vkc project
DESCRIPTION
project done in vkcTRANSCRIPT
Analysis of financial statements at VKC Pvt Limited
EXECUTIVE SUMMARY
The project report titled “financial statement Analysis” was carried out at VKC
Rubber industry Pvt Ltd. This study was conducted to evaluate the financial performance of
VKC Rubber industry Pvt Ltd. in order to give a better scope to the investors, shareholders,
creditors and the management themselves about the rating of VKC Rubber industry Pvt Ltd
and its performance in the market and thus suggest improvements.
Finance is the life blood of any organization. These statements serve as an important
tools for evaluating and comparing the present earning capacity of the unit and also for
forecasting its future performance and prospects. These statements also provide the basic
information for the purpose of analyzing, planning and taking vital and strategic financial
decisions by the executives of the company.
The project work involved two parts, that is Part A in plant training which involves in
detail study of the organization, Part B the final project involving study of analysis of financial
statement of VKC Rubber industry Pvt Ltd during the past three years from 2007-2010 on the
basis of in order to know the company performance, its financial and cash position.
The data used in this analysis has been obtained from the annual reports i.e., Balance
Sheets and Primary data was collected through Direct interview and personal observations.
From the analysis it was found that the liquidity position, long term solvency and cash position
of the firm is satisfactory.
To improve the financial position, a few measures were suggested which includes
decreasing the liabilities and increasing the income generating assets. The firm should employ
considerable portion of debt in its capital structure. The company has to concentrate much on its
credit policy for faster collections of accounts receivables. The company has to concentrate
much on efficient cash management in financing and investing activities.
With the help of the tools of financial analysis, it can be concluded that VKC Rubber
industry Pvt Ltd is in a good position from the point of view of performance, profitability and
liquidity.
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Analysis of financial statements at VKC Pvt Limited
INDUSTRY PROFILE:
HISTORY OF FOOTWEAR:
Spanish cave drawings from more than 15000 years ago show humans with animal
skins or furs wrapped around their feet. The body of a well preserved “ice-man” nearly 5000
years old wears leather foot stuffed with straw. Shoes, in some form or another, have been
around for a very long time. The evolution of foot coverings, from the sandal to present-day
athletic shoes that are marvels of engineering, continues even today as we find new materials
with which to cover our feet.
We are, in fact still wearing sandals- the oldest crafted foot covering known to us.
Moccasins are still readily available in the form of the loafer. In fact, many of the shoes we
wear today can be traced back to another era. The Cuban heel may have been named for the
dance craze of the 1920s, but the shape can be seen long before that time. Soles, which are
one of the most recognizable features of footwear in the 1970s and 1990s, were handed down
to us from 16th century choppiness. Then, high soles were a necessity to keep the feet off of
the dirty streets. Today they are worn strictly for fashion’s sake.
If one can deduce that basic shoe shapes have evolved only so much, it is necessary to
discover why this has happened. It is surely not due to a lack of imagination- the colors and
materials of shoes today demonstrate that. Looking at shoes from different parts of the world,
one can see undeniable similarities. While the venetians were wearing the choppiness, the
Japanese balanced on high-soled wooden shoes called get. Though the shape is slightly
different, the idea remains the same. The venetians had no contacts with the Japanese, so it is
not a case of imitation. Even the mystical Chinese practice of foot binding has been copied in
our culture. Some European women and men of the past bound their feet with tape and
squashed them into too-tight shoes. In fact, a survey from the early 1990s reported that 88%
of American wear shoes that are too small!
As one examines footwear history, both in the west and in other parts of the world, the
similarities are apparent. Though the shoemakers of the past never would have thought to
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Analysis of financial statements at VKC Pvt Limited
pair a sandal with a platform sole, our shoe fashions of today are, for the most part,
modernized adaptations of past styles.
PERFORMANCE OF INDIAN FOOTWEAR INDUSTRY
The foot wear industry is a significant segment of the leather industry in India. India
ranks second among the footwear producing countries next to the China.
In 1999, the global import of footwear in terms of value was around US$43278 million
accounting a share of 63.42% in the total global import of leather and leather products out of
this import of leather footwear alone accounted for us$26379 million and non leather foot
wear US$16899million.
India’s exports of leather footwear touched US$331 million in 1999-2000, recording an
increase of 3.29% over the preceding year. India thus holds a share of 1.25% in the global
import of leather footwear. The major markets were the UK, USA, France, Italy, Russia, etc.
In 1999-2000, export of leather footwear from India contributes 21% share of its total
export of leather and its products. Nearly 33 million pairs of various types of leather footwear
were exported during the year. It includes dress shoes, casuals, sport shoes, etc.
INDIAN FOOTWEAR COMPONENTS INDUSTRY
The footwear component industry is a segment of leather industry in India. The
footwear components which are exported from India are leather shoe upper and leather unit
soles. The estimated annual production capacity of leather shoe upper’s is 112 million pairs.
The major production centers are Chennai, Ranipet, Agra, Tamilnadu, etc.
The component industry has enormous opportunities for growth to cater to increasing
production of footwear of various type, both for export and domestic market.
Nearly 75% of total export of footwear component is from the southern region followed
by northern region with a share of 13%.
Nearly 83% of the India’s export of footwear component is from the UK, Germany,
Italy, USA, France and Portugal.
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Analysis of financial statements at VKC Pvt Limited
Company profile.
a. Background and inception of the company:
Name of the company : VKC GROUP OF COMPANY
Constitution : small scale industry
Date of establishment : 1984
Sales head quarters : Calicut
Incorporation : 1984
Contacts phone no : 0495-2442225
Authorized capital : Rs.40 lakh
Land and building : 4.5 acres and 1.75 acres
Financial year turnover : Rs.700 million
“VKC group of companies are the leading footwear manufacture especially in southern
region of India. The group established on (August17) 1984 with a nominal capital and few
employees. In 1984 the founder of the group Mr. V.K.C. Mammed Koya started a Hawai Sheet
manufacturing unit with his two brothers. Later on Hawai straps were also inducted to the
production line and in 1986 VKC group launched the first product with its own brand name in
the market viz. VKC Hawai with an initial production of 600 pairs per day. By 1989 the
production increased to 5000 pairs a day and by 1996 it jumped to 17000 pairs.
In between the founder initiated the floating of the first RPVC footwear manufacturing
unit in the Malabar Area of Kerala state with few of his friends. This product also got very good
acceptance in the market. The success of the first unit and the RPVC unit gave a signal to the
business community and the vast potential was seen by the various industrialists. This resulted in
a rapid change in the footwear industry itself. Within a few years the number of Rubber and
RPVC unit grew to more than 80 in this area.
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Analysis of financial statements at VKC Pvt Limited
In 1994 the group ventured the first unit in Kerala to manufacture footwear from virgin
PVC. This resulted in a big change and the multinational brands felt competitions from the local
brands. In 1998 the group started the first Micro Cellular PVC footwear in Kerala with imported
plant and machinery. “Quality at low price” made the VKC groups products popular in the
market day by day. It also expanded its market to other southern states.
In 2001 the group started the first Air Injected PVC DIP footwear manufacturing unit
in the South India. In 2003 the group ventured the first Injected EVA manufacturing unit in
South –Central India. In 2006 the group started backward integration to produce EVA compound
for Injection and started the first EVA compounding plant in the South –Central India. The unit
went in 2007 the group started manufacturing of PU DIP footwear.
During this period new bloods with technical, commercial and practical knowledge
were inducted and now the group consists of 20 working Directors and 60 share holders spread
over 19 various units. And have annual group turnover of Rs.700 million. More than 1000
employees are working in these units.
The company had achieved a prominent position in the footwear market of India. The
main markets, which are concentrated by the company, are Kerala, Tamilnadu and
Karnataka.The good quality and variety in models of VKC products help the companies to face
the market competition. The company has been able to maintain the quality of the products by
adopting foreign technologies. The group is now looking for further avenues in the field of
footwear to stretch their hands.
The Head Quarter of VKC group is in CALICUT .And the main plants of VKC group
of companies are situated in Kerala and Tamilnadu. The following are the associate companies
of VKC group.
1. M/s. VEEKESY RUBBER INDUSTRIES PVT.LTD.
2. M/s. VEEKESY ELASTOMERS PVT.LTD.
3. M/s. VEEKESY POLYMERS PVT.LTD.
4. M/s. SANDLON TECHNOLOGIES PVT.LTD.
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Analysis of financial statements at VKC Pvt Limited
5. M/s. FORTUNE ELASTOMERS PVT.LTD.
6. M/s. CALTECH POLYMERS PVT.LTD.
7. M/s. EMERALD PLASTOMERS PVT.LTD
8. M/s. SLIPONS INDIA PVT.LTD
9. M/s. DIADORA SHOES PVTLTD.
10. M/s. DIMESCO FOOTCARE INDIA PVT LTD.
11. M/s. VEEKESY PLASTOMERS (INDIA) PVT.LTD.
12. M/s. KOVAI FOOTWEARS PVT.LTD.
13. M/s. FERRARI SHOES (INDIA) PVT.LTD
14. M/s. VEEKESY FOOTCARE (INDIA) PVT. LTD
15. M/s. FERRERO VINYL TECHNOLOGIES PVT.LTD
16. M/s. MORBIDO VINYL PVT.LTD.
17. M/s. SMARTAK FOOTCARE PVT. LTD.
18. M/s. VEEKESY SANDALS (INDIA) PVT. LTD.
VEEKESY RUBBER INDUSTRY PVT.LTD
Veekesy rubber industry pvt ltd is the registered private limited
company situated at Kolathara in Kozhikode district. The objective of the company
is to manufacture the high quality footwear. It got its certificate of registration on
1-1-. 1984 The installed production capacity at the initial period is 21, 60, 000 pairs.
