kg per capita would lead to an increase in

demand of 1 million tons.

The new millennium is going to be the millennium of the knowledge. So demand

for paper would go on increasing in times to come. In view of paper industry's

strategic role for the society and also for the overall industrial growth it is

necessary that the paper industry performs well.

Government has completely delicensed the paper industry with effect from17th

July, 1997. The entrepreneurs are now required to file an Industrial Entrepreneur

Memorandum with the Secretariat for Industrial Assistance for setting up a new

paper mill or substantial expansion of the existing mill in permissible locations.

The Paper industry is a priority sector for foreign collaboration and foreign equity

participation upto 100% receives automatic approval by Reserve Bank of India.

Several fiscal incentives have also been provided to the paper industry,

particularly to those mills which are based on non-conventional raw material.

Employment opportunities in India:


The industry provides employment to more than 0.12 million people directly and

0.34 million people indirectly. Some of the paper products are sheet paper, paper

boxes, tissues, paper bags, stationery, envelopes, and printed-paper products such

as books, periodicals, and newspapers. Specialty papers like sandpaper, blueprint

paper, carbon paper are not a part of paper products industry. Stationery includes

greeting cards, printing and writing papers, school and office papers, etc. The

toiletry products include paper towels, tissue paper, and bath tissue.

Latest developments:

The US government's recent move to clamp anti-dumping duty

against the paper imports from China and Indonesia has affected the Indian paper

manufacturers.The Indian Paper Manufacturers Association (IPMA) has urged the

Centre to raise tariff walls or at least retain the 10% current level of import duties.

Indian paper and newsprint industry has a huge potentials and

prospects in coming future. In our, country, demand for paper and newspaper is

rapidly increasing. There are vast demands in the area of tea bags, filer paper,

tissue paper, medical-grade coated paper etc.

Indian paper industry is one of the underestimated industries for quite

some time because India's per capita consumption of paper is just about 5 kg.

Whereas it is 337 kg in North America, 110 kg in Europe and 30 kg in China. The

Rs. 22000-crore paper industry in India, rated 15th largest in world engages about

1.5 million people with the help of Rs. 2500 crore Government subsidy.


Top paper manufacturing industries in India:

1. ITC PSPD.

2. Ballarpur Industries Limited.

3. JK Paper Limited.

4. Tamil Nadu Newsprint & Papers Limited.

5. Century Pulp & Paper.

6. The Andhra Pradesh Paper Mills Limited.

7. West Coast Paper Mills Limited.

8. The Mysore paper mills limited.

9. Star paper mills limited.

10. Yash paper mills limited


PART B: ABOUT THE SUBJECT:

INTRODUCTION :

Finance is the life blood of business. It is rightly termed as the science of

money. Finance is very essential for the smooth running of the business.

DEFINITION OF FINANCE:

The term finance comes from the Latin "finis" which means end or finish It is a

term whose implications affect both individuals and businesses, organizations

and states it has to do with obtaining and using or money management.

Ivan Thompson

According to Wheeler, Finance is that business activity which is concerned

with the organization and conservation of capital funds in meeting financial

needs and overall objectives of a business enterprise.

According to Bodie and Merton, finance "study how scarce resources are

allocated over time”.


For O. Ferrel C. and Geoffrey Hirt, the term finance refers to "all activities

related to obtaining money and effective use”.

Financial management is that managerial activity which is concerned with the

planning and controlling of a firm financial reserve. Financial management as an

academic discipline has undergone fundamental changes as regards its scope and

coverage. In the early years of its evolution it was treated synonymously with the

raising of funds. In the current literature pertaining to this growing academic

discipline, a broader scope so as to include in addition to procurement of funds,

efficient use of resources is universally recognized.

Financial analysis can be defined as a study of relationship between many

factors as disclosed by the statement and study of the trend of these factors.

The basis for financial planning, analysis and decision-making is the financial

information. Financial information is needed to predict, compare and evaluate

the firm’s earning ability. It is also required to aid in economic decision making

investment and financing decision making. The financing information of an

enterprise is contained in the financial statements or accounting reports.

The financial analysis process is identifying the financial strengths and

weakness of the firm by properly establishing relationships between the items of

the balance sheet and profit and loss account. It is the study of the performance

of the unit and therefore is aimed at the financial performance in an individual

unit.

This is therefore aimed at analyzing the performance and trend and the areas of

strengths and weakness and the financial strength of the firm in its environment.


The objective of financial analysis is the analyzing of strength and

weakness of a business undertaking by regrouping and analysis of figures

obtained from a financial statement and balance sheet by the tools and

techniques of management accounting. Financial analysis is regarded as

the final step of accounting that results in the presentation of final and the

exact data that helps the business managers, creditors and investors.

FINANCIAL STATEMENTS:

Financial statements contain summaries, information of the firm’s financial

affairs, organized systematically. They are the means to present the firm’s

financial situation to the users. Preparation of the financial statements is the

responsibility of top management. As these statements are used by investors,

and financial analysts have to examine the firm’s performance in order to make

investment decisions, they should be well prepared and should have

sufficient information.

The basic financial statements prepared for the purpose of external

reporting to owners, investors and creditors are

1. Balance sheet or statement of financial position, and

2. Profit and loss account or income statement.

TECHNIQUES AND TOOLS OF FINANCIAL ANALYSIS:

There are various techniques involved in analyzing financial performance

of an organization.

The various tools of financial analysis are stated below:-

1. Ratio Analysis.


2. Comparative Financial Statement.

3. Common Size Financial Statement.

4. Trend Analysis.

5. Fund Flow Analysis.

6. Cash Flow Analysis.

7. Cost Volume – Profit Analysis.

8. Schedule of changes in working capital.

The main concern of this project study is on Ratio Analysis, which is the most

widely used technique of financial statement analysis. Ratio analysis is also one

of the powerful tools which help in measuring the company's performance in the

future and it has also gained huge importance in today's corporate world without

which the business operations cannot operate effectively and efficiently.

Other tools of financial analysis will also gives the results in its own way and its

own procedure which generally is very complicated when compared to ratio

analysis

RATIO ANALYSIS:


Financial ratio analysis is a useful technique to measure, compare, and evaluate

the financial condition and performance of a customer. Ratio analysis enables a

credit manager to spot trends in a customer's financial performance, and to

compare its performance and financial condition with the average performance of

similar businesses in the same industry. Balance sheet ratios measure liquidity and

solvency (a business's ability to pay its bills as they come due) and leverage (the

extent to which the business is dependent on creditors).

Financial ratio analysis is used by credit professionals to answer these

questions about customers:

Is the business profitable?

Can the business pay its bills on time?

How is the business financed?

How does the company financial performance this year compare to last

year?

How does the customer's performance compare with its competitors?

How does the customer's performance compare to the industry norms?

Financial ratio analysis is a useful tool for determining a customer's overall

financial condition. Industry-wide financial ratios are published by a variety of

sources, including Dun & Bradstreet. Financial ratios are useful for making quick

comparisons. Banks and trade creditors use financial ratio analysis to help them

decide whether a business is a good credit risk or not.

Ratio analysis is a tool to help evaluate the overall financial condition of a

customer's business. Ratios are useful for making comparisons between a

customer and other businesses in an industry. A financial ratio is a simple

mathematical comparison of two or more entries from a company's financial


statements. Creditors use ratios to chart a company's progress, uncover trends and

point to potential problem areas.

CLASSIFICATION OF RATIOS :

This is the most widely accepted classification of accounting ratios. Under this classification, accounting ratios are classified on the basis of their nature or functions and in view of the financial management or according to the tests satisfied, various ratios have been classified as follows


Liquidity Ratios

Current Ratio.

Liquidity Ratio or Quick Ratio.

