Documenti di Didattica
Documenti di Professioni
Documenti di Cultura
PROJECT REPORT
ON
Submitted By ;
Ms.Shilpa Chawla
RICHA NANDA
Faculty,MBA
//DECALARATION//
I hereby certify that the work which is presented in this Summer Training Project
Entitled as:-
Place:
Date:
Richa Nanda
D/o Sh. Ashok Kumar Nanda
Unv. Reg No :04-DGY-611
Unv. Roll No.:
Institute Roll No.: 1133/08
ACKNOWLEDGEMENT
Perseverance, diligence, inspiration and motivation have always played a key role in the triumph
of any venture. In the present world of walloping competition, a project is likely to apocalypse a
nexus between theoretical knowledge and practical working.
First of all, I would like to thank the paramount power, the ultimate impeccable creator, the
almighty God, who is the one who has always directed me to work on the right path of my life.
With his grace, this project could become a reality.
EXECUTIVE SUMMARY
The prime objective of my study was to study the impact of increasing debt on the profitability
and liquidity of the company. I also took the help of ratio analysis in my study to know about the
financial position of the company.
The first section includes introduction to Krishna Maruti Ltd. The successive chapter introduces
us with the project, gives proper definition to the problem, objectives of the study, significance of
undertaking this project and defines the limitations and scope of the study.
The third section briefs us about the way of carrying out the research methodology, which in
turns tells about the sampling, data collection methods, field work, analysis and interpretation etc
then is given the results and findings devised out of the research project. The bibliography and
annexure follow this. I hope that this report will prove o be useful for the management to carve
out the proper solutions put forth.
CONTENTS
TABLE OF CONTENTS
Topic
Page No.
1) Introduction
2) Profile of the study
i)
Indian
Automobile
Industry
History
electric
Tata Nano is the least expensive car in production in the world. The
price is about Rs. 100,000 (US$2,500).
Maruti Suzuki's A-Star vehicle during its unveiling in Pragati Maidan, Delhi. AStar, Suzuki's fifth global car model, was designed and is made only in India.
1897 First Person to own a car in India - Mr Foster of M/s Crompton Greaves Company, Mumbai
1901 First Indian to own a car in India - JamshedJi Tata
1905 First Woman to drive a car in India - Mrs. Suzanne RD Tata
1905 Fiat Motors
1911 First Taxi in India
1924 Formation of traffic police
1928 Chevrolet Motors
1942 Hindustan Motors
1944 Premier Automobiles Limited
Industry Today
Following India's economic liberalization in 1991, the automobile industry was opened for 100
percent foreign direct investment. A surge in the country's economic growth rate and purchasing
power has fueled a 17% annual growth rate in the Indian automobile industry since 1991. The
automotive industry generates direct and indirect employment to about 13.1 million people as of
2006-07.
The automotive parts and cars exports has grown at an annual rate of 30% per year in the 21st
century. However, the India's share of the overall global automotive industry remains low as of
2007. Increased competitin amongst automobile manufacturers provides for a variety of
competitive options for the consumer.
India was one of the largest manufacturers of tractors in the world in 2005-06, when it produced
293,000 units. India produced 65 Million tyres during FY 2005-06. India's tyre production meets
domestic demand, as well as are exported to over 60 countries.
Outlook
Indias car market has emerged as one of the fastest growing in the world. The number of cars sold domestically is
projected to double by 2014, and domestic production is skyrocketing as foreign makers are setting up their own
production plants in India. The governments 10-year plan aims to create a $145 billion auto industry by 2017.
According to McKinsey & Company, the automotive sectors drive for lowering costs will lead
to outsourcing. The global automotive industry's sourcing from emerging markets will reach
$375 billion by 2015, up from $65 billion in 2002. McKinsey thinks India can capture $25 billion
of this export potential. Out of 400 Indian suppliers, 80 percent are ISO 9000 certified the
international standard for quality management.
Most of India's current automobile production meets domestic demand. Forecasts predicts sales
of 4.2 Million four-wheel automobiles in India by 2015. But, several manufacturers are now
focusing on exports, and a diverse range of automotive components are now built and exported
from India. India's passenger vehicle exports are forecast to rise from 170,000 in 2006 to
500,000 in 2010.
Exports
Hyundai i20, one of the most widely exported cars solely made in India.
India has emerged as one of the world's largest manufacturers of small cars. According to New
York Times, India's strong engineering base and expertise in the manufacturing of low-cost, fuelefficient cars has resulted in the expansion of manufacturing facilities of several automobile
companies like Hyundai Motors, Nissan, Toyota, Volkswagen and Suzuki.
In 2008, Hyundai Motors alone exported 240,000 cars made in India. Nissan Motors plans to
export 250,000 vehicles manufactured in its India plant by 2011. Similarly, General Motors
announced its plans to export about 50,000 cars manufactured in India by 2011.
India automobile companies, mainly Maruti Suzuki, Tata Motors and Mahindra, have been
aggressively expanding their overseas market too. Prominent India-made automobiles which are
widely exported include:
Maruti Suzuki - exports Suzuki Alto, Maruti 800, Maruti Omni, Maruti Wagon-R and Zen Estilo
Hyundai Motor Company - exports Hyundai Santro, i10, Hyundai Getz, i20 and Hyundai Accent
- 42% of its India production
Tata Motors - exports Tata Safari, Tata Novus and Tata Xenon
Mahindra & Mahindra Limited - exports Mahindra Scorpio and Mahindra Xylo
In addition to Bangalore-based REVA, which currently is the only company actually selling EVs
today, electric cars made in India includes:
Ashok Leyland: Ennore, Chennai, Tamil Nadu; Hosur, Tamil Nadu (3 plants)
Audi: Aurangabad, Maharashtra.