All affairs and day-to-day business administration of the firm is vested
in the hands of Boards of Director. They are in charge of various activities like
Production, Finance & Marketing. The board is assisted by qualified administrative
staffs.
Veekesy rubber industry private limited is a leading rubber
manufacturer in south India. The company’s mission is to maintain and achieve
customer satisfaction through providing quality products at reasonable price. In
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Analysis of financial statements at VKC Pvt Limited
order to satisfy customer needs first the company is providing footwear which offers
better style, comfort, elegance, finish, colors and durability.
The product “VKC” has a high brand value in the minds of the
peoples of Kerala because of the quality and the affordable price of the product. The
management gives high priority to the quality of the product. The company assures
the quality of the product through the continuous quality checking in each and every
stages of the production process.
Veekesy rubber industry private limited synonymous with quality
footwear is today busy stepping from a splendid present into a glorious future, it is
energetically in the move to scale never heights in footwear designing and
manufacturing.
b.Nature of business The business carried by VKC is production of footwear. VKC mainly manufacturing
high quality footwear as per the requirement of customers. The company faces many
competitors for the kind of manufacturing. “Consistent quality at affordable price” made
the VKC group products popular in the market day by day. The success in Kerala market
gave morale boost to the group to market their product in the other southern states.
c.Vision, mission and quality policy Vission:
Mission:
To achieve international levels of excellence in technology and quality.
To maintain and achive customer satisfaction through providing quality
products at reasonable price.
To continuously grow in our business and became a significant player in the
world market.
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Analysis of financial statements at VKC Pvt Limited
Quality policy:
In order to satisfy customer needs first the company is providing footwear which offer
better style, comfort, elegance, finish, colors and durability. Quality performance demonstrated is
the result of optimization of design, effective process control in manufacturing together with
testing and approval process in the environment of Quality management system.
d.Product profile:
VKC Rubber industry pvt.ltd producing high quality plastic footwear from 100% virgin
rubbers. The company’s VKC Rubber industry pvt.ltd is producing high quality plastic footwear
from quality plastic footwear from 100% virgin micro cellular rubbers. The company’s
manufacturing facilities includes modern equipment and machineries imported from Taiwan,
first of its kind in south including rotary injection modeling machines for improved product
quality. The company has to face stiff competition as there is lots of plastic footwear
manufacturing in Kerala.
e.Area of operation:
Veekesy Rubber industry pvt ltd has operating the business in south India and it has a
long tradition of maintaining the highest quality standards, right from the selection of raw
materials to processing and packaging of the end product
f.Ownership pattern:
Veekesy Rubber industry pvt ltd is a private limited company.
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Analysis of financial statements at VKC Pvt Limited
g.Competitors’ information:
Paragon Rubber Industries BANGALORE, India Haritha Hawai Kerala, India Odessey rubber industries, kerala Hawalker rubber industries, kerala Witco India ltd karalla,
h.Infrastructural facilities
a. Security checks:
Any material official/otherwise that is being brought in taken must have appropriate
documentation. Regular security checks are conducted to prevent unauthorized material leaving
entering the organization. Employees required to leave the factory on official/personal work
during working hours are to be submit an authorized gate pass to the security.
b. Medical facilities:
The medical centre is staffed by a resident Doctor and trained attendants and
supported by efficient Ambulance service.
C.Canteen Facilities
Vkc has got a good canteen facility for the employees at project area also.
i.Achievement/ award
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Analysis of financial statements at VKC Pvt Limited
j.Work flow mode:
Process flow diagram for manufacturing of Hawai sheets, chappals and straps.
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Raw Materials
Mixing with Chemicals in mixing mill
Keep for Maturation
Mixing in mixing mill with blowing agent & Vulcanizing Agent
Vulcanization in Hydraulic Press
Hawai sheets & straps
Cutting & Drilling
Assembling & Packing
Hawai Sheets Hawai Chappals Hawai Straps
Analysis of financial statements at VKC Pvt Limited
k.Future growth and prospects:
To attain market leadership.
Introduction of new trade schemes to increase sales.
Aggressive advertisement and publicity as part of sales promotion.
Reduction in distribution expenses.
Cost-reduction in all areas.
Instant decision making in certain procurement activities.
Timely introduction and implementation of market driven decisions.
Ensuring effective internal control
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Analysis of financial statements at VKC Pvt Limited
3.M c Kinsey’s 7S Framework with special reference to the
organization under study
According to Waterman, organization change is not simply a matter of structure,
although structure is significant variable in the management of change. Again it is also not a
simple relationship between strategy and structure, although strategy is also a critical aspect. In
their view effective organizational change may be understood to be a complex relationship
between strategy, structure, system, style, skills & shared values. The first three elements-
strategy, structure &system are considered the “hardware” of success. The next four – style
skills, staff, and shared values are called the “software”. The complex relationship is
diagrammatically presented below;
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Analysis of financial statements at VKC Pvt Limited
Origin of 7s framework
The 7s framework was first mentioned in “The art of Japanese management” by Richard
Pascale and Antony Athos in 1981. They had been investigating how Japanese industry had been
so successful. At around the same time that Tom-Peters and Robert Waterman were exploring
what made a company excellent. The 7s model was born at a meeting of these four authors in
1978. It appeared also in “In search of excellence” by Peters and Waterman and was taken up as
a basic tool by the global management consultancy company Mckinsey. Since then it is known as
their Mckinsey’s 7-s model.
Benefits of 7-s Model Diagnostic tool for understanding organization those are ineffective.
Guides organizational change.
Combines rational and hard elements with emotional and soft elements.
Managers must act on all S’s in parallel and all S’s are interrelated.
Description: The 7s framework of is a value based management (VBS) model that describes how one can
holistically and effectively organize a company. Together these factors determine the way in
which a corporation operates. Mckinsey 7-s model is one of the approaches of management
analysis. Mckinsey model consists of 7-s. They are:
Structure-(virtual organization).
Skill-(competencies)
Style-(culture and leadership)
Strategy-(corporate, business, product or market)
System-(process)
Staff-(empowerment)
Shared values-(mission and goals)
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Analysis of financial statements at VKC Pvt Limited
According to this model, there are seven basic dimensions, which represent the core of
managerial activities. These are the levels which executives use to influence complex and large
organizations; obviously there was a concerted effort on the part of the originators of the model
to coin the managerial variables with works beginning with the letters so as to increase the
communication power of the model.
"Hard" elements are easier to define or identify and management can directly influence them:
Theses are strategy statements; organization charts and reporting lines; and formal processes and
IT systems.
"Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and
more influenced by culture. However, these soft elements are as important as the hard elements
if the organization is going to be successful. The way the model is presented in Figured 1 below
depicts the interdependent of the elements and indicates how a change in one affects all the
others.
Structure: the way the organization is structured and who reports to whom.
Skill: the actual skills and competencies of the employees working for the company.
Style: the style of leadership adopted
Strategy: the plan devised to maintain and build competitive advantage over the competition.
Systems: the daily activities and procedures that staff members engage in to get the job done.
Staff: the employees and their general capabilities.
Shared values: called "super ordinate goals" when the model was first developed, these are the
core values of the company that are evidenced in the corporate culture and the general work
ethic.
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EXICUTIVE DIRECTOR
ACCOUNTANTSUPERVISOR
BOARD OF DIRECTORS
MANAGING DIRECTORS
CHAIRMAN
PURCHASE DEPARTMENT
PRODUCTION DEPARTMENT
FINANCE DEPARTMENT
HUMAN RESOURCE
DEPARTMENT
MARKETING DEPARTMENT
OFFICE ASSISTANT
Channel of Distribution
Sales Promotion Advertisement Market Research
Un Skilled Labours
Semi Skilled Labours
Skilled Labours
Analysis of financial statements at VKC Pvt Limited
STRUCTURE
It refers to the more durable organization arrangements and relationships, &
forms the skeleton of the edifice of the organization. It prescribes the formal relationships,
communication channels, roles to perform and rules and procedures.
Structure has 3 important functions
It reduces the external uncertainty by forecasting, research & planning process.
It reduces the internal uncertainty due to variable, unpredictable, random human behavior
by mechanisms.
It helps in coordination of the activities of the organization to enables it to have a focus by
departmentation, specialization, division of labour & delegation of authority
ORGANISATIONAL STRUCTURE
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Analysis of financial statements at VKC Pvt Limited
FINANCE DEPARTMENT
VKC maintains a separate finance department under the super vision of finance manager
who is assisted by the assistant manager and his subordinates .The section handles all the
financial aspect of the firm. All transactions are handled through computerized transactions. All
the transactions are done by tally. Finance department involves preparing all the statements like, trading accounts,
profits and loss accounts, balance sheet, bills, notes, letters, other tender call letters, suppliers
list, creditor's information, shareholders' documents, dividend policy.
Functions of finance department
Planning, controlling, rising and administration of funds used in the business
Maintaining liquidity and profitability
Maintain integrity and ensure its' future prospects
Working capital management
To meet day to day expenses
To provide credit facility to customer
To maintain the inventories
MARKETING DEPARTMENT:
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Marketing Manager
Advertisement manager
Sales promotion manager
Channel of distribution
manager
Market research manager
Assistant manager
Assistant manager
Assistant manager
Assistant manager
Sales executives
Analysis of financial statements at VKC Pvt Limited
“Marketing is the management process responsible for the identifying,
anticipating and satisfying consumers’ requirements profitably”.
