A PROJECT REPORT ON ANALYSIS OF FINANCIAL STATEMENTS OF SOUTH INDIA METAL COMPANY, SHORANUR -2

A PROJECT REPORT SUBMITTED TO CALICUT UNIVERSITY IN PARTIAL FULFILLMENT OF THE REQUIREMENT FOR THE AWARD OF THE DEGREE OF BACHELOR OF BUSINESS ADMINISTRATION SUBMITTED BY

SAJA.K.A
REGISTER NO: UNDER THE GUIDANCE OF
RAMSEENA

MISS (M.Com)

DEPARTMENT OF COMMERCE& MANAGEMENT STUDIES

ANSAR WOMENS COLLEGE,

PERUMPILAVU,THRISSUR,KERALA.
(Affiliated to the University of Calicut) 2008-2009

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ANSAR WOMENS COLLEGE PERUMBILAVU, P.O KARIKKAD

Bachelor of Business Administration CERTIFICATE This is to certify that this Project Report entitled at SIMCO Metal Industry with reference to overall study is a bonafide record of placement training done by SAJA.K.A (REG NO: )under my guidance and supervision and that is has not previously formed the basis for the award of any degree, diploma, associate ship, fellow ship to her

Head of the department

Internal Guide MISS RAMSEENA (Lecturer)

Dept of commerce& managent studies

MR PRASAD. P

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DECLARATION

I hereby declare that the project report entitled atSIMCO METAL INDUSTRY has been written and prepared by me during the year 2008. The project was done under the valuable guidance and supervision of RAMSEENA MISS (Department of Commerce & Management Studies) ANSAR WOMENS COLLEGE PERUMPILAVU In partial fulfillment of the requirement of the Degree of Bachelor of Business Administration of Calicut University. I also declare that this study is the result of my own effort and has not been submitted to any other institution for the case of any Degree.

PLACE: PERUMPILAVU DATE:

SAJA..K .A
FINAL BBA ANSAR WOMENS COLLEGE

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ACKNOWLEDGEMENT

I would like to take this opportunity to express my profound thanks to all people who have helped me with sound advice. I Acknowledge my sincere thanks to Mr. Parameswaran of SIMCO for their sincere guidance and help without which this placement would have been Impossible. I am deeply indebted to my guide Miss. Roopalakshmi.VC

(Department of Commerce) and Mr. Prasad. P(Head Department),

who has been constantly encouraging me at every stage of the work of this placement training report. I cordially express my thanks to other staff members for their whole hearted co operation. Above all, I wish to express my gratitude to god and my parents under whose divine guidance; I have able to successfully complete this work. I myself, however remain solely responsible for the inadequancies and blemishes that might have crept in to the report

Perumbilavu: Date:

CONTENTS
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CHAPTER

PAGE NO:

1. INTRODUCTION.8-11 2. COMPAN PROFILE13-27 3.

FINANCIAL STATEMENT ANALYSIS OF SIMCO..28-40

4. RATIO ANALYSIS OF SIMCO.41-73 5. SUMMARYOF FINDINGS &SUGGESTIONS.74-76 6. CONCLUSION..77 7. BIBLIOGRAPHY.78 8. ANNEXURE.79-85

CHAPTER-1

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INTRODUCTION

Agriculture constitutes backbone of Indian Economy & in spite of congested industrialization in the last four decades; Agriculture still occupies a place of significance. Being the largest sector of the economic activity, it is the source of livelihood for over 70 % of the population in the economy. Agricultures accelerate the economic development to a very large proportion of population, capital for its own development and surplus for investment in other productive sectors. It is well known that agricultural production is the combined effect of a variety of implements, fertilizers, irrigation, farm machinery, high yielding varieties of seeds, etc.All these inputs in one way or another contribute to increasing in productivity of agriculture & form under one. But these inputs become more effective and their potential is better utilized if appropriate energy and power sources are made available to the farmer. The manufacturing of these agricultural implements & plays a dominant role in small scale industrial sector of Kerala economy. This industry generally is included in the agro based category units of small scale units. There are nearly 100small scale agricultural implements tools manufacturing units in KERALA. The main location of these units is at SHORANUR at PALAKKAD District, {70% are at SHORANUR itself}. The remaining units are spread over various parts of the state especially in rural areas. Total investments of these 100 units in plant and machinery are more than Rs6Crores .The industry provides employment to nearly 300 people in this sector. The ANNUAL turn over of these units is more than Rs20Crores and the main item of manufacturing include Spade, Pick-axe, Hammer, Sickles etc It should be noted that various processes of manufacturing, raw materials, machinery & equipments, investment, labour etc are required for small units. The industry has been included in small scale units because it requires less investment when compared to other large scale industries and also less technological background for

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manufacturing process. The system of marketing agricultural implements is through agents appointed at various parts of the country on commission basis. The products are sold both inside & outside KERALA. It may be stated that though these implements and machinery have been developed mainly for usage in farms. The demand for hand tools and simple implements continues due to small holding by the marginal farmer.

THE SOUTH INDIA METAL COMPANY

SOUTH INDIA METAL COMPANY is one of the reputed Companies in KERALA which involved in the manufacturing of Agricultural Implements, Garden Implements, Estate tools & Hand Tools. It has a very good popularity in South India Markets.The South India Metal Company was established in 1936. The South India Metal Company is pioneers in he manufacturing field of Agricultural and Horticultural implements, Garden tools, Estate tools and Hand tools. The products of South India Metal Company have good market in South India. The products of South India Metal Company have good market in South India. The company has received various awards including first prize in the World Agricultural Fare at New Delhi in 1961 for Secatures and second prize is the National Quality Award for Agricultural Implements In 1986.

OBJECTIVES OF THE STUDY

Working capital management is a significant aspect of financial Management. It is important that investment in current assets and the level of current liabilities will have to be geared quickly to change in sales. It is also important that apportion of working capital requirement is brought from Long term sources such as equity or long term loans .In adequate working capital is a crisis and it may arise due to poor working capital and financial management . Every organization has adequate working capital for its efficient functioning. As South India Metal Company, Shornur is a reputed institution it should have sufficient working capital for its uninterrupted growth. The growth can be ensured

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by a systematic and continuous analysis of fixed assets, current assets, fixed and current liabilities, sales liquidity etc. An analysis of financial statements of South India Metal Company will help to identify the weak points and convert it to strong points by taking some remedial measures. The present study is an attempt in this direction.

THE MAIN OBJECTIVES OF THE STUDY ARE

1. 3 To analyses the profitability of the business To analyses the short term and long term financial position of the firm. 2. To analyses the asset management of the firm. 4. To make recommendation based on the analysis of financial statements.

PERIOD OF THE STUDY

The analyses of financial statement of South Indian Metal Company have been made for a period of 5 years ranging from 2003-2008.

METHODOLOGY

The performance evaluation of an enterprise may be conducted by making a comparative study of its own records and an attractive approach would here to analyses the firms objectives and performance against absolute standard of efficiency. The study was conducted on the basis of financial data from published records and other books with both primary and secondary data. The data have been collected from partnership deed of SIMCO, published financial statements of last 6 years, personal interview with office staff and other relevant books and accounts of the firm.

TOOLS USED FOR ANALYSIS

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The study makes use of techniques like 1. 2. 3. 4. 5. 1. 2. 1. 2. Comparative Balance Sheet & Income Statements Common Size Balance Sheet & Income Statements Profitability Ratio. Liquidity Ratio Activity Ratio etc Averages Percentages Ratios Trend Analysis

Simple Mathematical Tools like

Accounting Tools like

& Statistical Tools were made also used for this analysis.

LIMITATONS OF THE STUDY

The Sample Size is very small. Only 5 data were analyzed. So there is a possibility of
occurrence of some sampling errors. If the sample were large and representative, the observation would have become more credible.

It considers only monetary factors, non monetary factors are not considered. It is applicable only in the case of South Indian Metal Company, Shornur, not a study
of industry concerned

The time allowed for the study is less. It has been conducted by using secondary data.

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COMPANY PROFILE

CHAPTER-2
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SOUTH INDIA METAL COMPANY SHORANUR

COMPANY PROFILE
REGISTERED OFFICE S.S.I Reg. No. AUDITOR MANAGING DIRECTOR BANK TRADE NAME BRAND SYMBOL : PURAYANNUR INDUSTRY SHORANUR : 09/07/00380/PMT : V.K.S NARAYANAN & CO : P.DIVAKARAN : PUNJAB NATIONAL BANK : SIMCO : LION

SOUTH INDIA METAL COMPANY located in SHORANUR is a partnership firm established and registered in the year 1947. The founder of this firm is PMC.DIVAKARAN NAMBOOTHIRIPAADU. The partners of the firm are PURAYANNUR DIVAKARAN and PURAYANNUR VALSALA. The partners of the firm are PURAYANNUR DIVAKARAN and PURAYANNUR VALSALA. The managing partner of the firm is P.DIVAKARAN .The firm is running with 20 office staff and 52 laborers.

HISTORY OF THE FIRM

SIMCO is a well known firm, manufacturing agricultural implements and garden tools. South India Metal Company was established in 1936 as a private company. Later partnership firm known as Purayannur Industries purchased the company from the ABDUL SAMAD in the year 1947 and registered under the Indian Partnership Act in 1956. The firm improved its working with the help of technical advice of Sri C.K MENON and Sri K.K RAJA.

STRUCTURE OF THE FIRM

Accounting to the partnership deed the firm consists of two partners. 11
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PURAYANNUR DIVAKARAN and PURAYANNR VALSALA The capital of the firm Rs 4, 00, 00 and contributed as under PURAYANNUR DIVAKARAN -1, 60,000 /PURAYANNUR VALSALA-2, 0,000/The profit and loss of the firm after adjusting their interest salary and bonus to the partners if any is divided among the two partners in the ratio of 40 % and 60% respectively. The managing partner of the firm is responsible for the overall and effective management of the staff and whole establishment of SIMCO.

WORKING CAPITAL of SIMCO

The company invites deposits in the form of unsecured loans from the partners for its day to day activities. It also invites deposits from outsides. These deposits are used for meeting the companys working capital requirements. It has also the banking facilities such as overdrafts.