BMW: Chennai, Tamil Nadu.
2008, overall production fell by 22 % over the same month last year. Global recession has hit the Indian
auto industry, India is strong and growing industry but the impact of recession is evident now on industry
as
sales
&
growth
of
automobile
companies
have
declined.
Passenger Vehicles segment registered negative growth. One of its supporting facts is that the sales in
December 2008 for passenger vehicles fell by 13.86% over December 2007. Maruti- the leading car
manufacturer, registered 10% fall in sells (56293 units), as compared to December07 (62,515 units). But
interestingly, Hyundai motors, the second largest car maker of country, registered a growth in sells, with
the help of export; Hyundai Motors reported 19% growth.
Two Wheelers registered minor growth of 1.85 % during April December 2008. However, Two
Wheelers sales recorded 15.43 percent fall in December 2008 over the same month last year. In two
wheeler segment, Hero Honda has witnessed 10% fall (215,931 units in Dec 2008) in sales as compared
to December 2007 (240,532 units). Bajaj Automobile has registered 33% fall in its over all two wheeler
sells, compared to last year. The company has reported 37% negative growth in bike sells.
Although the year 2008 saw a record launches of new products of various categories. Maruti launched A
Star, its new small segment car. Honda Motors launched the new version of Honda city, its best selling
sedan, also Civic Hybrid. Hyundai motor was not also far behind, in the end of the year, Hyundai
launched its much awaited sedan i20.
In Bikes segments, this year was full of happening. Yamaha introduced its two new hi-end models YZF &
R15. Suzuki Motorcycle India also launched its legendary bike Hayausa & Intruder in Indian market.
Introduction To
Krishna Maruti
KML entered the auto interior manufacturing business with a single product (seating system for
Maruti 800 CC Car) in year 1994. Krishna Maruti Ltd. (KML) was incorporated in year 1994 as
an ancillary to Maruti Udyog Ltd. (MUL), for the supply of Car seats. KML is joint venture
between Mr. Ashok Kapur, MUL, and Suzuki Motor Corporation and has technical collaboration
with SNIC of Japan for seat design and manufacturing. The state of the art plant is located at
Delhi-Jaipur Highway, Narsinghpur Gurgaon (Haryana), and spread over an area of five acre.
The installed capacity of plant is 4,000,000 seat set per annum.
Today Krishna Group has six plants for a different range of car interiors like door trims, Roof
Head liners, Rear view mirrors, Sheet metal components and auditorium seats all are located in
Gurgaon. (Please see Annexure). Total group outlay is Rs. 6500 Million. Today KML
manufacture
8
different
products
with
over
100
different
models.
KML came into the existence, when there were established seat manufacturer for supplies to
Maruti. We strived hard to prove ourselves better than others and today we got the distinction as
the most favored supplier to MUL, and enjoying 59% of MUL seating business, which is much
more than any other competitor who were in business before we came into business.
KML has been the proud recipient of following five major awards from MUL, at last year vendor
conference.
Best VA/VE award
Best Overall performance award
Best effort of Cost reduction award
Best effort for vendor up gradation award
KAIZEN award
Nevertheless, Satisfied with most delighted customer like, MUL, KML never looked back,
relaxed but kept on revising and achieving set targets, KML achievements in the area of quality,
Cost, Delivery, has become a benchmark for others industries.
KML has also achieved following quality certificates.
TS16949
ISO 14000
OHSAS 18000
Deming award
Pursuing towards TQM.
Over the past few years, KML has been upgrading software design tools, prototyping facilities,
testing equipments and above all engineering and design skills for better prepared for the
Challenge of AFTA, WTO and Trade Globalization. Our engineers have been working together
with our technical partners to upgrade their skills and technical knowledge.
The backbone of Krishna group is its corporate R&D center, established with an investment of
Rs. 100 million and has distinction as a approved lab by govt. of India, capable of conducting
tests as per Japanese standards, European Homologation. EEC/ECE, JASO & JIS.
ISO 14001, environment certificate serves to show that KML is committed to being a responsible
corporate citizen by ensuring that we take heed to minimize and where possible eliminate,
environment unfriendly substance.
Major customers are Maruti Udyog Ltd., Honda Siel, GM, FORD and HREC (STU).
KML are India's First Total Auto Interior Group of Companies manufacturing all the
requirements of auto interiors including Seating Systems, Rear View Mirrors, Head Rest
Assemblies, Arm Rest Assemblies, Seat Trims (Covers), Injection Moulded Door Trims, Roof
liners & Moulded Carpets.
KML reached all this in short span of time because KML firmly practice ' 6 - F' principle
throughout the organisation:
Focused: Focus towards customer delight, engineering infrastructure, cost
consciousness and continuous improvements through '5 - S', 'Kaizens',
Quality Circle Meetings and Suggestion Meetings.
Fast: Fast system & technological up - gradation and implementation.
Flexible: Flexible towards customer requirements.
Friendly: Creating friendly environment among customer, employees &
vendors.
Firm: Firmly adhering to laid down policies & procedures &
Fun: Achieving the targets in stipulated time.
In order to be a leader in its field, a strong centralized R & D Center (first of its kind in country)
was established with an investment of $ 1.5 Million. This center is the best in the country and is
recognized by the Department of Scientific & Industrial Research, Ministry of Science &
Technology, Govt. of India.This center is capable of not only testing as per International
Standards but can also issue Test Certificates to other Seat manufacturers. This test center can
also perform test for non - Automotive components for Endurance & Repeatability.
HISTORY OF KML
It was in 1993 when Mr. Ashok Kapur started Krishna Maruti Ltd. seat division, a joint venture
to supply car seats to Maruti Udyog Ltd. Since then he has never turned back and believes in
only looking ahead.
