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RATIO

ANALYSIS
OF USHA
MARTIN
LIMITED
PROJECT
CONCLUDED BY :
ANKIT KEDIA
RANJAN KUMAR
MAMTA KUMARI
AMIT KUMAR
NITESH MITTAL

UNDER GUIDANCE OF:

MR. RAJEEV SINGH A PROJECT REPORT


(DEPARTEMENT OF
FINANCE)
ON
A Study on Ratio Analysis of UML, Ranchi
A Study on Ratio Analysis of UML, Ranchi

DECLARATION

We hereby declare that this project is entitled “RATIO ANALYSIS OF


USHA MARTIN LIMITED, RANCHI” is a bonafide work out by us. We
state that no portion of this project report is published or submitted to any other
organization. This study is the work of our own, for the fulfillment of our
Summer Training Program. We hereby acknowledge that the information is
genuine to the best of our knowledge.
A Study on Ratio Analysis of UML, Ranchi

Certificate of Guide

This is to certify that Ankit Kedia, Ranjan Kumar,Mamta Kumari,Amit


Kumar, Nitesh Mittal students of BBA and MBA Courses have undergone
the SUMMER TRAINING in our organization.

Under the Finance Coordination Department of USHA MARTIN LIMITED.

During their project they were assigned the project on”RATIO ANALYSIS
OF USHA MARTIN LIMITED,RANCHI(TATISILWAI).”They have
completed their project satisfactorily.This certificate is being issued for
academic purpose.

We wish them a successful professional career.


A Study on Ratio Analysis of UML, Ranchi

Mr. Rajeev Singh

FINANCE DEPARTMENT
A Study on Ratio Analysis of UML, Ranchi

ACKNOWLEDGEMENT

There are times when one feels a sense of accomplishment combined with a
sense of gratitude. Writing the acknowledgement page in this project is one
among them. This project would have been a distant dream without the grace of
almighty. So, first and foremost, we, profusely thank god for his blessings and
grace, without which my project would not have seen the light of the day.

We would like thank HRD Manager, Mr. Arvind Kumar who provided us a
golden chance for training and our especial thanks to Mr. Rajeev Singh for his
guidance and appreciative support in spite of busy schedule at Usha Martin
Limited.
A Study on Ratio Analysis of UML, Ranchi

PREFACE

Summer Training is essential to get the practical orientation of theoretical


knowledge and analysis of the business realities at the corporate level. This 6
weeks training procedure made us understand the working culture of the
business organization.

The summer training in this reputed Company had been a challenging and
exciting experience which brought us closer to the business organization.

Our Project topic is Ratio Analysis of Usha Martin Limited(Wire Ropes and
Speciality Product Division) in Finance department of USHA MARTIN
LIMITED,TATISILWAI,RANCHI,JHARKHAND.
A Study on Ratio Analysis of UML, Ranchi

INDEX

1COMPANY BACKGROUND

2. COMPANY PROFILE

3. OVERVIEW OF THE INDUSTRY

4. FINANCIAL STATEMENT

5. CALCULATION OF RATIO

6. MAJOR LEARNING

7. FINDINGS

8. STEPS TAKEN BY MANAGEMENT

9. SWOT ANALYSIS

10. SUGGESTIONS AND CONCLUSION

11. BIBLIOGRAPHY
A Study on Ratio Analysis of UML, Ranchi

CONTENT

1. INDUSTRY PROFILE

2. COMPANY BACKGROUND

3. SWOT ANALYSIS

4. FINANCE REVIEW

5. MAJOR LEARNING

6. FINANCIAL STATEMENT

7. CALCULATION OF THE RATIO

8. FINDINGS

9. STEPS TAKEN BY THE MANAGEMENT

10. SUGGESTION

11. CONCLUSION

12. BIBLIOGRAPHY
A Study on Ratio Analysis of UML, Ranchi

CONTENT

1. COMPANY BACKGROND

2. COMPANY PROFILE

3. OVERVIEW OF THE INDUSTRY

4. FINANCIAL STATEMENT

5. CALCULATION OF THE RATIO

6. MAJOR LEARNING

7. FINDING

8. STEP TAKEN BY THE MANAGEMENT

9. SWOT ANALYSIS

10. SUGGESTIONS AND CONCLUSIONS

11. BIBLIOGRAPHY
A Study on Ratio Analysis of UML, Ranchi

INDUSTRY PROFILE

Global Steel Scenario and Indian Steel Industry

Though evidence indicates that iron and steel have been used for almost 6000
years, the modern form of iron and steel industry came into being only during
the 19th century. The growth and development of iron and steel industry in the
world until the Second World War was comparatively slower. But the industry
has grown very rapidly after the Second World War. World production of steel
which was only 28.3 MNT in 1900 rose to 695 MNT by 1992. The oil crisis of
the seventies affected the entire economy of the world including the steel
industry. The position started improving after 1983 peaked at 780 MNT in
1989. It started declining till 1994 (723 MNT), picked up again to 755.8 in
1995. The world steel production was around 900MNT in 2002.
A Study on Ratio Analysis of UML, Ranchi