LOCATION OF THE FIRM

SIMCO is situated at Kulappully, 3 kilometers from Shornur Town. There is about 8 acres of land for the company. The office, factory building, canteen, workers, rest room, watch man sitting room, workers and staff quarters are well constructed. As it is situated in the heart of Kulappully , all facilities such as road, rail electricity, banking, communication etc are readily available there. Besides these facilities the place is famous for small scale industries, especially Metal Industries .Because of this the parcel booking office of almost all transport companies have been opened here like T.V.S .Pattel Road ways, ABT ETC

LAY OUT
The layout of the firm comprises factory buildings, office, canteen and rest room for employees, security office and employers quarters well designed to accommodate with in the available area even providing space for future expansion.

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QUALITY CONTROL
SIMCO ranked first in its quality of products targeted towards user satisfaction. The firm has received various awards including a first prize in the WORLD AGRICUTURAL FAIR at NEW DELHI in 1961 for SECATURES and second prize in the NATIONAL QUALITY AWARD FOR AGRICULTURAL IMPLEMENTS in 1986

PRODUCTS OF SOUTH INDIA METAL COMPANY 1. AGRICULTURAL IMPLEMENTS MAMATTY PICK-AXE GRUBBLING MATTOCK 2. HORTICULTURAL IMPLEMENTS KODAALI FORK DIGGING FORK MAMMATTY FORK DIGGING FORK 3. GARDEN TOOLS GARDEN SHARES TRENCHING HOE HAND FORK etc. 4. ESTATE TOOLS RUBBER TAPPING KNIFE
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 PRUNNING SAW PRUNNING KNIFE 5. HAND TOOLS TM CUTTER ALAVANGOES FELLING KNIFE HAMMERS AXE SICKLE COMPANY HAVE A MONOPOLY ON THE PRODUCTION OF DIGGING FORK
PICK AXE Pick-axe is an inevitable implements used by farmers and workers.These are used for digging purposes.Two edges of pick-axe are sharpened one edge is pointed and the other iand the other is flattered.So the operations become easier. SPADE Spade is an essential tool for several kinds of agricultural operations.It is mainly used for turning up the soil or digging of the ground.It can be used both in light and hard soil. HAMMER Hammer is an indispresable tool for mining and quarry works. It is used for splitting stones or rocks and is also used in the preparation of metal for load and building constructions.The purpose for which it is being used the hammer is generally included in the category of agricultural implements.

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ORGANISATION CHART

Purayanur Industries Managing Partner

Technical Manager Manager

Office

Raw material Production and Accounting and Purchase and Maintenance Finance Stores department Department Department Department Foreman Clerk Charge man

Finished Goods and sales

Sales Manager Account Sales Clerk Wage Clerk Raw material Store Keeper Watchman

Workers

Dispatch clerk Computer Operator

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VARIOUS DEPARTMENTS
1) RAW MATERIALS PURCHASE AND STORES DEPARTMENT
The working of the company starts from the Raw material purchase and stores de partment. The raw material store keeper is the head of this department. There is one assistant store keeper to help the raw material store keeper. The main functions of thsi depatment are (1) Purchasing of raw material (2) Storing of raw material (3) Issuing of raw material. 1)PURCHASING OF RAW MATERIAL Purchase of raw material is the important function of the raw material purchase and stores department.It includes the following steps a) RECEIVING PURCHASE REQUISITION Purchase requisition is a form used as a formal request to the purchasing department to purchase materials.It gives the specification and quality materials to be bought ,works order number and sanctions reference appilicable and data line for the receipt of the materials. When the stock of materials come to the re-ordering level ,the store keeper prepare a purchase requisition.After receiving the purchase requisition,the purchase manager will inform the same to several manager and then inform to managing partner.Managing partner give consent to the purchase of such raw material.After selecting the supplier the purchase manager will send purchase order to those suppliers who supply the good quality material.

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b) ISSUING OF PURCHASE ORDERS A purchase order is an order to the supplier for specificed material it is the evidence of the contract between the buyer and the supplier that binds both buyer and supplier to the terms under which the order is placed. Purchase order will contain name and address of both the parties,name of goods,quantity of goods etc..After obtaining the order the supplier will inform the date of dispatch,quantity,price &mode of delivery of materials.The supplier send their goods to the consignee through TVS,KT etc stated in the indent.After receiving the materials storekeeper will check the quantity ,quality and condition and will issue Goods received note to facilitate the procurement department to release the invoice for payment. 2.STORING OF MATERIAL After receving the material ,store keeper place the material in proper place and maintain a stores ledger containing three main column a) Reciept column b) Issue column c) Balance column On the basis of stores receipt note ,the store keeper accounts the receipt in the receipt column of the stores ledger.It contain the quantity , rate and value of the material. 3.ISSUE OF RAW MATERIAL Issue of raw material is done through the raw material indent. It is prepared by the respective section chargeman showing the job order number, name of the material,number or quantity etcWhen the goods are issued, the storekeeper records it in the issue column of the store ledger and balance is shown in the balance column.The company adopt FIFO method for issuing the material .

PRODUCTION DEPARTMENT
Production is a process of converting rawmaterial into semi finished goods or finished products.The working of the production department consist of the following process: 17
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1.RAIL CUTTING The first step in production process is to cut the rail into comfortable size.Mainlythe rail is divided into 3 parts head,centre and flange or bottom.Head is used for making hammers, centre for making mammatties etcThe products which need high carbon content are made by billets. 2.POWER FORGING After Rail cutting it is then passed to the power forging section.A far heating the rail upto red form furnure,it is passed to power hammers.The power hammers will give Rough shape to the product.From here semi finished goods are passed to Hand forging section. 3.HAND FORGING Finishing work is manually done at hand forging section.Only that raw material which is having rough shape is passed to hand forging section. 4.TEMPRATURE 0R HEAT PROCESSING Tools are tempered on hardened under this process. Firstly the tools are heated then suddenly cooling. This is another area of expert work because the qualities of the tool or implements are very much depending on this process. Similarly sharper tools are tempered in quenching oil and other tools are tempered is know.

5.GRINDING OR POLISHING
Under this process tools are grinded or polished. This process makes the tools are very attractive. For this grinding wheels and polishing belts are used. 6.CUTLERY AND CARPENTARY Next process is cutting and carpentry certain tools require handles. These handles are fitted under this process. For handled, in this company avail plants are used because of the special quality in nature. 7.PAINTING AND PACKING Some tools are painted in the red colour, some others in light rose and others in varnish. Some special tools are electroplated. This process makes tools are very attractive and prevent stain.

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The painted or varnished tools are packed in convenient Quantities and then transferred to finished goods stall. The process Of Production is given in diagram. The diagram showing the Company process of section of production.

MAINTENANCE DEPARTMENT
Maintenance section is a part of production department. It helps to make the production smoothly affinity. It consists of on maintenance engineer and his workers. The workers include sharps, mechanist, man and fitters.Maintenance of a machine means effort dissected towards maintaining the machine in a good condition. Maintenance reduces break downs and helps in achieving targeted production. The maintenance is done with out affecting production. The main duties of the department are repair and maintenance of equipments of the factory. The main functions of their department are: 1) To provide spare part to the machine. 2) To repair machine 3) To maintain the machine properly 4) To provide directions and instruction regarding options of machines. The maintenance section is not a suppurate department. But it is a part of production department. This helps to repair the machines and prevent the stoppage of production or to avoid the interception in the flow of production process.

MARKETING DEPARTMENT
Marketing is a comprehensive term and includes all resources and set of activities necessary to direct and facilitate the flow of goods and services from the point of production to the consumption through the process of distribution.Marketing is the process of all activities including for the exchange of goods and services from the point of production to the point of consumption. The marketing area of SIMCO product is the whole over South India. The products are marketing directly by the firm. Sales manager is in charge of marketing department. He is to make sales and keep all records and account in connection with

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sales. Sales department divides the selling price of the products, profit on product and production on the basis of demand. The method is that the company has a sales representative to collect orders from the dealer/retailers. The sale representatives will inform the orders and the company directly will send the product to the dealer/retailers.

SALES DEPARTMENT
The sales manager with the help of sales clerk undertakes the sales activities. Orders are received by the firm through agents on securing orders the sales clerk makes arrangements for the delivery of goods. He records the products delivered, its quality, price quantity etc in a book known as order book.For order worth Rs 3500 /- or more at a times 15% discount will allowed for all items. It charges central sales tax and maximum credit period is one and half month.It also provides credit sales on limited rates.

HUMAN RESOURCE DEPARTMENT

Main purpose of human resource department is to establish and maintain sound personnel relation at all levels of organization and effective use of personnel by ensuring good condition of employment.Human resource department is under the charge of a human resource manager. Functions of personnel management 1. Incentivating developing and maintaining motivation for work. 2. Wage & salary administrating and wage & salary surveys. 3. To provide benefits and service of insurance, health, hospitalization, medical care etc. Types of workers There are three types of workers in the company 1. Piece rate workers on the production department. 2. Administrative staff. 3. Security staff SIMCO consists of 100 workers.Among them 49 are permenant workers.It also has 17 office staff and 4 security staff. 20
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The major functions of this department are: RECRUITMENT AND SELECTION Like any other company ,SIMCO also need different kinds of personnel for metal works , supervisors , clerks and so on.This company specifies separate skill and experience for all these work. SIMCO find out its human resources through various source like advertisement ,unsolicitated application.

INDUSTRIAL RELATION
Trade union are a powerful instrument to promote and safe guard the interests of the workers and to achieve the economical psychological and social goal of workers Trade union of the company are as follows CITU INTUC B.M.S SIMCO Staff Association (staff union)

WELFARE
Labour comprises all human efforts of body and mind, which is exchanged for a consideration in term of cash or kind or bosh. Welfare to a broad concept referring to a condition of an individual or group of relationship with the whole environmental. Friendly existence physiological balance, population free existence and proper sanitation, solid welfare is the prevention of decimation bred on costs, creed sex, establishment of equity and fairness, ensuring safety. The office of economic welfare same time promotes Economic development of society by increasing production, productivity and quality of products and services.