To be the best product in the market company is giving importance to the following.
BRAND NAME : The brand name used for the product is “VKC HAWAI”.
QUALITY : Quality of the products is the main marketing technique that the `
company used.
ADVERTISING : The Company treats the advertising as the main mode of marketing
to improve the sales of their products. But in the case of VKC Hawai, the advertisement is
comparatively less. The brand image helps to sell the product in the market.
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Analysis of financial statements at VKC Pvt Limited
SCHEMES : One of the main marketing techniques of the company is the different Schemes for their
customers and dealers.
WHOLSALERS MEET: The Company conducts the Wholesalers Meet at least once in a year.
By this the company provides an opportunity to the wholesalers to interact with the company and
between the dealers. This helps to identify problems, sort out differences, and to formulate plans
for future improvement in the market.
ORDER TAKING & COLLECTION: The Company executives are directly taking the orders
from the wholesalers.
DELIVERY SYSTEM: The Company has very good system for the supply of the products to the
wholesalers. The company had provided door delivery system and they are fixed a weekly chart
for the supply.
THE MARKETING TECHNIQUES USED ARE:
A) CHANNELS OF DISTRIBUTION
B) SALES PROMOTION
C) ADVERTISING
D) MARKET RESEARCH
A) CHANNELS OF DISTRIBUTION:
Channel of distribution is the set of marketing intermediaries through which the goods
flow from the producer to consumer. The company had provided the door delivery system to the
wholesalers for the distribution of products through their owned vehicles and through the
different transporters. The Channel of Distribution followed by the Company is:
The company adopts a two level distribution system consisting of Wholesale dealer and
Retail dealer. The company is satisfied with the existing arrangements.
B) SALES PROMOTION:
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Analysis of financial statements at VKC Pvt Limited
Manufacture
Wholesaler
Retailers
Consumers
Sales promotion plays a major role for the success of the VKC products. Sales promotion
influences the customers for buying the products and also helps to meet competition. It
popularizes the product so as to stimulate demand.
Sales promotion tools used are:
CONSUMERS PROMOTION
COUPONS
DEMONSTRATION
CONTEST
PRICE OFFER
DEALER PROMOTION
SALES CONTEST
DEALER GIFT
TURNOVER ALLOWANCE
C) ADVERTISING & SCHEMES:
The VKC’s Advertising covers all activities connected with giving of publicity regarding
goods and services offered for sale. The main Medias for advertising are: Indoor Media &
Outdoor Media
INDOOR MEDIA
TV CHANNELS NEWS PAPERS MAGAZINES CATALOGUES, DANGLERS, CALENDERS, & STICKERS
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Analysis of financial statements at VKC Pvt Limited
OUTDOOR MEDIA
NAME BOARDS & A BOARDS HOARDINGS
TV CHANNELS:Advertisements of the products of the company are given in all the major TV channels in
Malayalam. The Brand Ambassadors for the product is Cine Artist and Models “Lakshmi
Rathan, Raji, Aaru Nayar, Baby Sooraj and Silpa”.
SCHEMES:
The company is providing different schemes for customers, retailers and wholesalers
during seasons. This helps the company to gets the good results in sales and publicity. The
company had already undertaken various schemes and contests like:
VKC Sammanotsavam
Mathrubhumi – VKC perdition contest (Football World Cup 2010)
D) MARKET RESEARCH
Market research helps in analyzing the buyer’s habits, popularity of a product, and
effectiveness of advertising media. It also helps to collect information about marketing problems
and opportunities. The continuous marketing research has been conducted by the company which
helps them in planning and executing marketing strategies for the future course of action.
THE PILLARS IN THE PATH OF SUCCESS OF THE FIRM is
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Analysis of financial statements at VKC Pvt Limited
1. FOREIGN TECHNOLOGIES:
The main advantage of the company is the implementation of Italian technology used by
them for the injection moulding process. Moulding process is the main activity and the key
process of manufacturing of quality footwear. The Company purchases Footwear Mould from
Ital, Taiwan and China. This will help the company to ensure high quality with accurate size and
good finish to the product.
2. EMPLOYEES OF THE FIRM:
The Company always maintains good employer-employee relationship. The employees
are well satisfied with the attitude of the management towards them and in the facilities provided
to them. So there were no labour strikes, labour absenteeism and labour resignation. The
company provides excellent training programs for the employees to improve the skills and
productivity with in a lesser time. The employees are getting the statutory benefits like Bonus,
ES scheme, Employees Provident Fund, Festival Holiday Allowances from the company.
3. QUALITY OF THE PRODUCT:
Quality can be viewed as a weapon for competitive advantage, as a means of profitability
and a source of value for customers, investment in quality achieves desired business results.
Quality derives the productivity machine and leads the firm to prosperity. Quality of Hawai
product is the combined effort and cooperation of the entire organization. Quality Management
of VKC involves quality planning, quality control and quality improvement which are cross
functional in nature. The company has to face keen competition in the market since there are
numbers of footwear’s manufactures in the country. The main factor, which determines sales, is
the quality of the products. The company produces good quality products and hence they are
capable of competing with others. VKC Rubber Industries PVT. Ltd. Has succeeded in
withstanding stiff competition from the parallel manufactures because of the superior quality of
their products at reasonable price.
4. ADVERTISING & MARKETING:
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Analysis of financial statements at VKC Pvt Limited
The advertisement of VKC’s product is of news of information concerning an ideas,
services or products to induce action which is suitable with the intent of the advertiser. The
advertisement given is based on the new trends in the market and which are highly attractive by
the customer. “Marketing is the process of providing the right product of the right quality in the
right quantity in the right place at the right time”.
SKILLS
The term “skills” includes those characteristics, which people use to describe a
company. Organization have strengths in a number of area but their key strengths are dominant
skills are few. These are developed over a period of time of the result of the interaction of a
number of factors performing certain tasks successfully over a period of time, the kind of people
in the organization, the top management style, structure, the management systems, the external
environmental influence etc. Hence when organization makes a strategic shift it becomes
necessary to consciously build new skills.
Classification of skill at VKC is as follows:
1. Top Management Skills:
Top management includes board of directors, secretaries and unit chief. Top
management skills includes balancing, integrating, setting, priorities, developing standards,
conceptualizing, leading, persuasive, and planning process.
2. Supervisory Management Skills:
It includes additional general manager, deputy general manager, senior manager
and manager. Every superior in the unit should have sound technical knowledge of his field to
provide proper instructions and guidance to operatives, accuracy in work, and communication
skill for interaction with the higher management.
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Analysis of financial statements at VKC Pvt Limited
3. Technical and Clerical Skills:
Technical skills are required from an individual as per the project requirements.
For technical skills employee should be engineer/diploma holder. For clerical work candidates
should be BCom/ BBM.
Candidates who have passed industrial training institute are engaged scheme under trade
apprentices’ for a year. Besides fulfilling the training requirements under the apprentices act.
STYLE
The company employees share a common way of thinking and behaving. Leaders
establish unity of purpose and direction of the organization. They create and maintain the
internal environment in which people became fully involved in achieving the organization
policy.
Top down style
In VKC management follows the top down decision making at the time of taking
any decision relating to management.
Board of directors and chief executive of the company give decisions about the
management relating problems of the company. The decision taken is flow from top to down, (to
Middle Level and Lower Level Management) in VKC they follow the participative leadership in
case of recruitment.
Participative leadership:
The head of the department takes some decisions there may by consulting the
other employees. In this type of leadership all the level of management participate in taking
decisions. In case recruitment A.M personnel department consult the entire department head to
take decision regarding recruitment of new employees.
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Analysis of financial statements at VKC Pvt Limited
STAFF:
It refers to the people working in an organization the company’s people resources and
how they are developed, trained and motivated. The process of staffing includes various
processes like recruitment and selection procedures, training etc. It refers to how the people
are developed, trained, socialized, integrated, motivated and how the employees’ career is
shaped in an organization.
Technical Staff:
These are the staffs they are responsible for the work related to technical
aspect. In this company they are appointing well –qualified and experienced persons as
technical staff. So these staff will have good knowledge about the working environment.
Supervisory Staff:
These are the persons who are in charge with supervising the other employees in the
organization. In this company they are employing experienced staff as supervisor. so they
can observe the fellow workers and guide them as per the companies need. The experienced
supervisors are one of the key assets of this company.
Clerical staff:
Clerical staff required for clerical work, clerical work need for all organization for
clerical staff required B.com/BBM.
STRATEGY
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Analysis of financial statements at VKC Pvt Limited
Strategy is a choice of direction and action; the company adopts to achieve its objectives
in a competitive situation. Strategies formulated need to be implemented. Implementation of
strategies is often more difficult than their formulation. Strategic planning is about asking
questions, more than attempting to answer them. Strategy formulation entails a search for a
different frame of reference. It is the quest for a new business paradigm. There are two types of
paradigms that apply to management, namely the business and the organizational or managerial
paradigms. The business paradigms define a company’s position in the market place with respect
to customers, technology and products.
Pricing of VKC:
The name “VKC” itself is the mark of quality for the customer. The company has across
different price terminologies/price strategies. They are as follows:
1. List price
2. Discount
3. Payment periods
4. Credit terms
5. Seasonal pricing
6. Area wise pricing
7. Pricing on demand
SYSTEM:
Identifying, understanding and managing process as a system contribution to the
organization effectiveness and efficiency in achieving its objectives.