Absolute Liquid or Cash Ratio.

Activity Ratios

Inventory turnover ratio.

Debtors turnover ratio.

Payables Turnover Ratio.

Fixed Assets Turnover Ratio.

Total Asset Turnover Ratio.

Working Capital Turnover Ratio.

Capital Employed Turnover.

Leverage/Solvency Ratio

Debt-Equity Ratio.

Funded-Debt to Total Capitalisation Ratio.

Proprietry Ratio or Equity Ratio.

Solvency Ratio or Ratio of Total Liabilties to Total Assets.

Debt-Service Ratio or Interest Coverage Ratio.

Profitability Ratios

A) In relation to SalesGross Profit RatioOperating RatioOperating Profit RatioNet Profit Ratio

B) In relation to expensesCost Of Goods Sold.

Selling and distribution ratio.

Return on equity captial.

Ratios may be expressed in 3 forms:

a) As a quotient 1:1 or 2:1 etc.

b) As a rate i.e. inventory turnover as number of times in a year.

c) As a percentage.

With the help of ratio analysis, conclusions can be drawn regarding the liquidity

position of a firm. The liquidity position of a firm will be satisfactory if it is able

to meet its current obligations when they become due. A firm can be said to have

the ability to meet the short term liabilities if it has sufficient liquid funds to pay

the interest on its short term liabilities if it has sufficient liquid funds to pay the

interest on its short-term debt usually within a year as well the principal.

OBJECTIVES OF RATIO ANALYSIS:

Financial ratios are true test of the profitability, efficiency and financial soundness

of the firm. These ratios have following objectives:

1. Measuring the profitability: Profitability is the profit earning capacity of the

business. This can be measured by Gross Profit, Net Profit, Expenses and Other

Ratios. If these ratios fall we can take corrective measures.

2. Determining operational efficiency: Operational efficiency of the business can

be determined by calculating operating / activity ratios.


3. Measuring financial position: Short-term and long-term financial position of

the business can be measured by calculating liquidity and solvency ratios. In case of

unhealthy short or long-term position, corrective measures can be taken.

4 Facilitating comparative analysis: Present performance can be compared with

past performance to discover the plus and minus points. Comparison with the

performance of other competitive firms can also be made.

5 .Indicating overall efficiency: Profit and Loss Account shows the amount of net

profit and Balance Sheet shows the amount of various assets, liabilities and capital.

But the profitability can be known by calculating the financial ratios.

6. Budgeting and forecasting: Ratio analysis is of much help in financial

forecasting and planning. Ratios calculated for a number of years work as a guide

for the future. Meaningful conclusions can be drawn for future from these ratios.

NATURE OF RATIO ANALYSIS:

Ratio analysis is a technique of analysis and interpreting of financial statements.

It is the process of establishing and interpreting various ratios for helping in

making certain decisions. However, ratio analysis is not an end in itself. It is

only a means of better understanding of financial strengths and weakness of any

institution. The following are the steps involved in ratio analysis.

1. Selection of relevant data from the statements depending upon the objective

of the analysis.

2. Calculation of appropriate ratios from the above data.


3. Comparison of the calculated ratios with the past ratios of the same firm, or

with the ratios developed from projected financial statements, or the ratios of

some other firm.

4. Interpretation of ratios.

ADVANTAGES OF RATIO ANALYSIS:

There are several advantages of ratio analysis. Some of them are:

1. Helpful in Decision Making

All our financial statements are made for providing information. But this

information is not helpful for decision making because financial statements

provide only raw information.

2. Helpful in Financial Forecasting and Planning:

Every year we calculate lots of accounting ratios. When we make trend of all

these ratios, we can get useful information for our future forecasting and

planning.

3. Helpful in Communication:

Ratio analysis is more important from communication point of view. Suppose,

we have to appoint new sales agents for our company. At that time, we can

communicate them by using our company's sales and profit related ratios.

4. Helpful in Co-ordination :

No company has all the strength points. Company's financial results shows some

strength points and some weak points. Ratio analysis can create co-ordination

between strength points and weak points.


5. Helps in Control:

Ratio analysis can also use for controlling our business. We can easily create the

standard of each financial item of our balance sheet and profit and loss

6. Helpful for Shareholder’s decisions:

Helps in knowing the EPS and ROI and NPV values of a company.

LIMITATIONS OF RATIO ANALYSIS:

Though ratio analysis is a widely used technique to evaluate the financial

position of business, there are some certain problems in using ratios

1. Inherent Limitation of Financial Accounting :

Ratio analysis is just like simplification of financial accounting data.

2. Changes of Accounting Procedures :

If accounting procedures will change, our accounting ratio will be changed. At that

time, we cannot compare our current year ratios with our past year ratios.

3. Window Dressing:

because we have shown our financial data through window dressing. Our ratios will

also be affected from it.

4. Personal Bias:

This is reality, I saw many CAs who waste their time to optimize different ratios by

changing the project financial statements figures for making attractive projects. All

these activities are done for getting loan. So, this will make the drawback of ratio

analysis.

5. Matchless:


http://www.svtuition.org/2011/10/window-dressing-accounting.html

Different companies uses different accounting policies, so, we can not compare

their ratios.

6. Price Level Changes :

Inflation effect is ignored in calculation of ratios. So, ratio will not give perfect

answer in changing of price level.

LIQUIDITY RATIOS :

These are the ratios which measure the short-term solvency or financial position of

a firm. These ratios are calculated to comment upon the short-term paying capacity

of a concern or the firm’s ability to meets current obligations. The various liquidity

ratios are: current ratio, liquid ratio and absolute liquid ratio. Further to see

efficiency with which liquid resources have been employed by a firm, debtor’s

turnover and creditor’s turnover ratios are calculated.

The principal liquidity ratios are:

Current ratio or working capital ratio

liquid, Quick ratio, or acid test ratio

Absolute liquid ratio, cash ratio, or super quick ratio.

ACTIVITY RATIOS :

Activity ratios are calculated to measure the efficiency with which the resources of

a firm have been employed. These ratios are also called turnover ratios because

they indicate the speed with which assets are being turned over into sales e.g.

creditors turnover ratio.

PROFITABILITY RATIOS:


A class of financial metrics that are used to assess a business's ability to generate

earnings as compared to its expenses and other relevant costs incurred during a

specific period of time. For most of these ratios, having a higher value relative to a

competitor's ratio or the same ratio from a previous period is indicative that the

company is doing well.

2. RESEARCH DESIGN:

TITLE OF THE STUDY:

“A study on financial statements using ratio analysis at Mysore Paper Mills

LTD”

STATEMENT OF PROBLEM:

The analysis of income statements or financial statements of a firm no doubt will

give us an idea about the firms cash flows, liquidity position, credit worthiness and

many other factors but after a certain level these observations not enough to fulfill

the organizational basic goal which is profit maximization ,therefore by the use of

modern tools and techniques

We can see the exact financial position of the firm and make necessary

arrangements to make the firm to achieve maximum profits.

There are many ratios that can be calculated from the financial statements

pertaining to a company's performance, activity, financing and liquidity. Some

common ratios include the price-earnings ratio, debt-equity ratio, earnings per share,

asset turnover and working capital.

Therefore the various ratios are analyzed of The Mysore Paper Mills LTD by

using the balance sheets of the company.


Objectives of the study:

1. To show the strengths, weakness and areas where there can be a positive

improvement.

2. To understand the trends of profits over the last five years at Mysore Paper Mills

LTD.

3. To ascertain the immediate need towards the particular field of requirement, because

of which profits are being affected.

4. To get the accurate picture of the utilization of the firm's available capital for the

required criteria.

5. by doing ratio analysis we can observe the operational efficiency of the firm.