WAGE AND SALARY ADMINISTRATION

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There are different rule for determining the wages of workers and salary of office staff. Office staff and watch man received fixed salary.But the workers receive wages under piece rate system.The firm pays iut the wages as per the minimum wages Act of 1948

Benefits given to employees

This organization provides following retirement benefits to the employee, i.e. Gratuity, Provident fund and Pension etc.
FAMILY PENSION

Family pension is paid to employees who died before superannuating.Graded person is provided. Those who retire get a lump sum but no pension. eligibility condition of pension is to be 10 years experience.
PROVIDENT FUND

Minimum

Provident fund is give to the employee by way of contribution equally done by employer and the employees.
GRATUITY

Gratuity is calculated by using the following formula Gratuity = Basic Pay + Dearness allowance X 15/26 X year of service BONUS SIMCO provide certain percentage of profit as a bonus in a festival season.
EMPLOYEE STATE INSURANCE

Both employees and employers contribute a fixed sum to ESI. LOANS The concern provide,loan facility to its employees in times of festival,marriage and other needs. CANTEEN FACILITY The canteen facility are also provided to the employees. For availing this facility the employees should take canten token from the office and then his token should be given to canteen instead of cash.

SAFETY & SECURITY

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Management is primarily responsible for safety. Management involves all managers including top management. All department head and their management staff including supervisors are equally responsible for safety of their workers and equipment. A worker who is working with a machine is equally responsible for the safety of his life as well as the lives of his colleagues. So as also the security man as the gate of his factory thus we find safety encompasses every employee, every department and every functionary in the organization. 60 minor accidents are reported in the last year. The main cause of these accidents is to carelessness of the workers. Most of the workers are working near the furnace. This is always a chance to burn body of the workers. The company can avoid this accident to give more training and safety program to the workers.

OTHER ADMINSTRATIVE ACTIVITIES

PERFORMANCE APPRAISAL The performance of each employee is evalutated by the respective supervisor and the evaluation report is submitted to the top level executives by the supervisor.According to this workers may rewarded at the monthly meeting.

ABSENTEESIM
There are two types of absentees. They are habitual absentees and non habitual absentees. Habitual absentees will take leave frequently without any reason or somewhere engaged in other wise, other than their workers in the company.Non habitual absentees those who take leave very rarely. SIMCO permits 10 % absenteeism in a year

GRIEVANCE HANDLING
If there is any grievance are occupied it will be reported to the top leve managers and a mmeting will be called immediately.In this the workers and top level management reveal their problems and complaints according to this proper action will be taken

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TIME OFFICE
For recording the attendance of workers instead of attendance register and attendance card method is followed.It is placed in the time office. The attendance card contains the name of the worker, ticket number, name of the dept in which he works, working hours etc. At the time of his arrival the worker should submit his attendance card. The charge man also records the attendance in a particular book the note book include the name of worker, ticket number, 6time of arrival etc. After doing the charge man submits this book to the personal manager and he will make tick marks on the attendance card and this is the base for preparing wage sheet.

ACCOUNTING AND FINANCE DEPAREMENT

The accounting and finance department under the control of office manager. It consists of account clerk wage clerk, sales clerk and dispatch clerk and computer operator. The main functions of the finance department are as follows. 1. Maintenance of liquid asset.The department ensures that there is adequate cash in hand and at bank to meet its obligation at all times. 2. Building up reserves for growth expansion. 3. Maximisations of profit and wealth of the owners. 4. Ensuring maximum operational efficiency by efficient and effective utilization of finance for ensuring financial discipline in the organization. 5. Evaluation of financial performance. 6. Negotiate with bankers, financial institution and creditors. 7. The department undertakes financial planning to forecast the needs and source of finance.

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ACCOUNTING SYSTEM
The Accounting Department is fully computerized. The company maintains the accounts on double entry system of Book-Keeping.Office manager is in charge of accounts section and is responsible for the entire function of this section. Main books of accounts The company prepares mainly the following books. Cash book : Cash book is prepared for entering all the receipt and expenses of cash Purchase day book : Transaction of credit purchase of goods are recorded in this book Sales day book: Sales day book includes all sales made in a day. There are separate column for taxable and nontaxable items in these books.Two separate column for @ 4 percentages and 10 %. At the end of every month the sales clerk prepares sales day book. General Ledger: A general ledger contains all other accounts. Bankbook: The bank book contains the receipt and payments of check, demand draft etc. Personal Ledger: It includes personal accounts, which are divided into two separate accounts. They are: Sundry creditors:- All purchases are treated as credit purchase and so that all purchases entered in to sundry creditors account. Sundry debtors: - This account is kept for ending reminder and for Calculating sundry debtors.

CHAPTER 3

FINANCIAL STATEMENT ANALYSIS

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Financial Statements are the principal sources of Financial Information. They are the statements showing the financial position and the results of business operation at the end of the accounting period. It is prepared on the basis of recorded facts .The statements are prepared for a particular period, generally once in a year According to John .N. Myer, the financial statement provide a summary of accounts of a business enterprise in the balance sheet reflecting the assets, liabilities and capitals as on certain date and the income statements showing the results of operations during a certain period. Financial statements are the outcome of summarizing process of accounting. Financial analysis refers to the process of determining financial strength and weakness of the firm by establishing the strategic relationship between the items of the Balance Sheet, Profit &Loss account and other operative data .It is the use of financial statements to analyze a companys financial position and performance and to assess future financial performance. It is a technique of X-raying the financial position as well as progress of a firm. In the words of John .N. Myer Financial statements analysis is largely a study of relationship among the various financial factors in a business as disclosed by a single set of statements and a study of the trend of these factors in a series of statements. The analysis and interpretation of financial statements is used to determine the financial position and operation as well. For analyzing and interpreting the financial statements, some important tools used they are as follows. 1. 2. 3. 4. Comparative Statements. Trend Analysis. Common size statements. Ratio Analysis.

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5.

Single and multiple bar diagram.

COMPARATIVE STATEMENTS
The comparative financial statements are statements which show the financial position of a firm at different period of time. The changes in financial data are best understood if the statements of two or more years are placed side by side to facilitate comparison. Such statements are called Comparative Financial Statements. The two Comparative Statements are Comparative Balance Sheet & Comparative Income Statement.

COMPARATIVE INCOME STATEMENT

The Comparative Income Statements will show the operating results for two periods and the amount as well as percentage increase or decrease in them. It explains clearly the relation ship between sales and cost of goods sold and its effect on gross profit. It gives an idea of a progress of a business over a period of time. The changes in absolute data and money value and percentages can be determined to analyze the profitability of the business. Comparative Income Statement has four columns. First two columns give figures of various items for two years. Third and fourth columns are used to show increase or decrease in figures in absolute amounts and percentages respectively. The increase or decrease in sales will be comparative with increase or decrease in cost of goods sold. The second step of analysis should be the study of operational profit .The increase or decrease in net profit will gave you an idea about overall profitability. Thus an opinion is formed about profitability, i.e. whether good or not.

TABLE 3-1

COMPARATIVE INCOME STATEMENT

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PARTICULARS

2006-2007 Rs 1,85,38,693.38

2007-2008 Rs 2,15,67,735.45 1,66,17,804.53 49,49,930.92 54,571.39 50,04,502.31 36,69,114.19 13,35,388.12

ABSOLUTE INCREASE/ DECREASE 30,29,042.07 22,70,363.73 7,58,678.34 49,217.15 7,09,461.19 5,21,55,0.65 1,87,910.54

% INCREASE/ DECREASE 16.34 15.82 18.10 47.42 16.52 16.57 16.38

SALES

LESS COST OF GOODS SOLD 1,43,4,7440.8 GROSS PROFIT 41,91,252.58 {ADD}.OTHER INCOME TOTAL 10,37,88.54 42,95,041.12

{LESS}OPERATING 31,47,563.54 EXPENSES OPERATING 11,47,477.58 PROFIT {LESS}. NON OPERATING EXPENSES NET.OPERATING PROFIT 7,24,581.60 4,22,895.98

7,83,111.02 5,52,227.10

58,529.42 1,29,381.12

8.07 30.59

INTERPRETATION
The comparative income statement gives above reveals that 1. There has been an increase in sales of Rs 30,29,042.07 in the year 2007- 2008while the cost of goods sold has increased nearly by 15.82%ther by resulting in an increase in gross profit of Rs.7,58,679.34. 2. 3. 4. 5. The miscellaneous income decreased in the year 2007-2008. In the year 2007-2008 operating expenses shows an increase of 16.57%.The operating profit of the company is increased by 16.38%. In the year 2007-2008the non operating expenses show an increase of 8.07%. In the year 2007-2008 the net operating profit of the company is increased by 30.59%.There is a sufficient progress in the firm and the overall profitability of the firm is good.

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COMPARATIVE BALANCE SHEET

The comparative balance sheet analysis is the study of the same items and computed items, in two or more balance sheet of the same business enterprise on different dates. The changes in periodic balance sheet items reflect the conduct of a business while interpreting comparative balance sheet the interpreter is expected to study the aspects like current and liquidity position, long term financial position and profitability of the concern.

TABLE 3-2
PARTICULARS 2006-2007 Rs 2007-2008 Rs ABSOLUTE INCREASE/ DECREASE % INCREASE DECREASE

ASSESTS CURRENT ASSETS LOANS& ADVANCES INVENTORIES: SUNDRY DEBTORS CASH AND BANK BALANCE LOANS&ADVANCE TOTALCURRENT ASSETS FIXED ASSETS: Fixed Assets TOTAL.FIXED ASSETS TOTAL ASSETS 8,47,665.65 8,47,665.65 1,14,34,062.81 8,54,428.80 8,54,428.80 1,16,97,801.54 6,763.15 6,763.15 2,63,738.73 .797 .797 2.31 60,11,711.33 38,92,565.22 1,65,825.63 5,16,294.98 1,05,86,397.16 56,47,238.96 45,54,700.82 87,653.10 5,63779.86 1,08,43,372.74 3,64,472.04 6,52,135.06 78,172.53 47,484,.88 2,56,975.58 6.06 16.75 47.14 9.197 2.43

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LIABILITIES Current Liabilities Current Liability TOTAL.CURRENT LIABILITIES LONG.TERM LIABILITIES: Loans Secured Unsecured

29,18,093.23 29,18,093.23

34,89,218.58 34,89,218.58

5,71,125.35 5,71,125.35

19.57 19.57

32,94,765.74 34,12,826.50

33,03,299.00 32,71,432.00

9,133.26 1,41,3945

.28 4.14

TOTAL. LONG TERM LIABILITIES 67,06,992.24 Owners Fund Capital Purayannur Industries TOTAL.SHARE HOLDERS FUND TOTAL LIABILITIES 18,08,977.34

65,74,731

1,32,261.24

1.97

16,33,851.96

1,75,125.38

9.68

18,08,977.34 1,14,34,062.81

16,33,851.96 1,16,97,801.54

1,75,125.38 2,63,738.73

9.68 2.31

INTREPRETATION

1. The excess of current assets over current liabilities gives the working capital.
Both 2006-07 and 2007-08 shows that current assets exceed current liabilities. The working capital in the year 2006-07 was Rs 76,68304.93 and in 07-08 Rs 73,54,154.16. The working capital shows short term financial position of the concern.

