A Project Report ON

COMPARATIVE RATIO ANALYSIS BETWEEN JK TYRE & INDUSTRY AND CEAT TYRE (STUDY AT J.K. TYRE & INDUSTRIES. LTD., KANKROLI)

In the partial fulfillment of the Master of Business Administration Program 2012-2013

SITE Department of Management Studies Shrinathji Institute of Technology and Engineering Upali Oden, Nathdwara. SUPERVISED BY: Mr. ASHISH ADHOLIYA SUBMITTED BY: MONIKA BADALA

DECLARATION

I do hereby declare that the dissertation title COMPARATIVE RATIO ANALYSIS BETWEEN JK TYRE & INDUSTRY AND CEAT TYRE is a record of bonafide work done by me under the supervision of ASHISH ADHOLIYA, SHREE NATH JI INSTITUTE OF MANAGEMENT & BIOTECHNOLOGY.

MONIKA BADALA (MBA III SEM)

ACKNOWLEDGEMENT

I extend sincere thanks to my project supervisor MR. ASHISH ADHOLIYA whose expertise paved the way for realization of the study objective. He helped me a lot any each step of the project and pointed out of the areas, which needed more stress and coverage. I have also taken the advantages of Internet, especially for collecting the news. I am grateful to all the respondents for giving us their valuable time in completing the lengthy questionnaire. Last but not least, I really appreciate how my family members and friends supported me. While doing this report if there is any error of fact, omission and emphasis are solely my responsibility, I would remiss and humbly acknowledge those who helped me to prepare this report.

MONIKA BADALA (MBA III SEM)

INDEX S.NO. 1. 2. 3. 4. 5. 6. 7. CONTENTS

INTRODUCTION REVIEW OF LITERATURE RESEARCH & METHODOLOGY DATA ANALYSIS & INTERPRETATION SUGGESTION & RECOMMANDATION CONCLUSION REFRENCES & BIBLIOGRAPHY

CHAPTER-1

INTRODUCTION

HISTORY OF THE ORGANISATION

"Excellence comes not from mere words or procedures. It comes from an urge to strive and deliver the best. A mindset that says, when it is good enough, improve it. It is a way of thinking that comes only from a power within." H.S.Singhania

The advent of JK Organization on the industrial landscape of India almost synchronizes with the beginning of an era of industrial awareness - an endeavor for self reliance and the setting up of a dynamic Indian industry. This was way back in the middle of the 19th century. And the rest that followed is history. JK Organization has been a forerunner in the economic and social advancement of India. It always aimed at creating job opportunities for a multitude of countrymen and to provide high quality products. It has striven to make India self reliant by pioneering the production of a number of industrial and consumer products, by adopting the latest technology as well as developing its own know-how. It has also undertaken industrial ventures in several other countries.

JK Organisation is an association of industrial and commercial companies and charitable trusts. Its member companies, employing nearly 50,000 persons are engaged in the manufacture of a variety of products and in diverse fields of commerce. Trusts are devoted to promoting industrial, technical and medical research, education, religious values and providing better living and recreational facilities. With the spirit of social consciousness uppermost in mind, J.K. Organization is committed to the cause of human advancement. It has been rightly said "If you plan for a year, plant corn; If you plan for a decade, plant trees; But if you plan for a century, plant men". This is the philosophy which guides the people policies at JK Tyre.

THE WORK CULTURE

JK Tyre provides an enabling work culture with a clear sense of vision, mission and strategies in which people work with clear goals and thereby achieve more. Goals are set participative and performance is reviewed transparently, starting with selfassessment. Merit is recognized through proportionate rewards and growth opportunities. The company's aspiration of being a global player known for its excellence provides opportunities for stretch for the potential of its people. Jk Tyre and Industries is committed to self reliance and follows an ethic that views customer satisfaction as an index of achievement.

Over the years, the company has expanded and diversified its business portfolio. It has developed into a multi product, multi-location corporate entity comprising of following business division.

VISION:
To be amongst the most admired companies in India committed to excellence.

MISSION:
-Be a customer obsessed company. -No.1 tyre brand in India. -Deliver enhances value to all stake-holder. -Most profitable tyre company in India. -Enhance global presence through acquisition. -Motivated and committed team development for high performance organization.

FOUNDERS OF Jk Tyre

JK Organization owes its name to Late Lala Juggilal Singhania, a dynamic personality with a broad vision. Inspired by the cause of the Swadeshi movement of Mahatma Gandhi, and driven by the zeal to setup an Indian enterprise,Lala Kamlapat Singhania founded J.K. organization in the 19th century ushering in a new industrial era in India. The process of industrialization and diversification was worthily and successfully carried on by Lala Kamlapat and Lala Lakshmipat and Lala Kailashpat, aided in no small measure by the late Gopal Krishna son of Padampat. LEADERS PAR EXCELLENCE Mr. Hari Shankar Singhania, the President of JK Organization and Chairman of JK Tyre & Industries Ltd is a renowned business leader in India. He has been bestowed the prestigious national award "Padma

Bhushan" by the President of India. He has been the President of International Chamber of Commerce (ICC), Paris, being the 2nd Indian and 3rd Asian in the last 80 years and has made significant contributions in national and international business arenas.

Recognising his contribution to Indo-Swedish business relations, the King of Sweden honoured him with "Royal Order of Polar Star" one of Sweden's highest awards. His vision, dynamism and charisma is steering JK Tyre to greater heights.

Dr. Raghupati Singhania is the Vice Chairman & Managing Director of JK Tyre & Industries Ltd. His vision and entrepreneurial zeal have revolutionised the Indian Tyre Industry - from introducing Radials in India to setting up world-class R & D facilities. He has put India on the Motorsports map of the world by promoting and supporting the sport. Apart from being associated with many Apex Chambers and many government bodies, Dr. Singhania's illustrious career is studded with numerous prestigious recognitions and awards. His commitment to quality has brought many a laurel to JK Tyre by way of National Recognitions and awards. .MILESTONES OF JK TYRE INDUSTRIES 1933:First in India to manufacture Calico Prints-Juggilal Kamlapat. Cotton Spinning and Weaving Mills co. Ltd. Kanpur. 1959:First in India to set up a continuous process of Rayon Plant. 1962:First in India to produce Nylon-6 with its own polymerized raw material- J.K. Synthetics Ltd. Kota.

1969:First to manufacture Acrylic Fibers - J.K. Synthetics Ltd. Kota First to develop differently Dyeable- J.K. Synthetics Nylon Ltd. Kota. 1985:First in India to produce Catholics Dye able Polyester Fiber- J.K Synthetics Ltd. Kota First in India to produce Nylon Tyre Cord based on Spin Draw Technology- J.K. Synthetics Ltd. Kota. 1992:R&D center set-up at HASTERI. 1994:Indias T-rated tyre launched. Ban more tyre Plant(BTP) crossed 100 TPD 1995:Mercedes Benz Launched on JK steel radials First tyre manufacturer in the World to get ISO 9001. 1997:Awarded the National Export Award for 96-97. Vikrant Tyres (VTL) acquired. Indias first H rated tyre launched. Only Tyre manufacturer to get E Mark certification. HASTERI became the first research institute in Asia to get ISO 9002.

2000:JK introduced National Go-Karting Championships. 2001:Received CAPEXIL award. JK Industries Received FOCUS LAC export award for the year 1999 -2000. Commendation Certificate of CII Exim. Llnd National Go-Karting Championship held.

