PROJECT REPORT

On

“A study of Financial Performance Analysis of IT Company”

FOR
THE PARTIAL FULFILLMENT OF THE AWARD OF THE DEGREE OF
“MASTER OF BUSINESS ADMINSTRATION”
FROM GGS IP UNIVERSITY
DELHI

BATCH: 2017-2019

SUBMITTED BY: SUBMITTED TO:

JYOTI Dr. MONIKA JAIN

ARMY INSTITUTE OF MANAGEMENT & TECHNOLOGY,

GREATER NOIDA (UP) – 201306

i
CERTIFICATE OF TRAINING

ii
SUPERVISOR CERTIFICATE

This is to certify that Ms. Jyoti a student of Master of Business Administration, Batch –MBA-14,
Army Institute Management & Technology, Greater Noida, has successfully completed his project
under my supervision.

During this period, he worked on the project titled “STUDY OF FINANCIAL

PERFORMANCE ANALYSIS OF IT COMPANY” in partial fulfillment for the award of the
degree of Master of Business Administration of GGSIP University, Delhi.

To the best of my knowledge the project work done by the candidate has not been submitted to
any university for award of any degree. His performance and conduct have been good.

(Dr. Monika Jain)

AIMT- Gr. Noida

Date: Sept. 2018

iii
CERTIFICATE OF ORIGINALITY

I, Ms Jyoti, Roll No.047 of MBA 14 batch of Army Institute of Management & Technology has
undergone a Summer Internship in Infodart Technologies ltd. for a duration of 6 weeks (45
days) on a project titled “STUDY OF FINANCIAL PERFORMANCE ANALYSIS OF IT
COMPANY “ hereby declare that this project is my original piece of work.

Ms JYOTI
MBA-(2017-19)
Date Sept. 2018

iv
ACKNOWLEDGMENT

I want to show my sincere gratitude to all those who made this study possible. First of all, I am
thankful to the helpful staff and the faculty of the Army Institute of Management and Technology.
Second, I would like to extend my sincere thanks to my Industry Guide, Mr. Maneesh Jain, for her
untiring cooperation.

One of the most important tasks in every good study is its critical evaluation and feedback which
was performed by my faculty guide Dr. Monika Jain. I am very thankful to my Faculty as well as
Industry guide for investing his precious time to discuss and criticize this study in depth,
andexplained the meaning of different concepts and how to think when it comes to problem
discussions and theoretical discussions. My sincere thanks go to my Institute and family, who
supported and encouraged me.

Ms. Jyoti
MBA-2017-19

v
EXECUTIVE SUMMARY

vi
TABLE OF CONTENT

S NO. CONTENTS PAGE NO.

1 Certificate (ii)
2 Supervisor Certificate (iii)
3 Certificate of Originality (iv)
4 Acknowledgement (v)
5 Executive Summary (vi)
6 Chapter 1- Introduction 1
6.1 Investment Options Available 2
6.1.1 Shares 2
6.1.2 Mutual Funds 5
6.1.3 Corporate Debenture 7
6.1.4 Company Fixed Deposits 10
6.1.5 Fixed Deposits 10
6.1.6 Post Office Saving 10
6.1.7 Life Insurance 13
6.1.8 PPF 14
6.1.9 Real estate / gold / silver / other 15
7 Chapter 2- Objective and need of study 16
8 Chapter 3-Literature Review 18
9 Chapter 4-Research Methodology 21
9.1 Research Design 21
9.2 Sampling Design 21
9.3 Data Collection and Analysis 22
10 Chapter 5- Data Analysis and Interpretation 24
11 Chapter 6- Finding and Recommendation 35
12 Chapter 7- References 37
13 Appendices and Annexure 38

vii
CHAPTER 1

INTRODUCTION
1.1 IT INDUSTRY

India’s IT industry is one of the world’s successful information technology industries.

Measured by the age of many industries, IT industry in India is still in its infancy. and its growth
and development has caught the attention of the world so much so that India is now being
identified as the major powerhouse for incremental development of computer software. The
reason for attention is not the actual size of the industry but its rapid growth rate over the nineties
and subsequent decade. It has grown from the US $ 150million (source: NASSCOM) in 1991-92
to US $ 64 billion in the year 2008.
The industry’s contribution to India’s GDP has grown significantly from 1.2% in 1999
-2000 to around 5% in FY 06, and has been estimated to cross 5.5% in FY08. The sector has been
growing at an annual rate of 28% per annum since FY01The Indian IT industry can be mainly
categorised into following sectors IT services, IT enabled services and BPO, Research and
Development, Software Product and Hardware.
2. Market Structure

The size of the Indian IT industry, according to NASSCOM, is the US$ 64 billion as of year 2008.
It has been growing with an annual rate of 28.4% since year2001. The Indian IT industry can be
broadly divided into two market, i.e. domestic market and exports market. The exports market
constitutes thelargest segment accounting for 62-66% of the total revenue generated by the Indian
IT industry.Within the export segment, geographical diversification and maturity in services and
operatingefficiencies helped the IT services exports to jump 28 per cent to $23.1 billion, while the
BPO exportswere up 30 per cent to $10.9 billion. Engineering services and product exports
generate revenue of $6.4 billion, an increase of almost 29 per cent over FY07. The domestic IT
market accounted for 35-38% of revenue. The domestic market is gaining momentum day by day,
driven by overall economic growth, increased adoption of technology and outsourcing. The Indian
hardware industry is at present estimated to be in the proportion of 35% domestic, 1.25% exports
and the remaining being imports. The domestic market itself offers tremendous potential for
hardware companies, thus having very few companies venturing into hardware exports. Imports of
IT hardware which form a large component of the industry are mainly from Korea, China,

1
Taiwan, and China however, MNCs in the hardware segment have been viewing India is a hub for
setting up hardware manufacturing facilities, for instance Dell.

According to NASSCOM, one of the emerging sector where Indian IT software and services
companies can make a tremendous impact the software products segment, which encompasses the
embedded software, R&D and shrink wrap and enterprise products domains. Apart from these,
there is huge growth potential in hardware industry. Currently India is importing more than 50%
of its hardware requirements, so companies will try to expand and tap this segment of market.

1.2 COMPANY PROFILE: (INFODART)

Infodart Technologies limited is a global information technology and system integration company.
Incorporated in 2007, it is the subsidiary of Videocon group founded by Mr. Nandlal Madhav lal
Dhoot in 1987

Today it is the trusted partner of many organizations across the Asian continent and are
diversifying across the Globe. It provides innovative and customized business fit solutions to our
customers and help them do business better by leveraging our expertise, industry-wide experience
and comprehensive portfolio of services.

