Sood MEDICINE TRADERS Pvt LTD

REPORT ON “ANALYSIS OF FINANCIAL

STATEMENT”
Summer training
Rahul

2009-2011

SUBMITTED TO:
PUNJAB UNIVERSITY, CHANDIGARH

For The Degree of M.com(e-commerce)

SUBMITTED BY:
NANDINI GULERIA
M.COM (e-commerce)
2nd sem

[Type the company address]

SISTER CONCERNS OF SOOD MEDICINE TRADERS PVT LTD
 ACKNOWLEDGEMENT

“Gratitude is a duty which ought to be paid”

Rousseau

Word cannot express the deep sense of gratitude and indebtness. I am

highly grateful to Sh.Anuj sood, Managing Director SMT for granting me

permission for joining their company.

I pay my sincere thanks to P.K khanna (Finance Manager)

under whose guidance I am able to complete my project in a fruitful way. I would

like to thank all persons of Finance Department of SMT ( Hoshiarpur) without

whom my project would not have been completed successfully. I also pay special

thanks to Mr. Dinesh Sharma, Mr. Rakesh, Mr. Sunil Sharma & Mr. Vivek

Sharma and other members for helping, guiding & encouraging me a lot for

acquiring information about Financial Analysis. They made me learn financial

analysis of SMT in depth and guided me to complete the project.

I also pay my special thanks to the head of the various departments in

the SMT under whose kind cooperation I was able to gain ample quantity of

knowledge.
 EXECUTIVE SUMMARY

The summer training in an organization is an integrated part of

M.COM program. It exposes students to the problem areas and provides

knowledge as how to face these problems areas and provide confidence as

how to solve this problem. There is a gap between theory and practice and

the training is aimed at removing this gap and to increase the process of

communication between future manager and industrial sector.

 BUSINESS PROFILE OF THE COMPANY

They are in the pharmaceuticals business for the last 21 years and they
established Sood Medicine Traders Private limited on 23.02.1989 as whole sale and
retailer of all kinds of pharmaceuticals products. At present Sood Medicine Traders is
known all over the north India as one of the top ten Pharma whole sale dealers and is well
known for its excellent services to customers at their door steps. Sood Medicine traders is
stokists for more than 150 companies includes all top companies of India like Glaxo
SmithKline, Ranbaxy, Cipla, Cadila, Lupin, Johnson & Johnson, Wokhardt and Aventis
etc. Sood Medicine Traders has a fleet of vehicles for suppliers to each & every town
with its dedicated team of salesmen. It has its Own indigenous software for total
computerization of all operation.SMT is capable of executing orders of all of medicines
to any place in India and abroad.

They also have their own Manufacturing unit namely Axon Laboratories Pvt.
Ltd. Which is an ISO 9001:2000 company fully equipped with modern production and
packing units along with own Research & Development labs. Our manufacturing Unit is
one of the Unit in the state of Punjab and is reputed for producing excellent quality of
Tablets, Capsules and Injectables.Axon Lab. Is producing a vide range of products like
Antibiotics, Antifungals, Pain killers ,Harmones, Anabolics, Anti Ulcerants (PPIs), Anti
Histamines, Steroids, multi Vitamines, Anti Emetics, Muscle Relaxant and Eye & Ear
Drops etc. Our other sister concern Axon Laboratories Pvt .Ltd. in most of the states of
India and is also out sourcing some of the products from Meneil Pharma and Scott Edil
Pharmacia Ltd . Their motto is to provide healthcare services at affordable cost to all our
customers at their door steps.
NUMBER OF SUPPLIERS

There are about 150 suppliers from whom the company use to make purchases and then
they further sell it to the customers with the help of 22 sales man.

Some of the suppliers are:

 Company introduction

Company Name : SOOD MEDICINES TRADERS PRIVATE LIMITED

Nature of business : WHOLE SALE DEALER (STOCKIST) OF MEDICINES

Brand : MEDICINES

Status : PRIVATE LIMITED COMPANY

Turnover : 40 crore

Daily sales :

No of employees : 200

Total no of suppliers : 150

Total no of customers : 1500

Sale of medicine : 3121.28

Total dealers : 150

Managing Director : Anuj Sood

Date of Incorporation : 1989

 MISSION OF THE COMPANY

To set up and to carry on the business of Manufacturing, refining, processing,

preparing, raising, Acquiring, buying, selling, importing, exporting, distributing and

dealing in the either of their own and/or as commission agent in all kinds of Ayurvedic,

Alialopathic, Homopathic, and Biochemic, medicines, Chemicals, Basic drugs, Crude

drugs, Herbs, Pharmaceutical formulation, food products, Aromatic chemicals cosmetics

and injectable.