A. Inventory Control System:
An effort to achieve and maintain an ecological balance between the cost incurred and cost
solved by holding material in stock is called inventory.
ABC analysis for stock control.
FIFO method for issuing materials
B. Accounting System:
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Analysis of financial statements at VKC Pvt Limited
Financial statements are prepared under the historical cost convention on an accrual
basis and comply with the accounting standards refer to sec 211 (3c) of the companies Act 1956.
C. Remuneration System:
1. Piece rate system is followed to employees.
SHARED VALUES:
Values refer to the institutional standards of behavior that strengthen commitment to the
vision, and guide strategy formulation and purposive action. The core values are shaped around
the belief that enterprises exist to serve society. In terms of this belief, profit is a means rather
than an end in itself a compensation to owners of capital linked to the effectiveness of
contribution to society and the essential ingredient to sustain such enlarged societal contribution.
1. Integrity among various department
Various departments in organization are working successfully. Coordination of
all the functional departmental area works together to achieve the stated object of the
company.
2. Team work among the employees
Every person or worker in the organization knows the objectives of the
company. With the proper communication network and corporation among the employees,
synergy is existing in the organization.
3. Customer satisfaction
The status of customer satisfaction is measured through two principles
interventions.
a. Customer satisfactory survey
The customer satisfaction is measured by sending structured questionnaires to major
customers and exacts their opinion about the product being offered reported for internal reviews and
also for reviews at higher level in the organization. The results of these are used to update the quality
management system and procedures.
b. Customer complaint handling system
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Analysis of financial statements at VKC Pvt Limited
The calls and complaints from the customers are systematically processed for
timely response and solution right from the branch, maintenance centre or the site itself. The
complaints are continuously monitored and regularly reviewed by the unit chief to ensure speedy
redressal.
4. SWOT ANALYSIS
SWOT analysis is a strategic planning method used to evaluate the Strengths, Weaknesses,
Opportunities, and Threats involved in a project or in a business venture. It involves specifying
the objective of the business venture or project and identifying the internal and external factors
that are favorable and unfavorable to achieve that objective. The technique is credited to Albert
Humphrey, who led a convention at Stanford University in the 1960s and 1970s using data from
Fortune 500 companies
Strengths:
Easy availability of low cost of labour.
Comfortable availability of raw materials and other inputs.
Massive institutional support for technical services, designing, manpower development
and marketing.
Management is very stable, that forms strong foundation of the company.
Employees are being provided with all necessary welfare facilities.
There are highly skilled and committed employees.
Well equipped quality control department for inspecting the quality of incoming of raw
materials and final products
Competitive advantage in cost of production
Wide distribution network
Weaknes s
Due to lack of direct sales, debts with many dealers turning bad.
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Analysis of financial statements at VKC Pvt Limited
Lack of human resource.
Cost of production of is high.
Low turnover resulting in low profits.
Defective marketing strategy lacks effective advertising and publicity.
No proper utilization of R&D centre and less importance to R&D.
Opportunities:
The company has the opportunity to expand its production units due to more demand for its
products.
The company has got better tool for better planning and decision-making.
The company can establish more branches across the India.
At present it has good raw material sources to enhance production.
Good export market should tap foreign market vigorously.
At present it has Good raw material sources to enhance production
Threats
Competition from other leaders.
Government interference may reduce growth potential.
Competition from other global leaders like HUL.
Technology advancement at a faster rate.
To protect the financial interest of the company.
Financial statement analysisRATIO ANALYSIS:
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Analysis of financial statements at VKC Pvt Limited
The ratio is the most powerful tool of financial analysis. It is the process of
establishing and interpreting various quantitative relationships between the figures and
group of figures. It is with the help of ratio analysis that the financial statement
Can be analyzed more clearly and decision can be made.
SL.NO RATIOS 2009-2010
1 Current ratio 1.52
2 Acid test ratio 0.34
3 Net profit 3.00
4 Net worth ratio 28.76
5 Debt/Equity 1.63
Current ratio;
It expresses the relationship between current assets and current liabilities. The
company’s current ratio is 1.52 in the year 2009-10. The Indian Standard Current ratio is 3:1,
though the ideal ratio is 2:1. Therefore, the company does not meet the standard ratio and does
not enjoy sufficient liquidity and there is shortage of working capital in the year 2009-10
Acid test ratio;
The Acid Test Ratio is the rigorous measures of a firm’s ability to service short
term liabilities. The Acid Test Ratio is superior to the current ratio. Generally an Acid Test Ratio
of 1:1 is considered satisfactory. In the year 2009-10 the Acid Test Ratio is 0.34 which is not
satisfactory.
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Analysis of financial statements at VKC Pvt Limited
Net Profit Ratio:
Net Profit Ratio measures the relationship between net profit and sale of the firm. The
Net Profit shows the profit position of the company against sale during the year. The Net Profit
ratio in the year 2009-10 is 3.00. While calculating Net Profit Ratio, the investment or capital of
the firm is only in relation to sales.
Net worth ratio;
Debt/Equity ratio;
LEARNING EXPERIENCE
The learning experience gained by me during the in-plant training was very much
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practical oriented. Mostly all the concepts and theories, which I studied in the class, are
applicable practically. I had a great time working on the project, as it gives insights into the working environment
of an organization. The training has exposed me to many facts of an organization and also helped
me to gain practical knowledge, which will go a long way in the horizon of our career. I became
more aware of the soap industry and the role played by VKC RUBBER INDUSTRY PVT LTD.
It is fallowing very good accounting system by wish helps in meeting all its obligations in
time
Structure: I got to know how decisions are communicated, the flow of decision process.
The way in which departments are classifieds on the basis of their functioning. The
functions of each departments and its relevance.
Skills: Through skills, how the training needs are satisfied to the employees of different
grades. The different on-job and off-job training given to the employees.
Style: Through style, I got to know how decisions flow from top to bottom in VKC
RUBBER INDUSTRY PVT LTD. How the production process is planned and worked
out. How self managed teams perform to achieve the targets set by the management.
Strategy: Through strategy, I found how strategies were formulated to overcome the
rigorous competition. Strategy is very much essential for the company to survive in the
market. Supply Chain Management is one of the strategies adopted by VKC RUBBER
INDUSTRY PVT LTD. through which they are able to reduce the cost of production and
increase profitability.
System: System plays an important role of supporting and facilitating various activities
that are carried out within the organization VKC RUBBER INDUSTRY PVT LTD
adopts latest system.
Overall the learning experience was quite satisfactory which enabled me to experience a
slice of the real and ruthless industry.
THEORETICAL CONCEPT OF THE STUDYINTRODUCTION TO FINANCIAL STATEMENT ANALYSIS
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Financial statements
Position Statement (or) Balance SheetIncome Statement(or) Profit and Loss
Account
Statement of changesIn Owner’s Equity or
Retained Earnings
Statement of Changes inFinancial Position
Fund Flow statement Cash flow statement
Analysis of financial statements at VKC Pvt Limited
Financial statement is a collection of data in a defined format containing the
monetary figures with regard to business, industry and others generally for a
given period or at given date. Its purpose is to convey an understanding of some
financial aspects of a business firm.
Users of Financial Statements:
Investors
Creditors
Labour Unions
Financial Institutions
Management
Regulatory bodies
Types of Financial Statements :
The analysis of financial statements is a process of evaluating the relationship between
component parts of financial statements to obtain a better understanding of the firm’s position
and performance. In brief financial analysis is the process of selection, relation and
evaluation.
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Types of Financial Analysis
On the Basis of Material used On the basis of modus operandi
Internal Analysis Horizontal Analysis Vertical Analysis
Analysis of financial statements at VKC Pvt Limited
Objectives of financial analysis : Ascertain present & Future earning Capacity
Ascertain Operational efficiency as a whole or division wise
Short term and Long term Solvency
Short term and Long term liquidity
Comparative study of one company with other or among divisions
Studying present for future plans of the company
Ascertain financial stability
Compliance with Statutory requirements
Types of Financial Analysis:
Significance and purpose of Financial Statement Analysis: Judging Profitability
Judging Liquidity
Judging Solvency
Judging the efficiency of Management
Inter – firm comparison
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External Analysis
Analysis of financial statements at VKC Pvt Limited
Forecasting and Budgeting
Tools, Techniques and methods of financial analysis : The financial analyst can adopt one or more of the following technique or tools of
financial analysis:
Comparative financial statement analysis
Common size financial statement analysis
Comparative trend percentage
Ratio analysis
Fund flow analysis.
Cash flow analysis
Comparative Financial Statement Analysis: Comparative Financial Statement refer to those
statements of the financial affairs of business, which are prepared in such a way as to provide
time perspective to the various elements contained in such statements.
Common-Size Financial Statements Analysis: Common-size Financial Statements are those
statements in which the data or figures reported in the financial statement are converted into
percentages, taking some common base. Common-size financial statements are also known as
component percentages statements or 100 percent statements, because each statement is reduced
to 100% and each individual item is expressed as a percentage of the total of 100.
Funds flow Statement : Funds flow statement is an attempt to report the flow of funds between
various assets and liabilities and owner’s capital during an accounting period. In other words, “
Funds flow statement is prepared to indicate in summary form, changes occurring in items of
financial position between two different balance sheet dates”.
Here, the emphasis is on Ratios and Trend analysis to analyse the financial position of
the company.