It is the hard work and perseverance of 13 years & a brain of an architect who knows how to
build a high rise on a solid platform that has paved the way for The Krishna Group.
Today the existence of Krishna group with 8 manufacturing plants, infrastructure company,
media, floor & furnishing, tours & travels are the best example of his never dying approach of
diversifying in the age of competition. Mr. Kapur's philosophy of putting the customer first has
paid of handsomely & now Krishna group is one of the youngest diversified group which is
going to touch a turnover of INR 10 billion (1000 crore) by next year.
His son, Mr.Sunandan Kapur teamed up with him in 1999. Since then he has been responsible for
various companies under The Krishna Group and is currently in-charge of a newly acquired
company called SKH Metals Ltd.
Mr. Kapur has been honored 3 times consequently by his customers for best overall performance.
School of innovation management, Tokyo has honoured Mr. Kapur by passing on his teachings
to the new graduates.
His desire to prioritise quality perfection laid our seating division to not only win the Deming
Award but also to become the world's first & youngest seating company to have this honour.
1994-1995 - Established Krishna Maruti Ltd., a joint venture between Ashok Kapur &
Associates, Maruti Udyog Ltd., and Suzuki Motor Corporation to manufacture
automotive seats in technical collaboration with SNIC Co. Ltd. of Japan.
1996-1997 - Established Krishna Toyo Ltd., a joint venture between Ashok Kapur &
Associates and Toyo Ltd. to manufacture automotive mirrors in technical collaboration
with Toyo Ltd. of Japan.
1997-1998 - Established Krishna Pads Ltd., a joint venture between Ashok Kapur &
Associates and Krishna Maruti Ltd. to manufacture automotive head rests and
PolyUrethane (PU) products.
1998-1999 - Established Krishna Trims Ltd., a joint venture between Ashok Kapur &
Associates and Krishna Maruti Ltd. to manufacture automotive seat trims.
2002-2003 - Established Krishna Grupo Antolin (P) Ltd., a joint venture between Krishna
Maruti Ltd. and Grupo antolin to manufacture roof headliners in technical collaboration
with Grupo Antolin of Spain.
Established Krishna Quinette Galley, a joint venture between Ashok Kapur &
Associates and Quinette Galley to manufacture auditorium & cinema seats in
technical collaboration with Quinette Galley of France.
2004-2005 - Acquired Mark Auto Industries Ltd. (now SKH Metals Ltd.), a joint venture
between Ashok Kapur & Associates and Maruti Udyog Ltd. to manufacture fuel tank,
front suspension, and metqal parts in technical collaboration with Fatuba of Japan,
Okamoto of Japan, and Magnetti Marelli of Italy.
Established SKH Auto Components Ltd. through a merger of Krishna Trims Ltd.
and Krishna Pads Ltd.
Established Krishna Maruti Ltd. - Moulded Carpet Division.
The journey towards perfection is still on....
KML philosophy
Krishna Group take a turn for better in totality .Smaller , fewer, lighter , shorter, & beautiful.
Maxim quality & minimize expenses.
KML corporate philosophy is "RESPECT FOR INDIVIDUAL". Their employees, are their
greatest assets. Their future growth depends greatly upon excellence in human resource
management and evelopment.
Their offer equal growth opportunities across the Organisation. Company provides conducive
environment for employee's growth, by providing training and exposure for overall development
with a view to make them able to shoulder added responsibilities.
Krishna have a friendly work atmosphere in the day-to-day working. All family members are
free to collaborate and communicate, and maintain a smooth and steady rhythm of work with full
commitment.
Board of Directors
Testing facility
The R & D Center has been established with the aim of bringing innovation in seating systems
by incorporating latest principles in seat design. KML is the first seating manufacturing company
in the country to establish such an advance facility. This center was established with an
investment of $ 1.5 Million. This center is capable of conducting tests as per European
Homologation (EEC/ECE/FMVSS) and Japanese Standards (JASO) on not only automotive
seating systems but also on other components wherein repeatability and endurance life has to be
ascertained.
The test rigs are certified by Vehicle Certification Agency (VCA) of UK. The center is
recognised by the Department of Scientific & Industrial Research, Ministry of Science and
Technology, Govt. of India.
The set - up includes Vibration Test Rig, Free Flight Impact Test Rig and Static/Dynamic
Strength Test Rig. The software used for these Rigs produces precise waveforms e.g. Sine,
Triangular, Square and Ramps.
We are known for our innovative products and advanced technology which have been significant
factors in our growth. Our continued focus on quality, craftsmanship, execution and global
benchmarking are key elements of our way of doing business.
We have expertise in manufacturing the following products: Automobile Seats
Seating Systems
Rear View Mirrors
Head & Arm Rests
Seat Trims
Auditorium Seat
Injection Moulded Door Trims
Roof liners
Presently Krishna Maruti Limited produces 16 different Variants of seating systems of following Models:
ESTEEM , WAGON R, ZEN, OMNI, MARUTI 800cc & ALTO.
Krishna Maruti Limited has capabilities to Manufacture Seating Systems as an OE to potential customers for thei
of products
Company produces a range of Outside & Inside Rear View Mirror Assemblies for Maruti Udyog
Limited and Honda Siel Cars India Limited.
With 35% OE market share, Every Fifth Indian Car has Rear View Mirror Assembly
manufactured by Krishna Toyo Limited.
The range can easily be extended to suit the requirements of other Auto Manufacturers.
The Joint Venture agreement between Ashok kapur & Associactes and Toyo Industries Co.
Ltd. was signed on 20th day of Dec. 1995. The Commercial production started in September
1996.
Toyo Limited is Japan's Third largest Mirror Manufacturer and caters to 90% of Suzuki's
total requirements in Japan.