Ones More Achievement

Delhi-based JK Tyre, one of the top five tyre making companies in the country, has bought 100 per cent stake in the Mexico-based tyre-maker Tornel for Rs. 270 crore. The acquisition will help JK Tyre gain access to the world's largest auto market in the United States in addition to some distant markets of central and South America. Corporate : Manufacturing Facilitiez JK Tyre has six Modern plants in India which are strategically located at

1) Mysore, Karnataka

(2) Banmore, Madhya Pradesh 3) Kankroli, Rajasthan 4) Chennai, Tamil Nadu

JK Tyre has also enhanced its global reach by taking over Tornel a renowed Mexican company, which has 3 plants in Mexico. All these plants are equipped with Worlds most advanced manufacturing and testing machines.

EXECUTIVE SUMMARY
Organization Reporting Officer Name :::Jk Tyre & Industries Pvt. Ltd. Mr.N.K Sharma, HR Manager. MONIKA BADALA

QUALITY POLICY of INDUSTRIES.

The people of JK Tyre have an organization which committed to quality in everything they do. They will continuously anticipate and understand their customer's requirements, convert these into performance standards for their products and services and meet these standards every time. Full customer satisfaction - both internal and external is motto of the organization.

Commitment towards Quality:

In order to demonstrate its commitment towards Quality, JK tyre has made never ending efforts to make all its products of world class quality.

QUALITY MANAGEMENT
ISO 9001: JK Tyre world's first tyre company to receive 'ISO 9001' certification for its entire operations in 1995 in one go. Its Quality Management System is completely integrated into QS 9000: JK Tyre the world's first tyre company to receive Quality Management System certification QS 9000' in 1998 for multi location operations. They using 'QS 9000' system as a tool for continuous incremental improvement. all aspects of our operations.

Environment Management System (ISO 4001):

JK Tyre recognizes the impact that our business has on the environment and takes our responsibilities for maintaining harmony with nature. Jk tyres is the first tyre company in India to receive 'ISO 14001' certification for multi location operations in 1999. E-mark: JK Tyre is the only Tyre Company in India having the E-mark certification on their products, a mandatory requirement for exporting tyres to European Markets. DOT (Department of Transport): JK Tyre has the DOT certification on its products, a mandatory requirement for exporting tyres to US Market.

INMETRO (Instituto Nacional De Materiologia - Brazil) We also have the certification from INMETRO a mandatory requirement for exporting tyres to Brazi (South America). This is a product as well as a system certification. Also this is a proof of superior quality of JK Tyre and our ability to meet stringent international standards. PRODUCT OF J.K. TYRE & INDUSTRIES Ltd Today J.K. tyre Ltd rewarded as Indias no.1 RADIAL TYRE making company and contributes their product to the society not only in India but to the world community. The Chairman of company Mr. R P. Singania laid the ground work for a new approach to management that consider defect as being crime. Quality superior customer service are considered the key factor for success of its product in the very competitive environment.It becomes a leading manufacturer of variety of GLOBAL products and they are: OUR FIRSTS - LEADING THE WAY Ever since its inception, JK Tyre has been a leader rather than a follower. We have garnered many Firsts to our credit like;

First Indian tyre company to introduce All Steel Truck & Bus Radials in India in 1999

Pioneered Radial technology in India by introducing passenger radials in 1977

First Indian tyre company to be recognized as 'SUPERBRAND' by Global Advertising Professionals

First in India to launch 'Eco-friendly - Green tyre' First in India to launch 'Dual Contact' - Aquasonic tyre First to launch 'Asymmetric' tyre

First in India to launch high performance tyre o o o

H rated - Speed of above 190 kms upto 210 kms V rated - Speed of above 210 kms upto 240 kms Z rated - Speed of above 240 kms. Upto 300 kms.

World's first tyre manufacturer to get QS 9000 certification for all its multilocation operations

World's first tyre manufacturer to get ISO 9001 certification for its entire operations.

CHAPTER-2

REVIEW OF LITERATURE

:REVIEW OF LITERATURE:
INTRODUCTION Global competition involves multiple firms competing across markets, for supremacy in an industry. We analyze the competitive behaviors of globally operating firms from different countries, considering their foreign direct investment (FDI) positions. Our framework is based on the theories of oligopolistic reaction (Knickerbocker, 1973) and FDI (Dunning, 1998). This work contributes to the literature by incorporating measures of international oligopolistic behavior into a model of the determinants of decisions regarding foreign subsidiary location. We investigate international competition in the tire industry, and the behavior of individual firms with respect to each other. Oar model considers factors related to foreign subsidiary location, examining leading firms' FDI during different stages of the industry's consolidation. Using binomial logit models, we find that the investment behaviors of the tire industry's major players imply the use of global strategies and a consideration of the extent of competition in individual markets. This behavior is consistent with the theory of oligopolistic reaction. Our modeling also suggests that strategic behaviors differ, depending on the presence of particular rivals. LITERATURE REVIEW Two Outcomes of Oligopolistic Behavior Past literature predicts two different types of behavior by firms in an oligopolistic industry. Classical economic theory suggests that oligopolistic firms recognize their mutual interdependence, realizing that profits will be higher when cooperative policies are pursued (Scherer and Ross, 1990). Similar collusive outcomes can be expected in foreign investment. Then, oligopolists should be less likely to invest in markets already inhabited by rivals. Thus, classic oligopoly theory suggests that firms will attempt to avoid head-to-head competition in foreign markets; i.e., carving up the world market is consistent with joint profit maximization.

However, the literature related to multimarket contact indicates that head-to-head competition does not always reduce profits. A firm has incentive to establish a foothold in at least some of the same markets as its primary competitors, to signal its ability to respond, should it come under attack (Karnani and Wernerfelt, 1985). Firms competing simultaneously in many markets may actually cooperate. Each firm can gain by allowing its competitor to be superordinate in some markets, in exchange for similar treatment in others. The "mutual forbearance" hypothesis (Edwards, 1955) postulates that firms meeting in multiple markets can anticipate each other's potential reactions. Then, investments that result in multimarket competition generate credible threats of competitive retaliation. This reduces the incentive for individual firms to act too aggressively, as such actions will result in suboptimal performance for all members of the oligopoly. Over time, firms in highly concentrated industries expect to become familiar with the likely actions of their competitors, allowing them to coordinate activities more easily. Studying U.S. domestic firms, Scott (1991) and Kim and Singal (1993) identified a relationship between multimarket contact and performance, finding multimarket contact to be generally associated with higher profits, given high concentration. However, Mester (1987) found that high concentration, accompanied by extensive multimarket contact between dominant domestic firms, was associated with more competitive behavior, contrary to the mutual forbearance hypothesis. In addition to these empirical studies, Bernheim and Whinston (1990) and Klemperer (1992) developed formal models of multimarket contact. Thus, the existing literature identifies two distinct strategies in an oligopolistic industry: carving up the market and investing head-to-head. The behaviors implied by the different theories seem to stem from different assumptions. The collusive behavior predicted by the classical oligopoly literature is consistent with assumptions of perfect information and decreasing returns, because the uncertainty associated with competitive interaction disappears and collusion logically emerges. However, multimarket competition is consistent with assumptions of imperfect information and

increasing returns, where the uncertainty is too high to warrant the trust implicit in the decision to carve up the market. Empirical Evidence of Oligopolistic Reaction Past empirical research related to FDI theory has generally supported the notion that firms in an oligopolistic industry at home tend to follow each other overseas, making similar investments in the same countries. This phenomenon is known as "oligopolistic reaction," "follow-the-leader behavior," or the "bandwagon effect." The behavior predicted by the theory of oligopolistic reaction results in multimarket According to CARE Research, the domestic tyre industry is on a brink of a major structural change. T&B which is a dominant segment in terms of tonnage is witnessing a gradual rise in the proportion of radial tyres. Going by the global trend it seems that the radial tyre demand in India is at inflection point and with almost 97 98 per cent of the passenger car tyre production has been radialised, T&B tyre category is the next major category to witness spurt in the demand for radial tyres. And with improvement in road infrastructure and better cost economics the proportion of radial tyres in T&B category is expected to expand by around seven times from the current levels. Sighting this opportunity, almost all the expansion plans for T&B category tyres are for radial category tyres.