Historical Background

Indian History:-
Indian History is also full of reference to the usage of iron and steel. Some of
the ancient monument like the famous iron pillar in New Delhi or the massive
beams used in the Sun Temple at Konark bears ample testimony to the
technological excellence of the Indian metallurgists.
The history of iron in India goes back to the ancient era. Our ancient literary
sources like the Rig Veda, the Atbara Veda, the Purina’s and other picas are
full of references to iron and to the uses in peace and war. According to one of
the studies, iron has been produced in India for over 3000years.

Indian Industrial Background:-


The history of modern steel industry in India can be traced back to 1907, when
the house of Tata’s floated TISCO to produce 12,000 tons of pig iron, of which
85,000 tones was to be converted to 72,000 tons of mild steel. Located at
Jamshedpur, TISCO produced its first tones of hot metal at the end of 1911 and
steel was tapped in early 1912. In 1923, the steel corporation of Bengal set up
a steel plant near Alanson and three years later, tapped its first tone of steel, this
plant was later amalgamated with the Indian Iron and Steel Company (IISCO).
Thus on the eve of independence, India had three integrated steel plants,
TISCO, MISW and IISCO.
A Study on Ratio Analysis of UML, Ranchi

By the early 1950’s there were strong market as well as ideological pressures
for not only expanding the capacity of existing units but also building up new
plants in the public sector. In 1953, an agreement was signed with Kruoo-
Demage of Germany to set up a 1-MnT P/A plant at Rourkela for the
production of flat products. In 1956, two other agreements were concluded for
setting up 1-MnT P/A plant at Durgapur with the assistance from U.K. the 1
MnT steel plants at Bhilai, Durgapur and Rourkela came up in the early 1960’s
signifying an achievements, which could be considered unique for any
undeveloped or even developed nation at that point of time.

By the end of the 1960’s, Bhilai Steel Plant’s capacity increased to 2.5 MnT
P/A, Durgapur Steel Plant to 1.6 MnT P/A, and Rourkela Steel Plant to 1.8
MnT P/A. from the late 1950’s, plans were made to set up a public sector unit
at Bokaro, in Bihar. The Bokaro project however was fraught with delays. The
USA turned down technical assistance and funding, the USSR mover in and
wanted major changes in specifications before supplying technical expertise
and aid. Bokaro steel plant started rolling steel only in 19

Growth and Developments of Industry

Early Growth
Though the art of making iron was known to India from very ancient time, the
real development of the iron and steel industry started only since 1907 with the
A Study on Ratio Analysis of UML, Ranchi

establishment of the Tata Iron and Steel Company (TISCO) at Jamshedpur in


the private sector. This company started producing pig iron in 1911 and steel
in 1913. The First World War gave stimulus to the iron and steel industry.
Two more iron and steel works were started in the private sector. In 1918, the
Indian Iron and Steel Company (IISCO) was started at Kulti in West Bengal,
and in 1923, the Mysore Iron and Steel works were set up at Bhadravathi in
Karnataka. Severe foreign competition in 1922 and 1923 caused depression in
the Indian iron and steel industry. So, protection had to be given to the
industry. Protection was renewed from time to time till 1947. With protection,
the industry made good progress.