Toyo has manufacturing facilities in Thailand and Indonesia as well.
toyo's Five decade of Experience in field of Auto Mirror have been incorporated at all levels and
at all stages.
All facilities required for ensuring the Quality of Input Parts and Products have been provided.
Facilities for testing Mirror Assemblies as per International Standards are available. Very
specialized test are conducted at Toyo's Facility in Japan. All the Components, Parts &
Products are productionised after due approval from Toyo's Q.C, Japan.
Krishna Pads Limited uses NC Controlled Puromat High - Pressure Foaming Machine for its
foaming application for producing Head Rest & Arm Rest Assemblies for all models of
Maruti's Car.
Krishna Pads is working towards acquiring ISO 9002 certification in this year. Towards this
end, all quality/work procedures have been implemented and are being strictly followed.
Headrest defeletion test and impact tests are conducted regularly to ensure compliance as per
statutory required performance parameters of seats. As a Backward Integration Exercise,
Krishna Pads Limited (KPL) was established in Year 1996. Krishna Maruti Limited holds 10%
equity in the company.
This company manufactures Head Rest and Arm Rest Assemblies and is the single source for
Krishna Maruti Limited. Krishna Pads Limited is India's Largest Manufacturer of Head Rest &
Arm Rest Assemblies.
Krishna Trims Limited is India's Largest Seat Cover Manufacturing Company. State of art
cutting & stitching machines are used to manufacture products
The Company has a manufacturing capacity of 200,000 Set per annum.
Krishna Trims Limited is catering Krishna Maruti Limited's total requirement of trims. KPL
provides these items for the following cars :
Standard 800
Omni Van HR
Zen
Esteem
Wagan R
Baleno
Trim being a most important component for quality seat, KML decided to establish Krishna
Trims Limited for ensuring supply of high quality trims. Working on Group Quality Policy, KTL
sends its team on regular basis to SNIC Company - Japan for training. Experts from SNIC
Company - Japan are invited regularly to KTL for imparting training into designing
Cutting & Stitching patterns for Trims to team at KTL.
It was this effort that resulted in KTL acquiring ISO 9002 certificate within 1 year of its
inception.
July 2003.
Rajshri Lucknow
Novelty Lucknow
Movie Talkies Mumbai
Manipal Academy of Higher Education
Scientific Conventional Centre at
KGMU - Lucknow
PVR Hyderabad
PVR Mumbai
Door Trims
Roof Headliners
Carpets
For producing Injection Moulded Door Trims, we have Toshiba's (Japan) 1300 Tonne Machines
and for the Assembling of various plastic parts together, we use Branson's (USA) Ultrasonic
Welding Process.
For our Roofliners, we have Meyer's (Germany) Lamination Machine & Thermoforming
Machine. We are the only Indian Company to use Twin Head Robotic Water - Jet Cutting
Machine from ABB - IR Sweden.
The company is all set to use its specialty in Injection Molding for producing components for
White Good Industry.
This division incepted in June 1999. In Line with company philosophy of doing the projects
without cost or Time overrun this project was completed within a record time of 66 days and
production was started on 67th day (18th December 2000).
This division has helped its customer in Cost Reduction by successfully localizing of Door Trims & Roof Headliners for Wagon R and Alto.
The Door Trim manufacturing facility has been established with Technical Collaboration with
M/s OHTA SHEET of Japan. This agreement was signed on 7th April 1999.
OHTA SHEET is one of the leading Auto Interior Company of Japan and is in the business of
manufacturing Door Trims, Roof Headliners & Moulded Carpets. OHTA SHEET is one of the
Biggest Suppliers of Door Trims to Suzuki Motor Corporation in Japan
As per the Technical Collaboration Agreement OHTA SHEET provides the total Know - How
right from the selection of Raw Materials, Machines, Manufacturing Process and testing
Facilities.
In line of Vision of becoming a World Class Manufacturing Company the Philosophy of TQM is
followed through - out. The Organisation implements the best of Manufacturing and
Management Techniques since inception.
KML - DTD works on the principal that 'Customer is God'. For us Quality is the Way of Life.
The Company is committed to Quality and Customer Delight in terms of Total Quality, Cost &
Delivery i.e. Right Quantity, Right Price & Right Place.
KML - DTD is working progressively towards QS 9000 and is hopeful of achieving the same
within this year.
The division was setup in July 2000 & the machines for lamination & thermofoaming was
commission in December 2000. The commercial production started in Feb 2001.This plant can
manufacture 2,00,000 Roof Headliners of various models per year.
For Lamination of Substrates, Fully Automatic & Continuous Lamination Machine from Meyer
- Germany is used. The Machine is capable of laminating upto five different materials together in
a single operation. For moulding the Laminated Substrates into the required shape, the
Thermoforming Press is used. This Press is High Capacity Single Acting Hydraulic Machine
with advance controllers governing accurate controls over required parameters for consistent
results..
Outsourcing
At Krishna the basic raw materials used are :
Polyurethane raw materials to produce moulded cushion pads -Polyols & Isocynates.
CRCA sheet metal components.
PVC fabrics.
Wire Spring
Hardware items.
Various industrial consumables like mig wire, adhesives, safety items, spot welding
electrodes etc.
Automotive fabric.
Treads.
Mirror sheets.
CRCE sheet.
Quality
Company has been certified as ISO 9002 in year 1996 by TUV Bayran and QS 9000 in Year
1997 by AV Vincotte, Belgium.
Towards our quest to become a World Class Company, we at KML commenced the TQM
Mission jointly organized by CII and MUL since 1998.
At Krishna Maruti Limited we are totally committed to Quality Standards set by our customers.