To provide in India or elsewhere outside India know how in the manufacturing,

producing, processing and converting all kinds of Ayurvedic, homeopathic and

biochemic medicine, chemicals, basic drugs, crude drugs, herbs, pharmaceutical

formulation, food products, Aromatic Chemicals Cosmetics and injectable.

To manufacture, buy, sell, repack, C&F agents manipulate, import and export,

Distribute and Trade in or otherwise deal in all types of hospital requisites, toilet

requisites, surgical appliances and equipments, dental goods of all description, Optical

goods of all descriptions, vaternity medicines, Paints, pigments, varnishes, photographic

goods antibiotic, insecticides and Apparatuses and machinery for the testing and

manufactcture of the oforesaid articles and feeds and feed supplements.

OBJECTIVE OF THE STUDY

The main objective of the summer training programme is to make students familiar with the

practical aspect of the classroom learning. Therefore main objective of the present study is to

learn and experience the practical functioning of the organization, to evaluate the strength and

weaknesses of the company on the basis of their financial statements and to ascertain the

profitability of the company on the basis of analysis of its financial statements.

Following are the main objectives of the study:-

1. To be conversant with the financial results system and different planning and control

measures adopted by the company.

2. To know the different measure and way to make financial analysis a successful instrument

for planning and control purpose.

3. To study and review the present financial position of Sood Medicine Traders pvt Ltd (SMT).

(Hoshiarpur) for the purpose of better understanding of system and making it more effective.

4. To measure the growth rate of the organization.

5. To calculate the rate of profitability of the organization.

6. To find out the weakness of company working.

7. To find out the future prospect of the company and available opportunity in the near future.
 RECRUITMENT

Diploma/Graduate are recruited. Recruitments is done trough following sources:

1) Campus interviews.

2) Employment exchange.

3) Advertisement.

Candidates are required to go through compulsory selection testes as

personality, typing, aptitude test and a series of functional tests by which

competence of the candidates at the cognitive level is assured.

Also the candidates have to undergo training up to a particular

level. Important factor considered while selection an individual are the set of

aptitude and values an individual possess, as this determines the ultimate

adjustments between organization and employee. Candidates with the necessary

aptitude under goes a selection test program based on assessment center

methodology. Those who are successful can jump almost four grades.

LEARNING THROUGH TRAINING

All classes of employees are trained. Non-skilled are trained to become skilled

workers and skilled are trained to acquire multiple skills. Diploma and Graduate

are trained for one year. There are special management programs and classes. In

addition to the job related training all employees attend self-development

programs.
 Memorandum Of Understanding

SMT has signed MOUs with various banks all over the country for
Medicine retail finance, which is giving a special impetus to company. It has
resulted in easy availability of loans. The payment rotations have also become
faster from the dealers to the company, which helps cost cutting.

Following is the list of the banks:

CANARA BANK CAPITAL BANK

PUNJAB NATIONAL BANK OF PUNJAB

BANK
 FINANCIAL ANALYSIS

The term financial statement analysis includes both analysis and interpretation.
A distinction should, therefore, be made between the two terms. While the term
analysis is used to mean the simplification of financial data by methodical
classification of the data given in the financial statements, interpretation means
explaining the meaning and significance of the data so simplified. However both
analysis and interpretation are interlinked and complementary to each other.
Analysis is useless without interpretation and interpretation without analysis is
difficult or even impossible.

METHODS OR DEVICES OF FINANCIAL ANALYSIS

A number of methods are used to study the relationship between different

statements.
1. Ratio Analysis
2. Comparative Statements
3. Trend Analysis
4. Common-Size Statements
5. Fund Flow Analysis
6. Cash flow Analysis

The comparative financial statements are statements of the financial

position are different periods of time. The elements of financial position are
shown in a comparative form of so as to give an idea of financial position at two
or more periods.
The comparative statement may show:

1. Absolute figures (Rupee Amounts)

2. Changes in absolute figures i.e. increase or decrease in absolute figures.
3. Absolute data in terms of percentages.
4. Increase or Decrease in terms of percentages.

The analyst is able to draw useful conclusions when figures are

given in a comparative position. The figures of sales for a quarter, half-year may
tell only the present position of sales efforts. When sales figures of previous
periods are given along with the figures of current period, then the analyst will
be able to study the trends of sales over different periods of time. Similarly,
comparative figures will indicate the trend and direction of financial position

and operating results .