SCOPE OF THE STUDY:

Alexander wall is considered to be the pioneer of ratio analysis. He presented after a

very serious thinking a detailed system of ratio analysis in 1909. He explained the

work of interpretation could be made easier by establishing relationship between the

facts in the financial statements.

The ratio analysis is one of the most powerful tools of financial analysis. It is used as

a device to analyze and interpret the financial health of the enterprise. The use of ratios

is not confined to financial managers only. There are different parties interested on the

ratio analysis foe knowing the position of a firm for different purpose. They are

primarily prepared for decision making, financial, forecasting and planning. It is an

essential tool of budgetary control. The present potential investors can be found out.


It helps the company to find out its current position and its financial position over

period of time.

LIMTATIONS OF THE STUDY:

Ratio analysis is no doubt a useful and important method in a firms financial

structure but at the same time it has its own draw backs

Here are some

1. Ratios deal mainly in numbers – they don’t address issues like product quality,

customer service, employee morale and so on (though those factors play an

important role in financial performance).

2. Ratios largely look at the past, not the future. However, investment analysts will

make assumptions about future performance using ratios.

3. Ratios are most useful when they are used to compare performance over a long

period of time or against comparable businesses and an industry – this information

is not always available.

4. Financial information can be “massaged” in several ways to make the figures

used for ratios more attractive.

5. Financial accounting information is affected by estimates and assumptions.

Accounting standards allow different accounting policies, which impairs

comparability and hence ratio analysis is less useful in such situations.


DATA COLLECTION:

Primary data:

1. Balance sheet and profit and loss account of the company.

2. Information and clarifications given by the company’s finance department.

Secondary data:

Annual Reports of the Organization and company profile of the organization was

collected from the finance department of the company and its website.


3. COMPANY PROFILE:

ORIGIN OF MYSORE PAPER MILLS LTD BHADRAVATHI

The Mysore Paper Mills Limited, (MPM) founded by Sri.Krishnaraja

Wodeyar Bahadur in 1937 the Maharaja of erstwhile Mysore State was

incorporated on 20th May 1936 under the then Mysore Companies Regulation,

VIII of 1917. Later it became a Government Company in 1977 under Section

617 of the Companies Act, 1956. The Company has its Registered Office at

Bangalore and its plant located at Bhadravati, Shimoga District, and Karnataka

State.

The Company has an Authorized Capital of 150 Crs. and paid up capital of about

120 Crs. The shares of the company are listed in the Bombay Stock Exchange

and there are about 17,000 shareholders.

While Government of Karnataka holds 65% of the shareholding of the Company,

IDBI and other Financial Institutions hold 18% of the shares and shareholding by

the General Public is 17%.

The company is managed by eminent Board of Directors consisting of IAS, IFS

and other professionals.

The Chairman & Managing Director of the Company is assisted by a team of


professionals in various fields who have expertise in production, finance,

marketing etc., with a dedicated team force.

ISO CERTIFICATION:

The Environmental Management System of the Company has been certified to

conform to the coveted ISO 14001 standard since August 2004. The Scope of

certification covers manufacture of Newsprint, Writing, Printing & Packaging Paper

and Manufacture of Plantation White Sugar.

VISION:

Mysore papers mill committed to deliver products and service to satisfy the needs of customer.

To make continuous effort to improve quality by continuous training.

To actively involve people to contribute toward high productivity through Teamwork and innovation.

To consciously work toward conversion of resources and minimization of wastesof all forms.


MISSION:

“We aim to provide the best packaging solutions with customer satisfaction,

quality assurance and a congenial working environment. We strive to offer the

finest quality services, timely delivery and competitive prices to all our global

clients. We assure our clients the best products within a stipulated time frame.

Our goal is to provide our customers with complete packaging solutions, which

can help them enhance their business opportunities.

Board of Directors:

1. Government Directors:

Sri. Araga Jnanendra, Ex-MLA.

Chairman.

Sri. Padam Kumar Garg, IPS.

Managing Director.

Shri Vidyashankar, IAS.

Sri. Ajay Seth ,IAS.

2. Elected Directors:


Sri. Kaushik Mukherjee, IAS, (Principal Secretary to Forest & Ecology .Dept.)

Sri . M. Lakshminarayana, IAS.

Sri . S. Parameshwarappa, IFS (Retd).

Sri . C. Shivashankar.

Sri . C. B. Patil Okaly.

3.Nominee Directors :

Sri. P.V. Srinivas (Nominee of IFCI).

4.Company Secretary

Sri. Mohan D Kulkarni .

5. Auditors :

M/s. MNS & CO.

6.Legal Advisors:

Sri . M R C Ravi.

M/S (ILPM Consultants).


Organizational Chart Of Mysore Paper Mills LTD:


Share holders

Director Finance

Board of Directors

Chairman

Director Forest

GM (Marketing) GM (Production) GM(HRD) Company Secretary

AGM (Finance)

Senior Manager

AGM (Maintenance)

AGM (Projects) AGM (In Charge) AGM (Hard &P)

Senior MGR

(Material)

Senior MGR

(CP)

Senior MGR

(NP)

Manager

PRODUCTS:

The Product Mix consists of Writing Printing and Packing Paper(WPP),Newsprint and Sugar.

The By-Products are: Molasses and Bagasse

1. Writing & Printing Paper :

The Major Varieties manufactured include Cream wove, Mapleton, Azure laid, Duplicating

and Kraft Paper.

New Product Development - Test marketing of SS Mapleton is in progress. Also we

plan to introduce Copier grade in the market shortly.

Machine Deckle

Machine I

Make VOITH (Germany) Deckle 240 cm's Type – MG Mono-Glaze.

Machine II

Make VOITH (Germany) Deckle 240 cm's Type – MF Machine Finish

Machine III

Make ESCHERWYSS (Germany) Deckle 320 cm's Type – MF – Machine Finish

Machine III

Equipped with modern Quality Control Systems to monitor Grammage, Moisture, Caliper etc.


Deputy Managers

ASST Managers

PACKAGING:

Paper is supplied in Reels and Sheets.

Sturdy packaging with Kraft Paper, Hessian and HDPE.

Major Market

Southern India with major market located in Karnataka.

Export MPM is venturing into export market and currently exporting to Sri Lanka

Unique Product features

MPM Cream wove is known for its quality, excellent reeling of Paper and bulkness of Paper. MPM is a market leader in Kraft Paper which is a most sought after product by market.

Usage of MPM Paper

Packaging industry

Envelope making

Explosive industry

Book wrapping

Saree packing

Printing


Wedding Cards

Writing / Printing

Duplicating

Ledger manufacture

Text Books & Note Books

Calender printing Bus Ticket printing with security water mark.

The dealership network has spread widely in the country.


North Delhi, Bhopal

East Kolkata.

South South Ananthpur, Allepey,

Bangalore

Chennai, Calicut

Hyderabad, Hubli,

Kunnamkulam, Kochi,

Madurai

Salem, Sivakasi

Vellore, Vijaywada

West Ahmedabad, Mumbai, Nagpur, Surat

Production Capacity Of MYSORE PAPER MILLS

Unique Product Characteristics :

Excellent quality and can be used as import substitute.

Excellent services with customer satisfaction as our main objective.

Lead time between placement of order and despatches is kept to the absolute

minimum.

Major Customers :

The Times of India.

The Hindu.

Vijaya Karnataka.

Deccan Herald.

Samyukta Karnataka.

Eenadu.


Production

Capacity

80,000 MTs per

annum.

Production per day

Make

250 to 270 MTs

Belloit Wamsley

Variety White and Pink

Newsprint

Deckle width of

Newsprint Machine.

660 to 665 cms

Vaartha.

Deccan Chronicle.