2. The inventories of the firm decreased by 6.06% as compared to 2006-07.This

indicates that there is no accumulation of inventory. The sundry debtors and

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loans and advances increased by Rs 6, 52,135.6 and Rs 47,484 cash and bank balances of the firm decreased by 47.14% compared to previous year. This shows a decrease in the liquidity position of the firm

3. The figure of fixed assets and long term liabilities and capital reflect the long
term financial position o f the firm. Long term sources are used for financing not only fixed assets but also a part of working capital. It is better to finance fixed assets by raising long term funds.

4. The fixed assets increased by Rs 6,763.15 in the 2007-08 compared to

previous year. Long term liabilities shoe decrease of 4.14%.

5. The firm has no reserve and surpluses. This will adversely affect their
profitability. In the absence of reserves and surplus the firm has to depend on external sources in the event of an emergency. This will create problem for partners.

TREND ANALYSIS
The financial statement may be analyzed by computing trends of series of information. This method determines whether the direction is upward or downward and involves in the computation of the percentage relationship that each item bears to the same item in the base year is taken as base year. The figures of the base year are taken as base year. The figures of the base year are taken as 100 and trend ratio for other years calculated on the basis of the base year

TABLE: 3-3

TREND ANALYSIS OF SALES

YEAR 2003-04 2004-05 SALES {in Rs} 1,63.16,381.37 1,51,25,231.49 TREND % 100 92.69

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2005-06 2006-07 2007-08

1,94,23,836.66 1,85,38,693.38 2,15,67,735.45

119.04 113.62 132.18

GRAPH: 3-1

140 120 100 80 60 40 20 0 2003-04 2004-05 2005-06 2006-07 2007-08 East

TABLE 3-4

TREND ANALYSIS OF COST

YEAR 2003-04 2004-05 2005-06 COST {in Rs} 1,09,06,701.16 1,02,81,014.31 1,46,96,061.89 32 TREND % 100 94.26 134.74
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2006-07 2007-08

1,43,47,440.80 ,66,17,804.53

131.55 152.36

GRAPH 3-2

160 140 120 100 80 60 40 20 0 2003-04 2004-05 2005-06 2006-07 2007-08 East

TABLE 3-5

TREND ANALYSIS OF PROFIT

YEAR 2003-04 2004-05 2005-06 PROFIT {in Rs} 7,36,643.86 4,13,564.53 9,80,793.37 Trend % 100 56.14 133.14

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2006-07 2007-08

4,22,895.98 5,52,277.10

57.41 74.97

GRAPH: 3-3

140 120 100 80 60 40 20 0 2003-04 2004-05 2005-06 2006-07 2007-08 East

INTERPRETATION

Trend Analysis or trend percentage above has clearly given an idea about sales, cost and profit of five years i.e. 2003-04,2004-05,006-07 and 2007-08.Sales of 2003-04 is taken as base year sales have been decreased in 204-05 when compared to the base year. In the year 2005-06 sales have been increased by 19.04.I the year 2006-2007 trend percentage of sales is 113.62%.In the year 2007-08 sales has been increased by132.18%.Trend analysis of sales shows both increasing as well as decreasing trend.

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Cost of 2003-04 is taken as a base year. In the year 2004-05 trend percentage of cost is 94.26% which is lower than the base year. But cost has increased by 34.74%, 31.55% and 52.36% in 2006-07 and 2007-08 respectively. Cost has increased except in the year 2004-05 2003-04 is taken as the base year. Profit was highest in the year 2005-06.In the year 2005-06 profit has been increased by 33.145.The profit has decreased except in the year 2005-06.Profit shows a decreasing trend. The firm has no control over the cost. Because of this an increasing cost adversely affected the profit.

COMMON SIZE STATEMENTS

The common size statements are shown in analytical percentages. The figures are shown as percentages of total assets, total liabilities and total sales. The total assets are taken as 100 and different assets are expressed as a part of total. Similarly various liabilities are taken as a part of total liabilities. These statements are also known as component percentage or 100 percent statement because every individual

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item is expressed as total percentage of 100.The analyst is able to asses the figures in relation to total values. The common size statements may be common size income statements and common size balance sheet.

COMMON SIZE INCOME STATEMENTS.

A statement in which each expenses item is shown as a percentage of net sales is called common size income statements. A sales figure is assured to be 100 % and all percentage and all figures are shown as percentage of net sales. The items in income statements can be shown as percentage of sales to show the relation of each item to sales. A significant relation ship can be established between items of income statements and volume of sales. The increasing sales will certainly increase selling expenses and not administrative or financial expenses. In case the volume of sales increases to a considerable extent, administrative and financial expenses should be reduced at once. So a relationship is established between sales and other items in income statement and the relationship is helpful in evaluating operational activities of enterprise. the

C0MM0N SIZE BALANCE SHEET OF SIMCO YEAR 2003-2008

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PARTICULAR S

2003-2004 Amount Rs %

2004-2005 Amount Rs %

2005-2006 Amount Rs %

2006-2007 Amount RS %

2007-08 Amount Rs %

1)LIABILITI ES 1)Proprietors Fund a) Purayannur Industries 10,93,250.42 11.25 2)Loan Funds Secured 16,85,068.61 17.35 Unsecured 39,53,454.40 40.70 3)Current Liabilities 29,81,808.04 30.70 TOTAL LIABILITIES 97,13,581.47 100 II.ASSETS 1.Fixed Assets 2.Current Assets Loans &Advances Inventories Sundry Debtors Cash & Bank Balance Loans &Advance 49, 40,267.1050.86 32,65,810.21 33.62 3,28,204.36 4,36,745.06 3.38 4.50 60,18,323.1 26,48,334.42 2,80,744.06 4,19,40486 60.26 26.52 2.81 4.20 54,50,178.6 38,52,554.41 1,79,727.05 3,72,554.86 52.43 37.06 1.73 3.58 60,11,711.3 38,92,565.22 1,65,825,63 5,16,294.98 52.58 34.04 1.45 4.52 56,47,238.9 6 45,44,700.82 87,653.10 5,63,779.86 48.28 38.85 0.75 4.82 99,87,213.05 100 1,03,95,738.2 100 1,14,34,062.8 100 1,16,97,801.5 100 22,50,099.49 22.52 26,35,774.72 25.35 29,18,093.23 25.52 34,89,218.58 29.82 39,57,576.00 39.63 38,18,842.00 36.74 34,12,826.50 29.85 32,71,432.00 27.97 27,49,223.02 27.53 23,09,726.27 22.22 32,94,165.74 28.81 33,03,299.00 28..24 10,30,314.54 10.32 16,31,395.26 15.69 18,08,977.34 15.82 16,33,851.96 13.97

7,42,554.74

7.64

6,20,406.61

6.21

5,40,723.30

5.20

8,47,665.65

7.41

8,54,428.80

7.30

Total Assets

97,13,581.47 100

99,87,21 3.05

100

1,03,95,738.25

100

1,14,34,062.81

100

1,16,97,801.54

100

INTREPRETATION

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The table shows the sale of 5 years and its relationship with other figures. The sales vary from year to year. The sales in the year 2003-2004 was Rs 1,63,16,381.37 which reduced to Rs 1,51,25,231.49 in the year 2004-05.But sales of 2005-06 shows an increasing trend and sales reached Rs 1,94,23,836,66.After a decrease of Rs 18538693.38 in 2006-07 sales increased to Rs 2,15,67,735.45 in 2007-08.These variation in sales may be due to the changes in marketing strategy adopted by the firm. A comparison between sales and cost of goods sold gives a clear picture of the firms position .In 2003-04 the cost of goods sold was Rs 10,90,6701.16 which was 66.84% of sales. In 200-05 the sale was decreased to Rs 1,51,25,231.49.But the cost of goods sold was Rs10281012.31 which was 67.97% of sales. It resulted in a decrease in gross profit of Rs 3,71,225.03 cost of goods sold was increased in 200506.But because of increased sales, gross profit was satisfactory. In 2006-07 the sale was decreased to Rs 1,85,38,693.38.But the cost of goods sold was Rs 1,43,47,440.80 which is 77.39% sales. It resulted in a decrease in gross profit of Rs 5,36,522.19. Cost of goods sold was increased in 2007-08.But because of increase sales, gross profit was satisfactory Another important to be noted is the expenses. The expenses of the firm in the year 2003-04 was 27,76,920.35 which was 17.02 of the sales. It increased to 19.26% in 2004-05.In the year 2005-06 the expenses of the firm increased to Rs 30,25,755.99 because of increased sales, its percentage was only 15.585.In the year 200708,the expenses was Rs 35,34,875.96 which was 16.39% of sales.

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CHAPTER 4

RATIO ANALYSIS OF SIMCO

Ratio Analysis is one of the methods of analyzing financial statement. It is means of under standing better the financial strength soundness, weakness or position of a firm. According to Myer, Ratio Analysis is a study of relationship among the various financial factors in a business. It is a process of establishing a meaningful relationship between tow figures as a set of figures of a financial statement. Ratio can be expressed in three ways. It may be expressed in times. If the quotient is multiplied by hundred, it is expressed as percentage. It may also be expressed in terms of proportion between tow figures. Thus, times percentage and proportion are three ways of expressing ratios.

ADVANTAGE OR USES OF RATIO ANALYSIS

The use of Ratio Analysis as a tool of financial analysis has been considerably increased in these days. Ration analysis can be of very valuable aid to management in the discharge of its basic function of planning, forecasting, coordination, communication and control. It is a devise to diagnose the disease of an enterprise. It is a powerful tool of financial analysis. The advantages of Ratio Analysis is summarized as below. 1. Ratios are helpful in judging financial performance of an enterprise over a period of time. They tell the various aspects of management performance and the overall financial position. 2. A study of the trend of strategic ratios may help the management in the task of planning and forecasting. 3. The ratio measures the efficiency of operation of an enterprise. Hence they can be used as tool of management control. 39
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4. Ratio facilitate interfirm comparison 5. It is possible to test the liquidity, solvency and profitability of the enterprise through the technique of ratio analysis. 6. Some times, investment decisions are guided by certain ratios. 7. Ratio Analysis simplifies the comprehension of financial statement 8. Ratio Analysis communicate the financial strength or weakness of firm in a more easy and understandable manner. 9. Thus, ratio analysis gives valuable information not only to management but also to creditors, investors and share holders.