Information technology service spectrum includes IT Consulting, SAP, Oracle Retail, Mobility
Solutions, Business Intelligence, IT Infrastructure and Cloud Services.

SERVICE & PRODUCT:

Infodart technologies provide end-to-end solutions to their customers, right from project analysis,
infrastructure, consulting, designing, implementation, testing to integration and support. Whatever
be the complexities of your business requirements, Infodart technologies will have the perfect
solution for you.

SAP Service & Enterprise Consulting:

Transforming SAP Software and technologies into solution that address your strategic business
need drawing on breakthrough technologies such as SAP HANA, Mobile, and Analytics, Infodart
SAP services help to run better than ever.

2
Cloud Services:

Simplify and accelerate journey to the cloud with expert guidance from Infodart. Their cloud
services support the entire adoption lifecycle – from cloud design and strategy to deployment and
operations. Leverage flexible, value-driven consulting engagements to develop a solution
roadmap, execute migration, securely manage hybrid or cloud infrastructure, and move to cloud-
managed services like PaaS and IaaS.

• Services supporting the entire lifecycle.

• Flexible, fast and secure engagement.
• Value-driven engagements driving ROI and time-to-value.
• Run Big Data Analytics applications that let you see the bigger picture and predict the
future.
• Consistent, compliant and accessible service delivery

Enterprise Mobility Services & Solutions

Infodart offers a portfolio mobility services and tools for the mobile enterprise that moves with the
speed of its customers.

At Infodart, they have a scalable & agile architecture for Mobile & E-commerce solutions. They
have helped many clients with our enterprise mobility solutions and e-Commerce/ERP
applications. Using their Mobile application development offerings, clients have re-imagined their
interactions with the customers.

Retail:

Their Retail solutions not only encompass the state-of-art Oracle product but also make them
work effectively and efficiently with the other inevitable legacy system. These solutions help to
implement core merchandise solution to generate foundation and master data using master data
management (MDM) to facilitate operations such as ordering, allocations, buying, replenishment,
stock and inventory movements etc. for financial control and planning.

Infodart offers implementation of services of Oracle Retail Store Solution (ORSS), which include
sub-modules like Oracle Retail Point-of-Service (POS), Oracle Retail Central Office (CO), Oracle
Retail Back Office (BO), and Store Inventory Management (SIM) etc.

IT Consulting Services:

3
Infodart is in following IT consulting services:

• SAP - Consulting services, process consulting, implementation to support and hosting.

• Mobility – Consulting services include Mobile technology strategy, Business and
Technical architecture, Project Implementation, Implementation management
• Oracle Retail – As a trusted Oracle gold partner, They provide consulting services
related to implementation and support to retail customers
• IT Infrastructure – Consulting services includes IT strategy & design, System
Management Server (SMS), IT service management, Program management
• Business Intelligence – Consulting under Business Intelligence (BI) includes DW and
BI Strategy Consulting, Corporate Performance Management (CPM), Master Data
Management, Enterprise Data Architecture, Enterprise Data Quality Assessment

IT Infrastructure Services:

 End-to-End IT Infrastructure services include:

 IT Infrastructure Consulting
 Infrastructure Managed services
 Infrastructure Managed services
 System Management Services (SMS)
 IT Converged Services
• Mail Management
• Asset Management
• Enterprise Server & Storage Management
• Database Management
• Facility Management
• Data Center Management
• Security Management
• Network (WAN & LAN) Management

Business Intelligence Services:

At Infodart, they use below Business Intelligence analysis tools to deliver true values to different
clients:

4
SAP BI/BO: are well known in the market for its extensive experience and quality delivery for
both on–premise and on cloud in the field of Analytics like BOBJ for HANA live sidecar, BI on
cloud, management dashboard on mobile which help customer to increase the importance of the
ERP.

Oracle Business Intelligence Publisher: Using this tool, we develop reports related to financial
sales, purchase and return related to an item, customer, merchandise, department summary etc.

Retail Analytics: Using their business intelligence strategy, we deliver comprehensive retail
analytics that address all your essential retail business functions, namely Marketing,
merchandising, operations, supply chain, finance etc.

Geographic Information System Services:

Provide dedicated solutions in GIS and resource mapping including Concept to accomplish
solutions, Spatial Database Analysis, Digital Cartography and Surveys, GIS Development and
Customization. We provide numerous GIS services to our clients available all over the world.

Retail point of sale solution – infoPOS

It is designed to handle all needs of retail chain or an individual shop in an accurate way, it is
easily configurable and scalable according to the necessity of the customers as per their business
type.

It is integrated POS software with mainly three components: A POS front end, an inventory or
stock management system in the middle and a back-office accounting system. The retail POS
software is available in three variants including Mobile POS, POS register and web store, all
integrated into one product.

Mobile piont of sale solution– Mobile POS

Mobile POS work in combination with Retail Store Solution where items are scanned/deleted in
the transaction and the completed transaction is retrieved on Retail Store Solution. After retrieving
the transaction the rendering is completed.

Offline SIM
SIM offline works in combination with Oracle Retail Store Inventory Management Application.
The inventory dealings are carried out in the Store without any disturbance during SIM OFFLINE
when internet connectivity is lost. These transactions are synchronized with the Oracle Retail
Store Inventory Management Application once the internet connectivity is restored. Once the

5
internet connectivity has been restored, the inventory transactions are matched with the Inventory
Management Application.

CLIENTAGE OF INFODART TECHNOLOGIES:

Oracle Retail

• Lifestyle (fusion retailer)

• Hyper city (supermarket)

• Auchan Hypermarket

• DW Digi growth

SAP

• Spencer’s

• Vishal Mega Mart

• NRL

• Wipro

• HCL

• Jindal steel & power

• Colours

• NV groups

• Rockman Industry

• Birla Power

• Advik

• Ctrl C

• Philips

• OLAM

• John Carl Group

• Kurl-on

6
• Amrit

• The Great Ship Group

Mobility

• Zulekha Hospital

• Pt. GaungAlamSemesta

• PFC

• Philips

• Genetix

7
1.3 TOPIC INTRODUCTION
The study of financial statement is being prepared for the purpose of presenting a periodical
review or report of the company by the management and deal with the state of investment in
business and result achieved during the period under review. They reflect the financial position of
the company and operating strengths or weaknesses of the company.
Financial statement analysis can be taken either by the management of the firm or by the outside
parties. The nature of the analysis defers depending upon the purpose of the analysis. The analyst
is able to say how well the firm can utilize the resource of the society in producing goods and
services. Turnover ratios are the best tools in deciding these aspects.
Hence it is overall responsibility of the management to see that the resource of the firm is used
most efficiently and effectively and that the firm’s financial position is good. Financial statement
analysis does indicate what can be expected in future from the firm.
Meaning of Financial Statement
Financial statements refer to such statements which contains financial information about an
enterprise. They report profitability and the financial position of the business at the end of
accounting period. The team financial statement includes at least two statements which the
accountant prepares at the end of an accounting period.
The two statements are: -
• The Balance Sheet
• Profit And Loss Account
They provide some extremely useful information to the extent that balance Sheet mirrors the
financial position on a particular date in terms of the structure of assets, liabilities and owners
equity, and so on and the Profit and Loss account shows the results of operations during a certain
period of time in terms of the revenues obtained and the cost incurred during the year. Thus the
financial statement provides a summarized view of financial position and operations of a firm.