 RATIO ANALYSIS

MEANING OF RATIO

A ratio is assessment of the significant of one figure in relation to other. It

measures the comparative significant of individual item of income and position
statements. Thus it shows the mathematical relationship between two related
items express in quantitative form.

WAYS OF EXPRESSION OF RATIO: -

A ratio can be broadly expressed in three ways. It may be a
quotient. Obtained by dividing one value by other. In this unit of expressing 100
multiply the above quotient then unit of expression becomes a percentage. If 100
then unit of expression multiply the above quotient becomes a percentage. It
may also be expressed in the form of proportions between two figures.

RATIO ANALYSIS: -
Financial Analysis depends to a large extent on the use of ratio. A
direct examination of the magnitude of two related items is somewhat
enlightening but the comparison is greatly facilitated by expressing the
relationship as a ratio.

Meaning of Ratio Analysis:

An analysis of financial statements with the help of “Ratio” may be

termed as “Ratio analysis”. It implies the process of computing, determining &
presenting the relationship of items of financial statements. It also involves the
comparison & interpretation of these ratios & use of them for further
projections. It is with the help of ratios that the financial statement can be
analyzed more clearly & decisions made accruable & reliable from such
analysis. The judgment of the Management, seem to be made more easily when
they can be rationalized with the number. Thus the Ratio Analysis is a process
of comparison of figures against another and appraisal of ratios to make proper
analysis about the strengths & weaknesses of firm’s operations. So it is a
powerful analytical tool for measuring performance of an organization.

NATURE OF RATIO ANALYSIS: -

Despite the fact that there is no special in Ratio-Analysis as such, most creditors
investors intending to have some financial commitment in firm automatically
twin to a core of relationship for guidance as people prefer to work with data,
which appear to be concrete in nature. Quantitative Ratio-Analysis is not
capable of providing precise answer to all problems faced by a financial
manager or a potential fund supplier unless several ratios often related to one
another are computed & then alone the whole of ratio analysis acquires some
signature from the point of view of its users. Thus Ratio-Analysis is not an end
itself it is only a mean of better understanding of financial strengths &
weaknesses of a firm. The Ratio may be used as a symptom like Blood Pressure
the pulse rate on body temperature and this interpretation depends upon the
caliber & competence of the analyst.

INTERPRETATION OF RATIO : -

The importance of Interpretation of ratio lies when they prove as

useful true to financial analyst.
There are four different ways in which ratios may be interpreted.
1) INDIVIDUAL RATIOS : - The single ratio by itself may have
significance of its own. But one cannot draw any meaningful conclusions
when a single ratio is considered in isolation.
2) GROUP RATIO: - Ratios may be interpreted by expanding the analysis
& considering a group of several related ratios. In this way the ratio
whose significance is not fully understood are made more meaningful by
calculating Group Ratios.
3) HISTORICAL RATIOS : - This is the third approach of interpretation
of Ratio-Analysis, which involves making comparisons over time. Under
this the ratios are studied and compared over a period of years with the
results that significant trends indicating raise and falls on stability are
indicated.
4) INTERFIRM RATIOS : - In this approach the ratios of any given firm
may be compared with the ratios of other firms in the same industry, such
comparisons are very significant where members of same industry face the
similar financial problems.

OBJECTIVE OF RATIO ANALYSIS :

Ratio-Analysis serves the purpose of various parties interested in financial

statements. The main object of Ratio-Analysis is to help management in analysis
and interprets the financial statement to get adequate information useful for the
performance of various functions like planning, coordinating, controlling and
forecasting etc. although each ratio has some specific objective for a particular
use some general objects of Ratio-analysis are as given below:
1) Trends in costs, sales, profits and other related facts revealed by the past
ratios and future events can be forecasted on the basis of such ratios.
2) Ideal ratios may be constructed and relationship is found between
strategic ratios, which can be used for achieving desired c-ordination.
3) It also accomplishes the goals of communication. What has happened
during the two intervening periods can easily be communicated by ratios.
4) Ratio-Analysis can also be used as an instrument of managerial control
5) These are the indicators of managerial efficiency.
6) Inter-Firm comparisons can be made easily as ratios bring uniformity in
the financial data.
7) It also aims at making profitable investments.
NEED OF RATIO ANALYSIS: -

The need of ratio analysis due to following facts:

1) Business facts shown in financial statements do not carry any importance
individually. There importance lies in the fact that they are interpreted.
Hence there is a need for establishing relationship between various related
items.
2) Ratio-analysis is a tool for interpretation of financial statements is also
needed because ratios have analyst to have a deep peep into the data given
in the financial statements.