Our line rejection is less than 500 PPM and we have achieved Zero MARU 'A' Defect.
Kaizen and 5 S principals are followed at all levels through the organization.
Krishna group offers a very challenging work culture with emphasis on developing individual's
creativity.
Krishna group is the leader in its field of operation and has joined hands with World leaders in
their respective fields:
a)Suzuki Motor Corporation - Japan.
b)SNIC Company Limited - Japan (Seating Systems).
c)Toyo Industries Company Limited - Japan (Rear View Mirrors)
d)Ohta Sheet Company Limited - Japan (Door Trims)
In order to develop and manufacture world-class product the best machines and tooling are there
in the company. Individuals who look for a bright & promising career with Krishna Group please
PROFILE OF
THE STUDY
Total Debt
Secured Debt
Unsecured Debt
2008
996820254
969967830
13426212
2007
715018431
693138323
21880108
2006
454092269
423658613
30433656
2005
338938569
295062090
43336479
RATIO ANALYSIS ( Ratios related with the Profitability and Liquidity of KML)
FINANCIAL ANALYSIS
Financial analysis is the process of identifying the financial strengths and
weaknesses of the firm and establishing relationship between the items of the balance sheet and
profit & loss account.
Financial ratio analysis is the calculation and comparison of ratios, which are
derived from the information in a companys financial statements. The level and historical trends
of these ratios can be used to make inferences about a companys financial condition, its
operations and attractiveness as an investment. The information in the statements is used by
Trade creditors, to identify the firms ability to meet their claims i.e. liquidity position of
the company.
Investors, to know about the present and future profitability of the company and its
financial structure.
RATIO ANALYSIS
The term Ratio refers to the numerical and quantitative relationship between
two items or variables. This relationship can be exposed as
Percentages
Fractions
Proportion of numbers
Ratio analysis is defined as the systematic use of the ratio to interpret the financial
statements. So that the strengths and weaknesses of a firm, as well as its historical performance
and current financial condition can be determined. Ratio reflects a quantitative relationship helps
to form a quantitative judgment.
The first task of the financial analysis is to select the information relevant to the decision
under consideration from the statements and calculates appropriate ratios.
To compare the calculated ratios with the ratios of the same firm relating to the pas6t or
with the industry ratios. It facilitates in assessing success or failure of the firm.
Third step is to interpretation, drawing of inferences and report writing conclusions are
drawn after comparison in the shape of report or recommended courses of action.
Competitors ratio, of the some most progressive and successful competitor firm at the
same point of time.
Projected ratios, ratios of the future developed from the projected or pro forma financial
statements
Selection of relevant data from the financial statements depending upon the objective of
the analysis.
Comparison of the calculated ratios with the ratios of the same firm in the past, or the
ratios developed from projected financial statements or the ratios of some other firms or
the comparison with ratios of the industry to which the firm belongs.
Group of ratios
Historical comparison
Projected ratios
Inter-firm comparison
Different parties are interested in knowing about the various ratios of the company.
The following are various parties and their related interest:
Investors
To help them determine whether they should buy shares in the business,
hold on to the shares they already own or sell the shares they already own.
They also want to assess the ability of the business to pay dividends.
Lenders
to determine whether their loans and interest will be paid when due
Managers
might need segmental and total information to see how they fit into the
overall picture
Employees
Suppliers and other businesses supplying goods and materials to other businesses will read
trade creditors
their accounts to see that they don't have problems: after all, any supplier
wants to know if his customers are going to pay their bills!
Customers
Governments and
their agencies
Local community
the trends and recent developments in the prosperity of the business and
the range of its activities as they affect their area
Financial analysts
they need to know, for example, the accounting concepts employed for
inventories, depreciation, bad debts and so on
Environmental
groups
Researchers
Selection of ratios
Use of standards
Differences in definitions
Limited use
Personal bias
CLASSIFICATIONS OF RATIOS
The use of ratio analysis is not confined to financial manager only. There are
different parties interested in the ratio analysis for knowing the financial position of a firm for
different purposes. Various accounting ratios can be classified as follows:
1. Traditional Classification
2. Functional Classification
3. Significance ratios
1. Traditional Classification
It includes the following.
Balance sheet (or) position statement ratio: They deal with the relationship between two
balance sheet items, e.g. the ratio of current assets to current liabilities etc., both the items
must, however, pertain to the same balance sheet.
Profit & loss account (or) revenue statement ratios: These ratios deal with the relationship
between two profit & loss account items, e.g. the ratio of gross profit to sales etc.,
Composite (or) inter statement ratios: These ratios exhibit the relation between a profit &
loss account or income statement item and a balance sheet items, e.g. stock turnover ratio,
or the ratio of total assets to sales.
2. Functional Classification
These include liquidity ratios, long term solvency and leverage ratios, activity
ratios and profitability ratios.
3. Significance ratios
Some ratios are important than others and the firm may classify them as primary
and secondary ratios. The primary ratio is one, which is of the prime importance to a concern.
The other ratios that support the primary ratio are called secondary ratios.
Ratios to watch
Investors
Lenders
Gearing ratios
Managers
Profitability ratios
Employees
Customers
Profitability
Profitability
Local Community
Financial analysts
Environmental groups
1. LIQUIDITY RATIOS
Liquidity refers to the ability of a concern to meet its current obligations as &
when there becomes due. The short term obligations of a firm can be met only when there are
sufficient liquid assets. The short term obligations are met by realizing amounts from current,
floating (or) circulating assets The current assets should either be calculated liquid (or) near
liquidity. They should be convertible into cash for paying obligations of short term nature. The
sufficiency (or) insufficiency of current assets should be assessed by comparing them with shortterm current liabilities. If current assets can pay off current liabilities, then liquidity position will
be satisfactory.