Meaning of Financial Analysis:

The first task of financial analysis is to select the information relevant to the decision under
consideration to the total information contained in the financial statement. The second step is to
arrange the information in a way to highlight significant relationship. The final step is
interpretation and drawing of inference and conclusions. Financial statement is the process of
selection, relation and evaluation.
Features of Financial Analysis:

8
• To present a complex data contained in the financial statement in simple and
understandable form.
• To classify the items contained in the financial statement inconvenient and rational
groups.
• To make comparison between various groups to draw various
conclusions.

Purpose of Analysis of financial statements

• To know the earning capacity or profitability.
• To know the solvency.
• To know the financial strengths.
• To know the capability of payment of interest & dividends.
• To make comparative study with other firms.
• To know the trend of business.
• To know the efficiency of mgt.
• To provide useful information to mgt

Procedure of Financial Statement Analysis

• The following procedure is adopted for the analysis and interpretation of financial
statements:-
• The analyst should acquaint himself with principles and postulated of accounting. He
should know the plans and policies of the managements that he may be able to find out
whether these plans are properly executed or not.
• The extent of analysis should be determined so that the sphere of work may be decided. If
the aim is find out. Earning capacity of the enterprise then analysis of income statement
will be undertaken. On the other hand, if financial position is to be studied then balance
sheet analysis will be necessary.
• The financial data be given in statement should be recognized and rearranged. It will
involve the grouping similar data under same heads. Breaking down of individual
components of statement according to nature. The data is reduced to a standard form. A
relationship is established among financial statements with the help of tools & techniques
of analysis such as ratios, trends, common size, fund flow etc.
• The information is interpreted in a simple and understandable way. The significance and
utility of financial data is explained for help indecision making.
9
• The conclusions drawn from interpretation are presented to the management in the form of
reports.
Analyzing financial statements involves evaluating three characteristics of a company: its
liquidity, its profitability, and its insolvency. A short-term creditor, such as a bank, is
primarily interested in the ability of the borrower to pay obligations when they come due.
The liquidity of the borrower is extremely important in evaluating the safety of a loan. A
long-term creditor, such as a bondholder, however, looks to profitability and solvency
measures that indicate the company’s ability to survive over a long period of time. Long-
term creditors consider such measures as the amount of debt in the company’s capital
structure and its ability to meet interest payments. Similarly, stockholders are interested in
the profitability and solvency of the company. They want to assess the likelihood of
dividends and the growth potential of the stock.

10
Tools of Financial Statement Analysis:
Various tools are used to evaluate the significance of financial statement data. Three commonly
used tools are these:
• Ratio Analysis
• Funds Flow Analysis
• Cash Flow Analysis
• Ratio Analysis:
• Fundamental Analysis has a very broad scope. One aspect looks at the general (qualitative)
factors of a company. The other side considers tangible and measurable factors
(quantitative). This means crunching and analyzing numbers from the financial statements.
If used in conjunction with other methods, quantitative analysis can produce excellent
results.
• Ratio analysis isn't just comparing different numbers from the balance sheet, income
statement, and cash flow statement. It's comparing the number against previous years,
other companies, the industry, or even the economy in general. Ratios look at the
relationships between individual values and relate them to how a company has performed
in the past, and might perform in the future.

Meaning of Ratio:
A ratio is one figure express in terms of another figure. It is a mathematical yardstick that
measures the relationship two figures, which are related to each other and mutually
interdependent. Ratio is express by dividing one figure by the other related figure. Thus a ratio is
an expression relating one number to another. It is simply the quotient of two numbers. It can be
expressed as a fraction or as a decimal or as a pure ratio or in absolute figures as “so many times”.
As accounting ratio is an expression relating two figures or accounts or two sets of account heads
or group contain in the financial statements.
Meaning of Ratio Analysis:

Ratio analysis is the method or process by which the relationship of items or group of items in the
financial statement are computed, determined and presented.
Ratio analysis is an attempt to derive quantitative measure or guides concerning the financial
health and profitability of business enterprises. Ratio analysis can be used both in trend and static
analysis. There are several ratios at the disposal of an analyst but their group of ratio he would
prefer depends on the purpose and the objective of analysis.
While a detailed explanation of ratio analysis is beyond the scope of this section, we will focus on
a technique, which is easy to use. It can provide you with a valuable investment analysis tool.
This technique is called cross-sectional analysis. Cross-sectional analysis compares financial
ratios of several companies from the same industry. Ratio analysis can provide valuable
information about a company's financial health. A financial ratio measures a company's
performance in a specific area. For example, you could use a ratio of a company's debt to its
equity to measure a company's leverage. By comparing the leverage ratios of two companies, you

11
can determine which company uses greater debt in the conduct of its business. A company whose
leverage ratio is higher than a competitor's has more debt per equity. You can use this information
to make a judgment as to which company is a better investment risk.
However, you must be careful not to place too much importance on one ratio. You obtain a better
indication of the direction in which a company is moving when several ratios are taken as a group.
Objective of Ratios:
Ratios are worked out to analyze the following aspects of business organization-
A) Solvency-
1) Long term
2) Short term
3) Immediate
B) Stability
C) Profitability
D) Operational efficiency
E) Credit standing
F) Structural analysis
G) Effective utilization of resources
H) Leverage or external financing

STEPS IN RATIO ANALYSIS:

• The first task of the financial analysis is to select the information relevant to the decision
under consideration from the statements and calculates appropriate ratios.
• To compare the calculated ratios with the ratios of the same firm relating to the pas6t or
with the industry ratios. It facilitates in assessing success or failure of the firm.
• Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.
• Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.
Pre-Requisites to Ratio Analysis:
In order to use the ratio analysis as device to make purposeful conclusions, there are certain pre-
requisites, which must be taken care of. It may be noted that these prerequisites are not conditions
for calculations for meaningful conclusions. The accounting figures are inactive in them & can be
used for any ratio but meaningful & correct interpretation & conclusion can be arrived at only if
the following points are well considered.
1) The dates of different financial statements from where data is taken must be same.
2) If possible, only audited financial statements should be considered, otherwise there must
be sufficient evidence that the data is correct.
3) Accounting policies followed by different firms must be same in case of cross section
analysis otherwise the results of the ratio analysis would be distorted.
4) One ratio may not throw light on any performance of the firm. Therefore, a group of ratios
must be preferred. This will be conductive to counter checks.
5) Last but not least, the analyst must find out that the two figures being used to calculate a
ratio must be related to each other, otherwise there is no purpose of calculating a ratio.
GUIDELINES OR PRECAUTIONS FOR USE OF RATIOS:
The calculation of ratios may not be a difficult task but their use is not easy. Following guidelines
or factors may be kept in mind while interpreting various ratios are
• Accuracy of financial statements
• Objective or purpose of analysis
• Selection of ratios
• Use of standards

12
• Caliber of the analysis

Importance of Ratio Analysis:

As a tool of financial management, ratios are of crucial significance. The importance of ratio
analysis lies in the fact that it presents facts on a comparative basis & enables the drawing of
interference regarding the performance of a firm. Ratio analysis is relevant in assessing the
performance of a firm in respect of the following aspects:
1] Liquidity position
2] Long-term solvency
3] Operating efficiency
4] Overall profitability
5] Inter firm comparison
6] Trend analysis.

1] Liquidity position: -
With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of a firm.
The liquidity position of a firm would be satisfactory if it is able to meet its current obligation
when they become due. A firm can be said to have the ability to meet its short-term liabilities if it
has sufficient liquid funds to pay the interest on its short maturing debt usually within a year as
well as to repay the principal. This ability is reflected in the liquidity ratio of a firm. The liquidity
ratio is particularly useful in credit analysis by bank & other suppliers of short term loans.
2] Long-term solvency: -
Ratio analysis is equally useful for assessing the long-term financial viability of a firm. This
respect of the financial position of a borrower is of concern to the long-term creditors, security
analyst & the present & potential owners of a business. The long-term solvency is measured by
the leverage/ capital structure & profitability ratio Ratio analysis s that focus on earning power &
operating efficiency.
Ratio analysis reveals the strength & weaknesses of a firm in this respect. The leverage ratios, for
instance, will indicate whether a firm has a reasonable proportion of various sources of finance or
if it is heavily loaded with debt in which case its solvency is exposed to serious strain. Similarly
the various profitability ratios would reveal whether or not the firm is able to offer adequate return
to its owners consistent with the risk involved.
3] Operating efficiency:
Yet another dimension of the useful of the ratio analysis, relevant from the viewpoint of
management, is that it throws light on the degree of efficiency in management & utilization of its
assets. The various activity ratios measure this kind of operational efficiency. In fact, the solvency
of a firm is, in the ultimate analysis, dependent upon the sales revenues generated by the use of its
assets- total as well as its components.
4] Overall profitability:
Unlike the outsides parties, which are interested in one aspect of the financial position of a firm,
the management is constantly concerned about overall profitability of the enterprise. That is, they
are concerned about the ability of the firm to meets its short term as well as long term obligations
to its creditors, to ensure a reasonable return to its owners & secure optimum utilization of the
assets of the firm. This is possible if an integrated view is taken & all the ratios are considered
together.

5] Inter firm comparison:

Ratio analysis not only throws light on the financial position of firm but also serves as a stepping-
stone to remedial measures. This is made possible due to inter firm comparison & comparison
with the industry averages. A single figure of a particular ratio is meaningless unless it is related

13
to some standard or norm. One of the popular techniques is to compare the ratios of a firm with
the industry average. It should be reasonably expected that the performance of a firm should be in
broad conformity with that of the industry to which it belongs. An inter firm comparison would
demonstrate the firms position vice-versa its competitors. If the results are at variance either with
the industry average or with those of the competitors, the firm can seek to identify the probable
reasons & in light, take remedial measures.
6] Trend analysis:
Finally, ratio analysis enables a firm to take the time dimension into account. In other words,
whether the financial position of a firm is improving or deteriorating over the years. This is made
possible by the use of trend analysis. The significance of the trend analysis of ratio lies in the fact
that the analysts can know the direction of movement, that is, whether the movement is favorable
or unfavorable. For example, the ratio may be low as compared to the norm but the trend may be
upward. On the other hand, though the present level may be satisfactory but the trend may be a
declining one.
Advantages of Ratio Analysis:
Financial ratios are essentially concerned with the identification of significant accounting data
relationships, which give the decision-maker insights into the financial performance of a
company.

The advantages of ratio analysis can be summarized as follows:

• Ratios facilitate conducting trend analysis, which is important for decision making and
forecasting.
• Ratio analysis helps in the assessment of the liquidity, operating efficiency, profitability
and solvency of a firm.
• Ratio analysis provides a basis for both intra-firm as well as inter-firm comparisons.
• The comparison of actual ratios with base year ratios or standard ratios helps the
management analyze the financial performance of the firm.

Limitations of Ratio Analysis:

Ratio analysis has its limitations. These limitations are described below:
1] Information problems
• Ratios require quantitative information for analysis but it is not decisive about analytical
output.
• The figures in a set of accounts are likely to be at least several months out of date, and so
might not give a proper indication of the company’s current financial position.
• Where historical cost convention is used, asset valuations in the balance sheet could be
misleading. Ratios based on this information will not be very useful for decision-making.

2] Comparison of performance over time

• When comparing performance over time, there is need to consider the changes in price.
The movement in performance should be in line with the changes in price.

14
• When comparing performance over time, there is need to consider the changes in
technology. The movement in performance should be in line with the changes in
technology.
• Changes in accounting policy may affect the comparison of results between different
accounting years as misleading.