CLASSIFICATION OF RATIOS: -

Many types of financial ratios may be used and the purpose for
which analysis is made will usually suggest emphasizing one set of ratios in
preference to another. Because different parties are interested in different ratios
for knowing the financial position of a firm for different purpose. The particular
purpose of the user determines the particular ratios that might be used for
financial analysis. Ratios calculated from the information given in financial
statements pertaining to different purposes are classified into different
categories.
 LINE CHARTS

CURRENT RATIO :-

FORMULA: CURRENT ASSETS / CURRENT LIABILITIES

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

1.9 3.8 1.7 3.4 2.4

Current ratio of the company is satisfactory. In the last five years it stands at 1.9,3.8,1.7,3.4,2.4.
As per the ‘Rule of Thumb’, it should be in the ratio of 2:1, which shows the sound liquidity
position of the firm. Only in the year of 2005, 2007, it came down at 1.9,1.7 but the ratio shows
the improvement in liquidity position of the company. But the company that increases in the ratio
after limit is harmful for it should consider one thing. So proper steps should be taken to
maintain it at optimum level.
ACID TEST RATIO:-

FORMULA:

LIQUID ASSETS / CURRENT LIABILITIES

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009
0.56 2.6 0.67 1.79 1.03

Quick ratio is complementary to the current ratio. It measures the firm’s capacity to payoff its
current obligations and when they become due. The satisfactory norm for the liquid ratio is 1:1 is
acceptable by law. In the last five years company’s liquid ratio stands at 0.56,2.6,0.71.8,1.03,
which shows a satisfactory liquidity position of the concern. The increase in the ratio is due to
the increase in the sundry debtors and loan & advance

ABSOLUTE LIQUID RATIO

FORMULA: - = ABSOLUTE LIQUID ASSETS

CURRENT LIABILITIES

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.1 0.3 0.1 0.6 0.3

Absolute liquidity ratio include ratio of cash, bank, marketable securities to
current liabilities. The acceptable norm for it is 0.50:1.the absolute liquid ratios
of the company are 0.10 ,0.27,0.096,0.63 and 0.3, which shows a satisfactory
position of the cash with the company. This ratio is fluctuating up & down with
the change in the position of cash and loan & advances of the company. But it
shows a satisfactory position of cash with the company.

EFFICENCY RATIOS

DEBTORS TURNOVER RATIO

FORMULA:

CREDIT SALES / AVERAGE DEBTORS

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

26.9 32.6 23.9 24.03 22.43
Debtor turnover ratio indicates the velocity of debt collection of the firm. there
is no rule of thumb for the Debtor turnover ratio. But a high Debtor Turnover
ratio indicates more efficient management of debtors. It throws light on the
collection and credit policies of the firm. but much higher ratio shows the
inability of the firm to sell its product on credit. The debtor turnover ratio for
the last five years of the company is 26.9,32.6,23.9,24.03,22.43.. Which shows a
satisfactory position of debtors in the company.

WORKING CAPITAL TURNOVER RATIO

FORMULA:

SALES/NET AVERAGE WORKING CAPITAL

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

5.6 4.8 14.4 10.1 8.9

Working capital is directly relates to the sales as it is the difference between
current assets and current liabilities. Working capital turnover ratio indicates
the velocity of utilization of net working capital in the firm. This ratio indicates
the firm’s ability of generating sales per rupee of working capital. there is no
rule of thumb for this ratio but higher the ratio is considered good. The ratio of
the company for the last five years are 5.6,4.8,14.4,10.1,8.9.This show a
decrease in every year expect one year. So it is necessary for the company to
improve this ratio on higher side.

INVENTORY TURNOVER RATIO:-

FORMULA:

NET SALES/AVERAGE INVENTORY

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

11.2 12.9 10.6 12,2 10.9
A high Inventory Turnover ratio indicates the efficient management of inventory
because more frequently the stocks are sold; the lesser amount is required to
finance the inventory. It measures the relationship between cost of goods sold
and inventory level. On the other hand lower this ratio indicates inefficient
management of inventory. There is no rule of thumb for this ratio but higher the
ratio is considered good. The stock turnover ratio of the company for the last
five years are 11.2,12.9,10.6,12.2,10.9. which shows the fluctuation in it but
still it is satisfactory for the company.