Andhra Jyothi.

Malayalam Manorama.

Mathrubhumi.

Daily Thanthi.

Lok mat.

Indian Express (Mumbai).

Dinakaran.

Business Standard.

Employment News.

2. Sugar:

The firm’s primary product is sugar they produce good quality S-30 and S-40 white

crystal sugar .

MPM established its Sugar Mill of 2500 TCD in 1984. Government has allotted 155 villages

with 82,041 acres of irrigable land in Shimoga and Chikkamagalur Districts. The land suitable

for Sugarcane cultivation is 36,000 acres. Due to higher remunerative price for jaggery &

paddy during previous seasons and also farmers are changing the crop system from sugarcane

to Arecanut plantation and labour availability for Sugar cane cultivation is reducing every

year , Sugarcane growing area has reduced to about 8000 acres. Bagasse, the by-product of

sugar mill is used partly for manufacture as fuel in the boilers for captive generation of power.


During 2011-12, the following machineries / equipments have been added.

1. The old Rain and shower type MS condensers were replaced with new single entry multi

jet SS condensers at a cost of Rs.50 lakhs .This has resulted in power savings to the tune of

180 Kwh & improved pan boiling.

2. The old 10 no.s of steep cone type centrifugal machines for curing 'A' massecuite have

been replaced with 2 no.s of 1250Kg/ charge capacity Flat Bottom Centrifugal Machines at a

cost of Rs.1.00 Crore. We could achieve reduction in both & steam consumption and better

quality of sugar.

During 2013-14, it is proposed to install one Vapour Line Heater to the exiting juice heating

system for steam economy

The Future Outlook, Prospects And Competitors:

The per capita consumption of paper in our country has grown marginally to 7 Kgs.

against an Asian average consumption of 28 Kgs. and World average of 58 Kgs. The

growth in paper consumption is directly related to GDP growth in the country. With

expected growth of GDP of 8 to 9%, the demand for Newsprint is expected to grow at

about 8% and Writing & Printing Paper by 6%.

At present, there are about 525 Paper Mills in the country with an installed capacity of

78 lakh MT. During FY 2006-07, the production of paper was about 61.50 lakh MT.

compared to 58.90 lakh MT in 2005-06, i.e., up by 4.41%. The demand for paper in the

country increased from 61.54 lakh MT in 2005-06 to 65.00 lakh MT in 2006-07, i.e., up

by 5.69%. The overall import of paper was about 12.43 lakh MT, of which, the import

of Newsprint was 7.90 lakh MT. The export of paper from the country (mainly Writing

& Printing Paper and high value paper) was about 2.41 lakh MT.


Considering the present level of per capita consumption of paper of 6 Kgs. and the

anticipated growth in the population, the literacy level, living standards and growth in

the printing, packaging and publishing industries and the environmental restrictions on

the use of plastic vis-à-vis paper, there is substantial scope for increase in per capita

consumption of paper in future.

Some prominent competitors the company has to focus upon are

ITC PSPD.

Ballarpur Industries Limited.

Tamil Nadu Newsprint & Papers Limited.

Star paper mills limited.

The Andhra Pradesh Paper Mills Limited.


3. ANALYSIS AND INTERPRETATION

LIQUIDITY RATIOS :

1. CURRENT RATIO:

Current ratio may be defined as the relationship between current assets and current

liabilities. This ratio, also known as working capital ratio, is a measure of general

liquidity and is most widely used to make the analysis of a short-term financial

position or liquidity of a firm. It is calculated by dividing the total of current assets

by total of current liabilities. The standard norm is 2:1.

Current assets refer to all those assets which change their form and Substance, and

which are converted into cash during the normal operating Cycle of business, i.e.,

the normal course of business.

Current liabilities refer to all short-term obligations or liabilities which are required

to be paid within period of one year out of short-term or current assets.

EXPRESSION OF CURRENT RATIO

Current Ratio=Current Assets/Current Liabilities


TABLE -1 CURRENT RATIO:

year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Current

assets

22768.08 23815.80 23980.50

Current

liabilities

12942 19442 34596.34

Ratio 2.52:1 1.22:1 0.69:1

ANALYSIS:

The above table shows the details of current ratio for the past 3 years. It gives a

relation between the current assets and liabilities of the firm. We can analyze

through this that the ratio is gradually decreasing from the year 2009-10 to 2010-11

and again decreased in 2011-12.The highest ratio is in the year 2009-10 i.e. 2.52

and the lowest in 2011-12i.e. 0.69 through this we can get a clear conclusion that

the company’s current ratio is in a decline stage.

INFERENCE:


The current ratio is fluctuating in all the 3 years compared to the idle ratio of 2:1

which tells us that the liability of the company is increasing faster than the current

asset. This means that the division is having serious cash crunch.

GRAPH 1- CURRENT RATIO:

2. QUICK OR ACID TEST OR LIQUID RATIO:

3.

Quick ratio is that ratio which expresses the relationship between quick or liquid

assets and current liabilities. Quick/liquid ratio may be defined as the

relationship between quick/liquid assets and current or liquid liabilities which is

usually 1:1. An asset is said to be liquid if it can be converted into cash within a

short period of time. Current assets include inventories and prepaid expenses


which are not easily convertible into cash, thus are excluded in liquid/quick/acid

test ratio which is more rigorous test of liquidity.

Expression of quick ratio:

Quick or Acid Test or Liquid Ratio= Quick Assets/Current Liabilities

QUICK ASSETS : refer to all those current assets, which can be converted into

cash quickly, i.e., immediately or at a short notice without much loss. They

include all current assets except inventories or stocks and prepaid expenses.

CURRENT LIABILITIES : refer to all short –term obligations, which are to be

paid within a period of one year. However , when it is considered desirable to

use quick liabilities instead of current liabilities for the calculation of quick

ratio , then , quick liabilities refer to all those liabilities , which should

necessarily be paid within a short period of one year. They include all current

liabilities expect bank overdraft and cash credit.

TABLE-2 QUICK RATIO:

year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Quick

assets

4485.48 7361.22 6310.46

Current 12942 19442 34596.34


liabilities

Ratio 0.34:1 0.37:1 1.82:1

ANALYSIS:

The above table shows the quick ratio of the company of the past 3 years. Here the

ratio is fluctuating from one year to another it is varying from 0.34to 1.82 it can be

noted it is highest in the previous year and lowest in 2010-11.this ratio gives a

relation between the quick assets or liquid assets and the current liabilities

INFERENCE:

We can observe that the firm’s quick ratio is in a good state in 2011-12,however in

the other two years the ratio is not satisfactory between 2009-10 and 2010-11 there is

decline and signs of recovery can be seen in the previous year. The ratio is decreasing

because of the increase in current liabilities .The quick ratio of the company is less

than the standard quick ratio which is 1:1 the quick assets are more than the current

liabilities which is unsatisfactory.

GRAPH-2 QUICK RATIO:


2009-10 2010-11 2011-12

QUICK RATIO 0.34 0.37 1.82

0.1

0.3

0.5

0.7

0.9

1.1

1.3

1.5

1.7

1.9

QUICK RATIOR

AT

IO

4. ABSOLUTE LIQUID RATIO OR CASH RATIO:


Although receivables, debtors and bills receivable are generally more liquid than

inventories, yet there may be doubts regarding their realization into cash

immediately or in time. Hence, some authorities are of the opinion that the absolute

liquid ratio should also be calculated together with current ratio and acid test ratio

so as exclude even receivables from the current assets and find out the absolute

liquid assets. Absolute liquid assets include cash in hand and at bank and

marketable securities or temporary investments. The standard norm for his ratio

is 1:2.