INTRODUCTION TO RATIO ANALYSIS
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Analysis of financial statements at VKC Pvt Limited
A Ratio is an expression by accounting relationship between two numbers. It may also
be defined as relationship of one amount to another. It is one number from another. Accounting
Ratio are relationships expressed in mathematical terms between figures which are related with
each other. They indicate the quotient of two mathematical expressions.
Ratios may be expressed in percentages or in terms of “Times”. They facilitate better
comparison when compared to absolute figures. Therefore they are used as one of the techniques
of Financial Analysis. They help to understand the financial position and performance of
enterprise in a better manner.
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TRADITIONAL FUNCTIONAL
Profit and Loss Ratio
Balance Sheet Ratio
Composite Ratio
LIQUIDITY RATIO
ACTIVITY RATIO PROFITABILITY LEVERAGE & SOLVENCY
Current Ratio Liquid Ratio Absolute Ratio
Stock Turnover Ratio
Debtors Turnover Ratio
Creditor Turnover Ratio
Fixed Assets Turnover Ratio
Capital Turnover Ratio
Gross Profit Ratio
Net Profit Ratio Operating Profit
Ratio Return on
Equity Capital Earning Per
Share
Capital Gearing Ratio
Financial Leverage
Debt Equity Ratio
Proprietary Ratio
TYPES OF RATIOS
Analysis of financial statements at VKC Pvt Limited
I. LIQUIDITY RATIOS [SHORT TERM SOLVENCY RATIOS]:
Liquidity refers to the ability of a concern to meet its current obligations as and when
they become due.
The following are the important liquidity Ratios:
1. Current Ratio
It is the ratio of current Assets to current Liabilities. It is also known as Working Capital
Ratio. It helps to understand relationship between total current assets and total current liabilities.
A ratio equal or near to the rule of thumb of 2:1 is considered as a standard for this ratio.
2. Liquid Ratio or Acid Test Ratio:
It is the ratio of liquid assets to liquid liabilities. Liquid Assets usually include all the
current assets except inventories and pre – paid expenses. Liquid liabilities usually refer to
current liabilities less bank overdraft. The standard for this ratio is 1:1
3. Absolute Liquidity Ratio:
This ratio establishes the relationship between the sum of cash
It represents cash in hand, cash at bank and other marketable securities and their
relationship with the liquid assets. This ratio is used as supplement to current ratio to assess
short term financial position of an enterprise.
The standard for this ratio is 0.5:1.
II. ACIVITY AND TURNOVER RATIOS:
1. Receivables or Debtors Turnover Ratio:
This ratio explains the relationship between the net credit sales and the average accounts
receivables. A high ratio indicates efficiency in the collection function and a lower ratio
signifies inefficiency or liberal credit policy.
2. Creditors Turnover Ratio:
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Analysis of financial statements at VKC Pvt Limited
This ratio is similar to debtor’s turnover ratio. It signifies credit period enjoyed by the
firm in paying the creditors.
3. Inventory Turnover Ratio:
It indicates the relationship between cost of sales and average inventory at cost. It also
helps to understand whether the investments are within limits or otherwise. It explains the rate at
which inventories are converted into sales and then into cash. A Stock turnover ratio of 8
times in a year is considered to be ideal.
4. Fixed Assets Turnover Ratio
This ratio explains the relationship between the costs of goods sold and fixed assets. It
explains the efficiency with which fixed assets have been used in generating sales and better
profits. The Standard or ideal fixed assets turnover ratio is 5 times
III. PROFITABILITY RATIO:
1. Net Profit Ratio:
It is the ratio of Net Income or Net Profit after taxes to Net Sales. This ratio is expressed
as a percentage. It helps to measure overall profitability of the concern and useful to owners. It
indicates the efficiency as well as profitability.
2. Return on Shareholders investments or Net worth or Proprietors Funds
This ratio explains the relationship between the Net Profit after interest and tax to share
holder’s funds. Share holders funds include equity capital, preference capital, reserves and
surplus, and profit and loss account minus the accumulated losses. The standard or ideal ratio
is about 13%.
3. Return on Equity Capital:
This ratio explains the relationship between Net Profit after interest, tax & Preference
dividend and the Equity share capital. It helps the owners measure the returns on their
investments. This ratio indicates the profits finally available to equity share holders. The
standard or ideal return on capital employed ratio is about 15%.
4. Earning Per Share [EPS]
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It is calculated by dividing net profit after tax, interest and preference dividend by the
number of equity shares. It indicates the earning power of company and facilitates comparison
between earning capacity of one company with another company belonging to the same industry.
IV. LEVERAGE RATIOS OR LONG TERM SOLVENCY RATIOS :
Leverage ratios indicate the relative interests of the owners and the creditors in an
enterprise. They measure the state of the creditors as against the owners and they portray the
long - term solvency of the concern.
1. Debt – Equity Ratio :
This ratio is calculated to measure the relative claims of outsiders and the owners against
the firm’s assets. The standard or ideal debt-equity ratio is 2:1
2. Proprietary Ratio or Equity Ratio :
This ratio expresses the relationship between net worth or equity and total assets.
Generally, a ratio of 5:1 is considered to be ideal.
3. Fixed Assets to Net worth Ratio :
The ratio establishes the relationship between fixed assets and shareholder’s funds. The
Standard or ideal fixed assets to net worth ratio for an industrial undertaking is 67%, it
should not constitute more than 67%.
4. Capital gearing Ratio :
Capital gearing ratio is the ratio which expresses the relationship between fixed interest-bearing
securities and fixed dividend-bearing shares and equity capital.
5. Interest Coverage Ratio :
It is the ratio between net profits and fixed charges. Net profit means net profit before
deducting fixed charges and income- tax. Fixed charges mean interests on long-term loans and
deposits and debentures. The standard or ideal fixed charges cover is 6 times..
INTRODUCTION TO TREND ANALYSIS OR TREND PERCENTAGES :
Trend percentages if a technique of studying financial statements of a company over a number of
years. It compares the past data over a period of time with a base year, under this method the
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Analysis of financial statements at VKC Pvt Limited
percentages relationship that each financial statement item of each year bears to the same item in
the base year is calculated.
Advantages of trend percentages :
Trend percentages analysis is of immense use in making a comparative analysis over a
series of years.
It is easy to identify changes and interpret the same because percentage figures disclose
more than the absolute figures.
Trend analysis is extremely helpful in budgeting, forecasting etc.
STATEMENT OF THE PROBLEM:
Title of the study:
“Analysis of financial Statement at VKC rubber industries pvt ltd”
The justification of existence of any company is determined by performing as per
expectations. Analysis of overall performance is one of the major requirements for planning.
Performance evaluation is necessary from the point of view of creditors, public, government,
other organizations and the company itself. It is also necessary to bridge the gap between the
current and expected position by taking corrective measures. It acts as a yardstick of measuring
how the company has been able to move forward as per the plan.
The information provided through the analysis and interpretation of financial statements
is of immense help in making decisions. They play a dominant role in setting the framework of
managerial decisions.
The main aim of this study is to evaluate the performance and market standing of VKC
rubber industries pvt ltd in order to give a better scope to the investors, shareholders, creditors
and the management themselves about the rating of VKC rubber industries pvt ltd and its
performance in the market.
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Analysis of financial statements at VKC Pvt Limited
This Financial Statement analysis at VKC Pvt Ltd. is on the basis of ratio analysis
and Trend Percentages.
OBJECTIVES OF THE STUDY:
The main objectives of this study are as follows:
To analyze the management efficiency of the concern.
To evaluate the liquidity position and profitability of the company.
To gain insight into long term solvency and leverage position.
To make an overall performance analysis and know the progress of the concern.
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Analysis of financial statements at VKC Pvt Limited
To emphasize on changes in the financial and operational data from year to year with the
help of trend percentages.
To know the trends of the business.
To find out the solution to the unfavourable financial condition and financial performance
To help the company to make future projections by analysing its past performance.
To suggest the ways and means to improve the overall financial position.
SCOPE OF THE STUDY:
The study is exclusively conducted for for past 4 financial years.
The trends indicated may differ from year to year based on the pattern of investments,
borrowings etc. The study becomes more meaningful only if it covers a longer period of
10 or more years which is beyond the scope of this project.
The study was aimed at analyzing the financial statements of VKC rubber industries pvt
ltd on the basis of Ratiosis and Trend Percentages in order to know the company’s
financial & cash position and its performance during past four years from 2007 to 2010.
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Analysis of financial statements at VKC Pvt Limited
The data used in this analysis has been obtained from the annual reports i.e., Balance
Sheets and Profit & Loss Account.
LIMITATIONS OF THE STUDY : Even though there are so many tools of financial analysis, this study uses only Ratio analysis
and trend analysis.
Limitations of time i.e, the study is carried out for academic purpose for a limited span of 10
weeks. The time constraint did not allow for the in-depth study regarding the performance of
the company.
The findings and analysis of this report is prepared from the information available in the
annual reports and books of accounts.
The information provided in the financial statements is not an end in itself as no meaningful
conclusions can be drawn from these statements alone.
The financial analyses based on the past financial statements are not the indicators of future.
Since some facts and business secrets maintained strictly confidential, it is not possible to
collect all information.
As it is an external study, conclusion and suggestions are not ultimate and are based on
personal judgment and the ability of the researcher to understand the concept.
The study is limited to VKC rubber industries pvt ltd, the findings need not apply to whole
VKC Group and similar firms in the same industry.
RESEARCH DESIGNA poorly defined problem will not yield useful results. It is rightly said that “a problem
well defined is half solved”, poorly defined problems cause confusion and do not allow to
develop a good research design. The question is how we can identify a research problem. Three
categories of symptomatic situation namely, overt difficulties, latent difficulties and unnoticed
opportunities should be studied. The problem should be briefly described and its salient features
brought out.