To measure the liquidity of a firm the following ratios can be calculated
Current ratio
CURRENT LIABILITIES
Cash in hand
Cash at bank
Bills receivable
Bills payable
Inventories
Short-term advances
Work-in-progress
Sundry creditors
Marketable securities
Dividend payable
Short-term investments
Income-tax payable
Sundry debtors
Prepaid expenses
CURRENT LIABILITIES
Cash in hand
Cash at bank
Bills receivable
Bills payable
Sundry debtors
Short-term advances
Marketable securities
Sundry creditors
Temporary investments
Dividend payable
Income tax payable
Absolute liquid assets include cash in hand etc. The acceptable forms for this ratio
is 50% (or) 0.5:1 (or) 1:2 i.e., Rs.1 worth absolute liquid assets are considered to pay Rs.2 worth
current liabilities in time as all the creditors are nor accepted to demand cash at the same time
and then cash may also be realized from debtors and inventories.
CURRENT LIABILITIES
Cash in hand
Cash at bank
Bills payable
Short-term advances
Sundry creditors
Dividend payable
Income tax payable
2. PROFITABILITY RATIOS
The primary objectives of business undertaking are to earn profits. Because profit
is the engine, that drives the business enterprise.
Return on investments
Net Profit after Tax = Net Profit () Depreciation () Interest () Income Tax
It also indicates the firms capacity to face adverse economic conditions such as
price competitors, low demand etc. Obviously higher the ratio, the better is the profitability.
Net profit
Return on assets =
Total assets
Reserves& surplus
Capital
The Earnings per share is a good measure of profitability when compared with
EPS of similar other components (or) companies, it gives a view of the comparative earnings of a
firm.
Operating cost
Operation ratio =
Net sales
Operating profit
Sales
Ratios Of
KML
LIQUIDITY RATIO
1. CURRENT RATIO
(Amount in Rs.)
Current Ratio
Year
Current Assets
Current Liabilities
Ratio
2005
383222867
253066203
1.51
2006
384183841
255701566
1.50
2007
518352735
340425415
1.52
2008
981970741
688935052
1.42
2. QUICK RATIO
(Amount in Rs.)
Quick Ratio
Year
Quick Assets
Current Liabilities
Ratio
2005
200637827
253066203
0.79
2006
179181676
255701566
0.70
2007
196523103
340425415
0.58
2008
457150547
688935052
0.66
Current Liabilities
Ratio
2005
17293347
253066203
6.7
2006
1598190
255701566
6.2
2007
1738793
340425415
0.5
2008
1581744
688935052
0.2
PROFITABILITY RATIOS
Ratio(%)
2005
21919419
1415228253
1.5
2006
29675318
1457487364
2.1
2007
30091531
1872953336
1.6
2008
83901327
3460757092
2.4
5. OPERATING PROFIT
(Amount in Rs.)
Operating Profit
Year
Operating Profit
Ratio
2005
1415228253
2006
1457487364
2007
1872953336
2008
3460757092
Total Assets
Ratio(%)
2005
21919419
841446948
2.6
2006
29675318
996622755
2.9
2007
30091531
1053968849
2.8
2008
83901327
1643477509
5.1
Capital
Ratio
2005
152430709
54300000
2.8
2006
182106027
3.5
2007
212197558
54300000
54300000
2008
292829576
54300000
5.4
3.9
2005
21919419
2006
2007
2008
No of Equity Shares
Ratio
4.1
29675318
5430000
5430000
30091531
5430000
5.5
83901327
5430000
15.4
5.5
Ratio (%)
2005
21919419
206730709
10.6
2006
29675318
236406027
12.5
2007
30091531
266497558
11.3
2008
83901327
347192576
24.2
BALANCE
SHEET &
P&L
ACCOUNT
Balance sheet
2008
2007
2006
2005
54000000
54300000
54300000
54300000
292829567
212197558
182106027
152430709
969967830
693138323
423658613 2950620090
b)Unsecured Loans
13426212
21880108
30433656
43336479
90658186
74537038
54637691
45107053
1421181804 1056053027
745135987
590236331
SOURCES OF FUNDS
1) Share capital
a)Capital
b)Reserves & Surplus
2) Loan Funds
a)Secured loans
TOTAL
APPLICATION OF FUNDS
1)Fixed Assets
a)Gross Block
1373378562 1206374464
888991905
789600274
b)less : depreciation
527895377
461633635
413246467
423492469
c)Net Block
845483185
744740629
475744628
366107805
232671238
61820220
118507580
72007622
22273037
-------
-------
-------
2)INVESTMENTS
25014360
69480680
19147689
19147680
11105
10049
27673
115149
a)Interest Accrued
364984656
194784310
128679827
137256202
b)Inventories
455568803
194032428
177583486
183344480
1570639
1728744
1570517
17178198
159835538
127797204
76322338
45328828
671551795
329421414
247794086
239221600
17383257
11004001
7907580
13844603
293035689
177927321
128482275
130156664
2704295
2084178
3253824
2816560
1421181804 1056053027
745135987
590236331
2006
2005
c)Sundry Debtors
d)Cash & Bank Balances
e)Loans & Advances
LESS: Current Liabilities &
Provisions
a)Current Liabilities
b)Provisions
Net Current Assets
4)MISCELLANEOUS EXPENSES
TOTAL
2008
2007
INCOME
Turnover
Less : Excise Duty
Net Sales
Add : Other Incomes
TOTAL
658610938
443442945
443550638
88671206
63728019
62350512
EXPENDITURE
Cost Of Materials
Personnel Expenditure
Financial Charges
Other Expenses
Depreciation
Miscellaneous Expenses Written Off
TOTAL
PROFIT BEFORE TAX
160813185
136784980
128649899
89982381
53862177
29071944
22975964
166160070
114697924
115261944
150336804
66544087
57992081
52924251
76912287
935668
2222871
2800066
2697140
58424878
44179683
42023772
Current Tax
26669080
6600000
3965700
18435000
Deferred Tax
17804588
19899347
9530638
1669353
2050833
1744000
1008027
-------
100000
90000
-------
-------
83901327
30091531
29675318
21919419
92387557
62296026
32620709
19231159
176288884
92387557
62296027
41150578
Fringe Benefits
Wealth Tax
Objectives
Of The
Study
Primary objectives :
To study the impact of debt (bifercated into secured and unsecured debt) raised during
2005-2008 on profitability of the firm.