SOLVENCY RATIOS

DEBT-EQUITY RATIO

FORMULA:

OUTSIDER’S FUND / SHAREHOLDER’S FUND

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.6 0.9 0.5 0.9 o.99

It establishes a link between the long-term funds from outsiders and long funds
available in the business. Though there is no thumb rule but still the lesser
reliance on outsiders will be better option. If this ratio is smaller it will be
favorable for the firm. There is no acceptable rule of thumb for this ratio but 50-
55% is tolerable and not beyond .the ratios of the company for the last five
years are 0.6,0.99,0.57,0.9,0.99.As the ratio should be less than 50% so we can
say that this ratio is absolutely under control.

EQUITY RATIO

FORMULA: SHAREHOLDER’S FUND

TOTAL ASSETS

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.27 0.18 0.182 0.2 0.17

This ratio establishes the relationship between shareholder’s funds to total
assets of the firm. This ratio is an important ratio for determining long-term
solvency of firm. Higher the ratio, means better is the long-term solvency of the
firm. This ratio indicates the extent to which the assets of company can be lost
without affecting the interest of the creditors. In the firm this ratio is increasing
year by year. It is 0.27,0.18,0.18,0.2,0.17 in the last five years. So we can say
that the firm is strengthening year by year.
FUNDED DEBT TO TOTAL CAPITALISATION : -

FORMULA: FUNDED DEBT X 100

TOTAL CAPITALISATION

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.9 0.95 0.56 0.67 0.69
It establishes a link between the long-term funds from outsiders and long funds
available in the business. Though there is no thumb rule but still the lesser
reliance on outsiders will be better option. If this ratio is smaller it will be
favorable for the firm. There is no acceptable rule of thumb for this ratio but 50-
55% is tolerable and not beyond .the ratios of the company for the last five
years are 0.93,0.95,0.55,0.67,0.69.As the ratio should be less than 50% so we
can say that this ratio is absolutely under control.

PROFITABILITY RATIOS

NET PROFIT RATIO

FORMULA: NET PROFIT (BEFORE TAX) X 100

SALES

2004-2005 2005- 2006 2006-2007 2007- 2008 2008-2009

0.03 0.06 0.07 0.14 0.2
This ratio is very useful as if the profits are not sufficient the firm shall not be
able to achieve a satisfactory return on investment. This indicates the firm’s
capacity to face the adverse situations. Higher the ratio better will be
profitability. The ratios for the last five years for the company are
0.03,0.06,0.07,0.14,0.19. The net profit of the firm is not stable and fluctuates
year by year. The company should try to make growth in net profit by efficiency
of management in manufacturing, selling, administration and other activities of
the company and be in the position to earn the faith of the customers.

GROSS PROFIT RATIO:

FORMULA: PROFIT (BEFORE TAX) / SALES X 100

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

6.5 7.4 6.5 3.4 6.6
 Gross profit ratio reflects the efficiency with which a firm produces its
products. There are no standard norms for gross profit, but should be adequate
to cover the operating expenses. A lower ratio indicates high cost of goods sold
due to unfavorable purchasing policies, lesser sales; over investment etc. the
G.P ratios of the company for the last five years are 6.5,7.4,6.5,3.4,6.6. which
shows a fluctuating trend in profit. So company need to take necessary action to
control it.

RETURN ON INVESTMENT

FORMULA: NET PROFIT (AFTER TAX) X 100

SHAREHOLDER’S FUND

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.21 0.97 1.0 2.07 2.09
It shows the relationship between net profits and shareholder’s fund. This ratio
is one of the important ratios used for measuring the overall efficiency of the
firm. This ratio reveals the how well the resources of a firm are being used.
Higher the ratio better will be the results. If we ignore the year of 2004-05, it is
on decreasing side, which is not good from the company point of view. So the
management of the company should take necessary action to improve this ratio

RETURN ON ASSETS

FORMULA: PROFIT AFTER TAX X 100

TOTAL ASSETS

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.25 0.37 1 1 0.35
It shows the relationship between net profits and shareholder’s fund. This ratio
is one of the important ratios used for measuring the overall efficiency of the
firm. This ratio reveals the how well the resources of a firm are being used.
Higher the ratio better will be the results. The R.O.I Ratios for the last five
years for the company are 0.25,0.37,1,1,0.35.