Expression for Absolute liquid ratio

Absolute Liquid Ratio= Absolute Liquid Assets / Current Liabilities

ABSOLUTE LIQUID ASSETS

Cash in hand

Cash at bank

Marketable securities (short term)

Short term investments

TABLE-3 ABSOLUTE LIQUID RATIO:


year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Absolute -

liquid asset

1090.28 4075 3418

Current

Liabilities

12942 19442 34596.34

Ratio 0.08:1 0.20:1 0.09:1

ANALYSIS:

The above table shows the absolute liquid ratio of the company of the past 3 years.

This ratio gives a relation between absolute liquid asset such as cash balance ad the

current liabilities In this table we can see that the absolute liquid ratio has increased

from 0.08 to 0.20in the year 2010-11 but has decreased in the year 2011-12 to 0.09.

INFERENCE:

The above table indicates that absolute liquid ratio during 2009-10 is 0.08 which

means that the organization has a worth of absolute liquid asset of 0.08 paisa to pay

a rupee worth. Current liabilities as well as creditors are not expected to demand

cash and at the same time the ratio is just 0.09 in 2011-12, which is not satisfactory

as the accepted norms is 1:2.

GRAPH-3 ABSOLUTE LIQUID RATIO:


2009-10 2010-11 2011-12

ABSOLUTE LIQUID RATIO 0.08 0.2 0.09

0.025

0.075

0.125

0.175

0.225

ABSOLUTE LIQUID RATIOR

AT

IO

ACTIVITY RATIOS :


1. INVENTORY TURNOVER RATIO:

Inventory Turnover Ratio (I.T.R) indicates the number of times the stock has been turned

over during the period and evaluates the efficiency with which a firm is able to manage its

inventory. Usually a ratio of 8:1 is considered healthy.

Expression of I.T.R

Inventory Turnover Ratio = Cost of Goods Sold/Average Inventory at Cost

TABLE-4 INVENTORY TURNOVER RATIO:

year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Cost of

goods sold

14249.46 9979.69 10482.59

Average

inventory at

cost

4979.27 4389.69 5981.85

Ratio 2.86:1 2.27:1 1.75:1

ANALYSIS:


From the above table we can see the inventory turnover ratios of the past 3 years. It

gives the relation between costs of goods sold and average inventories at cost. We

can observe that there is increase and decrease in the ratio the highest ratio

increased is in the year 2009-10 i.e. 2.86 and the lowest in 2011-12 i.e. 1.75.

INFERENCE:

The standard norm for inventory turnover ratio of 8:1 is considered as ideal. The

company’s ratio is less than the standard the reason for low values in and -12 is due

to over investment in inventories, dull business, accumulation of slow moving

goods and low profits.

GRAPH-4 INVENTORY TURNOVER RATIO:


2009-10 2010-11 2011-12

INVENTORY TURNOVER RATIO 2.86 2.27 1.75

0.25

0.75

1.25

1.75

2.25

2.75

3.25

INVENTORY TURNOVER RATIO

RA

TIO

2. INVENTORY CONVERSION PERIOD


Inventory conversion period reports us about the average time to convert our total

inventory into sales. It is relationship between total days in year and inventory turnover

ratio. In other words, it measures the length of time on average between the

acquisition and sale of merchandise. Lesser is this period the better it is for the firm

we can calculate it with following formula.

TABLE-5 INVENTORY CONVERSION PERIOD:

year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Number of

days in a year

365 365 365

Inventory

turnover ratio

2.86 2.27 1.75

days 128 161 208

ANALYSIS:


http://www.svtuition.org/2011/10/inventory-turnover-ratio.html

http://www.svtuition.org/2011/10/inventory-turnover-ratio.html

The above table shows the inventory conversion period of the company of the past

3 years, this ratio tells us the time required to convert the inventory, and we can see

that the period is the highest in the previous year i.e. 208 days and lowest in 2009-

10 i.e. 128 days.

INFERENCE:

In the company the conversion period is decreased in the year 2009-10 and has

again increased because it has taken steps to improvement in sales as sales increases

automatically it requires more stocks of inventories to meet requirement of the

demand.it is important to look into the management of sales level more efficiently

so that the inventory is converted into sales and in turn into cash.

GRAPH -5 INVENTORY CONVERSION PERIOD:


2009-10 2010-11 2011-12

INVENTORY CONVERSION PERIOD(IN DAYS)

128 161 208

25

75

125

175

225

INVENTORYCONVERSION PERIOD

DA

YS

3 .CREDITORS/TURNOVER RATIO:


Creditor’s turnover ratio indicates the velocity of credit payment of firm. In simple

words, it indicates the number of times average creditors (payables) are turned over

during a year. Higher creditor turnover ratio is good because it will decrease

the average payment period.

Expression of Creditors/Payables Turnover Ratio

Creditors/Payables Turnover Ratio = Net Credit Annual Purchases/Average Trade

Creditors

TABLE-6 CREDITORS TURNOVER RATIO:


year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Net annual

purchases

16568.68 11260.35 12627.03

Average

trade creditors

4733.52 9566.5 12530.3

Ratio 3.50:1 1.17:1 1:1

ANALYSIS:

In the above table it can be observed that the creditors’ turnover ratio has

decreased when compared to previous years 2009-10 has the highest ratio of

3.50.and it has successfully met the standard norms of 1:1 in the previous year This

ratio gives the relation between the total purchases made and average trade

creditors.

INFERENCE:

Longer the period of outstanding payables is, lesser the problem of working

capital of the firm .but when the firm does not pay off its creditors within time it

may have adverse effect on the business.it indicates that the number of times the

payable rotate in a year .it signifies that the credit period enjoyed by the firm paying

creditors in all the years it above the standard norms which is 1 expect for the

previous where it satisfies the standard norm which is a satisfactory improvement

the firm should try to maintain this optimum level in the future years.


GRAPH-6 CREDITORS TURNOVER RATIO:

2009-10 2010-11 2011-12

CREDITORS TURNOVER RATIO 3.5 1.17 1

0.25

0.75

1.25

1.75

2.25

2.75

3.25

3.75

CREDITORS TURNOVER RATIO

RA

TIO


4 .AVERAGE PAYMENT PERIOD

The average payment period represents the average number of days for which a

firm has to wait before its payables are converted into cash. If this period will be

low, it will create the risk for our liquidity position because some creditor can

demand and in long period, we can forget to pay.

Expression of Average Payment Period Ratio

Average Payment Period = No. of Working Days/Creditors Turnover Ratio

TABLE-7 AVERAGE PAYMENT PERIOD


year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Average

trade creditors

X

360

4733.52 9566.5 12530.3

Net annual

purchases

16568.68 11260.35 12627.03

Days 103 306 357

ANALYSIS:

The above table shows the average payment period ratio of the past 3 years .this

ratio shows us the relation between the average trade creditors and net annual

purchases multiplied by the number of working days in a year we can see a

increasing trend in the number of days with 2011-12 at 357 days as the highest and

2009-10 with a least of 103 days.

INFERENCE:

The average payment period represents the average number of days taken by a firm

to pay its creditors. A lower period shows that the business is not taking advantage

of the credit period allowed by the creditors and a higher period indicates that the

creditors are not being paid on time. In the year 2009-10 the company has a pretty

good APP which indicates better liquidity but In the next 2 years it has failed to pay

the creditors on time.


GRAPH-7 AVERAGE PAYMENT PEIOD


2009-10 2010-11 2011-12

AVERAGE PAYMENT PERIOD(IN DAYS)

103 306 357

25

75

125

175

225

275

325

375

AVERAGE PAYMENT PERIOD

DA

YS

5. WORKING CAPITAL TURNOVER RATIO:


Working capital turnover ratio indicates the velocity of the utilization of net

working capital. This ratio indicates the number of times the working capital is

turned over in the course of a year. This ratio measures the efficiency with which

the working capital is being used by a firm. A high ratio indicates efficient

utilization of working capital and a low ratio indicates otherwise. But a very

high working capital turnover ratio may also mean lack of sufficient working

capital which is not a good situation.