CHAPTER-3

RESEARCH & METHODOLOGY

ANALYSIS TOOLS
While analyzing financial statements there are varieties of tools that can be chosen to suit a specific purpose. The tools used for analysis purpose are:

Ratio Analysis Year to year change or Horizontal Analysis Common size or Vertical Analysis Cross sectional Analysis

1. RATIO ANALYSIS
Accounting Ratios | Financial Ratios: RATIO ANALYSIS : - is a powerful tools of financial analysis. A ratio is an arithmetical relationship between two related or inter dependent items. The relationship between two accounting figure, expressed mathematically, is known as Financial Ratio. Ratios help to summarize large quantities of financial data and to make qualitative judgment about the firms financial performance.

Advantages of Ratios Analysis:

Ratio analysis is an important and age-old technique of financial analysis. The following are some of the advantages / Benefits of ratio analysis: Simplifies financial statements: It simplifies the comprehension of financial statements. Ratios tell the whole story of changes in the financial condition of the business Facilitates inter-firm comparison: It provides data for inter-firm comparison. Ratios highlight the factors associated with with successful and unsuccessful firm. They also reveal strong firms and weak firms, overvalued and undervalued firms.

Helps in planning: It helps in planning and forecasting. Ratios can assist management, in its basic functions of forecasting. Planning, co-ordination, control and

communications. Makes inter-firm comparison possible: Ratios analysis also makes possible comparison of the performance of different divisions of the firm. The ratios are helpful in deciding about their efficiency or otherwise in the past and likely performance in the future. Help in investment decisions: It helps in investment decisions in the case of investors and lending decisions in the case of bankers etc.

Limitations of Ratios Analysis:

The ratios analysis is one of the most powerful tools of financial management. Though ratios are simple to calculate and easy to understand, they suffer from serious limitations. Limitations of financial statements: Ratios are based only on the information which has been recorded in the financial statements. Financial statements themselves are subject to several limitations. Thus ratios derived, there from, are also subject to those limitations. For example, non-financial changes though important for the business are not relevant by the financial statements. Financial statements are affected to a very great extent by accounting conventions and concepts. Personal judgment plays a great part in determining the figures for financial statements. Comparative study required: Ratios are useful in judging the efficiency of the business only when they are compared with past results of the business. However, such a comparison only provide glimpse of the past performance and forecasts for future may not prove correct since several other factors like market conditions, management policies, etc. may affect the future operations.

Ratios alone are not adequate: Ratios are only indicators, they cannot be taken as final regarding good or bad financial position of the business. Other things have also to be seen. Problems of price level changes: A change in price level can affect the validity of ratios calculated for different time periods. In such a case the ratio analysis may not clearly indicate the trend in solvency and profitability of the company. The financial statements, therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to be made through accounting ratios. lack of adequate standard: No fixed standard can be laid down for ideal ratios. There are no well accepted standards or rule of thumb for all ratios which can be accepted as norm. It renders interpretation of the ratios difficult. Limited use of single ratios: A single ratio, usually, does not convey much of a sense. To make a better interpretation, a number of ratios have to be calculated which is likely to confuse the analyst than help him in making any good decision. Personal bias: Ratios are only means of financial analysis and not an end in itself. Ratios have to interpreted and different people may interpret the same ratio in different way. Incomparable: Not only industries differ in their nature, but also the firms of the similar business widely differ in their size and accounting procedures etc. It makes comparison of ratios difficult and misleading.

Classification of Accounting Ratios:

Classification of Accounting Ratios / Financial Ratios (B) (C) Ratios or to

(A) Traditional Classification or Statement Ratios

Functional Classification or Significance Classification According to Ratios Tests Importance Primary ratios

According

Profit

and

loss

account Profitability ratios Liquidity ratios Activity ratios Leverage ratios or long term solvency ratios

ratios or revenue/income statement ratios Balance sheet ratios or position statement ratios Composite/mixed ratios or inter statement ratios

Secondary ratios

Ratios may be classified in a number of ways to suit any particular purpose. Different kinds of ratios are selected for different types of situations. Mostly, the purpose for which the ratios are used and the kind of data available determine the nature of analysis. The various accounting ratios can be classified as follows

Analysis of Profitability
1. Liquidity Ratio:a) Current Ratio: It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities. Definition: Current ratio may be defined as the relationship between current assets and current liabilities. This ratio is also known as "working capital ratio". It is a measure of general liquidity and is most widely used to make the analysis for short term financial position or liquidity of a firm. It is calculated by dividing the total of the current assets by total of the current liabilities. Formula: Following formula is used to calculate current ratio:

Significance: This ratio is a general and quick measure of liquidity of a firm. It is also an index of technical solvency and an index of the strength of working capital. A ratio equal to or near 2 : 1 is considered as a standard or normal or satisfactory.

b) Liquid or Liquidity or Acid Test or Quick Ratio:

Definition: Liquid ratio is also termed as "Liquidity Ratio", "Acid Test Ratio" or "Quick Ratio". It is the ratio of liquid assets to current liabilities. The true liquidity refers to the ability of a firm to pay its short term obligations as and when they become due. Formula of Liquidity Ratio / Acid Test Ratio:

Liquid Ratio = Liquid Assets / Current Liabilities]

Significance: The quick ratio/acid test ratio is very useful in measuring the liquidity position of a firm. It is used as a complementary ratio to the current ratio. As a convention, generally, a quick ratio of "one to one" (1:1) is considered to be satisfactory. c) Absolute Liquid Ratio: Absolute liquidity is represented by cash and near cash items. It is a ratio of absolute liquid assets to current liabilities. In the computation of this ratio only the absolute liquid assets are compared with the liquid liabilities. The absolute liquid assets are cash, bank and marketable securities. It is to be observed that receivables (debtors/accounts receivables and bills receivables) are eliminated from the list of liquid assets in order to obtain absolute4 liquid assets since there may be some doubt in their liquidity. Formula of Absolute Liquid Ratio: Absolute Liquid Ratio = Absolute Liquid Assets / Current Assets

This ratio gains much significance only when it is used in conjunction with the current and liquid ratios. A standard of 0.5 : 1 absolute liquidity ratio is considered an acceptable norm. That is, from the point of view of absolute liquidity, fifty cents worth of absolute liquid assets are considered sufficient for one dollar worth of liquid liabilities. However, this ratio is not in much use.