EARNING PER SHARE

FORMULA: PROFIT AFTER TAX

NO. OF PAID UP EQUITY SHARES

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.75 7.15 3.7 7.7 7.9

This is a good measure of profitability. It is calculated to know that weather the
earning power of the firm has increased or not. In ITL this ratio shows a
continuous increasing trend from the last four years. The EPS ratios for the last
five years for the company are 0.75,7.15,3.7,7.7,7.9 which shows that company
has excellent profitability and seems satisfactory for the company

LEVERAGE RATIOS

CAPITAL GEARING RAITO:

FORMULA: EQUITY SHARE CAPITL + RESERVE & SURPLUS – LOSSES

PREF. SHARE CAPITAL + DEBENTURE + LONG TERM DEBT

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

0.78 0.37 0.39 0.29 1.57

The term capital gearing used to describe the relationship between equity share
capital including Reserve & surplus and preference share capital plus other fixed
interest bearing loans. The firm is said to be in high gear if preference capital &
fixed interest bearing loans exceed equity share capital and reserve & surplus.
The ratios for the company for the last five years are 0.78,0.37,0.39,0.299,1.57.
The Company is always in low gear as equity capital plus reserve & surplus are
always is more than fixed interest bearing long term loans. So company is in
good position according to capital gearing ratio.

RATIO OF RESERVES TO EQUITY CAPITAL

FORMULA: RESERVES X 100

EQUITY SHARE CAPITAL

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

53.5 57.7 60.04 64.70 69.45

This ratio establishes relationship between reserves and equity capital. This
ratio is important to know that how much profits are retained by the company
for the future growth. Generally higher the ratio better is the position of the
company. As we analyzed the financial statements of SMT we find that over the
years, SMT has been able to build very large amount of reserve, which are,
much more than its equity share capital.
RATIO OF CURRENT LIABILITIES TO SHAREHOLDER’S FUND: -
FORMULA: CURRENT LIABILITIES
SHAREHOLDER’S FUND

2004-2005 2005-2006 2006-2007 2007-2008 2008-2009

1.5 2.3 2.7 1.25 2.1

SCHEDULE FOR CHANGES IN WORKING CAPITAL

FOR THE YEAR 2004-2005

PARTICULAR 2004 2005 INCREASE DECREASE

CURRENT
ASSETS
INVENTORIES 22526663.00 22100397 _ 426266

SUNDRY 11219692.25 7362817.28 _ 3856874.97

DEBTOR

CASH & BANK 35417647.79 31340793.98 _ 4076853.81

LOAN & _ _ _ _
ADVANCES
69164003.04 789722918.98 8359994.78
TOTAL (A)
CURRENT 25154289.47 16456422.28 8697867.19 _
LIABILITIES
25154289.47 16456422.28 8697867.19 _
TOTAL (B)
NET WORKING 44009713.57 773266496.7 _ _
CAPITAL (A-B)
INCREASE IN 729256783.13 _ _ _
WORKING
CAPITAL

NET AFFECT _ _ _ _

SCHEDULE FOR CHANGES IN WORKING CAPITAL

FOR THE YEAR 2005-2006

PARTICULAR 2005 2006 INCREASE DECREASE
CURRENT
ASSETS
INVENTORIES 22100397 30125520.57 8025123.57 -

SUNDRY 7362817.28 13336271.99 5973454.71 -

DEBTOR

CASH & BANK 31340793.98 50616514.67 19275720.69 -

LOAN & _ 2223120.58 2223120.58 -

ADVANCES
60804008.26 96301427.81 35497419.55 -
TOTAL (A)
CURRENT 16456422.28 25367634.14 8911211.86
LIABILITIES
16456422.28 25367634.14 - 8911211.86
TOTAL (B)
NET WORKING 44347585.98 70933793.67
CAPITAL (A-B)
INCREASE IN 26586207.69
WORKING
CAPITAL

NET AFFECT

SCHEDULE FOR CHANGES IN WORKING CAPITAL

FOR THE YEAR 2006-2007

PARTICULAR 2006 2007 INCREASE DECREASE

CURRENT
ASSETS
INVENTORIES 30125520.27 33035225 2909704.73 -
SUNDRY 13336271.99 14735723.60 1399451.61 -
DEBTOR

CASH & BANK 50616514.67 3194597.74 - 47421916.93

LOAN & 2223120.58 1864581.84 - 35853874

ADVANCES
96301427.81 52830128.18 - -
TOTAL (A)
CURRENT 25367634.14 29518096.46 4150462.32
LIABILITIES
25367634.14 29518096.46 - 4150462.32
TOTAL (B)
NET WORKING 70933793.37 23312031.72
CAPITAL (A-B)
INCREASE IN 26586207.69
WORKING
CAPITAL