To study the impact of debt (bifercated into secured and unsecured debt) raised during
2005-2008 on liquidity of the firm.
Secondary objectives :
To study the financial position of the company.
To study the various ratios of the company in the year 2005 to2008.
THEORITICAL
FRAMEWORK
CONSTRUCT
Impacts of debt rose during 2005-2008 on the profitability and liquidity of the company.
VARIABLES
Independent Variable: Debt (bifercated into secured and unsecured debt).
Dependent Variable: Profitability, Liquidity.
Literature
Review
CONCEPTUAL LITERATURE
CONCEPTUAL LITERATURE is that which relates with concepts & theories. Help from different books should be
taken for different concepts & theories.
EMPIRICAL LITERATURE
Empirical literature consists of study made by others in the same field.
2.
Kothari C.R., Research Methodology Methods and Techniques2 (Second Edition) New
Age International Publishers, Ansari Road, Daryaganj, New Delhi-110002. Chapter 4,
Page 55-58. Chapter 6, Page 95,100,111. (Methods of data collection, collection of data
and collection of secondary data are referred before the data collection.)
3.
Jain, ,T.R., and Aggarwal, Dr. S.C., Statistics For M.B.A3,VK publication, PP1-3 Part
b, , 2nd Edition ,PP 131-134 Part (Correlation is studied to use these test in study.)
4.
5.
Statistical Methods- Sultan Chand Publication The information regarding the statistical
tools and their limitations in different fields the research is given in this section. This
section explains why to use trend analysis and what are the situations in which regression
can be used, and what does regression means
6.
7.
Khan M.Y. & Jain P.K. Financial Management the information regarding the inventory
management etc.,Financial Management,3th edition(page no-4.75).
8.
Beri G.C. - Marketing Research 3rd edition: This book helped in understanding the
different research designs and statistical tools used here.
9.
10.
Jain T.R. & Aggarwal S.C Statistics for MBA, V.K. Publication(Page no.59-88)
11.
Patel Rashna( 2002), Indias strengths Tremendous sourcing centers, Home Fashion ,
Servewell Printers, Mumbai, Vol-1, No.1,pp-08-09.
12.
Gupta S.P. and Gupta M.P., Business Statistics 4, Twelth Edition, Sultan Chand and
Sons Publications. PP 237-241,628-629 (test hypotheses testing).
13.
Murray R. Spiegel, Theory and Problem of Statistics 5, Third edition, Tata Mc Graw
Hill Publication, Chapter 12, Pg No.45-48 (correlation and regression)
14.
khan and Jain, FInancial Management, ed 2003., McGraw Hill Publishing Co. Ltd
NEW DELHI10
15.
1,
Wachonicz Jr. John M. & Van Horme James C. Financial Management ed. 1993. (PHI)
Eight Edition , Mumbai11
17.
Annual Report 2005-06 of Chinar Textiles Industries Limited The balance sheet and
profit & loss account of Chinar Textiles Industries Limited. And corporate governance is
an integral element of the companys value system, management ethos and other business
practice.
18.
Annual Report 2006-07of Chinar Textiles Industries Limited 15, The information
regarding the balance sheet and profit & loss account for the year 2006-07.
Research
Methodology
RESEARCH METHODOLOGY
Research is a systematic and continuous method of defining a problem, collecting the facts and
analyzing them, reaching conclusion forming generalizations.
Research is defined as a scientific & systematic search for pertinent information on a specific
topic. Research is an art of scientific investigation. Research is a systemized effort to gain new
knowledge. It is a careful inquiry especially through search for new facts in any branch of
knowledge. The search for knowledge through objective and systematic method of finding
solution to a problem is a research.
1
OBSERVATION
Broad area of
research interest
identified
3
PROBLEM
DEFINITION
Research
Problem
Delineated
4
THEORETICAL
FRAMEWORK
5
GENERATION
OF
HYPOTHESES
Variables clearly
identified and
labelled
2
PRELIMINARY
DATA
GATHERING
Interviewing
Literature Survey
6
SCIENTIFI
C
RESEARC
H DESIGN
7
DATA COLLECTION,
ANALYSIS AND
INTERPRETATION
8
DEDUCTION
Hypotheses
substantiated?
Research
question
answered?
NO
Yes
9
Report
writing
10
Report
Presentat
ion
11
Manager
ial
decision
making
A research is the arrangement of the conditions for the collections and analysis of the data in a
manner that aims to combine relevance to the research purpose with economy in procedure. In
fact, the research is design is the conceptual structure within which research is conducted; it
constitutes the blue print of the collection, measurement and analysis of the data. As search the
design includes an outline of what the researcher will do from writing the hypothesis and its
operational implication to the final analysis of data.
The design is such studies must be rigid and not flexible and most focus attention on the
following;
What is the study about?
Why is the study being made?
Where will the study be carried out?
What type of data is required?
Where can be required data be found?
What period of time will the study include?
What will be sample design?
What techniques of data collection will be used?
How will the data be analyzed?
In what style will the report be prepared?