2) Activity Ratio:a) Inventory Turnover Ratio or Stock Turnover Ratio (ITR): Every firm has to maintain a certain level of inventory of finished goods so as to be able to meet the requirements of the business. But the level of inventory should neither be too high nor too low. A too high inventory means higher carrying costs and higher risk of stocks becoming obsolete whereas too low inventory may mean the loss of business opportunities. It is very essential to keep sufficient stock in business. Definition: Stock turn over ratio and inventory turn over ratio are the same. This ratio is a relationship between the cost of goods sold during a particular period of time and the cost of average inventory during a particular period. It is expressed in number of times. Stock turn over ratio/Inventory turn over ratio indicates the number of time the stock has been turned over during the period and evaluates the efficiency with which a firm is able to manage its inventory. This ratio indicates whether investment in stock is within proper limit or not. Formula of Stock Turnover/Inventory Turnover Ratio: The ratio is calculated by dividing the cost of goods sold by the amount of

(a) [Inventory Turnover Ratio = Cost of goods sold / Average inventory at cost]

average stock at cost. Generally, the cost of goods sold may not be known from the published financial statements. In such circumstances, the inventory turnover ratio may be calculated by dividing net sales by average inventory at cost. If average inventory at cost is not known then inventory at selling price may be taken as the denominator and where the opening inventory is also not known the closing inventory figure may be taken as the average inventory.

(b) [Inventory Turnover Ratio = Net Sales / Average Inventory at Cost] (c) [Inventory Turnover Ratio = Net Sales / Average inventory at Selling Price] (d) [Inventory Turnover Ratio = Net Sales / Inventory]

Significance of ITR: Inventory turnover ratio measures the velocity of conversion of stock into sales. Usually a high inventory turnover/stock velocity indicates efficient management of inventory because more frequently the stocks are sold, the lesser amount of money is required to finance the inventory. A low inventory turnover ratio indicates an inefficient management of inventory. b) Debtors Turnover Ratio | Accounts Receivable Turnover Ratio: Definition: Debtors turnover ratio or accounts receivable turnover ratio indicates the velocity of debt collection of a firm. In simple words it indicates the number of times average debtors (receivable) are turned over during a year.

Formula of Debtors Turnover Ratio:

A) Debtors Turnover Ratio = Net Credit Sales / Average Trade Debtors The two basic components of accounts receivable turnover ratio are net credit annual sales and average trade debtors. The trade debtors for the purpose of this ratio include the amount of Trade Debtors & Bills Receivables.

Significance of the Ratio: Accounts receivable turnover ratio or debtors turnover ratio indicates the number of times the debtors are turned over a year. The higher the value of debtors turnover the more efficient is the management of debtors or more liquid the debtors are. Similarly, low debtors turnover ratio implies inefficient management of debtors or less liquid debtors. Average Collection Period Ratio: Definition: The Debtors/Receivable Turnover ratio when calculated in terms of days is known as Average Collection Period or Debtors Collection Period Ratio. The average collection period ratio represents the average number of days for which a firm has to wait before its debtors are converted into cash.

Formula of Average Collection Period:

B) Debtors Turnover Ratio = Total Sales / Debtors

Following formula is used to calculate average collection period: (Trade Debtors No. of Working Days) / Net Credit Sales

Significance of the Ratio: This ratio measures the quality of debtors. A short collection period implies prompt payment by debtors. It reduces the chances of bad debts c) Creditors / Accounts Payable Turnover Ratio: Definition and Explanation: This ratio is similar to the debtors turnover ratio. It compares creditors with the total credit purchases. It signifies the credit period enjoyed by the firm in paying creditors. Accounts payable include both sundry creditors and bills payable. Same as debtors turnover ratio, creditors turnover ratio can be calculated in two forms, creditors turnover ratio and average payment period. Formula:

Creditors Turnover Ratio = Credit Purchase / Average Trade Creditors

Average Payment Period:

Average Payment Period = Trade Creditors / Average Daily Credit Purchase Average Daily Credit Purchase= Credit Purchase / No. of working days in a year Or Average Payment Period = (Trade Creditors No. of Working Days) / Net Credit Purchase

Average payment period ratio gives the average credit period enjoyed from the creditors. It can be calculated using the following formula: (In case information about credit purchase is not available total purchases may be assumed to be credit purchase.) Significance of the Ratio: The average payment period ratio represents the number of days by the firm to pay its creditors. A high creditors turnover ratio or a lower credit period ratio signifies that the creditors are being paid promptly. This situation enhances the credit worthiness of the company. However a very favorable ratio to this effect also shows that the business is not taking the full advantage of credit facilities allowed by the creditors. d) Working Capital Turnover Ratio: Definition:

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

This ratio represents the number of times the working capital is turned over in the course of year and is calculated as follows: Formula of Working Capital Turnover Ratio: Following formula is used to calculate working capital turnover ratio Working Capital Turnover Ratio = Cost of Sales / Net Working Capital

The two components of the ratio are cost of sales and the net working capital. If the information about cost of sales is not available the figure of sales may be taken as the numerator. Net working capital is found by deduction from the total of the current assets the total of the current liabilities. Significance: The working capital turnover ratio measure the efficiency with which the working capital is being used by a firm. A high ratio indicates efficient utilization of working capital and a low ratio indicates otherwise. But a very high working capital turnover ratio may also mean lack of sufficient working capital which is not a good situation

e) Fixed Assets Turnover Ratio: Definition: Fixed assets turnover ratio is also known as sales to fixed assets ratio. This ratio measures the efficiency and profit earning capacity of the concern. Higher the ratio, greater is the intensive utilization of fixed assets. Lower ratio means under-utilization of fixed assets. The ratio is calculated by using following formula:

Formula of Fixed Assets Turnover Ratio: Fixed assets turnover ratio turnover ratio is calculated by the following formula: Fixed Assets Turnover Ratio = Cost of Sales / Net Fixed Assets

3) Profitability Ratio:A) On the basis of salesa) Gross Profit Ratio (GP Ratio): Definition of gross profit ratio: Gross profit ratio (GP ratio) is the ratio of gross profit to net sales expressed as a percentage. It expresses the relationship between gross profit and sales. Formula: Following gross profit ratios: formula is used to calculate [Gross Profit Ratio = (Gross profit / Net sales) 100]

Significance: Gross profit ratio may be indicated to what extent the selling prices of goods per unit may be reduced without incurring losses on operations. It reflects efficiency with which a firm produces its products.

b) Net Profit Ratio (NP Ratio): Definition of net profit ratio: Net profit ratio is the ratio of net profit (after taxes) to net sales. It is expressed as percentage.

Formula: Net Profit Ratio = (Net profit / Net sales) 100

Significance: NP ratio is used to measure the overall profitability and hence it is very useful to proprietors. The ratio is very useful as if the net profit is not sufficient, the firm shall not be able to achieve a satisfactory return on its investment. c) Operating Ratio: Definition: Operating ratio is the ratio of cost of goods sold plus operating expenses to net sales. It is generally expressed in percentage. Operating ratio measures the cost of operations per dollar of sales. This is closely related to the ratio of operating profit to net sales. . Formula of operating ratio:

Operating Ratio = [(Cost of goods sold + Operating expenses) / Net sales] 100 Significance: Operating ratio shows the operational efficiency of the business. Lower operating ratio shows higher operating profit and vice versa. An operating ratio ranging between 75% and 80% is generally considered as standard for manufacturing concerns.

d) Expense Ratio: Definition: Expense ratios indicate the relationship of various expenses to net sales. The operating ratio reveals the average total variations in expenses. But some of the expenses may be increasing while some may be falling. Hence, expense ratios are calculated by dividing each item of expenses or group of expense with the net sales to analyze the cause of variation of the operating ratio. While interpreting expense ratio, it must be remembered that for a fixed expense like rent, the ratio will fall if the sales increase and for a variable expense, the ratio in proportion to sales shall remain nearly the same. Formula of Expense Ratio: Following formula is used for the calculation of expense ratio:

Particular Expense = (Particular expense / Net sales) 100

B) On the basis of Investmenta) Return on Shareholders Investment or Net Worth Ratio: Definition: It is the ratio of net profit to share holder's investment. It is the relationship between net profit (after interest and tax) and share holder's/proprietor's fund. This ratio establishes the profitability from the share holders' point of view. The ratio is generally calculated in percentage.