NET AFFECT

SCHEDULE FOR CHANGES IN WORKING CAPITAL

FOR THE YEAR 2007-2008

PARTICULAR 2007 2008 INCREASE DECREASE

CURRENT
ASSETS
INVENTORIES 33035225 22713593.54 - 10321631.46

SUNDRY 14735723.60 13785750.26 - 949973.34

DEBTOR
CASH & BANK 3194597.74 8993265.83 5798668.09 -

LOAN & 1864581.84 2571428.68 706846.84 -

ADVANCES
52830128.18 48064038.31 - -
TOTAL (A)
CURRENT 29518096.46 14087853.82 15430242.64
LIABILITIES
29518096.46 14087853.82 -
TOTAL (B)
NET WORKING 23312031.72 33976184.49
CAPITAL (A-B)
INCREASE IN 10664152.77
WORKING
CAPITAL

NET AFFECT

SCHEDULE FOR CHANGES IN WORKING CAPITAL

FOR THE YEAR 2008-2009

PARTICULAR 2008 2009 INCREASE DECREASE

CURRENT
ASSETS
INVENTORIES 22713593.54 34158648.25 11445054.71

SUNDRY 13785750.26 14047661.02 261910.76

DEBTOR

CASH & BANK 8993265.83 8069023.90 924241.93

LOAN & 2571428.68 3060180.55 488751.87

ADVANCES
48064038.31 59335513.72 12195717.34 924241.93
TOTAL (A)
CURRENT 14087853.82 24349003.44 10261149.62
LIABILITIES
14087853.82 24349003.44 - 10261149.62
TOTAL (B)
NET WORKING 33976184.49 34986510.28
CAPITAL (A-B)
INCREASE IN 1010325.79
WORKING
CAPITAL

NET AFFECT

MEANING OF BUSINESS FINANCE AND ITS IMPORTANCE

FOR BUSINESS

Finance is an indispensable for any business. It is as important to a business as

blood streams to a person. It is foundation of sound management.Business
finance is the provision of money at the time when it is required. Every
enterprise big or small, private or public, sole trader or partnership needs
finance to carry on its operations, to run the business smoothly, to stand
comfortable in the highly competitive market and finally to accomplish its
targets. Moreover finance is needed for meeting short-term requirements
(working capital) and for vital permanent investments in the fixed assets.

IMPORTANCE OF FINANCE FOR A BUSINESS

Finance is just like lubricant oil that oils the engine of enterprise
and helps it to run smoothly. Every business needs finance to complete their
jobs such as to promote or establish the business, to acquire fixed assets for
research and development for making investigations, create values, quality
control, to keep right men at right job and for efficient management control
system. The importance of the finance can be evaluated from following points: -
1. Proper allocation of funds.
2. To increase or improve profits.
3. To increase savings and investments.
4. Acquisition of assets.
5. Helps in financial planning and controlling functions.
6. To increase goodwill of the company.
7. To satisfy investors.
8. To acquisition of funds as and when required at minimum possible
cost.
 LITRATURE REVIEW

Different type of literature is studied while preparing this report which includes:

1) CONCEPTUAL LITRATURE :

Conceptual literature is that literature which relates with concepts and

theories. Help from the different books should be taken for studying different

concepts & theories.

2) EMPERICAL LITERATURE:

Empirical literature consists of study made by other persons in the same field

that is similar to it.

3) Published data in newspapers such as Financial Express, Business

Standard and Denik Bhaskar etc.

4) Books and magazines available in the organization library.

5) Discussion with the people of the organization.

6) Study of Audit Reports and Balance Sheets of the company of last five

years.
 RESEARCH METHODOLOGY

The present chapter explains the objective of the study and methodology
adopted to achieve those objectives. The main objective of the summer training program
is to make students familiar with the practical aspect of the classroom learning. Therefore
aim objective of the present study is to learn and experience the practical functioning of
the organization to evaluate the strength and weakness of the company on the basis of
their financial statements and to ascertain the profitability of the company on the basis of
the analysis of its financial statements.
The whole research work can be described in following steps:-
1. Recognition of Information: - The very first step is the recognition of various
types of information, which in necessary for the study of financial ratio-analysis.
2. Collection of Data:- Collecting the required information from accounts
department carried out by the study of the financial performance of (ITL)
International Tractor Limited (Hoshiarpur). Base for the study is published &
unpublished records prepared by accounts department. Mainly the information is
secondary is nature, in order to understand the present system of financing data
conducting personal interviews has collected from various departments.
3. Understanding of reports being prepared by the Units:- For understanding
the various types of reports being set to finance departments by different sections,
personal interviews have been conducted with the concerned person with prior
permission from concerned department head.
METHODOLOGY

Collecting the required information from accounts department carried out

the study of the financial performance of SMT Hoshiarpur. Base for the study is

published and unpublished records prepared by accounts department. Mainly the

information is secondary in nature but direct conservation with accounts department also

was used for the study.