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Analysis of financial statements at VKC Pvt Limited
Research can be defined as -“ The systematic and objective identification, collection, analysis, dissemination and use
of information for the purpose of assisting management in decision making related to the
identification and solution of problems ( and opportunities ). It is a
1) Methodical, unbiased and compete investigation of subject matter to establish principles
2) Investigation of a problem to discuss pertinent information to help solve it.
Research design:“A framework or blueprint for conducting a research project. It specifies the details of
the procedures necessary for obtaining the information needed to structure and or solve research
projects”.
There are three types of research design :
a. Exploratory research design
b. Conclusive research design
- Descriptive research
- Causal Research
a. Exploratory Research :
One type of research design, which has its primary objective the provision of insights into
and comprehension of the problem situation confronting the researcher.
b. Conclusive Research :
Research designed to assist the decision maker in determining, evaluating and selecting the
best course of action to take in a given situation.
- Descriptive Research : A type of conclusive research that has as its major objective the
description of something. The descriptive study is typically concerned with determining the
frequency with which something occurs or how two variables vary together. This study is
typically guided by an initial hypothesis.
Descriptive research is conducted in the following cases:
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Analysis of financial statements at VKC Pvt Limited
a. To describe the characteristics of relevant groups
b. To estimate the percentage of units in a specified population exhibiting a certain
behaviour.
c. To determine the degree to which marketing variables are associated
d. To make specific predictions.
- Causal Research : A type of conclusive research where the major objective is to obtain
evidence regarding cause – and – effect ( causal ) relationships.
The study on “Analysis of financial statements” at VKC is based on Descriptive
Research
Research design used in the specific study includes the following:
Identifying the statement of the problem
Collection of the company’s specific literature i.e, annual reports for the study period and
the profile of the company
Scanning through standard books to understand the theory behind the financial
performance evaluation
Collection of information from various journals to understand the industrial background
of the study
Decision regarding the study period in this case it was decided to be 4 years i.e, from
2007-2010.
Identification of financial tools likely to reflect capital adequacy, resources deployed,
assets quality, management quality, earning quality, liquidity, cash position and trends.
In this case, it was decided to use
- Ratio analysis
- Trend Percentages
Calculation of the above financial tools over the study period and analysing it
Forwarding certain recommendation and conclusion to the company.
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Analysis of financial statements at VKC Pvt Limited
The term “methodology” refers to carefully planned procedures (should consistently follow the
same procedure ). That will facilitate the comparison of results of similar investigations over a
period of time as that are arrived at by other researchers investigating similar problems in various
parts of the same country or in any corner of the world .
Methodology assumptions :
Definitions used are universal
Selected study period is sufficient
Selected financial ratios, trend percentages and cash flow analysis reflects the financial
performance of the company.
Ultimate financial evaluation of the company is shown in its financial statements.
Sources of Data collection :After going through and weighing pros and cons of different methods of data collection,
it was decided that both primary data and secondary data are suitable for the study but more
emphasis was given on Secondary data. A project of this nature is by and large a desk job and
primary data is of little relevance.
Sources of data:a. Primary data :
It is the first hand information on any happening or event. They are the original sources
from which the researcher directly collects data that have not been previously collected. It was
collected with the administration assistant and other staff members of finance department and
through Direct interview and personal observations.
b. Secondary data :Particularly it is very difficult to collect the entire information through primary sources.
So the researcher has to depend on the secondary data. These are sources containing data which
have been collected and compiled for another purpose.
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Analysis of financial statements at VKC Pvt Limited
It was collected through Annual reports of the company for the past 5 years from
2003 – 2007. And from the prospectus, website of the company (VKC.com), textbooks,
journals and magazines.
Tools used for data collection :
a) Schedule
b) Interview
In this study, data is collected through schedules – i.e, data collected from the records, annual
reports and financial statements of VKC rubber industries pvt ltd and Interview of finance
controller and finance officers.
Sampling plan :
As such no sampling plan has been adopted in the above financial analysis.
Field work: As such no fieldwork was involved for the study since this was an In – house desk
research job.
Plan for analysis :
The data collected have been analysed by the use of statistical tools and techniques such
as percentages, averages. Wherever necessary, the data have been presented diagrammatically
using charts and tables etc.
Review of Literature :
The project report presupposes a good knowledge of the subject and the title, which has
been chosen for a detailed analysis. Attempts have been made to acquire the detailed
information on the subject through a detailed literature survey. This requires an extensive survey
of literature available in the form of published articles in business magazines, publication of
institutions, newspapers and Journals.
After deciding about the topic of the project, it was decided to do a detailed literature
survey, to know what type of work was already done in the similar topic. The purpose of doing a
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Analysis of financial statements at VKC Pvt Limited
literature survey is to avoid repetition of the same study of the topic and also to understand the
scope of the subject and difficulties which arise during the course of the study.
It helps to study the tools and technique appropriate to suit the requirement of the
company & apply them in the appropriate context and come to meaningful conclusions and find
solutions to the problems faced by the company. The literature survey helped in deciding about
the methodology which is adopted for the collection, analysis and presentation of data.
I. RATIO ANALYSIS
A] Liquidity ratios
1. Current Ratio :
Current AssetsCurrent ratio = --------------------------
Current Liabilities
Current Assets = Inventories + Sundry Debtors + Cash and bank balances + Loans and
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Analysis of financial statements at VKC Pvt Limited
Advances Current Liabilities = Current Liabilities and Provisions
Table No. A1: Showing current ratio ( Rs. in thousands)
Year Current Assets Current Liabilities Current Ratio
2007 5441138.20 1563082.2 3.48
2008 9891746.33 3082074.38 3.20
2009 10674918.61 6492715.04 1.64
2010 10422655.64 6852013.77 1.52
Analysis:-
From the above table we can observe that in the year 2007 current ratio is 3.48 & it decreased by
3.20%, 1.64%&1.52 in the year 2008, 2009, & 2010, respectively. It can be analysed from the
above table that current ratio is slightly fluctuating from the year 2007 to 2010.
Graph No.A1: Showing Current Ratio
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Analysis of financial statements at VKC Pvt Limited
2007 2008 2009 20100
0.5
1
1.5
2
2.5
3
3.5
Current ratios
Interpretation:-A Ratio equal or near to the rule of thumb of 2:1 i.e., Current assets double the current
liabilities is considered to be satisfactory. This Rule of Thumb implies that for every one rupee
of Current Liabilities, two rupees of Current Assets are available. But a Current Ratio of greater
than 1.50 is normally considered to be satisfactory.
However, it can be inferred from the above table and graph that in all the 4 years the
current ratio its decrease from the first year. Even though it is satisfactory because its more than
the standard. Since the actual ratios are less than the ideal ratios the company may find it difficult
to meet its short term obligations.
2. Liquid Ratio: Quick Assets
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Analysis of financial statements at VKC Pvt Limited
Liquid ratio = ------------------------- Current Liabilities
Quick Assets = Sundry Debtors + Cash and bank balances + Loans and Advances
Current Liabilities = Current Liabilities and Provisions
Table No. A2 : Showing Liquid / Quick ratio (Rs. in thousands)
Year Quick Assets Current Liabilities Liquid Ratio
2007 1848322.49 1563082.2 1.18
2008 3310455.55 3082074.38 1.07
2009 4093367.44 6492715.04 0.63
2010 2302407.73 6852013.77 0.33
Analysis :- It is clear form the above table, in the year 2007 the liquid ratio is 1.18 & it gradually
decreased to 1.07, 0.63&,0.33 during the years 2008, 2009,& 2010. Liquid ratio of VKC was
quite fluctuating but it was consistent throughout 4 years.
Graph No.A2: Showing Liquid Ratio
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Analysis of financial statements at VKC Pvt Limited
Interpretation:-
An ideal quick ratio of 1:1 is considered not to be Satisfactory. Since, the quick ratio at
VKC is above the ideal quick ratio of 1:1 during the study period in 2007&2008, and it is less
than the ideal quick ratio of 1:1 during the study period 2009&2010.
This high quick ratio at VKC indicates that the firm is having slow – paying debtors & all
debtors cannot be realised so quickly by the firm to meet its short term obligations
B] Long term solvency ratios:
RAJIV GANDHI INSTITUTE OF TECHNOLOGY Page 51
2007 2008 2009 20100
0.2
0.4
0.6
0.8
1
1.2
Liquid ratio
-Years-
-Ratios-
Analysis of financial statements at VKC Pvt Limited
1. Debt-equity ratioLong term debt External Equities
Debt-equity ratio = ---------------------------- ( or ) -------------------------Shareholders funds Internal Equities
Long term debt = Loan funds (Finance lease Obligations + Unsecured loans)
Shareholder funds = Equity share capital + Reserves & Surplus
Table No. B1: Showing Debt-equity ratio (Rs. in thousands)
Year Long term debt Shareholders funds Debt-equity ratio
2007 3813712.21 6877975.15 0.55
2008 8628658.88 6221963.59 1.39
2009 5556566.49 5950411.60 0.93
2010 6528483.46 6256863.92 1.04
Analysis:- The above table represents that in the year 2007 the Debt – equity ratio is 0.55% and it
increased to 1.39% in 2008. Again the ratio decreased by 0.93% during 2009 & it increased by
1.04% during 2010.