Formula of return on shareholder's investment or net worth Ratio: Return on share holder's investment = {Net profit (after interest and tax) / Share holder's fund} 100]

Significance: This ratio is one of the most important ratios used for measuring the overall efficiency of a firm. As the primary objective of business is to maximize its earnings, this ratio indicates the extent to which this primary objective of businesses being achieved.

b) Return on Equity Capital (ROEC) Ratio: In real sense, ordinary shareholders are the real owners of the company. They assume the highest risk in the company. (Preference share holders have a preference over ordinary shareholders in the payment of dividend as well as capital. Return on equity capital which is the relationship between profits of a company and its equity, can be calculated as follows: Formula of return on equity capital ratio is:

Return on Equity Capital = [(Net profit after tax Preference dividend) / Equity share capital] 100

Significance : This ratio is more meaningful to the equity shareholders who are interested to know profits earned by the company and those profits which can be made available to pay dividends to them. Interpretation of the ratio is similar to the interpretation of return on shareholder's investments and higher the ratio better is. c) Return on Capital Employed Ratio (ROCE Ratio): Definition of Capital Employed: Capital employed and operating profits are the main items. Capital employed may be defined in a number of ways. However, two widely accepted definitions are "gross capital employed" and "net capital employed". Gross capital employed usually means the total assets, fixed as well as current, used in business, while net capital employed refers to total assets minus liabilities. On the other hand, it refers to total of capital, capital reserves, revenue reserves (including profit and loss account balance), debentures and long term loans. To find out net capital employed, current liabilities are deducted from the total of the assets as calculated above. Gross capital employed = Fixed assets + Investments + Current assets Net capital employed = Fixed assets + Investments + Working capital*. *Working capital = current assets current liabilities.

Formula of return on capital employed ratio: Return on Capital Employed=(Adjusted net profits*/Capital employed)100

*Net profit before interest and tax minus income from investments.

Significance of Return on Capital Employed Ratio: Return on capital employed ratio is considered to be the best measure of profitability in order to assess the overall performance of the business. It indicates how well the management has used the investment made by owners and creditors into the business. d) Proprietary Ratio or Equity Ratio: Definition: This is a variant of the debt-to-equity ratio. It is also known as equity ratio or net worth to total assets ratio. This ratio relates the shareholder's funds to total assets. Proprietary / Equity ratio indicates the long-term or future solvency position of the business. Formula of Proprietary/Equity Ratio:

Proprietary or Equity Ratio = Shareholders funds / Total Assets

Significance: This ratio throws light on the general financial strength of the company. It is also regarded as a test of the soundness of the capital structure. Higher the ratio or the share of shareholders in the total capital of the company, better is the longterm solvency position of the company. A low proprietary ratio will include greater risk to the creditors. This ratio may be further analyzed into the following two ratios: Ratio of fixed assets to shareholders/proprietors' funds Ratio of current assets to shareholders/proprietors' funds

e) Capital Gearing Ratio: Definition and Explanation: Closely related to solvency ratio is the capital gearing ratio. Capital gearing ratio is mainly used to analyze the capital structure of a company. .Formula of capital gearing ratio [Capital Gearing Ratio = Equity Share Capital / Fixed Interest Bearing Funds]

Significance of the ratio: Capital gearing ratio is important to the company and the prospective investors. It must be carefully planned as it affects the company's capacity to maintain a uniform dividend policy during difficult trading periods. It reveals the suitability of company's capitalization. 4.OVERALL PROFITITABILITY: a)Earnings Per Share (EPS) Ratio: Definition: Earnings per share ratio (EPS Ratio) is a small variation of return on equity capital ratio and is calculated by dividing the net profit after taxes and preference dividend by the total number of equity shares. Formula of Earnings Per Share Ratio Earnings per share (EPS) Ratio = (Net profit after tax Preference dividend) / No. of equity shares (common shares) .

Significance: The earnings per share is a good measure of profitability and when compared with EPS of similar companies, it gives a view of the comparative earnings or earnings power of the firm. EPS ratio calculated for a number of years indicates whether or not the earning power of the company has increased. b)Dividend Payout Ratio: Dividend payout ratio is calculated to find the extent to which earnings per share have been used for paying dividend and to know what portion of earnings has been retained in the business. It is an important ratio because ploughing back of profits enables a company to grow and pay more dividends in future. Formula of Dividend Payout Ratio

Dividend Payout Ratio = Dividend per Equity Share / Earnings per Share

A complementary of this ratio is retained earnings ratio. Retained earning ratio is calculated by using the following formula: Retained Earning Ratio = Retained Earning Per Equity Share / Earning Per Equity Share

Significance of the Ratio: The payout ratio and the retained earning ratio are the indicators of the amount of earnings that have been ploughed back in the business.

c)Dividend Yield Ratio: Definition: Dividend yield ratio is the relationship between dividends per share and the market value of the shares. Formula of Dividend Yield Ratio: Dividend Yield Ratio = Dividend Per Share / Market Value Per Share

Significance of the Ratio: This ratio helps as intending investor is knowing the effective return he is going to get on the proposed investment.

d)Debt Service Ratio or Interest Coverage Ratio: Definition: Interest coverage ratio is also known as debt service ratio or debt service coverage ratio. This ratio relates the fixed interest charges to the income earned by the business. It indicates whether the business has earned sufficient profits to pay periodically the interest charges. It is calculated by using the following formula. Formula of Debt Service Ratio or interest coverage ratio : Interest Coverage Ratio = Net Profit Before Interest and Tax / Fixed Interest Charges

Significance of debt service ratio: The interest coverage ratio is very important from the lender's point of view. It indicates the number of times interest is covered by the profits available to pay interest charges. e)Price Earnings Ratio (PE Ratio): Definition: Price earnings ratio (P/E ratio) is the ratio between market price per equity share and earning per share. Formula of Price Earnings Ratio: Price Earnings Ratio = Market price per equity share / Earnings per share The market value of every one dollar of earning is six times or $6. The ratio is useful in financial forecasting. It also helps in knowing whether the share of a company are under or over valued Significance of Price Earning Ratio: Price earnings ratio helps the investor in deciding whether to buy or not to buy the shares of a particular company at a particular market price. Generally, higher the price earning ratio the better it is. If the P/E ratio falls, the management should look into the causes that have resulted into the fall of this ratio.