3] Inter-firm comparison
• Companies may have different capital structures and to make comparison of performance
when one is all equity financed and another is a geared company it may not be a good
analysis.
• Selective application of government incentives to various companies may also distort
intercompany comparison. Comparing the performance of two enterprises may be
misleading.
• Inter-firm comparison may not be useful unless the firms compared are of the same size
and age, and employ similar production methods and accounting practices.
• Even within a company, comparisons can be distorted by changes in the price level.
• Ratios provide only quantitative information, not qualitative information.
• Ratios are calculated on the basis of past financial statements. They do not indicate future
trends and they do not consider economic conditions.Evaluation of efficiency
• Effective tool

CLASSIFICATIONS OF RATIOS:
The use of ratio analysis is not confined to financial manager only. There are different parties
interested in the ratio analysis for knowing the financial position of a firm for different purposes.
Various accounting ratios can be classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratios

1. Traditional Classification
It includes the following.

15
• Balance sheet (or) position statement ratio: They deal with the relationship between two
balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items
must, however, pertain to the same balance sheet.
• Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship
between two profit & loss account items, e.g. the ratio of gross profit to sales etc.,
• Composite (or) inter statement ratios: These ratios exhibit the relation between a profit &
loss account or income statement item and a balance sheet items, e.g. stock turnover ratio,
or the ratio of total assets to sales.
2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity ratios and
profitability ratios.

3. Significance ratios
Some ratios are important than others and the firm may classify them as primary and secondary
ratios. The primary ratio is one, which is of the prime importance to a concern. The other ratios
that support the primary ratio are called secondary ratios.
IN THE VIEW OF FUNCTIONAL CLASSIFICATION THE RATIOS ARE
1. Liquidity ratio
2. Leverage ratio
3. Activity ratio
4. Profitability ratio

1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as & when there becomes
due. The short term obligations of a firm can be met only when there are sufficient liquid assets.
The short term obligations are met by realizing amounts from current, floating (or) circulating
assets The current assets should either be calculated liquid (or) near liquidity. They should be
convertible into cash for paying obligations of short term nature. The sufficiency (or)
insufficiency of current assets should be assessed by comparing them with short-term current
liabilities. If current assets can pay off current liabilities, then liquidity position will be
satisfactory.
To measure the liquidity of a firm the following ratios can be calculated
• Current ratio
• Quick (or) Acid-test (or) Liquid ratio
• Absolute liquid ratio (or) Cash position ratio

16
(a) 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.

Current ratio = current assets / current liabilities

Components of current ratio

Current assets Current liabilities

Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses

(b) QUICK RATIO:

Quick ratio is a test of liquidity than the current ratio. The term liquidity refers to the ability of a
firm to pay its short-term obligations as & when they become due. Quick ratio may be defined as
the relationship between quick or liquid assets and current liabilities. An asset is said to be liquid
if it is converted into cash with in a short period without loss of value.
Quick ratio = Quick or liquid assets / Current liabilities

Components of quick or liquid ratio

Current assets Current liabilities

17
Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Sundry debtors Short-term advances
Marketable securities Sundry creditors
Temporary investments Dividend payable
Income tax payable

(c) ABSOLUTE LIQUID RATIO

Although receivable, 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, absolute
liquid ratio should also be calculated together with current ratio and quick ratio so as to exclude
even receivables from the current assets and find out the absolute liquid assets.
Absolute liquid ration = Absolute liquid assets / Current liabilities

Absolute liquid assets include cash in hand etc. The acceptable forms for this ratio is 50% (or)
0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are considered to pay Rs.2 worth current
liabilities in time as all the creditors are nor accepted to demand cash at the same time and then
cash may also be realized from debtors and inventories.

Components of Absolute Liquid Ratio

Current assets Current liabilities

Cash in hand Outstanding or accrued expenses
Cash at bank Bank over draft
Interest on Fixed Deposit Bills payable
Short-term advances
Sundry creditors
Dividend payable
Income tax payable

2. LEVERAGE RATIOS
The leverage or solvency ratio refers to the ability of a concern to meet its long term obligations.
Accordingly, long term solvency ratios indicate firm’s ability to meet the fixed interest and costs
and repayment schedules associated with its long term borrowings.
The following ratio serves the purpose of determining the solvency of the concern.

• PROPRIETORY RATIO

18
A variant to the debt-equity ratio is the proprietory ratio which is also known as equity ratio. This
ratio establishes relationship between share holder’s funds to total assets of the firm.
Proprietory ratio = Absolute liquid assets / Current liabilities

Share Capital Fixed Assets

Share holders fund Total assets

Share Capital Fixed Assets
Reserves & Surplus Current Assets
Cash in hand & at bank
Bills receivable
Inventories
Marketable securities
Short-term investments
Sundry debtors
Prepaid Expenses

3. ACTIVITY RATIOS
Funds are invested in various assets in business to make sales and earn profits. The efficiency with
which assets are managed directly effect the volume of sales. Activity ratios measure the
efficiency (or) effectiveness with which a firm manages its resources (or) assets. These ratios are
also called “Turn over ratios” because they indicate the speed with which assets are converted or
turned over into sales.

• Working capital turnover ratio

• Fixed assets turnover ratio

• Capital turnover ratio

• Current assets to fixed assets ratio

(a) WORKING CAPITAL TURNOVER RATIO

Working capital of a concern is directly related to sales.

Working capital = current assets – current liabilities

19
It indicates the velocity of the utilization of net working capital. This indicates the no. of times the
working capital is turned over in the course of a year. A higher ratio indicates efficient utilization
of working capital and a lower ratio indicates inefficient utilization.
Working capital turnover ratio=cost of goods sold/working capital.

Components of Working Capital

Current assets Current liabilities

Cash in hand Out standing or accrued expenses
Cash at bank Bank over draft
Bills receivable Bills payable
Inventories Short-term advances
Work-in-progress Sundry creditors
Marketable securities Dividend payable
Short-term investments Income-tax payable
Sundry debtors
Prepaid expenses

(b) FIXED ASSETS TURNOVER RATIO

It is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning
capacity of the firm. Higher the ratio, greater is the intensive utilization of fixed assets. Lower
ratio means under-utilization of fixed assets.
Fixed Asset turnover ratio =Cost of Sales / Net fixed assets
Cost of sales = Income from services
Net fixed assets = Fixed assets - Depreciation

(c) CAPITAL TURNOVER RATIOS

Sometimes the efficiency and effectiveness of the operations are judged by comparing the cost of
sales or sales with amount of capital invested in the business and not with assets held in the
business, though in both cases the same result is expected. Capital invested in the business may be
classified as long-term and short-term capital or as fixed capital and working capital or Owned
Capital and Loaned Capital. All Capital Turnovers are calculated to study the uses of various
types of capital.

20
Capital turnover Ratio = Cost of Goods sold / Capital employed
Cost of Goods Sold = Income from Services
Capital Employed = Capital + Reserves & Surplus

(d) CURRENT ASSETS TO FIXED ASSETS RATIO

This ratio differs from industry to industry. The increase in the ratio means that trading is slack or
mechanization has been used. A decline in the ratio means that debtors and stocks are increased
too much or fixed assets are more intensively used. If current assets increase with the
corresponding increase in profit, it will show that the business is expanding.