Expression of Working Capital Turnover Ratio

Working Capital Turnover Ratio = Sales/Working Capital

TABLE-8 WORKING CAPITAL TURNOVER RATIO

YEAR 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

NET SALES 32981.30 58157 37339.50

WORKING

CAPITAL(Current

assets –Current

liabilities)

4224.8 1675.43 10615.84

Ratio 7.8:1 3.47:1 3.51:1

ANALYSIS:


The above table shows the working capital turnover ratio of the company for the

past 3 years it gives the relation between the net sales and the difference between

the current assets and liabilities. From the table we can see that the ratio has

increased in the year 2009-10 then the successive years show a low working capital

turnover ratio and the ratio just creeps from 3.47 to 3.51 in 2010-11 to 2011-12.

INFERENCE:

We can see that the ratio has decreased after 2009-10 and in general the ratio is very

less except for the first year which implies that the management is not making

efficient use of working capital. This ratio has a direct effect on sales hence the firm

needs to uplift its current asset and current liability management and should utilize

the resources efficiently.

GRAPH-8 WORKING CAPITAL TURNOVER RATIO:


2009-10 2010-11 2011-12

WORKING CAPITAL TURNOVER RA-TIO

7.8 3.47 3.51

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

8.5

WORKING CAPITAL TURNOVER RATIO

RA

TIO

6. CURRENT ASSET TURNOVER RATIO:


Current Assets Turnover Ratio indicates that the current assets are turned over in

the form of sales more number of times. A high current assets turnover ratio

indicates the capability of the organization to achieve maximum sales with the

minimum investment in current assets. Higher the current ratio better will be the

situation.

EXPRESSION OF CURRENT ASSETS TURNOVER RATIO:

Fixed Assets Turnover Ratio = Net Sales/current assets

TABLE-9 CURRENT ASSETS TURNOVER RATIO:


YEAR 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Net sales 32981 58157 37339.50

Current

assets

4806.46 25074.23 34596.34

Ratio 6.86:1 2.31:1 1.079:1

ANALYSIS:

The above table shows the current assets turnover ratio of the company. Here we

can observe that the ratio goes downwards after 2009-10 and has decreased to a

lowest of 1.07 in the previous year.

INFERENCE:

This ratio indicates the relationship between current assets to sales. Higher the ratio

more satisfactory the turnover ratio is.The trend of this ratio continues to decrease

year after year leading to low cash conversion which results in failing to meet the

firms daily obligations. The firm has to pay adequate attention to management of

sales activity and its current assets.


GRAPH-9 CURRENT ASSETS TURNOVER RATIO:

2009-10 2010-11 2011-12

CURRENTASSETS TURNOVER RATIO 6.86 2.31 1.07

0.5

1.5

2.5

3.5

4.5

5.5

6.5

7.5

CURRENT ASSETS TURNOVER RATIO

RA

TIO


LEVERAGE / SOLVENCY RATIOS:

1. FUNDED DEBT TO TOTAL CAPITALISATION RATIO:

A measurement of a company's financial leverage, calculated as the company's debt

divided by its total capital. Debt includes all short-term and long-term obligations.

Total capital includes the company's debt and shareholders' equity, which includes

common stock, preferred stock, minority interest and net debt.

Components of Funded Debt to Total Capitalization Ratio:

FUNDED DEBT TOTAL CAPITALISATION

Debentures Equity Share Capital

Mortgage Loans Preference Share Capital

Bonds Reserves and Surplus

Other long-term Loans Other Undistributed Reserves

Debentures

Mortgage Loans

Bonds & Other long-term Loans

Expression of Funded Debt to Total Capitalisation Ratio

Funded Debt to Total Capitalisation = Funded Debt / Total Capitalisation X 100


TABLE-10 FUNDED DEBT TO TOTAL CAPITALIZATION RATIO

year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Funded

debt

16917.27 30719.73 20747.43

Total

capitalization

11889.34 11889.34 11889.34

Ratio 1.42:1 2.58:1 1.74:1

ANALYSIS:

The above table shows the funded debt to capitalization ratio which establishes the

relation between the funded debt which includes short term and long term

borrowings of the company from 2009-10 to 2011-12.

INFERENCE:

Funded debt to capital employed ratio in 2009-10 is 1.42 implying that out of the

total owners fund and long term outsiders’ funds 1.42 is invested by outsiders for

their total investment of RS.1 that is 0.42 is provided by owners and it has increased

in the next year. Therefore owner’s contribution is more than the outsiders’ fund.


GRAPH-10 FUNDED DEBT TO CAPITALIZATION RATIO

2009-10 2010-11 2011-12

FUNDED DEBT TO TOTAL CAPITALIZATION RATIO

1.42 2.58 1.74

0.25

0.75

1.25

1.75

2.25

2.75

FUNDED DEBT TO TOTAL CAPITALIZATION RATIO

RA

TIO


2. PROPRIETORY RATIO OR EQUITY RATIO:

The proprietary ratio which is also known as Equity Ratio or Shareholders to Total

Equities Ratio or Net worth to Total Assets Ratio. This ratio establishes the relationship

between shareholders’ funds to total assets of the firm. The components of this ratio are

Shareholders funds or Proprietors Funds and Total Assets. The shareholders’ funds are

Equity Share Capital, Preference Share Capital, Undistributed profits, Reserves and

Surpluses. A low ratio indicates that the business may be making use of too much debt

or trade payables, rather than equity, to support operations (which may place the

company at risk of bankruptcy).Thus, the ratio is a general indicator of financial

stability.

Expression of Proprietary Ratio or Equity Ratio:

Proprietary Ratio or Equity Ratio = Shareholders Funds / Total Assets


http://www.accountingtools.com/definition-bankruptcy

http://www.accountingtools.com/definition-accounts-payable

TABLE-11 PROPRITERY RATIO:

ANALYSIS:

The propriety ratio shown in the above table for the past 3 years it shows the

relationship between the shareholders’ funds and total assets we can see that it is

lowest in the year 2010-11 and highest in 2009-10 and the ratio is fluctuating.

INFERENCE:

.here it is evident that the firm has used outsiders fund in financing its assets, the

ratio indicates the extent to which the assets of the company can be lost without

affecting the interest of the creditors of the company. The acceptable norm for this

ratio is 1:3 but here it is less than 50 % which is alarming for the creditors due to

heavy losses in the event of liquidation of the company.


year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Share-

holders funds

11889.34 11889.34 11889.34

Total assets 30574.15 63116.12 44825.69

Ratio 0.38:1 0.18:1 0.26:1

GRAPH-11 PROPERITORY RATIO:

2009-10 2010-11 2011-12

PROPERITORY RATIO 0.38 0.18 0.26

0.025

0.075

0.125

0.175

0.225

0.275

0.325

0.375

PROPERITORY RATIO

RA

TIO


3. DEBT SERVICE RATIO OR INTEREST COVERAGE RATIO:

Interest coverage ratio indicates the number of times interest is covered by the profits

available to pay the interest charges. Long-term creditors of a firm are interested in

knowing the firm’s ability to pay interest on their long-term borrowings. When a

company's interest coverage ratio is only 1.5 or lower, its ability to meet interest expenses

may be questionable. An interest coverage ratio below 1.0 indicates the business is

having difficulties

Expression of Interest Coverage Ratio:

Interest Coverage Ratio = Net profit (before interest and taxes) / Fixed Interest

Charges

TABLE-12 INTEREST SERVICE RATIO:

year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Net profit or

loss (before

interest and

tax)

-5003.83 -8478.36 -7686.47

Fixed

interest

charges

1708.86 5504.77 8715.52


Ratio -2.92:1 -1.5:1 -0.88:1

ANALYSIS:

The above table shows the debt service ratio of the company for the past 3 years. It

indicates ratios are in a depleted stage and in the year 2011-12 it showing signs of

recovery with the value of -088 which may improve in the coming years.