General profitability: 1) Gross profit ratio = (Gross profit / Net sales) 100 2) Operating ratio = (Operating cost / Net sales) 100 3) Expense ratio = (Particular expense / Net sales) 100 4) Operating profit ratio = (Operating profit / Net sales) 100

Overall profitability: 1) Return on shareholders' investment or net worth = Net profit after interest and tax / Shareholders' funds 2) Return on equity capital = (Net profit after tax Preference dividend) / Paid up equity capital 3) Earnings per share (EPS) ratio = (Net profit after tax Preference dividend) / Number of equity shares 4) Return on gross capital employed = (Adjusted net profit / Gross capital employed) 100 5) Return on net capital employed = (Adjusted net profit / Net capital employed) 100 6) Dividend yield ratio = Dividend per share / Market value per share 7) Dividend payout ratio or pay-out ratio = Dividend per equity share / Earnings per share

Short Term Financial Position or Test of Solvency: 1) Current ratio = Current assets / Current liabilities 2) Quick or acid test of liquid ratio (for immediate solvency) = Liquid assets / Current liabilities 3) Absolute liquid ratio = Absolute liquid assets / Current liabilities

Current Assets Movement, Efficiency or Activity Ratios: 1) Inventory / Stock turnover ratio = Cost of goods sold / Average inventory at cost 2) Debtors of receivables turnover ratios = Net credit sales / Average trade debtors 3) Average collection period = (Trade debtors No. of working days) / Net credit sales 4) Creditors or payables turnover ratio = Net credit purchase / Average trade creditors 5) Average payment period = (Trade creditors No. of working days) / Net credit purchase 6) Working capital turnover ratio = Cost of sales / Net working capital

Analysis of Long Term Solvency: 1) Debt to equity ratio = Outsiders funds / Shareholders funds or External funds / Internal funds 2) Ratio of long term debt to shareholders funds (Debt equity) = Long term debt / Shareholders funds 3) Proprietary of equity ratio = Shareholders funds / Total assets 4) Fixed assets to net worth = Fixed assets after depreciation / Shareholders' funds 5) Fixed assets ratio or fixed assets to long term funds = Fixed assets after depreciation / Total long term funds 6) Ratio of current assets proprietors' funds = Current assets / Shareholders' funds 7) Debt service or interest coverage ratio = Net profit before interest and tax / Fixed interest charges 8) Capital gearing ratio = Equity share capital / Fixed interest bearing funds

2.Year to year change or Horizontal Analysis: -

A comparison of financial statements over two or three year can be undertaken by computing the year to year change in absolute amounts and in terms of percentage changes.

3. Common Size or Vertical Analysis Statements: - are very well suited to inter company comparisons because the financial statements of a variety of companies can be recast into the uniform common size format regardless of the size of individuals account. Comparison of Common Size statements of companies within an industry or with Common Size composite statistics of that industry can alert the analysts attention about variations in accounting structure or distribution.

4.Cross Sectional Analysis: this involves comparison of ratios of one firm it some other firm in the same industry at the same point in time.

CHAPTER-4

DATA INTRPRETATION & ANALYSIS

DATA ANALYSIS OF JK TYRE

Balance Sheet of JK Tyre and Industries Mar '12 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 41.06 41.06 0.00 0.00 629.54 0.00 670.60 1,396.69 281.35 1,678.04 2,348.64 Mar '12 12 mths Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments Inventories Sundry Debtors Cash and Bank Balance 2,773.27 1,330.08 1,443.19 749.20 100.89 661.54 867.36 78.23 2,737.33 1,321.02 1,416.31 287.88 93.56 688.60 713.99 85.11 41.06 41.06 0.00 0.00 673.66 0.00 714.72 758.68 559.35 1,318.03 2,032.75 Mar '11 12 mths ------------------- in Rs. Cr. ------------------Mar '11 12 mths

Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

1,607.13 470.48 0.19 2,077.80 0.00 1,917.17 105.27 2,022.44 55.36 0.00 2,348.64 241.22 163.32

1,487.70 250.02 0.17 1,737.89 0.00 1,398.74 104.15 1,502.89 235.00 0.00 2,032.75 467.09 174.07

Interpretation: The Equity share capital is the JK tyres is 2011 are 41.06 & 2012 are 41.06, corer .The Equity share capital is equal in both year . Reserves & surplus are the year 2011 is 673.66 & 2012 is 629.54 corer RS. TOTAL LOAN of year 2011 are 1318.03,& 2012 is 1678.04corer RS . NET BLOCK of 2011 is 1,443.19 & 2012 is 1416.31 corer RS. CAPITAL WORK IN PROGRESS of the year 2011 is 287.88 & 2012 is 749.20 corer RS .The capital WIP is 2012 is increases by 461.32 crore rs. INVESTMENT of the year 2012 is 93.56, & 2012 is 100.89 corer RS . The increase of the amount of the investments . TOLAT NET CURRENT ASSETS of the year 2011is 1487.70 & 2012 is 1607.13 .

Profit & Loss account of JK Tyre and Industries

------------------- in Rs. Cr. -------------------

Mar '12

Mar '11

12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 4,212.64 224.32 294.80 59.53 432.17 55.60 0.00 5,279.06 Mar '12 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off 279.70 284.64 170.43 114.21 101.41 0.00 6,148.59 502.51 5,646.08 4.94 -87.32 5,563.70

12 mths

5,247.57 449.39 4,798.18 24.05 178.66 5,000.89

3,739.46 184.18 271.80 86.33 360.76 0.08 0.00 4,642.61

Mar '11 12 mths

334.23 358.28 175.70 182.58 114.54 0.00

Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

12.80 0.00 12.80 1.80 11.00 1,066.42 0.00 10.26 1.67

68.04 0.19 68.23 30.35 61.32 903.15 0.00 12.32 2.00

410.59 2.68 24.99 163.32

410.59 14.93 30.00 174.07

Interpretation: The profit and loss of the year 2011 & 2012 is show the total sale of the year 2011 is 4798.18 & 2012 is 5646.08 crore .and other income of year is 2011 is 24.05 & 2012 is 4.94 crores .The total sales is increased by847.9 crore RS. The total raw material is consumed in year 2011 is 3739.46 & 2012 is 4212.64 croers rs.The operating profit of the year 2011 is 334.23 & 2012 is 279.70 crores RS. The sales of 2011 is low than but the profit of 2011is the greater then the year 2012. The expenses of year 2012 is more than year 2011. Equity dividend of year of the 2011 is the paid by the company is the 12.32 and 2012 is 10.26 crores RS.

CEAT TYRES:

COMPANY OVERVIEW: On the road since 1958, CEAT has run up to be one of the best tyre manufacturers in the business. We not only make trailblazing tyres, but also market tubes and flaps. And that's not all. At CEAT we personify our business; tough yet smooth, secure yet ready to explore the undaunted. We are young and revving to go; with a maturity that comes with years of market presence. More than 3000 Cr annual turnover, an impressive list of clients and OEMs, various awards and certificates are statistics that could speak for us. But we'd rather scorch the road with our performance! We believe that tyres are not just accessories; they are the force that moves your aspirations. With us you get to choose from a wide range of tyres that suit your needs and vehicle type. (Not to mention, our radials are racers in the world market!) Strength is one of the most important attributes of our products, which complements our solid foundation as a part of RPG Enterprises. Our commitment to quality ensures that you have a safe ride, always. So go on, defy destiny Vision & Mission Vision: "CEAT will at all times provide total customer satisfaction through products and services of highest quality and reliability."

Mission: "To nurture an exciting and challenging work environment with fairness and transparency." Corporate History A recollection of our past gives us pride, but it is the responsibility of the future that makes us wise. CEAT International was first established in 1924 at Turino in Italy and manufactured cables for telephones and railways. In 1958, CEAT came to India, and CEAT Tyres of India Ltd was established in collaboration with the TATA Group. In 1982, the RPG Group took over CEAT Tyres of India, and in 1990, renamed the company CEAT Ltd. The journey since has been smooth, ups and downs not withstanding. Today, we are on a roll and looking long distance. Our current mileage: Over 6 million tyres produced every year Operations in Mumbai and Nasik plants Exports to USA, Africa, America, Australia and other parts of Asia Network of 34 regional offices, 7 Zones, over 3,500 dealers and more than 100 C&F agents Dedicated customer service, with customer service managers in all four divisional offices, assisted by 50 service engineers WORK CULCTURE: At CEAT, your progress graph is marked by the decisions you make. And the

emphasis here is not on the progress or the decisions, but on you. Because YOU make all the difference.