Study of various Financial Statements:- For better understanding various ratio have

been calculated and comparative statements are prepared.

1 Calculation of Ratio & Their Interpretation:- By comparing the ratio of

different years the analysis in made and various strengths and weakness of the

firm is mentioned out.

2 Identification of Strength and weakness of the Financial Statement:- The

strength & weakness of the financial statements have been observed in the light of

the requirement of various types of information and adequacy and sufficiency of

the reports being sent to the unit

SAMPLING & SAMPLING DESIGN

Sampling design is a definite plan for obtaining a sample in a given population.

It refers to the techniques or procedure which would adopt in selecting item for

the sample.

FEATURES OF SAMPLE DESIGN

 Sample design must result in a true representative sample of the

population.

 Sample design should be with small sampling errors

 It must be viable in context of availability of time and funds.

 It should be such so that systematic bias can be controlled.

 It should be such that the result of the sample study can be applied for

universe with reasonable level of confidence.

TYPE OF SAMPLE DESIGN USED

For preparing this report, mainly the Exploratory Research Design is used. In

exploratory research design, we try to discover the new relationship between

two or more variables. The different types of research design used in

exploratory research design are as follow:

EXPERIENCE SURVEY :
Experience survey means survey of peoples who have practical knowledge or

experience with the problem to be studied. its main objective is to obtain insight

into the relationship between variable and new ideas relating to the study.

ANALYSIS OF INSIGHT STIMULATING

It is the most fruitful method of suggesting hypothesis for research. This method

consists of the intensive study of selected instances of the phenomenon in which

one is interested. For this purpose Existing records may be examined,

Unstructured interviews may take place or some other approaches may be

adopted.

SURVEY OF CONCERNING LITRATURE

IT is the most fruitful and simple method of collecting information regarding the

research problem or developing hypothesis. Literature includes study of

different magazines and journals, newspapers, company reports, and other

published or unpublished data.

 TOOLS AND DEVICES OF THE STUDY:

For analyzing the financial performance of the company the various tools or

devices can be used such as:

a. Comparative Statements

b. Common Size Statements

c. Trend Analysis

d. Ratio Analysis

e. Schedule of change in working capital.

f. Cash Flow Statements

In the present study only four devices are used to analyze the financial

performance of the company, which are as under: -

1. Comparative Statements Analysis

2. Ratio Analysis

3. Common Size Statements

4. Trend Analysis

PERIOD UNDER OBSERVATION

The present study relate to the financial year 2005-2006. The other

data is also observed for the period from 2001-02 to 2005-06.

 DATA COLLECTON

Mainly two techniques of data collection is used in this report which area as

follow:

1) OBSERVATION METHOD

2) UNSTRUTURED PERSONAL INTERVIEW METHOD.

OBSERVATION METHOD

Observation deals with obtaining information that is already recorded or deals

with the objectives. In this method, the efforts, time and cost involved are high

but it provides more accurate and reliable data. The accuracy of data depends

upon the capacity of observer to perceive and recording the people’s behavior.

PERSONAL INTERVIEW METHOD

This method helps in obtaining a great range of data although it requires more

time, efforts and funds. It should be conducted after establishing sufficient

rapport or level of understanding with the respondent. It provides the

opportunity to interpret and collect information as per the objective. The

interviewer has to be very apt and experienced to collect adequate and proper

information from the respondent. This method helps in obtaining much reliable

and accurate data from the respondent.

LIMITATIONS OF THE STUDY

1. All the techniques or tools available for financial performance

analysis are not used; only comparative statement, analysis, common

size statement and trend analysis and ratio analysis have been used for

analysis.

2. The ratios have been interpreted by comparing the standard with the

actual wherever these are available in literature. So cent percent

accuracy cannot be claimed.

3. The data may not be accurate.

4. Time was the major limitation.

5. Rely upon the information supplied by the organizations & various

departments.

6. There are not proper arrangements for the trainees.