Current Asset to Fixed ratio = Current Asset / Fixed asset

Component of Current Assets to Fixed Assets Ratio

CURRENT ASSETS FIXED ASSETS

Cash in hand Machinery
Cash at bank Buildings
Bills receivable Plant
Inventories Vehicles
Work-in-progress
Marketable securities
Short-term investments
Sundry debtors
Prepaid expenses

4. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit is the engine,
that drives the business enterprise.
• Net profit ratio
• Return on total assets
• Reserves and surplus to capital ratio
• Earnings per share
• Operating profit ratio
• Price – earning ratio

21
• Return on investments

(a) NET PROFIT RATIO

Net profit ratio establishes a relationship between net profit (after tax) and sales and indicates the
efficiency of the management in manufacturing, selling administrative and other activities of the
firm.
Net Profit ratio + Net profit after tax / Net sales
Net Profit after Tax = Net Profit (–) Depreciation (–) Interest (–) Income Tax
Net Sales = Income from Services

It also indicates the firm’s capacity to face adverse economic conditions such as price competitors,
low demand etc. Obviously higher the ratio, the better is the profitability.

(b) RETURN ON TOTAL ASSETS

Profitability can be measured in terms of relationship between net profit and assets. This ratio is
also known as profit-to-assets ratio. It measures the profitability of investments. The overall
profitability can be known.
Return on assets = Net profit / Total assets
Net Profit = Earnings before Interest and Tax
Total Assets = Fixed Assets + Current Assets

(c) RESERVES AND SURPLUS TO CAPITAL RATIO

It reveals the policy pursued by the company with regard to growth shares. A very high ratio
indicates a conservative dividend policy and increased ploughing back to profit. Higher the ratio
better will be the position.
Reserve and surplus ratio = Reserves and surplus / share capital

(d) EARNINGS PER SHARE:

Earnings per share is a small verification of return of equity and is calculated by dividing the net
profits earned by the company and those profits after taxes and preference dividend by total no. of
equity shares.

22
Earnings Per share = Net Profit after tax / Number of equity shares

The Earnings per share is a good measure of profitability when compared with EPS of similar
other components (or) companies, it gives a view of the comparative earnings of a firm.

(e) OPERATING PROFIT RATIO

Operating ratio establishes the relationship between cost of goods sold and other operating
expenses on the one hand and the sales on the other.
Operation ratio = Operating Cost / Net sales

However 75 to 85% may be considered to be a good ratio in case of a manufacturing under taking.
Operating profit ratio is calculated by dividing operating profit by sales.

Operating profit = Net sales - Operating cost

Operating profit ratio = Operation Profit / sales

(f) PRICE - EARNING RATIO

Price earning ratio is the ratio between market price per equity share and earnings per share. The
ratio is calculated to make an estimate of appreciation in the value of a share of a company and is
widely used by investors to decide whether (or) not to buy shares in a particular company.
Generally, higher the price-earning ratio, the better it is. If the price earning ratio falls, the
management should look into the causes that have resulted into the fall of the ratio.

Price earning ratio = Market price per share / Earning per share

Market Price per Share = Capital + Reserves & Surplus / Number of Equity Shares
Earnings per Share = Earnings before Interest and Tax / Number of Equity Shares

(g) RETURN ON INVESTMENTS

Return on share holder’s investment, popularly known as Return on investments (or) return on
share holders or proprietor’s funds is the relationship between net profit (after interest and tax)
and the proprietor’s funds

23
Return on shareholder’s investment = Net profit (after interest and tax) / Shareholder’s
funds

The ratio is generally calculated as percentages by multiplying the above with 100.

Purpose of Ratio Analysis:

1. To identify aspects of a business’s performance to aid decision making
2. Quantitative process – may need to be supplemented by qualitative factors to get a
complete picture.
3. 5 main areas-
 Liquidity – the ability of the firm to pay its way
 Investment/shareholders – information to enable decisions to be made on the extent of the
risk and the earning potential of a business investment
 Gearing – information on the relationship between the exposure of the business to loans as
opposed to share capital
 Profitability – how effective the firm is at generating profits given sales and or its capital
assets
 Financial – the rate at which the company sells its stock and the efficiency with which it
uses its assets

Role of Ratio Analysis:

It is true that the technique of ratio analysis is not a creative technique in the sense that it uses the
same figure & information, which is already appearing in the financial statement. At the same
time, it is true that what can be achieved by the technique of ratio analysis cannot be achieved by
the mere preparation of financial statement.
Ratio analysis helps to appraise the firm in terms of their profitability & efficiency of
performance, either individually or in relation to those of other firms in the same industry. The
process of this appraisal is not complete until the ratio so computed can be compared with
something, as the ratio all by them do not mean anything. This comparison may be in the form of
intra firm comparison, inter firm comparison or comparison with standard ratios. Thus proper
comparison of ratios may reveal where a firm is placed as compared with earlier period or in
comparison with the other firms in the same industry.
Ratio analysis is one of the best possible techniques available to the management to impart the
basic functions like planning & control. As the future is closely related to the immediate past,
ratio calculated on the basis of historical financial statements may be of good assistance to predict
the future. Ratio analysis also helps to locate & point out the various areas, which need the
management attention in order to improve the situation.
As the ratio analysis is concerned with all the aspect of a firms financial analysis i.e. liquidity,
solvency, activity, profitability & overall performance, it enables the interested persons to know
the financial & operational characteristics of an organisation& take the suitable decision.

24
25
CHAPTER 2

OBJECTIVE OF STUDY

Objective of Study

To understand the information which is in financial statements with a view to know the strength
or weaknesses of the company and to forecast about the future prospects of the firm and thereby
enabling the financial analyst to take different decisions regarding the operations of the firm?

1. To study the present financial system of Infodart Technologies Ltd.

2. To determine the Profitability, Liquidity Ratios, Activity Ratios, Leverage Ratios.

4. To offer appropriate suggestions for the better performance of the organization

26
CHAPTER 3

LITERATURE REVIEW

3.1 Manish Mittal and Arunna Dhademade (2005)

They found that higher profitability is the only major parameter for evaluating banking sector
performance from the shareholders point of view. It is for the banks to strike a balance between
commercial and social objectives. They found that public sector banks are less profitable than
private sector banks. Foreign banks top the list in terms of net profitability. Private sector banks
earn higher non-interest income than public sector banks, because these banks offer more and
more fee based services to business houses or corporate sector. Thus there is urgent need for
public sector banks to provide such services to stand in competition with private sector banks.