Here you have the freedom to identify your own training and development

needs.

You identify the subject that interests you and work toward enhancing your knowledge in that area. You are encouraged to acquire the necessary skills, and constantly keep improving your performance by practicing hard. Here, the emphasis is always on your progress chart, because we believe that is what ultimately leads to the success of the company. We will give you the opportunities to kick-start, the ignition would have to be your initiation. NETWOEK : Eyes on the road. Head firmly on shoulders. A thirst in our heart. And the world's our highway. 130 countries. Does that sound big? Because it isn't. The world is a big place and there are inroads to be made yet. But it feels good to know there are people around the world riding safe on our tyres. We don't believe in flashing numbers, we let quality do our talking. And it is with reason that CEAT marks the highest exports from India in truck, OTR and LCV categories. That's not all; we have a whole range to suit the global market. We take special interest in fulfilling the needs of our global customers: special sizes, quality that matches world standards, and a global presence. Reaching out to the end-users makes business; pleasing them with a reliable product makes business sense

CEAT ROYAL: Philosophy CEAT Royal is a program for CEAT Loyal customers rewarding the experience and building a stronger emotional bond with CEAT. Like the name suggests treating its customers as "Royals" providing a higher plank of recognition and transformation. Through this program, CEAT endeavors to reward the bestmanaged fleets and strengthen the bond with its esteemed customers to create a strong platform for the future of the brand. Objective

Fostering relationships with our major fleet owners is at the core of CEAT Royals. We aim to be the first choice for our customers by winning their trust on the road and off it. Hence, it is an emotion-driven initiative and not a transaction-led platform. This program is at the heart of our plans to evolve from being a manufacturer into a transportation partner of choice.

DATA OF CEAT TYRE :-

Balance Sheet of Ceat

------------------- in Rs. Cr. -------------------

Mar '12 12 mths Sources Of Funds Total Share Capital Equity Share Capital Share Application Money Preference Share Capital Reserves Revaluation Reserves Networth Secured Loans Unsecured Loans Total Debt Total Liabilities 34.24 34.24 3.64 0.00 618.46 0.00 656.34 936.43 134.38 1,070.81 1,727.15

Mar '11 12 mths

34.24 34.24 6.05 0.00 608.85 0.00 649.14 624.13 130.78 754.91 1,404.05 Mar '11 12 mths

Mar '12 12 mths Application Of Funds Gross Block Less: Accum. Depreciation Net Block Capital Work in Progress Investments 2,100.82 576.74 1,524.08 13.42 74.48

1,881.55 520.46 1,361.09 123.40 86.53

Inventories Sundry Debtors Cash and Bank Balance Total Current Assets Loans and Advances Fixed Deposits Total CA, Loans & Advances Deffered Credit Current Liabilities Provisions Total CL & Provisions Net Current Assets Miscellaneous Expenses Total Assets Contingent Liabilities Book Value (Rs)

579.61 612.60 33.43 1,225.64 150.93 0.00 1,376.57 0.00 1,237.95 23.44 1,261.39 115.18 0.00 1,727.16 182.66 190.61

567.46 468.68 44.62 1,080.76 159.71 3.26 1,243.73 0.00 1,383.58 27.12 1,410.70 -166.97 0.00 1,404.05 269.63 187.80

Source : Dion Global Solutions Limited

Interpretation:

THE BALBANC SHEET of ceat tyres is show the share capital is year 2011 is 34.24 & 2012 is 34.24 corer RS. The share capital is stable.Reserves & Surplus are the year 2011is 608.85,2012 is 618.46 corer RS.The Reserves & Surplus are increasesing. TOLAL LIABILITIY of the year 2011 is 1404.05, 2012 is 1727.15, corer RS. The total liability is the continusly incraesesing . NET BLOCK of the year 2011 is 1361.09, 2012 is 1524.08 corer RS. SUNDRY DEBTORS for the year 2011 is 468.68 & 2012 is 612.60 corer RS . Cash And Bank of the year 2011 is 44.62,& 2012 is 33.43, crore RS. cash & bank is increases year by year.

Profit & Loss account of Ceat

------------------- in Rs. Cr. -------------------

Mar '12 12 mths Income Sales Turnover Excise Duty Net Sales Other Income Stock Adjustments Total Income Expenditure Raw Materials Power & Fuel Cost Employee Cost Other Manufacturing Expenses Selling and Admin Expenses Miscellaneous Expenses Preoperative Exp Capitalised Total Expenses 3,342.81 151.47 232.70 0.00 0.00 463.57 0.00 4,190.55 4,824.81 352.79 4,472.02 16.85 -25.90 4,462.97

Mar '11 12 mths

3,779.66 294.61 3,485.05 22.43 151.74 3,659.22

2,760.57 122.61 204.43 135.78 240.59 25.73 0.00 3,489.71 Mar '11 12 mths 147.08 169.51 102.50 67.01 34.17 0.00

Mar '12 12 mths Operating Profit PBDIT Interest PBDT Depreciation Other Written Off 255.57 272.42 192.16 80.26 70.47 0.00

Profit Before Tax Extra-ordinary items PBT (Post Extra-ord Items) Tax Reported Net Profit Total Value Addition Preference Dividend Equity Dividend Corporate Dividend Tax Per share data (annualised) Shares in issue (lakhs) Earning Per Share (Rs) Equity Dividend (%) Book Value (Rs)

9.79 0.00 9.79 2.25 7.54 847.74 0.00 3.42 0.56

32.84 0.52 33.36 11.08 22.28 729.14 0.00 6.85 1.06

342.44 2.20 10.00 190.61

342.44 6.51 20.00 187.80

INTERPRETATION PROFIT &LOSS AIC OF CEAT TYRES:2011 &2012:The profit and loss a/c of the ceat tyres is show the sales of year 2011 is 3485.05 &,2012 4472.02 crores RS.The increases the total sales of the year 2011 to 2012 is the 389.75 crore 986.97 RS. and other income is the year 2011 is 22.43 & 2012 is 16.85 crores RS.The other income is the decrasesing in ceat tyers .The raw material consumed in the year 2011 is 2760.57 &,2012 is 3342.81 crores RS.The gross profit of the year 2011 is 147.08 & 2012 is 225.57 crores RS. .

Comparative Ratio Analysis Between JK Industry & CEAT Tyre

S.NO. RATIO NAME 2011 2012 CEAT TYRE JkTYRE INDUSTRIES 2011 2012 & INTERPRETATION

INVESTMENT VALUATION RATIO

1.

Dividend Per 2.00 Share

1.00

3.00

2.50

DPS Ratio of jk industry is higher then CEAT tyre

which shows DPS of JK is more for

favourable shareholder.

PROFITABILITY RATIO

2.

Operating Profit Margin(%)

4.22

5.71

6.96

4.95

JK

has

lower

operating ratio, it can be further by GP

improved increasing ratio. 4. Gross Profit 3.23 Margin(%) 4.13 4.57 3.15 higher the

gross

profit is better so CEAT is in better position.

5.

Cash

Profit 1.83

1.80

3.15

1.96

JK having higher

Margin(%

cash profit so it is in better position.

6.