INFERENCE:

This ratio is used to test the debt –servicing capacity of the company.by the above

table we can see that there is loss in the earnings before interest and tax therefore

the firm is incapable to meet its interest charges.


GRAPH-12 INTEREST SERVICE RATIO:


2009-10 2010-11 2011-12

INTEREST SERVICE RATIO -2.92 -1.5 -0.88

-3.25

-2.75

-2.25

-1.75

-1.25

-0.75

-0.25

INTEREST SERVICE RATIO

RA

TIO

PROFITABILITY RATIOS:


A .IN RELATION TO SALES:

1 .OPERATING RATIO:

Operating ratio establishes the relationship between cost of goods sold and other

operating expenses on the one hand and sales on the other. In other words, it measures

the cost of operations per rupee of sales. A ratio of 75% and 80% is considered as

standard.

Expression of Operating Ratio

Operating Ratio = cost of goods sold + operating cost/Net salesX100

TABLE-13 OPERATING RATIO:

year 2009-10 (In

lakhs)

2010-11 (In

lakhs)

2011-12(In

lakhs)

Cost of

goods sold

+operating

cost X100

50282.85 23681.5 37308.34

Net sales 32981.30 58157 37339.50

Percentage 152 40.71 99.99

ANALYSIS:


The above table shows the operating ratios of the company in the past 3 years. It

shows the relationship between cost of goods sold operating cost and the net sales

Here we can see that the operating ratios are fluctuating in every year with the

lowest at 40.71% in 2010 and highest at 152% in 2009-10.

INFERENCE:

This ratio shows the operational efficiency of the company. Lower is the value

higher is the operating profit and higher operating ratio the lower the profits. For a

manufacturing concern the ratio should be between 75% and 80%. Therefore we

can understand that the company has recovered from a loss from 2009 to 2010 and

again in 2011 the loss is at an increasing trend.

GRAPH-13 OPERATING RATIO


2009-10 2010-11 2011-12

OPERATING RATIO 1.52 0.4071 0.9999

10%

30%

50%

70%

90%

110%

130%

150%

OPERATING RATIO

PE

RC

EN

TA

GE

2 .OPERATING PROFIT RATIO:


Operating Profit = Net Sales – Operating Cost Operating net profit ratio is

calculated by dividing the operating net profit by sales. This ratio helps in

determining the ability of the management in running the business. An operating

15% to 20% of operating profit ratio is considered as normal standard.

Expression of Operating profit Ratio

Operating Profit Ratio = Operating Profit / Sales X 100

TABLE-14 OPERATING PROFIT RATIO:

Year 2009-10 (in

lakhs)

2010-11 (in

lakhs)

2011-12(in

lakhs)

Operating

profit or loss

X100

-5003.83 -8478.36 -7686.47

Net sales 32981.30 58157 37339.50

Percentage -15 -14.5 -20


ANALYSIS:

The table above shows the operating profit of the company. We can see that all the

3 years there is backward in the percentage and it is the lowest in 2011-12

INFERENCE:

The business concern is said to be efficient if it is able to keep up the cost of goods

and other operating expenses as low as possible in relation to the net sales is

affected.


GRAPH-14 OPERATING PROFIT RATIO:

2009-10 2010-11 2011-12

OPERATING PROFIT RATIO -0.15 -0.145 -0.2

-23%

-18%

-13%

-8%

-3%

OPERATING PROFIT RATIO

PE

RC

EN

TA

GE


B. IN RELATION TO EXPENSES:

1. SELLING AND DISTRIBUTION EXPENSES RATIO:

This ratio shows the relationship between selling and distribution expenses in

relation with sales, which includes even excise duty if any. Higher is the ratio lower

is the profit achieved by the company.

Expression of selling and distribution expenses ratio

Selling and distribution expenses ratio= selling and

distribution expenses/salesX100

TABLE-15 SELLING AND DISTRIBUTION EXPENSES RATIO:

Year 2009-10 (in

lakhs)

2010-11 (in

lakhs)

2011-12(in

lakhs)

Selling and

distribution

expenses

X100

1443.65 1539.29 1356.19

Net sales 32981.30 58157 37339.50

Percentage 4.37 2.64 3.63


ANALYSIS:

The above table shows that the selling and distribution expenses ratio have

relatively slight changes when compared from 2010 to 2012 in the year 2011 there

is decrease in the ratio when compared to 2009-10 of 4.37 and again there is a

increase in 2011-12 to 3.63. this ratio shows the relation between selling and

distribution expenses and the net sales.

INFERENCE:

We can infer that in the years 2009-10 and 2011-12 the profitability of the company

is less when compared to 2010-11 the rule is that higher is the ratio lower is the

profit achieved by the company if sales in increases as in the year 2010-11 the ratio

dips down which proves the above rule. The firm has to focus upon increasing its

sales in the coming years.


GRAPH-15 SELLING AND DISTRIBUTION EXPENSES RATIO:

2009-10 2010-11 2011-12

SELLING AND DISTRIBUTION EXPENSES RATIO 0.0437 0.0264 0.0363

0.25%

0.75%

1.25%

1.75%

2.25%

2.75%

3.25%

3.75%

4.25%

4.75%

SELLING AND DISTRIBUTION EXPENSES RATIOPE

RC

EN

TA

GE


2. RETURN ON EQUITY CAPITAL:

In real sense, ordinarily shareholders are the real owners of the company. They

assume the highest risk in the company; preference shareholders have a preference

over ordinary shareholders in the payment of dividend as well as capital. Preference

shareholders get a fixed rate of dividend irrespective of the quantum of profits of

the company. The standard norm for this ratio is 2:1.

Expression of Return on Equity Capital

Return on Equity Capital = Net Profit after Tax X 100

Equity share capital

TABLE-16 RETURN ON EQUITY CAPITAL RATIO:


Year 2009-10 (in

lakhs)

2010-11 (in

lakhs)

2011-12(in

lakhs)

Net profit or

loss after tax x100

-3294.97 -2973.59 -1029.05

Equity share

capital

11889.34 15000 15000

Percentage -27.7 -19.82 -6.86

ANALYSIS:

The above table shows the return on equity ratio of the company for the past 3

years. Here also we can clearly see that the equity capital of the company has crept

backward from 2009-10 to 2011-12 .

INFERENCE:

Due to the decrease in equity share capital we can understand that the firm has

lower rate of return on equity shareholders. The company is having less percentage

of net profits so it has affected the returns on shareholders. All the above 3 years the

company is showing a loss which means there was no return in these years.


GRAPH-16 RETURN ON EQUITY RATIO:


2009-10 2010-11 2011-12

RETURN ON EQUITY RATIO -0.277 -0.1982 -0.0686

-27.50%

-22.50%

-17.50%

-12.50%

-7.50%

-2.50%

RETURN ON EQUITY RATIOP

ER

CE

NT

AG

E

3. ADMINISTRATIVE AND OFFICE EXPENSE RATIO


This ratio explains the relation to the day-to-day operations of a business to the net

sales of the firm General and administrative expenses pertain to operation

expenses rather that to expenses that can be directly related to the production of

any goods or services. General and administrative expenses include rent, utilities,

insurance and managerial salaries etc. The lower the operating expense ratio, the

greater the profit for the investor or investors.