3.2. I.M. Pandey (2005):

An efficient allocation of capital is the most important financial function in modern times. It
involves decision to commit the firm's funds for the long term assets. The firm’s total value will
tend increase if investments are profitable and add to the shareholders wealth. Financial decisions
are important to influence the firm’s growth and to involve commitment of large amount of funds.
The types of investment decisions are expansion of existing business, expansion of new business
and replacement and modernization. The capital budgeting decisions of a firm has to decide the
way in which the capital project will be financed. The financing or capital structure decision. The
assets of a company can be financed either by increasing the owners claims on the creditors’
claims. The different means of financing signify the financial structure of an enterprise.

3.3. Medhat Tarawneh (2006):

Financial performance is a dependent variable and measured by Return on Assets (ROA) and the
intent income size. The independent variables are the size of banks as measured by total assets of
banks, assets management measured by asset utilization ratio (Operating income divided by total
assets) operational efficiency measured by the operating efficiency ratio (total operating expenses
divided by net income)

27
3.4. Jha DK and D S Sarangi (2011):

The financial performance of seven public sector and private sector banks during the period
2009-10. They used three sets of ratio, operating performance ratio, financial ratio and Efficiency
ratio. The study revealed that Axis bank was on the top of these banks followed by ICICI, BOT,
PNB, SBI, IDBI and HDFC.

3.5. NeeruMundrai, Kamni Tandon, Nidhi Malhotra (2011):

Excel books found that there is significant impact on the SBI’s performance due to entry of new
private sector banks as the new banks are profit oriented institutions while traditional banks are
operating with the shackles of social responsibility towards the society. The other reasons that can
be attributed are slow technological up gradation, poor staffing and employment practices which
affect long term profitability of public sector banks. The study revealed that profitability of SBI is
lower than that of private sector banks even predicting of private sector banks (business per
employee) is higher than state banks.

3.6. Fernando Ferreng (2012):

it is generally agreed that recent economic crisis intensified worldwide competition among
financial institution. This competition has direct impact on how bank deal with their customer and
achieve its objectives performance evaluation of banks is the key function for improving banks
performance. Banks profitability and success to a large extent depends on bank branch financial
performance

3.7. Ramchandan Azhagasahi and Sandanvn Gejalakshmi (2012):

In their study found the impact of assets management operational efficiency and bank size on the
financial performance of the public sector and private sector bank. The research revealed that
bank with higher total capital deposits and total assets do not always mean that they have better
financial performance. The overall banking sector is strongly influenced by assets utilization,
Operational efficiency and interest income.

28
CHAPTER -4

RESEARCH METHODOLOGY

4.1. Research Methodology:

Research methodology is an organized way to resolve the research problem. The research
methodology includes the variety of methods and techniques for conducting a research. Research
is an art of scientific study.
It determines strength reliability and accuracy of the project.

4.2. Research Design:

Research Design pertains to the great research approach or strategy adopted for a particular
project. A research project has to be the conducted scientifically making sure that the data is
collected adequately and economically.
The study used a descriptive research design for the purpose of getting an insight over the issue. It
is to provide an accurate picture of some aspects of market environment. Descriptive research is
used when the objective is to provide a systematic description that is as factual and accurate as
possible.

4.3. Data Collection

29
 Secondary Data: Secondary data are those which have already been collected by
someone else and which already had been passed through the statistical process. The
secondary data was collected through books, articles, web sites, and magazines.

30
CHAPTER -5

DATA ANALYSIS AND INTERPRETATION

5.1: RATIO ANALYSIS

5.1.1: PROFITABILITY RATIOS:
5.1.1.1: Gross Profit Ratio:
This ratio is also known as a Gross Margin or Trading Margin Ratio. Gross Profit Ratio includes
the difference between sales and direct cost.

31
Gross profit ratio = (Gross Profit / Net sales) * 100

Table No. 5.1 GROSS PROFIT RATIO

Years Gross Profit (Rs) Net Sales Ratio (%)
2014-2015 30289.71 90176.44 33.58
2015-2016 21971.03 108277.62 20.29
2016-2017 32347.63 118189.37 27.37

GP chart
2014-2015 2015-2016 2016-2017

118189.37
108277.62
90176.44

30289.71 32347.63
21971.03

33.58 20.29 27.37

Gross Profit (Rs) Net Sales Ratio (%)

INFERENCES:
The gross profit for the financial for the financial year 2007-2008 was recorded as per the ratio is
35.58%, whereas the year between 2008-2009 went through a change in the ratio of 20.29% and
the companies profit went upward in 2009-2010 with the ratio of 27.37%.
Thus, it is showing the steady growth in the company profile.

32
5.1.1.2. RETURN ON EQUITY OR EQUITY OR RETURN ON NET WORTH

The ratio signifies the return on equity shareholders funds. The profit considered for computing
the ratio is taken after payment of presence dividend.

Return on equity = (Net profit after interest and tax/shareholders fund )* 100

Table No. 5.1 RETURN ON EQUITY

YEAR NET PROFIT SHAREHOLDERS RATIO (IN %)
AFTER INTEREST FUND
AND TAX
2014-2015 21254.24 231280.81 9.18
2015-2016 15073.14 268538.97 5.61
2016-2017 22674.86 333318.07 6.80

Return on Equity
2014-2015 2015-2016 2016-2017
333318.07

268538.97
231280.81

22674.86
21254.24

15073.14
9.18 5.61 6.8

NET PROFIT AFTER INTEREST AND SHAREHOLDERS FUND RATIO (IN %)

TAX

33
INFERENCES:

Return on shareholder fund determines the profitability from the shareholders point of view. From
the above , shows that in the year 2008-2009 , the company shows 5.61% of ratio and has risen to
6.80%.

This is the clear indication of operation is efficient.

5.1.2 TURNOVER RATIO:

5.1.2.1 WORKING CAPITAL TURNOVER RATIO

Working capital ratio measures the effective utilization of working capital. It also measures the
smooth running of business. The ratio establishes relationship between cost of sales and working
capital..

Working capital turnover ratio= Sales / Net working capital

Table No. 4 WORKING CAPITAL TURNOVER RATIO

YEARS SALES NET WORKING RATIO
CAPITAL
2014-2015 90176.44 645733.44 0.13

2015-2016 108277.62 666319.1.8 0.16

2016-2017 118189.37 898497.57 0.13

34
working capital turn over ratio
2014-2015 2015-2016 2016-2017

898497.57

645733.44

90176.44 118189.37

108277.62
0 0.13 0.16 0.13

SALES NET WORKING CAPITAL RATIO

INFERENCES:
A higher ratio is the indication of lower investment of working capital and more profit.