Graph No. B1: Showing Debt-equity ratio
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Analysis of financial statements at VKC Pvt Limited
Interpretation:-
As a general rule, there should be an appropriate mix of owner’s funds and outsider’s
funds in financing the firm’s assets. A ratio of 1:1 may usually be considered to be satisfactory.
At VKC the Debt – equity proportion is low & it is satisfactory from the point of view of
long term creditors, because a high proportion of owner’s funds provide a larger margin of safety
and substantial protection against shrinkage in assets for the outsiders, during the study period on
2008&2010. But In the same way it is not satisfactory from the firm’s point of view of long term
creditors, in t during the the study period on 2007&2009.
On the other hand, a low Debt – equity ratio at VKC is indicating that the shareholders of
the firm are deprived of the benefits of trading on equity to magnify their earnings.
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2007 2008 2009 20100
0.2
0.4
0.6
0.8
1
1.2
1.4
DEBT-EQUITY RATIO
- Years -
- Ratios -
Analysis of financial statements at VKC Pvt Limited
2. Proprietary or equity ratio:
Shareholders funds (Net worth)Proprietary or equity ratio = --------------------------------------------------
Total Assets
Shareholder funds = Equity share capital + Reserves & Surplus
Total Assets = Fixed Assets + Investments + Current Assets
Table No. B2: Showing proprietary ratio (Rs. in thousands)
Year Shareholder funds Total Assets Proprietary ratio
2007 6877975.15 10696839.39 0.64
2008 6221963.59 14850622.47 0.42
2009 5950411.60 11506978.09 0.52
2010 6256863.92 12785347.38 0.49
Analysis:It can be analysed from the above table, in the year 2007 proprietary ratio is 0.64 & it
decreased by 0.42% in the year 2008. In the year 2009 it increased 0.52 & again it decreased by
0.49 in the year2010.
Graph No. B2: Showing Proprietary Ratio
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Analysis of financial statements at VKC Pvt Limited
2007 2008 2009 20100
0.1
0.2
0.3
0.4
0.5
0.6
0.7
Proprietary Ratio
Interpretation:
The proprietary ratio at VKC is satisfactory in the four year, as shareholders fund
constitute 64%, 42%, 52%&49%in the total assets of the company, to this extent the assets of the
company can be lost without affecting the interest of the creditors of the company.
Proprietary ratio at VKC is satisfactory and it indicates Long term solvency and financial
position of the company is considerably good.
C] TURNOVER RATIOS: -
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Analysis of financial statements at VKC Pvt Limited
1. Working Capital Turnover Ratio : -
Cost of goods sold ( Sales )Working Capital Turnover Ratio = ----------------------------------------
Net Working Capital
Cost of goods sold = (Opening stock + Purchases + Direct Expenses – closing stock)
Direct Expenses = Tools & stores, Royalty, Freight & Forwarding, power, fuel & Water
Net Working Capital = Current Assets – Current Liabilities
Table No. C2: Showing Working Capital turnover ratio
Year SALES Net Working Capital
WCT Ratio
2007 29054725.76 3878056
7.49 times
2008 31276972.52 6809671.95
4.59 times
2009 35897227.45 4182203.57
8.58 times
2010 38277892.28 3570641.81
10.72 times
(WCT* = Working Capital Turnover)
Analysis:
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Analysis of financial statements at VKC Pvt Limited
The above table represents the working capital turnover ratio is 7.49 times in the year
2007. During 2008 it decreased to 4.59 times. During 2009&2010 the ratio increased to
8.58&10.72 times.
Graph C2: Showing Working Capital Turnover Ratio
2007 2008 2009 20100
2
4
6
8
10
12
Working Capital Turnover Ratio
Interpretation:
The Working Capital Turnover ratio of VKC is satisfactory, once in every 5 to 10 months
working capital is turned over in generating sales. It indicates efficient working capital
management.
3. Debtors Turnover Ratio: -
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Analysis of financial statements at VKC Pvt Limited
Credit Sales Total SalesDebtors Turnover Ratio = -------------------------- (or) ------------------
Average Debtors Debtors
Trade Debtors = Gross value of sundry debtors + Bills receivable & accounts
Receivables
Total Sales = Sales & Services
Table No.C3: Showing Debtors Turnover ratio (Rs. in thousands)
Year Sales Debtors DT Ratio
2007 29054725.76 828030 35.08 times
2008 31276972.52 586440 53.33 times
2009 35897227.45 1552097 23.13 times
2010 38277892.28 1618792 23.64 times
(DT* = Debtors Turnover)
Analysis:
The above table represents in the year 2007, 35.08 times receivables are converted into
cash. This turnover rate increased by 53.33 times during 2008 this is due to quick payment by
the customers, then this ratio fell down by 23.13 during 2009 due to delay in collection from
customers & liberal credit policy. Again this ratio increased during 2010 23.64 times.
Graph C3: Showing Debtors Turnover Ratio
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Analysis of financial statements at VKC Pvt Limited
2007 2008 2009 20100
10
20
30
40
50
60
Debtors Turnover Ratio
- Years -
- No. of times -
Interpretation:
Considering its nature of business the Debtors turnover ratio at VKC is satisfactory. It is
showing there is greater efficiency of credit management during the year 2007 & 2008 compared
to all other years. Again it’s decreasing in last two years. Its shows efficiency in the collection
period is slow in last two years. Even though its satisfactory.
5. Fixed Assets Turnover Ratio : -
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Analysis of financial statements at VKC Pvt Limited
Cost of Sales ( Sales)Fixed Assets Turnover Ratio = --------------------------------
Net Fixed Assets
Cost of goods sold =(Opening stock + Purchases + Direct Expenses – closing stock)
Direct Expenses = Tools & stores, Royalty, Freight & Forwarding, power, fuel & Water
Net Fixed Assets = Fixed Assets - Depreciation
Table No. C5: Showing Fixed Assets Turnover Ratio
(Rs. in thousands)
Year SALES Net Fixed Assets FAT Ratio
2007 29054725.76 6818783.38 4.26 times
2008 31276972.52 8040950.52 3.89 times
2009 35897227.45 7324774.52 4.90 times
2010 38277892.28 7844126.99 4.90 times
(FAT* = Fixed Assets Turnover)
Analysis:It is clear from the above table the fixed assets turnover ratio was 4.26 times in the year
2007; it decreased by 3.89 times during the year 2008. The ratio was significantly consistent
during 2009 & 2010 as it was 4.90 times.
Graph No. C5: Showing Fixed Assets Turnover Ratio
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Analysis of financial statements at VKC Pvt Limited
2007 2008 2009 20100
0.51
1.52
2.53
3.54
4.55
Fixed Assets Turnover Ratio
- Years -
- No. of times -
Interpretation:
The standard or ideal Fixed Assets Turnover Ratio is 5 times. Fixed Assets Turnover
ratio at VKC during the year 2007&2008 was not satisfactory when compared to
and2009&2010.As it is indicating excessive investment in fixed assets during the year2007
&2008. During 2009&2010 the ratio was satisfactory and it is indicating efficient utilisation of
fixed assets in generating sales. Overall fixed assets turnover ratio at VKC is satisfactory.
D] PROFITABILITY RATIOS: -
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Analysis of financial statements at VKC Pvt Limited
1. Return on Shareholders Investment or Net worth :-
Net Profit ( after interest & taxes )Formula of ROSI or Net worth ratio = --------------------------------------------------- x 100
Shareholders funds
Table No. D2 : Showing ROSI or Net worth ratio ( Rs. in thousands )
Year NPAT* Net Worth Return on Shareholders Investment
2007 2877975.15 6877975.17 42%
2008 1205363.59 6221963.59 33%
2009 1341111.60 5950411.60 23%
2010 1150463.92 6256863.92 12%
( NPAT* = Net Profit After Tax)
Analysis:
It is clear from the above table the ROSI is 42% in the year 2007, it increased to 33%
during 2008, the during year 2009&2010 it decreased by 23% & 12%.
GrapNo.D2: Showing Return on Shareholders:
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Analysis of financial statements at VKC Pvt Limited
2007 2008 2009 20100
5
10
15
20
25
30
35
40
45
NET WORTH RATIO
Interpretation:
The Standard or ideal Net worth ratio is about 13%. Return on Net worth at VKC is
satisfactory as on during the study period 2007 to 2009.But it is not satisfactory in the year
2010.But this reveals that the funds of owners are profitably utilised by the firm & its overall
efficiency is good.
2. Earnings Per Share ( EPS ) :
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Analysis of financial statements at VKC Pvt Limited
Net Profit after Tax – Preference dividendFormula of Earnings per Share = ----------------------------------------------------------
Number of Equity Shares
Table No. D3: Showing Earnings Per Share (Amount in Rupees)
Year PAT* ( Rs. in thousands)
Number of Equity Shares EPS*
2007 197311.02 400000 Rs. 0.49
2008 1683888.42 400000 Rs. 4.21
2009 4408248.01 400000 Rs 11.02
2010 4970802.32 400000 Rs. 12.43(PAT* = Profit after Tax
EPS* = Earnings per Share)
Analysis: The above table represents that the EPS is Rs. 0.49/- in the year 2007, it increased by
Rs. 4.21/- during 2008 and Rs11.02/- during 2009 and Rs 12.43/- during 2010.
Graph No. D3: Showing Earnings per Share
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Analysis of financial statements at VKC Pvt Limited
2007 2008 2009 20100
2
4
6
8
10
12
14
EPS
Interpretation:
VKC’s EPS is much satisfactory as it is showing a trend of above 50% increase from year
to year (2008%2010), it is signifying the profitability of the firm is good and has significantly
improved over the years.