Expression of administrative and office expense ratio

Administrative and office expense ratio=Administrative and office X100 expense/net sales

TABLE-17 ADMINISTRATIVE AND OFFICE EXPENSES RATIO:

Year 2009-10 (in

lakhs)

2010-11 (in

lakhs)

2011-12(in

lakhs)

Administrati

ve &office

expenses X 100

118.32 4509.84 3549.07

Net sales 32981.30 58157 373390.50

Percentage 0.35 7.75 9.50

ANALYSIS:


The above table shows the administrative and office expenses ratios of the

company in the past 3 years it establishes a relation between the various office

expenses and the net sales there is a progressive increase from 0.35 to 7.75 again to

9.50 from 2010 to 2012 and highest value is recorded in the year 2011-12

INFERENCE:

We can understand that the firm has used more administrative expenses in the last

year when compared to the first year. Whether the sales increase or decrease they

do not have effect on this ratio as these expense are fixed and there is an increase in

the previous year of 9.50 due to fall in sales.

GRAPH-17 ADMINISTRATIVE AND OFFICE EXPENSES RATIO


2009-10 2010-11 2011-12

ADMINISTRATVE AND OFFICE EXPENSES RA-TIO

0.0035 0.0775 0.095

0.50%

1.50%

2.50%

3.50%

4.50%

5.50%

6.50%

7.50%

8.50%

9.50%

ADMINISTARTIVE AND OFFICE EXPENSES RATIOPE

RC

EN

TA

GE

5. FINDINGS AND CONCLUSION:


FINDINGS:

After analysis of all the ratios we can understand the various aspects of the

company such as liquidity of the company the ability to make profit the time taken

to manufacture and convert raw-materials into finished goods ,the time taken by the

company to pay backs its creditors and so on we can summarize them as follows.

The liquidity position of the company is fluctuating it is indicated by the

liquidity ratios which clearly measure the firm's capacity to pay off short term

obligations immediately and is a more rigorous test of liquidity Usually a high

liquid ratio is an indication that the firm is liquid and has the ability clear its short

term liabilities in time and on the other hand a low liquidity ratio represents that the

firm's liquidity position is not good on the other hand the debtors are not prompt in

repaying the debts for the company and the cash and bank balances is not sufficient

for the present situation of the firm .Therefore we can understand that the firm is

not prepared to sudden change in market trends or any other upcoming future

challenging contingencies and should strive to maintain and manage current asset

which will in turn helps to meet the short term liability which is due.

Activity ratios are used to measure the relative efficiency of a firm based on

its use of its assets, leverage or other such balance sheet items. These ratios are

important in determining whether a company's management is doing a good enough

job of generating revenues, cash, etc. from its resources. When we look at the

activity ratios of the company they do not comply with the standard norm of 8:1,

we learn that the firm has dull profits due to poor sales and the duration taken to pay

the creditors is delayed. We can infer that the assets are not utilized properly from

the results of turnover ratios like current asset turnover ratio and working capital


ratios which are referred as real time indices meant to fore-see the payment capacity

of the firm.

The solvency ratios are very important to know the solvency position of the

firm that gives you an idea about the debt one company is in and the equity it has at

its disposal. Leverage ratios also determine the company’s cost mix and its effects

on the income. The ratios like funded debt to capitalization ratio and propriety ratio

throws light on the general financial strength of the company. It is also regarded as

a test of the soundness of the capital structure. Higher the ratio or the share of

shareholders in the total capital of the company better is the long-term solvency

position of the company. A low proprietary ratio will include greater risk to the

creditors .The study shows that the funded debts are more or in simple in words

there are loans which should be paid and the prosperity ratio suggests that the

solvency period of the is short lived .

Profitability ratios measure a company’s ability to generate earnings

relative to sales, assets and equity. These ratios assess the ability of a company to

generate earnings, profits and cash flows relative to relative to some metric, often

the amount of money invested. They highlight how effectively the profitability of a

company is being managed. We can understand from the study that the firm is

running on a loss The smaller the operating ratio, the greater the organization's

ability to generate profit the trends in the study shows that it is fluctuating due to

the alternative profit and loss situation in the year 2010 -11 the ratio is moderate

which shows the hint of a profit to a certain extent though it low to compared to the

standard norm of 80%. From the expense ratios we can infer that the firm is trying

to match its expenses with its sales but should employee more efficient methods to

do this as the values which are greater show that the operational efficiency is less.


CONCLUSION:

To conclude the short-term financial standing of the company is concerned,

it may be stated that, it is unsatisfactory. It is due to the important profitability

ratios such as current ratio, quick ratio, and absolute liquid ratio are not upto to

the standard norm The long-term financial position is also poor. This is due to

the low funded debt to capitalization ratio and funded debt to capitalization ratio,

etc.

In the years 2010-11 and 2011-12 the company has incurred heavy losses

this may be due to many reasons like decrease in demand for paper or availability of

alternative markets which produce paper and sugar at cheaper price.

We can give a broader view of the conclusion by a brief SWOT analysis:

1 .STRENGTHS

Market leaders in paper manufacturing.

Technical and experienced manpower.

ISO14001 [for pollution control] certified company.

Improvised infrastructure.

Efficient communication network.

Well-planned layout.

Automated and highly sophisticated machines.

Capacity to meet higher demand.


2 .WEAKNESSES

The cost involved in completion of the product is high.

As the company is in process of decreasing the existing.

Manpower, it may lose the opportunity of obtaining.

Creative and enthusiastic people in further development of the company are

needed

As customers’ expectations are increasing day by day it has become difficult

to satisfy them completely.

3 .OPPORTUNITIES

Capacity of meeting higher demands and attains optimum utilization of

existing Resources.

Due to advance in technology there is a scope for recruiting and retaining

right people on right jobs.

As the company has obtained six sigma and company has the capability of

Achieving global standards.

Forfeiture of paper industry can be directly linked increased level of literacy

now that the right to education act the opportunities are enormous.

4. THREATS

Price of raw material is comparatively high adopting automatic machines

may cause fear among the existing employees of Job loss, which may affect morale,

and productivity of employees.

New entrants in market may dilute the market share of the company


Finally, it may be concluded that, the ratio analysis undertaken in this project

gives only bird’s eye view of the overall organizational financial and operative

performances as indicated by the financial statements of the company for the past

3 years. We do hope that our effort would benefit the company in assessing the

Future prospects and impact on the financial status in the near future.


6. SUGGESTIONS:

The company can reduce the level of inventory by introducing a system of

scientific techniques of inventory management like Just In Time(JIT),Fast

Moving, Slow moving and Nonmoving analysis(FSN ) Variable, Essential and

desirable analysis (VED) to improve the organizational efficiency.

Company needs a fund for the up gradation of technology. So government

should provide fund for development of the company.

Adopt new technology, to reduce cost

A. labour.

B. fuel and power.

The company can consider by producing other varieties of papers like card

paper, drawing paper and also explore marketing needs for newer types of paper.

Excessive labour in certain departments, they should try to remove the

labours. So that company will be in profit mode.

Since the management to an extent has taken care of the inventory

conversion period it is important to continue this trend for the swift conversion of

raw-materials into finished goods.

The company has to try to maintain current ratio to the standard level (2:1)

otherwise it becomes difficult for the company to obtain funds in future.

The company has to increase the current asset turnover ratio by replacing the

outdated assets with the modern technology.


The company has to pay adequate attention to production policy and review

it constantly. Because inventory not only affects the working capital but also the

profitability of the company.

The company should avoid excessive dependence of short term source of

funds. And has to try to finance its financial needs from long term funds.

The company has to improve its liquidity ratios which will help the firm in

improving its liquidity position.


the mysore paper mills limited project draft final

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