Net

Profit 0.63

0.16

1.27

0.19

NP ratio is used to measure & JKs the overall

Margin(%)

overall profitability.

profitability is good. 7. Return Capital Employed(%) On 10.25 11.87 11.99 7.74 CEAT is more

efficient in using its funds bcoz it has higher return.

8.

Return Net Worth(%)

On 3.46

1.15

8.57

1.64

JK

is

in

better bcoz it

position

has higher return & investor would like to invest in it.

9.

Return total Asset

to 0.78

0.44

1.5

0.47

Bcoz

of

having

lower ratio of CEAT shows utilization under of

companies assets.

LIQUIDITY & SOLVENCY RATIO

10.

Current Ratio 0.76

1.09

0.64

0.63

In this CEAT tyre has more liquidity than jk tyre and in

profitability jk tyre is better 11. Quick Ratio 0.46 0.63 0.69 0.68 In this jk tyre has more liquidity and ceat tyre has more profitability.

DEBT COVERAGE RATIO

12.

Interest Cover

1.84

1.07

2.49

1.07

As

both

are

in

stable position and it assures the

lenders a regular and periodical

interest income.

MANAGEMENT EFFICIENCY RATIO

13.

Inventory Turnover Ratio

6.97

8.32

7.91

9.78

JK has higher ITR ratio then CEAT. Which indicates JK has efficient of

management inventory. 14. Debtors Turnover Ratio 8.25 8.27 7.99 7.14

IN this CEAT is in better position bcoz the value higher of the

debtors

turnover the more efficient is the of

management

debtors

or

more

liquid the debtors are. 15. Fixed Assets 1.92 Turnover Ratio 2.20 1.76 2.04 In this jk has lower ratio means underutilization of fixed assets is there 16. Total Assets 2.60 Turnover Ratio 2.69 2.37 2.41 In this ratio ,CEAT is better which better

means

utilization of total assets is there.

17.

Capital Turnover ratio

2.59

2.40

CEAT

has better

utilization of capital & more profitability

CAPITAL STRUCTURE RATIO

18.

Debt Ratio

Equity 1.17

1.64

1.84

2.50

Ceat better

tyre

is

in

position

because it has long term financial

solvency position OTHER RATIOS

19.

Dividend Payout Ratio Net Profit

35.48

52.79

23.35

108.45

CEAT ratio

has

lower which strong

indicates

financial position of

company.

20.

Earnings Per 6.51 Share

2.20

14.93

2.68

JK is slightly higher then CEAT tyre

which shows good profitability of JK. 21. Retention ratio 74.05 62.79 62.05 -24.79 Higher the ratio of CEAT which shows the high growth of

potential company.

CHAPTER-5 SUGGESTION & RECOMMENDATION

Suggestions & Recommendations :

Financial statements do not take account changes in price levels. Analysis of such statements may not give a true picture of the states of affairs.

Different companies follow different accounting policies, comparison with the company having different policies may not give the true result.

A problem may arise on two accounts interpretation of ratio on its own, and interpretation of the ratio taken together. It is difficult to decide the optimum level of a ratio, inspire of the presence of industry average.

Current ratio has decreased to 0.63 which is lower than the normal standard which is 1.5:1 for manufacturing industry, which is showing that the ability of J.K. Tyre industry to meets its current obligation, is not good.

Company liquidity is mainly relying on the sale and recovery of its inventory since most portions of current assets is holding by debtors and inventory, which is not good.

Profit margin of the tyre industry is higher than the J.K. Tyre which is not much efficient in its production, selling, financial and tax management comparing with other player in the industry.

Present asset turnover of the company has decreased in last two years. But now the ratio is increased so this is good sign in absolute terms.

 There has been a drastic decrease in profit after tax (PAT). It showing a decreasing trend in 2011 as compared to 2012. This decrease has been mainly due to increase in employees, freight and transportation cost and increase in cost of borrowing.

The increase in Current Liabilities is more than that of Current Asset. There is decrease in sources of fund. This decrease has been contributed by decrease in loans (both secured and unsecured) and decrease in reserve and surpluses. The application of fund has been mainly done in acquiring assets, meeting current assets, loans and advances.

The interest coverage ratio of J.K. Industries is very less as compared to its competitors. It indicates that the Margin of Safety for the lenders is very less as compared to the competitors. The reason being very low net profit before interest and very high interest paid.

The receivable turnover ratio is showing a declining trend in past and now improve in receivable turn over ratio but is not showing a healthy position. It indicates that debts are not collected quickly

The Assets turn over ratio is showing an increase trend. It states that the assets are use efficiently.

The company not maintained Debt-Equity ratio. The ideal ratio should be between 2:1 & 1:1, which has not maintained by the company.

CHAPTER-6 CONCLUSION

CONCLUSION:The period under review was one with daunting challenges of acute global financial crunch followed by economic down-turn worldwide including India. The impact was severe on the Automobile Industry-both commercial and passenger, resulting in curtailed demand for tyres,more so, for the commercial tyres. Moreover, unprecedented hike in the oil prices led to sharp cost increases of petro-based raw materials and other inputs for the tyre industry.

The all round cost push on the one hand and economic slowdown on the other, affected profitability.

However, there has been significant improvement in the profitability

of the Company

in the current year on account of better operating efficiencies, higher productivity, all round cost reduction measures and richer product mix.

JK tyre has already been exporting tyres to these markets and will thus be able to strengthen its presence apart from leveraging strategi clocational advantage. All-round initiatives have been undertaken to stream-line and improve Tornels operations to optimize the use of resources and synergies offered by this acquisition. These

initiatives have started yielding results.

JK Tyre now comprises 7 tyre plants with an aggregate capacity of 15.8 million tyres per annum with a combined tonnage of over 1000 MTs per day,The journey started in 1977 with Companys first tyre manufacturing plant with an initial capacity of 0.5 million tyre in Kankroli,Rajasthan. Over these eventful years, JK Tyre acquired Vikrant Tyre in 1997, a Government of Karnataka undertaking which was subsequently amalgamated with JK Tyre. With the acquisition of Tornel, JK Tyres combined turnover exceeds US $ 1 billion, giving a boost to its national positioning as also strengthening JK Tyres position in the international ranking.

The Indian Automotive Industry is becoming increasingly globalised and is operating in highly dynamic environment with rising customer expectations. JK Tyre is proud to be associated with the leading automotive manufacturers of the country, and enjoys the privileged position of being major suppliers in most of the successful car launches in recent times like Swift, Logan, Swift Dzire, SX4, A star, Indigo XL and Scorpio.

CEAT company ended the year with net sales of Rs. 2514 crores as compared to Rs. 2330 crores in the previous year relating to a growth of 8%. The OEsegment and exports did not perform well during the year under review. However, this was compensated by gains in the replacement market

References/ Bibliography

References:
http://money.rediff.com/companies/jk-tyre-and-industries ltd/10680007/balance-sheet http://money.rediff.com/companies/jk-tyre-and-industries/10680007 http://myiris.com/shares/company/financial.php?icode=APOTYRES http://www.jktyre.com/ http://www.ceattyres.in/

Bibliography:

Stock

Exchanges,

Investments

and

Derivatives,

3/e

(Paperback),

V.Raghunathan, Prabina Rajib.

Foundations of Financial Management; 6th edition, Block and Hirt, Irwin, 1992. Guide to Financial Analysis; Bowlin, Martin, and Scott. 2nd edition, McGrawHill, 1990.

Financial Management Theory and Practice; Brigham and Gapenski, 6th

edition, Dryden Press, 1991.