CLASSIFICATION OF RATIOS
On the basis of purpose, Ratio may be classified as under 1. Profitability Ratios 2. Turn over Ratios. 3. Financial Ratio a) Liquidity or Short term financial ratios b) Solvency or Long term financial ratio

ANALYSIS OF PROFITABILITY OF SIMCO

The ultimate aim of any business enterprise is to earn maximum profit. Lord Keynes remarked, Profit is the engine that derives the business enterprises. A firm should earn profit to survive and grow over a long period of time. To the management profit is the measure of efficiency and control. To the owner, it is measure worth of their investment. To the creditors it is the margin of safety. The management of the company should know how efficiently they carry on business operations. In other words the management of the company is very much interested in the profitability of the company. Besides management, creditors and owners are also interested in the profitability of the company.

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The profitability of a firm can be easily measured by its profitability ratios. Profitability ratio measures the ability of the firm to earn an adequate return on sales, total assets and invested capital. Profitability ratios are generally calculated either in relation to sales or in relation to investment.

PROFITABLILTIY RATIOS BASED ON SALES

The general profitability ratios based on sales are gross profit ratio, net profit ratio, operating profit ratios and expenses ratio.

GROSS PROFIT RATIO

Gross profit ratios show the relationship between gross profit to sales. To calculate this ratio gross profit and net sales are required. This ratio indicates the

efficiency of production or trading operations. It is useful to as certain whether the average percent age of mark up on the goods sold is maintained. A higher gross profit ratio is always favorable to the firm. GROSS PROFIT= GROSS PROFIT ---------------------X 100 NET SALES

GROSS PROFIT = SALES-COST OF GOODS SOLD NET SALES= SALES SALES RETURN

GROSS PROFIT RATIO OF SIMCO from 2003 to 2008

Table 4.1 YEAR GROSS PROFIT 41 NET SALES GROSS PROFIT
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2003-04 2004-05 2005-06 2006-07 2007-08

Rs 46,06,914.21 42,35,689.18 4,72,774.77 41,91,252.58 49,49,930.92

Rs 1,63,16,381.37 1,51,25,231.49 1,94,23,836.66 1,85,38,693.38 2,15,67,735.45

RATIO 28.23% 28.00% 24.34% 22.16% 22.95%

GRAPH:4.1 Graph showing Gross Profit Ratio of SIMCO year 2003-08

30 25 20 15 10 5 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
The above bar diagram clearly indicates the Gross profit Ratio for the last Five years. It indicates the margin of profits on sales. Gross profit ratio in the ear 2003 04 was the highest in 28.23%. Then it started decreasing. In the year 2007-08 Gross profit ratio was 22.95%. Decrease in gross in gross profit ratios is mainly due to inability of the management to improve the volume of sales and decrease in selling price with out corresponding decrease in the cost of goods sold.

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NET PROFIT RATIO

Net profit ratio is the ratio of net profit earned by a business to its net sales. Net profit or net income is calculated by deducting the selling and distribution expense and financial expenses from gorses profit. It measures over all profit it ability. It is calculated as follows. Net profit = Net Profit -------------X100 Net Sales Net profit = Gross Profit + Operating and non operating income Operating and non operating expenses.

TABLE: 4.2

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Net Profit it (Rs) 7, 36,643.86 4,13,564.53 9,80,793.37 4,22,895.98 5,52,277.10

Net Sales 1,63,16,381.37 1,51,25,231.49 1,94,23,836.66 1,85,38,693.38 2,15,67,735.45

Net Profit Ratio 4.51% 2.73% 5.04% 2.28% 2.56%

GRAPH: 4.2
Graph showing net Profit Ratio of Simco from 2003 08

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6 5 4 3 2 1 0

2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
Net profit ratio indicates management efficiency in manufacturing administrating and selling the products. This is a measure of over all profitability. Net profit ratio was the highest in the year 2005-06 ie 5.04%. But in the next year it again decreased to 2.28% and in the 2007-08 net profit ratio was 2.56%. a low net profit ratio would mean low efficiency and in adequate returns to the owners

OPERATING RATIO
This ratio establishes the relationship between operating cost and net sales. This ratio is used to test the operating efficiency of the firm. It is calculated by using the following formula.

Operating ratio= Cost of goods sold + operating expenses ---------------------------------------------------X 100 Net sales

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TABLE: 4.2

OPERATING RATIO OF SIMCO FROM 2003-08

YEAR 2003-04 2004-05 2005-06 2006-07 2007-08

COST OF GOODS SOLD+ OPERATING EXPENSES 1,09,06,701.16+27,76,920.35 =1,36,83,621.51 1,02,81,014.31+29,13,706.71 =1,31,94,721.02 1,46,96,061.80+30,25,755.99 =17,72,1871.99 1,43,47,440.80+30,49,989.95 =1,73,97,430.75 1,66,17,804.53+35,34,875.96 =2,01,52,680.49

NET SALES 1,63,16,381.37 1,51,25,231.49 1,94,23,836.66 1,85,38,693.38 2,15,67,735.45

OPERATIN G RATIO 83.86% 87.24% 91.24% 93.84% 93.44%

GRAPH:4.3
Graph showing operating profit of SIMCO year 2003-08

94 92 90 88 86 84 82 80 78 East 2003-04 83.86 2004-05 87.24 2005-06 91.24 2006-07 93.84 2007-08 93.44

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INTERPRETATION
The Operating Ratio of SIMCO indicates that for every Rs 100 % of sales, cost of goods sold and operating expenses between 80% to 95%.

PROFITABILITY RATIO BASED ON INVESTMENT

These ratios are computed on the basis of investment in business. Important over all profitability ratios are return on investment, return on owners funds etc.

RETURN ON INVESTMENT
When a firm investment money in business it naturally expects adequate return on its investment. Therefore the firm wants to know how much profit is earning on its investment. It is for knowing this return on investment is computer. ROI measures the over al profitability. It establishes the relationship between profit or return and investment. It is computed as follows.

ROI = Profit it before interest and Tax ------------------------------------------X100 Net capital employed Net capital employed = Fixed asset Current asset current liabilities
TABLE: 4.5

RETURN ON INVESTMENT OF SIMCO YEAR 2003-08

Year 2003-04 Net Profit it (Rs) 18,40,356.36 Net sales 67,31,773.43 Net profit ratio 27.34%

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2004-05 2005-06 2006-07 2007-08

13,44,713.79 1,86,716.71 12,45,051.17 14,69,626.35

77,37,113.56 77,59,963.53 85,15,969.58 82,08,582.96

17.38% 24.03% 14.62% 17.90%

GRAPH: 4.4
Graph showing return on investment of SIMCO from 2003-08

70 60 50 40 East 30 20 10 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
Ideal return on capital employed 13.1 in the year 2006-07 ROI is below the standard norm. but in all other years RIO was above the standard norm.

Return on owners Funds

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This will help to measure the profitability from owners point of view. This is the ratio of net profit to share holders funds or net worth. It is calculated in follows. Return on owners fund = Net Profit after tax and interest -------------------------------------------X 100 Owners fund

TABLE 4.6
YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 NET PROFIT (Rs) 7,36,643.86 4,13,564.53 9,80,793.37 4,22,895.98 5,52,277.10 NET SALES (Rs) 10,93,250.42 10,30,314.54 16,31,395.26 18,08,977.34 16,33,851.96 NET PROFIT RATIO 67.38% 40.14% 60.12% 23.38% 33.80%

GRAPH:4.5
Graph showing Return on owners fund of SIMCO year 2003-08

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2007-08 15% 2006-07 10%

2003-04 30%

2005-06 27%

2004-05 18%

INTERPRETATION
This ratio helps to measure the profitability from the owners point of view. It indicates how efficiently the owners funds have been utilized by the firm. In the year 2003-04 return on owners funds is 67.38%. But in the year 2007-08it was decreased to 33.80%.

ANALYSIS OF ASSET MANAGEMENT OF SIMCO

Asset management is an important function of financial management. In this chapter an attempt is made to analyze the efficiency of the management in managing the assets. Turn over ratios is used to measure the efficiency of effectiveness with which a firm manages its resources or assets.

TURN OVER RATIOS OR PERFOMANCE RATIOS OR ACTIVITY RATIOS

These ratios indicate how effectively the resources are being utilized by a firm. In other words, these ratios reflect the efficiency of a firm in the asset 49
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management. Turn over ratios related to sales. Sales have divert relationship to the performance of the business. Higher sales mean better performance which means better efficiency and productivity of the business. Higher sales also mean, more production which is the result of the best possible utilization of physical resources. Important turn over ratio is the following.

Fixed Asset Turnover Ratios

Fixed assets are used in the business to produce goods for sale. The effective utilization of fixed assets will result in increased production and reduced cost. Fixed asset turn over ratio is calculated by establishing the relationship between net fixed asset and sales (or cost of goods sold) of the concern. It is used to judge the effectiveness of the use of fixed assets.This ratio assumes added significance in the case of manufacturing concern like SIMCO. An increase in this ratio is the indicator of efficiency, work performance and a decrease in this ratio speaks of unwise and improper investment in fixed assets. However in the labour intensive industries it is exported to be high and in capital intensive industries it is bound to be low. As a rule of thumb fixed asset turn over ratio of 5 times is considered ideal. Fixed assets turn over ratio is calculated by following formula. Fixed Asset Turnover Ratio = Net sales ------------Fixed asset

TABLE: 4.7
YEAR NET SALES Rs FIXED ASSETS Rs TURNOVER RATIO

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2003-04 2004-05 2005-06 2006-07 2007-08

1,63,16,381.37 1,51,25,231.49 1,94,23,836.66 1,85,38,693.38 2,15,67,735.45

7,42,554.74 6,20,406.61 5,40,723.30 8,47,665.65 8,54,428.80

22 TIMES 25 TIMES 36 TIMES 22 TIMES 25 TIMES

GRAPH: 4.6 Graph Showing Fixed Assets Turn Over Ratio from 2003
40 35 30 25 20 15 10 5 0 East 2003-04 22 2004-05 25 2005-06 36 2006-07 22 2007-08 25

INTERPRETATION
The above table indicates that from the year 2003 fixed asset turn over ratio is showing an increasing trend and attained highest level of 36 times in 2005. The high ratio is the sign of efficiency of fixed asset management. Another reason is SIMCO is a labour intensive small scale unit.