In 2007-2008 , the sales of the company are low at 0.13 times but in the year 2008-2009,

It gone uoward of sales to 0.16 times.

5.1.2.2 CAPITAL TURNOVER RATIO:

Managerial efficiency is also calculated by establishing the relationship between cost of sales with
the amount of capital invested in the business.

Capital Turnover Ratio = Sales / Capital employed

Table No. 5.5 CAPITAL TURNOVER RATIO

YEARS NET SALES CAPITAL RATIO

EMPLOYED
2014-2015 90176.44 536009.27 0.16
2015-2016 108277.62 533288.26 0.20
2016-2017 118189.37 720052.92 0.17

35
capital turn over ratio
2014-2015 2015-2016 2016-2017

720052.92

536009.27
533288.26

90176.44 118189.37

108277.62

0.16 0.2 0.17

NET SALES CAPITAL EMPLOYED RATIO

INFERENCES:

In the year 2007-2008, the sale comparing to 2008-2009, it is increased to 0.20 times and it shows
that efficient methods are adopted to use the capital employed. In 2009-2010, which compares to
the year 2007-2008 it indicates higher ratio of 0.17 times. The capital of the company has
utilized efficiency comparing to 2007-2008

5.1.2.3 FIXED ASSET TURNOVER RATIO

This ratio determines efficiency of utilization of fixed asset and profitability of a business
concern.

Fixed Asset Turnover Ratio = Sales / Net fixed assets

Table No. 5.6 FIXED ASSET TURNOVER RATIO

YEARS NET SALES FIXED ASSET RATIO

2014-2015 90176.44 17264.30 5.22

2015-2016 108277.62 20241.05 5.35

2016-2017 118189.37 23237.80 5.09

36
Fixed Asset Turnover Ratio
2014-2015 2015-2016 2016-2017

118189.37

108277.62
90176.44

20241.05
23237.8
17264.3
5.22 5.35 5.09

NET SALES FIXED ASSET RATIO

INFERENCES:
Higher the ratio is more than the efficiency in utilization of Fixed assets. Lower ratio indicates
the underutilization of fixed assets. From the above table it indicates in the year 2008-2009, the
sales have been increased comparing to the next year 2009-2010. And it is gradually declining
over the next year 2009-2010 for 5.09 times.

5.1.3 SOLVENCY OR FINANCIAL RATIO

5.1.3.1 CURRENT RATIO
In order to measure the short -term liquidity or solvency of a concern , comparison of current
assets and current liabilities in inevitable. Current ratio indicate the ability of a concern to meet its
current obligations as and when they are due for payment.
Current Ratio = Current Asset / Current Liabilies

Table No. 5.7 CURRENT RATIO

YEAR CURRENT ASSET CURRENT RATIO
LIABILTIES
2014-2015 56187.53 53034.57 1.06
2015-2016 68876.04 50360.94 1.36
2016-2017 166489.36 55084.13 3.02

37
Current Ratio
2014-2015 2015-2016 2016-2017
166489.36

53034.57 55084.13
68876.04
56187.53 50360.94

1.06 1.36 3.02

CURRENT ASSET CURRENT LIABILTIES RATIO

INFERENCES:
A high current ratio is a assurance that the firm will have adequate funds to pays current liabilities
and other payment. During the year 2009-2010, the current ratio is 3.02 times and it is more when
compared with previous year 2008-2009 is 1.36 times.

5.1.3.2 DEBT EQUITY RATIO:

The debt equity is determined to ascertain the soundness of the long term financial policies of the
company and company and also to measure the relative proposition of outsider’s fund and
shareholders fund investment in the company.

Debt Equity Ratio = Total long term debt/ Shareholders fund

Table No. 5.8DEBT EQUITY RATIO

YEAR LONG TERM DEBT SHAREHOLDER’S RATIO

FUND

2014-2015 431716.93 104292.34 4.13

2015-2016 418021.26 115297 3.62

2016-2017 588417.27 131635.65 4.47

38
Debt Equity Ratio
LONG TERM DEBT SHAREHOLDER’S RATIO

588417.27

431716.93 418021.26

115297 131635.65
104292.34

0 4.13 3.62 4.47

2014-2015 2015-2016 2016-2017

INFERENCES:
From the above table, during the year 2007-2008 the debt equity ratio is 4.13 times and it is
decreased to 3.62 times then it shows the uptrend from the year 2009-2010 as 4.47 times. Suggest
that the debt from the company has increased over the year with increase in shareholders funds as
well.

5.1.3.3 DEBT TO TOTAL FUNDS RATIO:

This ratio gives same indication as the debt equity ratio as this is a variation of debt equity ratio.

This ratio is also known as solvency ratio. This Ratio is the relationship between long term debts

and total long term funds.

Debt to Total Funds Ratio= Long Term debt / Total funds

Table No. 5.9 DEBT TO TOTAL FUNDS RATIO

YEAR LONG TERM DEBT TOTAL FUNDS RATIO

2014-2015 431716.93 712389.16 0.60

2015-2016 418021.26 742843.84 0.56

2016-2017 588417.27 981013.79 0.59

39
Debt to Total Funds Ratio
2014-2015 2015-2016 2016-2017

981013.79
712389.16
742843.84
431716.93 588417.27
418021.26

0.6 0.56 0.59

LONG TERM DEBT TOTAL FUNDS RATIO

INFERENCES:
During the year 2007-2008, the debt to total fund ratio is 0.60 times and it was deceased . And in
2009-2010 again it had an increase in the company’s sales comparing to previous year2008-2009
is 0.56 times in 2009-2010.

5.1.3.4 EQUITY TO TOTAL FUNDS RATIO:

Equity to total funds explains the relationship between equity and total funds.

Equity to total Fund = Equity / Total

Table No. 5.10EQUITY TO TOTAL FUNDS
YEAR EQUITY TOTAL FUNDS RATIO

2014-2015 104292.34 712389.16 0.14

2015-2016 115267.00 742843.84 0.15

2016-2017 131635.65 981013.79 0.13

40
Equity to total Fund ratio
2014-2015 2015-2016 2016-2017

981013.79
712389.16
742843.84

104292.34 131635.65
115267
0.14 0.15 0.13

EQUITY TOTAL FUNDS RATIO

INFERENCES:
In the year 2007-2008, the total funds was Rs. 712389.16 (in lakhs) and it shows upward trend of
Rs. 981013.79 ( in lakhs) and during the year 2009-2010 comparing to the year 2008-2009 is for
Rs 742843.84(in lakhs).

41