Research Design can be categorized as12:
TYPES OF RESEARCH
DESIGN
EXPLORATORY
RESEARCH
DESCRIPTIVE &
DIAGONOSTIC
RESEARCH DESIGN
EXPERIMENTAL
RESEARCH
DESIGN
The present study is descriptive in nature, as it seeks to discover ideas and insight to bring out
new relationship. Research design is flexible enough to provide opportunity for considering
different aspects of problem under study. It helps in bringing into focus some inherent weakness
in enterprise regarding which in depth study can be conducted by management.
RESEARCH DESIGN:
Research design involves a series of rational decision making benefits at each point from such
sophisticated design to ensure accuracy, confidence and commensurate with large investment of
resources.
Purpose of study:
Exploratory
Descriptive
Hypothesis testing
The purpose of my study is descriptive. A descriptive study is undertaken in order to ascertain be
able to describe the characteristics of variables of interest in a situation.
It is also hypothesis testing also. Because studies that engage in hypothesis testing usually
explain the nature of certain relationship or establish the difference among groups or
independence of the two or more factors in the situation.
Types of investigation:
Establishing
Casual relationship
Correlation
Group differences, ranks etc.
Type of investigation in my study will be correlation. Because my main motive is to check
whether there is significant relationship between the debt raised and profitability and liquidity of
the company. So investigation type will be correlation type.
Extent of researcher interference in study:
Minimal: studying events as they normally occurs
Manipulation and/or control and/or simulation
The extent of research interference in my study will be minimal. Ive to just collect and analyze
the data for findings. There will be no need for simulation tests etc.
Study setting:
Contrived
Non-contrived
Measurements and measures:
Operational definition
Items (measures)
Scaling
Categorization
Coding
Machines etc.
The units of analysis or the population that will be studied in my research will be the balance
sheet, P&L account, cash flow statements, etc.
Sampling design: It is a definite plan for obtaining a sample from sampling frame. It is
determined before collection of data.
Sampling size for my study will be the data of last four years i.e from 2005 to 2008.
Time horizon:
One shot (cross sectional)
Longitudinal
The time horizon for my study is the four years time period.
Data collection method:
Primary data
Secondary data
Interviewing
Questionnaires
Observations
Unobtrusive methods.
My data collection is based on secondary data i.e. from websites, books, prowess, companys
balances sheets, etc.
Data analysis
Feel for data
Goodness of data
Hypothesis testing
For data analysis mostly the hypothesis testing will be used. By using SPSS Software it will be
performed. Statistical tools will also be used. Analytical tools will also be used.
Hypothesis
Testing
With the help on ANNOVA we will use the following hypothesis
Analytical and
Statistical Tools
Correlation
1) Between secured debt and liquidity
High degree of correlation exists between secured debt and liquidity of the company i.e. 86%.
2) Between unsecured debt and liquidity
Low degree of correlation exists between unsecured debt and liquidity of the company i.e.
32.4%.
High degree of correlation exists between secured debt and liquidity of the company i.e. 89.1%.
Low degree of correlation exists between unsecured debt and profitability of the company i.e.
37.8%.
ANOVA
1) Let null hypothesis be that there is no significance effect of secured debt on the profitability
of the company.
As the level of significance is greater than 0.05, we reject our null hypothesis and accept our
alternate hypothesis i.e. secured debt effects the profitability of the company.
2) Let null hypothesis be that there is no significance effect of unsecured debt on the
profitability of the company.
As the level of significance is greater than 0.05, we reject our null hypothesis and accept our
alternate hypothesis i.e. unsecured debt effects the profitability of the company.
3) Let null hypothesis be that there is no significance effect of secured debt on the liquidity of the
company.
ANOVA
Model
1
Sum of Squares
df
Mean Square
Regression
9.956E18
9.956E18
Residual
4.396E18
2.198E18
Total
1.435E19
Sig.
.167a
4.530
As the level of significance is greater than 0.05, we reject our null hypothesis and accept our
alternate hypothesis i.e. secured debt effects the liquidity of the company.
4) Let null hypothesis be there is no significance effect of unsecured debt on liquidity.
ANOVA
Model
1
Sum of Squares
Df
Mean Square
Regression
9.373E17
9.373E17
Residual
1.341E19
6.707E18
Total
1.435E19
Sig.
.140
As the level of significance is greater than 0.05, we reject our null hypothesis and accept our
alternate hypothesis i.e. unsecured debt effects the liquidity of the company.
.744a
MULTIPLE REGRESSION
1) Multiple Regression between secured debt, unsecured debt and liquidity of the company.
Reliability Analysis
Cronbachs alpha is most commonly used reliability coefficients, which is based on the average
correlation of items within a test if the items are standardized. If the items are not standardized, it
is based on the average covariance among the items. Because Cronbachs alpha can be
interpreted as a correlation coefficient, it ranges in value from 0 to 1.
Here the value of our Cronbachs alpha is 4.5% which is less then 5% I means that our data is
reliable.
Limitations
Except the supreme power, the Almighty, no one is impeccable and prowess enough to
accomplish anything without any faults and limitations. A research is no exception. No study is
devoid of certain shortcomings. Some problems encountered in this study are under mentioned:
Time Constraints:
Time was a bit short to fathom into the depth of the study. But still all efforts to the best possible
extent have been made to collect the data.
Data collection Constraints:
Since data used is secondary in nature, this poses the constraints on the validity and reliability of
the data.
Secrecy of Internal Data
In todays day the companies are very sensitive regarding their internal data, this proved a
hindrance to my study.
Period of Analysis
Sample size of four years was taken by me i.e. from 2008-2009 which was sufficient but
a bigger sample would have helped to reach too more precise findings.
Findings
Recommendations