Stock Turn over Ratio

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Stock or Inventory Turn over ratio, measures how many times the average stock is sold during the year. Higher inventory turn over ratio is always beneficial to the concern. This ratio measures the effectiveness of the stock policy of the management. This ratio indicates the relationship between cost of goods sold and average stock. This ratio is calculated as follows. Stock Turn over ratio = Cost of goods sold -----------------------Average stock Cost of goods sold = Opening stock + purchases closing stock Average stock = Openings stock +closing stock 2

TABLE 4.8Stock Turn over ratios of SIMCO from 2003-08

Year Cost of goods sold Rs 2003-04 2004-05 2005-06 2006-07 2007-08 1,09,06,701.16 1,02,81,014.31 1,46,96,061.89 1,43,47,440.80 1,66,17,804.53 Average Stock Rs 46,89,844.71 54,79,295.10 57,34,250.86 57,30,944.98 58,29,475.15 Stock Turn over Ratio 2.33 times 1.88 times 2.56 times 2.50 times 2.85 times

GRAPH: 4.7 Graph showing stock turn over ratio of SIMCO from 2003-08

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3 2.5 2 1.5 1 0.5 0 East 2003-04 2.33 2004-05 1.88 2005-06 2.56 2006-07 2.5 2007-08 2.85

INTERPRETATION
The stock turn over ratio is below standard norm i.e. 8 times. It indicates that the firms stock turned over into cash below 3 times in a year.

Debtors Turn over Ratio

This ratio is also known as Receivables Turn over ratio. It shows how quickly debtors are converted into cash. It established the relation ship between credit sales and average debtors. It can be calculated as follows. Debtors Turn over Ratio = Credit sales Average Debtors Average Debtors = Opening Debtors + Closing Debtors 2

Table: 4.9
Debtors Turnover Ratio of SIMCO from 2003-08
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Year 2003-04 2004-05 2005-06 2006-07 2007-08 GRAPH: 4.8

Credit sales Rs 1,63,16,381.37 1,51,25,231.49 1,94,23,836.66 1,85,38,693.38 2,15,67,735.45

Average Debtors Rs 30,43,246.68 29,57,072.31 32,50,444.41 38,72,559.82 42,18,633.02

Debtors Turnover Ratio 5.36 times 5.11 times 5.97 times 4.78 times 5.11 times

Graph showing Debtors Turnover Ratio of SIMCO from 2003-08

6 4 2 0 East 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
Debtors Turn over ratio indicates that how fast the debtors are turned over or converted into cash. This depicts how fast the firm can collect the credit sales. Debtors turn over ratio was highest in the year 2007-08 it was 4.78 times and in the year 2007-08 it was increased to 5.11 times

AVERAGE COLLECTION PERIOD

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Average collection period indicates days in which debts are collected or in other words, sales remain uncollected. This ratio is in fast interrelated with and depended upon the receivable turnover ratio. It is calculated by dividing the days in a year by the debtors turnover ratio. Average collection period= Days in a year (360 or 365) Debtors turn over ratio TABLE: 4.10

Average Collection Period of SIMCO from 2003-08 Year 2003-04 2004-05 2005-06 2006-07 2007-08
DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD

5.36 times 5.11 times 5.97 times 4.78 times 5.11 times

69 days 72 days 62 days 77 days 72 days

GRAPH: 4.9 Graph showing Average Collection Period of SIMCO from 2003-08
80 70 60 50 40 30 20 10 0 East 2003-04 69 2004-05 72 2005-06 62 2006-07 77 2007-08 72

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INTERPRETATION
The above bar diagram clearly indicates the speed with which debts are collected. From 2003-04 to 2007-08 it is seen that there is slight fluctuation in the average collection period. The average collection period is between 62 to 72 days. The efficiency of management of receivable would be analyzed with that of management of payables.

CREDITORS TURNOVER RATIO Creditors turn over ratio shows the relation ship between net credit purchases and average creditors including bills payable. This ratio indicates the number of times creditors are paid. Creditors turnover ratio is also called payables turnover ratio. It is computed by the following formula.
CREDITORS TURN OVER RATIO = NET CREDIT PURCHASE AVERAGE CREDITORS INCLUDING BILLS PAYABLE AVERAGE CREDITORS=OPENING CREDITORS+CLOSING DEBTORS 2

Net Credit Purchase=Total Credit Purchase Purchase Returns Total Purchase =Cash Purchase +Credit purchases
Year Total Purchase Rs

Average Creditors (Rs) 24,00,994.49 26,15,953.77 24,42,937.10 27,76,933.97 32,03,655.91

Creditors Turnover Ratio 2.73 times 2.48 times 2.92 times 2.99 times 3.09 times

2003-04 2004-05 2005-06 2006-07 2007-08 GRAPH: 4.10

65,54,924.28 64,83,206.33 71,43,407.80 83,20,541.41 99,08.548.21

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Graph shows Creditors Turn over Ratio of SIMCO from 2003-08

3.5 3 2.5 2 1.5 1 0.5 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION Creditors turn over ratio indicates that how fast the firm has to make payment for the credit purchases. A lower ratio indicates the firm is taking full advantage allowed by creditors. Above table indicates that creditors turn over ratio is satisfactory. AVERAGE PAYMENT PERIOD

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Average payment period means the credit period enjoyed by the firm in paying creditors. In short it means creditors turn over is expressed in days or months. It is computed by the following formula. Average Payment = 365/360 --------------------------------------------CREDITORS TURNOVER RATIO In months = 12 ----------------------------------------------------CREDITORS TURN OVER RATIO TABLE: 4.12

Average Payment Period of SIMCO from 2003-08 Year 2003-04 2004-05 2005-06 2006-07 2007-08 GRAPH: 4.11 Creditors Turn Over Ratio 2.73 times 2.48 times 2.92 times 2.99 times 3.09 times Average Payment Period 134 days 148 days 125 days 123 days 119 days

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160 140 120 100 80 60 40 20 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
This ratio indicates the speed with which payment against credit purchases are made. Average payment period is between 119 and 134 days.In 2007-08 average payment

period is 119 days. WORKING CAPITAL TURNOVER RATIO

Current assets will change with change in sales. This means working capital is related with sales. The relation between sales and working capital is called working capital turn over ratio. This ratio shows how many times the working capital is turned over to produce sales. Working capital turn over is computed by the following formula Working Capital Turnover ratio = Net Sales -------------------Working Capital Net Sales=Sales-Sales Return

Working Capital =Current Asset-Current Liabilities

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TABLE: 4.12 WORKING CAPITAL TURNOVER RATIO OF SIMCO FROM YEAR 2003-08
YEAR 2003-04 2004-05 2005-06 2006-07 2007-08 NET SALES 1,63,16,381.37 1,51,25,231.49 1,94,23,836.66 1,85,38,693.38 2,15,67,735.45 WORKING CAPITAL Rs 59,89,218.69 71,16,706.95 72,19,240.23 76,68,303.93 73,54,154.16 WORKING CAPITAL TURN OVER RATIO 2.72 times 2.12 times 2.69 times 2.42 times 2.93 times

GRAPH: 4.12
WORKING CAPITAL TURN OVER RATIO FROM 2003-08

3 2.5 2 1.5 1 0.5 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
Working Capital turnover ratio indicates the relationship between net sales and working capital. The working capital turnover ratio in every year was below standard norm. So the management should take necessary action to utilize the working capital efficiently.

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ANALYSIS OF LIQUIDITY OR SHORT TERM FINANCIAL POSITION OF SIMCO

Liquidity means the firms liability to meet its current liabilities when they become due. Christs and Roden defines the liquidity of an asset as money ness. Whether the liquidity position of SIMCO is good or bad is analyzed by comparing the assets and liabilities of SIMCO it can be analyzed by using various ratios.

LIQUIDITY RATIO
Liquidity ratio is used to measure the liquidity position or short tem financial position of a firm. Various ratios like current ratio, liquid ratio and absolute liquid ratio are used to measure the liquidity position of business.

1. CURRENT RATIO Current ratio is defined as the ratio of current assets to current liabilities .It shows the relation ship between total current assets and total current liabilities. Current ratio is also called working capital ratio or bankers ratio, generally current ratio of 2:1 is considered satisfactory or ideal.

Current Assets Current Ratio = ----------------------Current Liabilities

TABLE: 4.14 CURRENT RATIO OF SIMCO FROM 2003-2008

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GRAPH 4:13 Year 2003-04 2004-05 2005-06 2006-07 2007-08 Current Assets Rs 89,71,026.73 93,66,806.44 98,55,014.95 1,05,86,397.16 1,08,43,372.74 Current Liabilities Rs 29,81,808.04 22,50,099.49 26,35,774.72 29,18,093.13 34,89,218.58 Current Ratio Rs 3.01:1 4.16:1 3.73:1 3.62:1 3.10:1

Graph showing current ratio of SIMCO year 2003-2008

4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
During the years under study the current ratio is much above the standard norm ie 2;1.The current ratio in most years shows the ratio around 4.However the rule of 2;1 should not be blindly followed while making interpretation of ratios.