3. Net Profit Ratio: -
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Analysis of financial statements at VKC Pvt Limited
Net Profit (after interest & tax)Formula of Net Profit Ratio = ---------------------------------------------- x 100 Net Sales
Table No. D5: Showing Net Profit Ratio (Rs. in thousands)
Year Net Profit ( after interest & Taxes )
Sales N/P Ratio*
2007 2877975.15 29054725.76 9.90%
2008 1205363.59 31276972.52 6.56%
2009 1341111.60 35897227.45 3.37%
2010 1150463.92 38277892.28 3.00%
(N/P* = Net Profit)
Analysis: The above table represents that the N/P ratio is 9.90% in the year 2007; it decreased to
6.56%, 3.37%&3.00 during the 2008, 2009&2010 respectively.
Graph No. D5: Showing Net Profit Ratio
Interpretation:
N/P ratio of VKC is in decreasing trend for the past 3 years except in the year
2007.During the year 2007 it showed a decline trend of 51%. This ratio also reflects that the
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Analysis of financial statements at VKC Pvt Limited
company is ensuring not adequate return to the owners. N/P ratio at VKC is not fully
satisfactory.
III . TREND ANALYSIS OR TREND PERCENTAGES
1. Trend Analysis of Sales
Table No. F1: Showing Trend percentages of sales(Base Year 2007 = 100)
( Rs. in thousands )
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2007 2008 2009 20100123456789
10
Net Profit Ratio
- Years -
- Percentages -
Analysis of financial statements at VKC Pvt Limited
Year SALESTrend Percentages
2007 29054725.76 100
2008 31276972.52 108
2009 35897227.45 124
2010 38277892.28 132
Analysis:
The trend percentages of sales for the year 2008 is 108, it is 124 and 132 during 2009 and
2010.
Graph No. F1: Showing Trend Percentages of Sales
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Analysis of financial statements at VKC Pvt Limited
20072008
20092010
0
20
40
60
80
100
120
140
Trend Per-centages of Sales
- Years -
Per-cent-ages
Interpretation: The above table and graph represents that trend values of sales are at an increasing trend
considering the base year 2007. The growth of sales is a good sign reflecting the growth of the
company is at an upward trend. The company’s key strategic initiatives i.e, exports, higher
operational efficiencies, standard products, range expansion, market penetration, services and
value added projects have resulted in growth of sales from the year 2007 to 2010.
2. Trend Analysis of Net Profit
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Analysis of financial statements at VKC Pvt Limited
Table No. F2: Showing Trend percentages of Net Profit (Base Year 2007 = 100)
( Rs. in thousands )
Year Net Profit Trend Percentages
2007 2877975.15 100
2008 1205363.59 71
2009 1341111.60 41
2010 1150463.92 40
Analysis: The trend percentages of Net Profit decreased by 71,41,&40 in the during year respectively .
Graph No. F2 : Showing trend percentages of Net Profit
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Analysis of financial statements at VKC Pvt Limited
2007 2008 2009 20100
20
40
60
80
100
120
Trend Percent-ages of Net Profit
- Years -
Percentages
Interpretation: The above table and graph represents the N/P of VKC is at a decreasing trend, it is not
satisfactory in three years such as 2008, 2009 & 2010 except in the year 2007. During the last
year the rate of decrease in net profit is low compared to remaining 3 years. This decreasing
trend of net profit shows that the firm cannot with stand adverse economic conditions when
selling price is declining, cost of production is rising and demand for the product is falling, this
trend also reflects that the company is ensuring not adequate return to the owners.
3. Trend Analysis of Fixed Assets
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Analysis of financial statements at VKC Pvt Limited
Table No. F3: Showing Trend percentages of Fixed Assets(Base Year 2007 = 100)
(Rs. in thousands)
Year Fixed Assets Trend Percentages
2007 6818783.38 100
2008 8040950.52 118
2009 7324774.52 107
2010 7844126.99 115
Analysis: The trend percentages of Fixed Assets during the year 2008 was 118, it is at an down
ward trend showing 107 in the year 2009, and it is upward trend showing 115
during the year 2010.
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Analysis of financial statements at VKC Pvt Limited
Graph No.F3: Showing trend percentages of Fixed Assets
2007 2008 2009 201090
95
100
105
110
115
120
Trend Percent-ages of Fixed Assets
- Years -
Percentages
Interpretation:
The above table and graph represents utilisation of Fixed Assets at VKC is satisfactory
during the year 2007 to 2010. The fluctuating trend of fixed assets is indicating there is an
investment in fixed assets from the year 2007 to 2010 is not consistent; it is also indicating there
is an efficient utilisation of fixed assets in generating sales and also satisfactory.
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Analysis of financial statements at VKC Pvt Limited
4. Trend Analysis of Current Assets
Table No. F4 : Showing Trend percentages of Current Assets(Base Year 2007 = 100)
( Rs. in thousands )
Year Current Assets Trend Percentages
2007 5441138.20 100
2008 9891746.33 182
2009 10674918.61 196
2010 10422655.64 192
Analysis :
The trend percentages of Current Assets during the year 2008 was 182, it is at an upward
trend showing 196 in the year 2009, and it is at an down ward trend showing 192 during the year
2010.
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Analysis of financial statements at VKC Pvt Limited
Graph No.F4 : Showing trend percentages of Current Assets
2007 2008 2009 20100
50
100
150
200
250
Trend Percentages of Current Assets
- Years -
Percentages
Interpretation :
The above table and graph represents the trend of current assets at VKC is satisfactory in
the past 4 years, since it is showing an upward trend from the year 2007 to 2010. The upward
trend of current assets shows that the firm is capable of meeting short term obligations in time. It
also signifies the liquidity position at VKC is good.
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Analysis of financial statements at VKC Pvt Limited
4. Trend Analysis of Current Liabilities
Table No. F6: Showing Trend percentages of Current Liabilities(Base Year 2007 = 100)
(Rs. in thousands)
Year Current Liabilities Trend Percentages
2007 1563082.2 100
2008 3082074.38 197
2009 6492715.04 415
2010 6852013.77 438
Analysis: The trend percentages of Current Liabilities during the year 2004 is 123, it is at an
upward trend showing 180 in the year 2005, 252 and 380 during the year 2006 and 2007.
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Analysis of financial statements at VKC Pvt Limited
Graph No.F6: Showing trend percentages of current liabilities
20072008
20092010
050
100150200250300350400450500
Trend percentages of Current Liabilities
- Years -
Percentages
Interpretation: The above table and graph represents the trend percentages of current liabilities shows an
upward trend from the year 2007 to 2010. We can observe from this the current assets and
liabilities are increasing at an equal proportion. This indicates the firm is capable of meeting
short term obligations in time.
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Analysis of financial statements at VKC Pvt Limited
FINDINGS The study is made to find out the consistency of financial position of VKC Pvt
limited. Through the use of ratios and trend percentages the following are the summary
of findings :
Considering the convention rule of thumb the overall current ratio of VKC is good, but it
is decreasing trend in all the three years.
The liquidity position of the firm is good in first two years; than its decreasing quick ratio
is fluctuating, its shows that VKC is not having capacity to pay off its immediate
obligations on time in the last two years.
A firm having considerable position in debt and equity , the first two years is low after
that shareholder fund is increasing , its should be maintained in future also..
There is an optimum and efficient utilization of fixed assets at VKC.
The working capital is also efficiently utilized at VKC.
During the year 2007, the firm made excessive investment on fixed assets.
Debtors Turnover Ratio at VKC is good during 2008, considering its nature of business.
Due to delay in collection from the customers & liberal credit policy, this ratio declined
and stabilized between 2009 to 2010. The collection and recovery policy of the company
must be strengthened.
Funds of owners are profitably utilized by the firm since ROSI is an decreasing trend in
each year from 2007 to 2010.
The profitability of VKC is good, since it can be justified with the increase in EPS of the
firm each year. The firm has many future plans, to meet its future prospects the firm has
retained more earnings.
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Analysis of financial statements at VKC Pvt Limited
The firm is achieving lower rate of Net profit. Due to operational efficiencies, increase in
sales volume growth, lower overheads and higher operating incomes the firm, but it
cannot able to achieve higher profit.
Sales of VKC is at an upward trend, it is a good sign reflecting the growth of the
company from the year 2007to 2010.
Net profit of VKC is at an down ward trend. This decreasing trend of net profit shows
that the firm cannot withstand adverse economic conditions when selling price is
declining, cost of production is rising and demand for the product is falling, this trend
also reflects that the company is ensuring not adequate return to the owners.
There is an efficient utilization of fixed assets in generating sales at VKC.
The current assets and liabilities of VKC are showing an increasing trend
SUGGESIONS The current ratio of the concern is meeting its standard ideal ratio in first two years,
but next two years its not meeting standard ideal ratio, so the organization needs to
improve its current assets over its current liabilities to meet the standard of 2:1. It is
advised to go for working capital loan so that without affecting the routine operations,
the company can go ahead with its activities.
To improve the Short term solvency position, liabilities must be decreased and the
income generating assets must be increased.
The company has to concentrate much on its credit policy for faster collections of
accounts receivables.
The fixed assets, working capital and Inventory turnover ratio of VKC is satisfactory
and the company should try to maintain the same in future.
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Analysis of financial statements at VKC Pvt Limited
The trend percentages of sales, fixed assets, current assets and current liabilities are at
an increasing trend each year, this is a good sign and it is recommended to maintain
the same.
The trend percentage of net profit decreasing trend each year.
CONCLUSION
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