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2. LIQUID RATIO
Liquid ratio is the ratio of liquid assets current liabilities. It establishes the relation between quick assets and current liabilities .It is the measure f instant debt paying ability of business enterprise. It is also called Acid Test Ratio. Liquid Assets Liquid Ratio= -----------------------Current Liabilities Liquid Assets = Current Assets-(Stock Prepaid Expenses)

TABLE: 4.15 LIQUID RATIO OF SIMCO FROM 2003-2008

GRAPH: 4.14 Graph showing Liquid Ratio of SIMCO YEAR 2003-04 Current Liabilities Rs 29,81,808.04 22,50,099.49 26,35,774.72 29,18,093.23 34,89,218.58 Liquid Ratio

Year 2003-04 2004-05 2005-06 2006-07 2007-08

Current Asset Stock =Liquid Asset Rs 89,71,026.73 -49,40,267.10=40,30,759.63 93,66,806,44 60,18,323.10=33,48,483.34 98,55,014.95 60,11,711.33=45,74,685.83 1,05,86,397.1660,11,711,33=45,74,685.83 1,08,43,372.74 -56,47,238.96=51,96,133.78

1.35:1 1.49:1 1.67:1 1.57:1 1.49:1

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1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
Liquid Ratio is the ratio of Liquid Assets to current liabilities. It is considered to be superior to current ratio in testing the liquidities of the firm. Standard form of quick ratio is 1:1.Liquidity ratio above standard norm is good. Liquidity ratio below 1:1 will not help to pay of its Current liabilities when they become due. From 2003-04 to 2007-08 Quick Ratio states that Liquid Liabilities can be easily paid off by realizing Quick Assets without resorting to the sale of stock.

ABSOLUTE LIQUID RATIO

Although receivables i.e. debtors and bills receivable are generally more liquid than inventories; there may be doubts regarding their realization into cash immediately or in time. Therefore the absolute liquid ratio should also be calculated together with current ratio and quick ratio. Absolute liquid ratio establishes the relationship between absolute liquid assets and current liabilities Absolute liquid assets=Cash in hand Cash at bank +Marketable securities TABLE: 4.16

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Year

Absolute Liquid Assets

Current Liabilities Rs 29,81,808.04 22,50,099.49 26,35,774.72 29,18,093.23 34,89,218.58

Absolute Liquid Ratio

2003-04 2004-05 2005-06 2006-07 2007-08 GRAPH:4.15

3,28,204.36 2,80,744.06 1,79,727.05 1,65,825.63 87,653.10

0.11:1 0.12:1 0.07:1 0.06:1 0.03:1

Graph sowing Asolute liquid ratio of SIMCO from 2003-2008

0.12 0.1 0.08 0.06 0.04 0.02 0 2003-04 2004-05 2005-05 2006-07 2007-08

INTERPRETATION Absolute Liquid Ratio establishes the relationship between Absolute Liquid Assets and Current Liabilities. Absolute Liquid Ratio of 5:1 is considered as ideal. Above group shows that the absolute liquid ratio in various years. In no year the firm could attain the standard norm. It is far below the standard norm. The concern may face serious crises to meet the liabilities.

ANALYSIS OF SOLVENCY OR LONG TERM FINANCIAL POSITION OF SIMCO

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The term solvency refers to the ability of a concern to meet its long term obligation. The long term indebtedness of a firm includes Debenture holders, financial institution providing medium and long term loans and other creditors selling goods on installment basis. DEBT EQUITY RATIO Debt-Equity Ratio also known as External Internal equity Ratio, is calculated to measure the relative claims of the outsiders and the owners i.e. the share holders against the firms assets. This ratio indicates the relationship between the external equity or outsiders funds and the internal equities or the share holders funds. Outsiders Funds Debt Equity Ratio= -------------------------Share holder Funds External Equities Debt Equity Ratio =-------------------------Internal Equities

TABLE: 4.17 DEBT EQUITY RATIO OF SIMCO YEAR2003-2008 Year 2003-04 2004-05 2005-06 2006-07 2007-08 Debt Rs 56,38,523.01 67,06,799.02 61,28,568.27 67,06,992.24 65,74,731.00 Equity Rs 10,93,250.42 10,30,314.54 16,31,395.26 18,08,977.34 16,33,851.96 Debt Equity Ratio 5.15:1 6.51:1 3.76:1 3.71:1 4.02:1

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GRAPH: 4.16 GRAPH SHOWING DEBT EQUITY RATIO OF SIMCO YEAR 2003-2008

7 6 5 4 3 2 1 0 2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION
Debt Equity ratio includes the relative contribution of creditors and owners of the business in its financing. It is an index of the degree of protection the creditors have. Standard Debt Equity Ratio is considered to be 2:1.Both high and low Debt Equity Ratio is not desirable to firm. From above bar diagram, it is clear that in 2004-05 debt equity ratio was very high which very risky.But they have improved a lot and by 2006-2007 they brought the ratio near to the standard ratio i.e. 3.71:1.In the year 2007-08 Debt Equity Ratio was increased to 4.02:1

INTEREST COVERAGE RATIO

Interest Coverage Ratio is also known as Debt Service Ratio. This ratio relates fixed interest charges to the operating profits or earning before interest and tax .It shows 67
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Year 2003-04 2004-05 2005-06 2006-07 2007-08

Earning Before Interest and Tax 18,40,356.36 13,44,713.79 18,66,716.71 12,45,051.17 14,69,626.35

Interest 9,33,131.78 7,91,835.18 7,57,702.03 7,24581.60 7,83,111.02

Interest 1.97 times 1.70 times 2.46 times 1.72 times 1.88 times

whether the concern is able to pay the interest and tax. It shows whether the company is able to pay the interest and tax. It shows whether the company is able to pay the interest and tax. It shows whether the company is able to pay the interest out of the profit. Earning before interest and tax Interest Coverage Ratio = ----------------------------------------Interest TABLE: 4.18 INTEREST COVERAGE RATIO OF SIMCO YEAR 2003-2008 Interest Coverage Ratio is also known as Debt Service Ratio. This ratio relates fixed interest charges to the operating profits or earning before interest and tax. It shows whether the company is able to pay the interest and tax. It shows whether the company is able to pay the interest out of their profit. INTEREST COVERAGE RATIO = Earning before Interest and Tax ----------------------------------------Interest TABLE: 4.18 INTEREST COVERAGE RATIO OF SIMCO YEAR 2003-2008

GRAPH: 4.17 GRAPH SHOWING INTEREST COVERAGE RATIO OF SIMCO FROM 2003-2008

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2.5 2 1.5 1 0.5 0

2003-04 2004-05 2005-06 2006-07 2007-08

INTERPRETATION Interest Coverage Ratio shows how many times the interest charges are covered by EBIT .It indicates the ability of the company in the payment of interest to creditors. Standard Ratio is 6 to 7 times. The above bar diagram clearly shows that the interest coverage ratio in 5 years i.e., from 2003-04 to 2007-08 is very low which clearly indicates exercise use of debt and the inability to offer assured payment of interest to creditors. BAR DIAGRAM SHOWING THE RELATION SHIP BETWEEN CURRENT ASSETS AND CURRENT LIABILITIES. TABLE: 4.19 Table showing Current Assets and Current Liabilities from 2003-08 Year 2003-04 2004-05 2005-06 2006-07 2007-08 Current Assets Rs 89,71,026.73 93,66,806.44 98,55,014.95 10,58,6397.16 10,84,3372.74 Current Liabilities Rs 29,81,808.04 22,50,099.49 26,35,774.72 29,18,093.23 34,89,218.58

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GRAPH: 4.18 GRAPH SHOWING CURRENT ASSETS AND CURRENT LIABILITIES FROM 2003-2008 12000000 10000000 8000000 6000000 4000000 2000000 0 2003-04 2004-05 2005-06 2006-07 2007-08

BAR DIAGRAM SHOWING THE RELATIONSHIP BETWEEN DEBT AND EQUITY TABLE: 4.20 TABLE SHOWING DEBT AND EQUITY FROM 2003-04 TO 2007-08 Year 2003-04 2004-05 2005-06 2006-07 2007-08 Current Assets Rs 56,38,523.01 67,06,799.02 61,28,568.27 67,06,992.24 65,74,731.00 Current Liabilities Rs 10,93,250.42 10,30,314.54 16,31,395.26 18,08,977.34 16,33,851.96

GRAPH: 4.19 GRAPH SHOWING DEBT AND EQUITY FROM 2007-08

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7000000 6000000 5000000 4000000 3000000 2000000 1000000 0 20032004 2004-05 2005-06 2006-07 2007-08

CHAPTER 5
FINDINGS SUGGESTIONS AND CONCLUSIONS
FINDINGS
Shoranur is the sale centre of Agricultural and Horticultural implements. There are a number of firms engaged in the production of agricultural and horticultural implements. Among them, SIMCO stands first due to its high quality products. 1. When compared with other firms SIMCO is the only concern which get regular tenders for their products from Tamilnadu

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2. Products of SIMCO are sold not only with in Kerala but ALSO outside the state. In short, it has its market in all states of South India including Orissa. 3. Workers of SIMCO are very efficient and majority of them are able to produce more than the standard fixed. But they are facing the problem of hiring skilled labors. Hence, they hire unskilled labours and provide sufficient training. As such employees are taking time to get acquainted with the methods of production and machines used. 4. The company is purchasing raw materials at very high prices which in turn increases the cost of goods and hence decreases the profit . 5. Net Profit position of the business is not at all satisfactory. The operating expenses of the business are very high. 6. The operating profit ratio is not satisfactory. 7. In the year 2006-07 Return On Investment is below the standard norm. 8. Inventory management of the firm is not satisfactory 9. The collection of debtors is not effective .In 2006-07 the firm has taken 77 days to collect the credit sales. 10. Creditors turnover ratio of the firm is satisfactory. 11. On analyzing working capital turn over ratio, it is understood that the management of working capital is not efficient. 12. During all year under study, current ratio shows that is much above the standard norm. 13. A major portion of the current asset is blocked in trade. 14. The liquid ratio in all years under study above standard norm. 15. On comparing the current ratio and liquid ratio, it is understood that the current ratio is much higher than liquid ratio position. It is because of excessive investments in stock in trade. 16. The absolute liquidity position of the firm is in pathetic condition. 17. Debt Equity Ratio of the firm comes near to standard by 2006-07, which indicates high degree of protection to creditors. The firm makes use of loan funds to purchase fixed assets by paying interest.

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SUGGESTIONS
1. The over investments in stock is a notable defect. This can be over come by taking necessary steps for improving the sales. 2. The cash position of the firm is not at all satisfactory. Sufficient cash balance should be kept in the firm so as to keep the available favorable position. 3. Necessary steps have to be taken to make the working capital management more effective. 4. The profitability of any business depends to a very depends to a very extent on the capacity of it to enhance sales. So new marketing techniques have to be introduced. 5. Profit earned by the firm shows both increasing and decreasing trend. Due to this fluctuation, firm is suggested to make use of owned funds rather than outsiders fund. 6. Unnecessary funds locked up in inventory and debtors should be invested in some profitable project which in turn helps in the expansion of the firm. 7. Some of the item included in the product line of SIMCO is out dated. Therefore new models or new versions of such items should be introduced and outdated items should be excluded from the product line. 8. Firm is suggested to give more attention to garden tools which contribute a sizeable portion of the profit to the firm. 9. Since the firm is facing the problem of labour absenteeism, it is suggested to take necessary measures to reduce the same and also provide additional incentives which in turn motivate them to work more efficiently and effectively. 10. Advertisement programme should be improved for the increase in sales. SIMCO is facing more competition from other units, therefore the strength and weakness of the competitors should be studied and new strategies should be prepared accordingly. 11. Firm should take measures to purchase raw materials at lower prices which directly affects profit of the firm.

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CONCLUSION
The material for writing this project report was obtained during the actual course of the allowed time period undergone at SIMCO, Shoranur.The three weeks project helped me in getting a rare chance to familiarize with the functioning of manufacturing organization .This project report enabled to expose certain valuable conclusions pertaining to the short term and long term liquidity position of the firm and its profitability. Though the firm has reached near declining stage, but due to the importance of simple implements I agricultural sector, it occupies the good position in small scale industries. In short, this project report has given me an opportunity to list and substantiate theoretical knowledge, which in turn facilitated its own argumentation.

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BIBLIOGRAPHY
BOOKS 1. R.K Sharma and Sasi . K .Guptha MANAGEMENT ACCOUNTING Kallyani Publishers, New Delhi 1991
2. I. M. Pandey FINANCIAL MANAGEMENT Vikas Publishing

House Pvt Ltd, New Delhi 1999 3. Khan .M.Y and Jain .P.K FINANCIAL MANAGEMENT Tata Mc Graw Hill Publishing Company Ltd , New Delhi 1985
4. P.V

Kulkarni

FINANCIAL

MANAGEMENT

Himalaya

Publishing House, Mumbai 1996.

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5. Prasanna Chandra FINANCIAL MANAGEMENT THEORY

AND PRACTICES Tata Mc Graw Hill Publishing Company Ltd New Delhi 2002. 6. S.P Guptha STAISTICAL METHODS Sulthan Chand and Sons, New Delhi 1995.

REPORTS
1. Annual Reports of South India Metal Company 2003-08 2. Financial Statements of South India Metal Company fom2003-08

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ANNEXURE

COST STATEMENT OF SIMCO OF SIMCO FOR THE YEAR 2003-2008 Particulars Opening Stock of Raw Materials Purchase Expenses on Purchases Materials available Less:Closing Stock of Raw Material Material Cost Direct Labour Cost Add :Opening Stock of W/P Less:Closing Stock of W/P Prime Cost 17,62,722.68 63,90,489.05 38,83,842.23 18,59,413.71 1,21,33,744.99 16,04,614.55 1,05,29,230.44
77

2003-04 12,82,677.75 65,54,924.28 3,15,609.70 81,53,211.73

2004-05 17,62,722.68 64,83,206.33 1,78,107.30 84,24,036.31 12,89,552.21 71,34,484.10 40,19,390.57 16,04,614.55 1,27,58,489.2 2 24,52,206.11 1,03,06,283.1

2005-06 12,89,552.21 71,43,407.80 3,17,821.25 87,50,781.26 11,20,129.28 76,30,651.98 40,06,189.15 24,52,206.11 1,40,89,047.24 1,18,10,105.95 1,18,10,105.95
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Manufacturing Expenses Cost of Production Add.Opening Stock of Finished Goods Finished Goods Purchased Cost of Goods Available for sale Less: Closing Finished Goods COST OF GOODS SOLD

6,60,186.10 1,11,89,316.54 12,31,142.62 --1,24,20,454.16 15,13,758.00 1,09,09,701.16

1 6,80953.20 1,09,87,236.3 1

6,12,883.32 1,24,22,989.27 22,19,980.00

15,13,758.00 --1,25,00,994.3 1 22,19,980.00 1,02,81,014.3 1

20,37,192.62 1,66,80,161.89 19,84,100.00 1,46,061.89

COST STATEMENT OF SIMCO FOR THE YEAR 2006-2008 Particulars Opening Stock of Raw Materials Purchase Expenses on Purchases Materials available Less:Closing Stock of Raw Material Material Cost Direct Labour Cost Add :Opening Stock of W/P Semi Finished goods purchases Less:Closing Stock of W/P Prime Cost Manufacturing Expenses Cost of Production 14,22,195.66 84,64,309.16 39,85,028.66 22,78,941.29 ----1,47,28,279.11 30,41,134.78 1,16,87,144.33 6,62,621.07 1,23,49,765.50
78

2006-07 11,20,129.28 83,20,541.71 4,45,834.13 98,86,504.82

2007-08 14,22,195.66 99,08,548.21 3,51,414.00 1,16,82,157.87 16,67,019.10 1,00,15,138.77 43,57,258.34 30,41,134.78 2,05,384.00 1,76,18,915.89 25,67,212.02 1,76,18,915.89 7,63,938.66 1,58,15,642.53
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Add.Opening Stock of Finished Goods Semifinished goods purchased Finished Goods Purchased Cost of Goods Available for sale Less: Closing Finished Goods COST OF GOODS SOLD 19,84,100.00 98,457.00 13,93,213.40 1,58,25,535.80 14,78,095.00 1,43,47,440.80 14,78,095.00 ---6,43,134.00 1,79,36,871.53 13,19,067.00 1,66,17,804.53

PROFIT AND LOSS ACCOUNT OF SIMCO FOR THE YEAR ENDED 31st MARCH 2003 2004 Year 31 / 03 / 2003 Particulars Year ended 31 / 03 / 2004 INCOME 16342713.03 2633163.00 16316381.37 802766.00 15513615.37 10906701.16 4606914.21 10362.50 4617276.71 647578.58 1360556.08 768775.69 2776920.35 1840356.36 933131.78 907224.58 170580.72 736643.86 Sales Less:- returns.. Less:- exercise duty Less:- cost of goods sold Gross profit Add:- other income EXPENDITURE Provision to office staff Sales and distribution cost Other general expenses Profit before interest and depreciation Less:- interest Profit after interest 1515819.13 33387.64 15125231.49 608528 14516703.49 10281014.31 4235689.18 22731.50 4258420.68 633773.50 1365545.23 914387.98 2913706.71 1344713.97 791835.18 552878.99 139314.26 413564.53

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Depreciation Profit transferred to purayannur industries

PROFIT AND LOSS ACCOUNT OF SIMCO FOR THE YEAR ENDED 31st MARCH 2005 2006

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Year 31 / 03 / 2005

Particulars

Year ended 31 / 03 / 2006

INCOME 19455006.66 31170.00 19423836.66 14696001.89 4727774.77 164697.93 4892472.70 EXPENDITURE 579290 1538041.94 908424.05 Provision to office staff Sales and distribution cost Other general expenses 1866716.71 757702.03 1245051.17 724581.60 646051.52 1504139.88 899798.85 Sales Less:- returns Less:- cost of goods sold Gross profit Add:- other income 4295041.12 18570636.53 31943.15 18538693.38 14347440.80 4191252.58 103788.54

Profit before interest and depreciation Less:- interest Profit after interest Depreciation Profit transferred to purayannur industries

1109014.68 128221.31 980793.37

520469.57 97573.59 422895.98

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PROFIT AND LOSS ACCOUNT OF SIMCO FOR THE YEAR ENDED 31st MARCH 2007 Particulars INCOME Sales Less:- returns 21665195.91 97460.46 Year ended 31 / 03 / 2007

21567735.45 Less:- cost of goods sold Gross profit Add:- other income 16617804.53 4949930.92 54571.39 5004502.31

EXPENDITURE Provision to office staff Sales and distribution cost Other general expenses 686733.32 1120786.74 1127355.90 3534875.96 1469626.35 Profit before interest and depreciation Less:- interest Profit after interest Depreciation Profit transferred to purayannur industries 686515.33 134238.23 552277.10 783111.02

SOUTH INDIA METAL COMPANY,SHORANUR -2, BALANCE SHEET AS ON 31ST MARCH

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PARTICULAR S

2003-2004 Amount Rs %

2004-2005 Amount Rs %

2005-2006 Amount Rs %

2006-2007 Amount RS %

2007-08 Amount Rs %

1)LIABILITI ES 1)Proprietors Fund a) Purayannur Industries 10,93,250.42 11.25 2)Loan Funds Secured 16,85,068.61 17.35 Unsecured 39,53,454.40 40.70 3)Current Liabilities 29,81,808.04 30.70 TOTAL LIABILITIES 97,13,581.47 100 II.ASSETS 1.Fixed Assets 2.Current Assets Loans &Advances Inventories Sundry Debtors Cash & Bank Balance Loans &Advance 49, 40,267.1050.86 32,65,810.21 33.62 3,28,204.36 4,36,745.06 3.38 4.50 60,18,323.1 26,48,334.42 2,80,744.06 4,19,40486 60.26 26.52 2.81 4.20 54,50,178.6 38,52,554.41 1,79,727.05 3,72,554.86 52.43 37.06 1.73 3.58 60,11,711.3 38,92,565.22 1,65,825,63 5,16,294.98 52.58 34.04 1.45 4.52 56,47,238.9 6 45,44,700.82 87,653.10 5,63,779.86 48.28 38.85 0.75 4.82 99,87,213.05 100 1,03,95,738.2 100 1,14,34,062.8 100 1,16,97,801.5 100 22,50,099.49 22.52 26,35,774.72 25.35 29,18,093.23 25.52 34,89,218.58 29.82 39,57,576.00 39.63 38,18,842.00 36.74 34,12,826.50 29.85 32,71,432.00 27.97 27,49,223.02 27.53 23,09,726.27 22.22 32,94,165.74 28.81 33,03,299.00 28..24 10,30,314.54 10.32 16,31,395.26 15.69 18,08,977.34 15.82 16,33,851.96 13.97

7,42,554.74

7.64

6,20,406.61

6.21

5,40,723.30

5.20

8,47,665.65

7.41

8,54,428.80

7.30

Total Assets

97,13,581.47 100

99,87,21 3.05

100

1,03,95,738.25

100

1,14,34,062.81

100

1,16,97,801.54

100

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