Development under the plans

The iron and steel industry of the country has made remarkable progress after
independence under the five-year plans. During second five-year plan, three
public sector steel plants were set up at Rourkela in Orissa with German
assistance, Bhilai in Madhya Pradesh with Russian assistance and Durgapur in
West Bengal with British assistance. Besides, the government gave financial
and other help to the three existing private sector iron and steel works for their
expansion, and all the private sector works expanded their capacity. Thus, the
second five-year plan period was the most memorable period in the
development of the Indian iron and steel industry.
During the third five-year plan, one more public sector steel plant was set up at
Bokaro in Bihar with Russian help. Besides, expansion was carried out in the
Tata Iron and Steel Company, Indian Iron and Steel Company and Mysore Iron
A Study on Ratio Analysis of UML, Ranchi

and Steel works. Again during third plan, the Iron & steel industry of the
country diversified its production, producing several types of iron and steel.
During the fourth plan, steps were taken for the maximization of the capacity of
the existing plants. Besides, plants were prepared for the setting up of three
more public sector steel plants at Salem in Tamil Nadu, Vijayanagar in
Karnataka and Vishakapattanam in A.P though there was expansion of
production, there was shortage of steel during the fourth plan period.
During the fifth plan, production was expanded, especially in the Bhilai
and Bokaro steel plants.

COMPANY PROFILE

BACKGROUND AND INCEPTION OF THE COMPANY


Usha Martin Limited was started in 1961 in Ranchi (Jharkhand) as a wire
rope manufacturing company. Today the Usha Martin Group is a Rs.3000 crore
conglomerate with a global presence. The products are, wire rods, bright bars,
steel wires, specialty wires, wire ropes, strand, conveyor cord, wire drawing
and cable machinery.

Incorporated in 1960 Mr. B.K. Jhawar, the present chairman, pioneered it.It
was promoted to manufacture steel and wires ropes in a collaboration with
Martin Black of Scotland as a joint Indo-British venture. From 1st October
1997, this company has been merged with Usha Beltron Ltd which has been
renamed as wire and wire ropes division, within which six companies are
included.
A Study on Ratio Analysis of UML, Ranchi

Board of director
Chairman Mr. Prashant Jhawar
Director Mr.Brij K Jhawar
Director Mr. N. J. Jhaveri
Director Mr. U.V. Rao
Director Mr. A. K. Chaudhuri
Director Mr. Suresh Neotia
Director Mr. Ashok Basu
Director Mr. Salil Singhal
Managing Director Mr. Rajeev Jhawar
Jt. Managing Director Dr. P. Bhattacharya

Companies
USSIL
Usha siam steel industries (USSIL) was incorporated in
1980 as a joint venture between Usha martin industries,
India and leading industrialists in Thailand – promoted
by board of investment (BOI) for production of steel
wire and rope.

UM Singapore
Established in 2000, is a wholly owned subsidiary of
Usha Martin Limited, India. It has been operational as a
distribution center for Usha Martin Group’s core
business of steel wire ropes and related products in
South East Asia. It also has distribution set up in
Australia & Indonesia.
A Study on Ratio Analysis of UML, Ranchi

BWWR
Established in 2003, Brunton Wolf Wire Ropes FZCO is
a joint venture between Usha Martin Limited of India
and Gustav Wolf of Germany.BWWR is the first wire
rope factory set up in the middle east, situated in Jebel
Ali Free Zone Enterprise (FZE) with an annual capacity
of 12,000 MT. The product range includes general
engineering rope, elevator rope, crane rope, off-shore
application rope, etc.

UM Cables
A wholly owned subsidiary of Usha Martin Limited,
located at Silvassa, Western India, manufactures PIJF
Copper Telecom cables and Optical Fibre Cables and
has an annual capacity of 2.9 MCKM and 35000 RKM
respectively.

UMIL
Established in 1997, Usha Martin International Limited
is a wholly owned subsidiary of Usha Martin Limited,
formed to facilitate distribution & marketing of the
group’s wire & wire rope products in Europe. The
company also acquired in 2001 a Nottinghamshire based
A Study on Ratio Analysis of UML, Ranchi

Wire Rope manufacturing company “Brunton Shaw


UK” with an annual capacity of 6,000 MT. It also
specialises in providing services to oil drilling and
offshore exploration activities thru its arm European
Management & Marine Corporation having offices in
Aberdeen (UK), Baku & Tananger(Norway).
UM America
A wholly owned subsidiary of Usha Martin Limited,
India. It has been operational as a distribution center for
Usha Martin Group’s core business of steel wire ropes
and related products in United States of America.

Brunton Shaw America


Established in 2007, Brunton Shaw America is a wholly
owned subsidiary of Usha Martin Limited, India having
a wire rope manufacturing capacity of 6000 TPA.

COMPANY BACKGROUND
The Company is a part of the Usha Martin Group, which was formed in India
in the early 1960s with the establishment of Usha Martin Industries Limited
(UMIL), engaged in the manufacture of steel wires, wire ropes and other
related products. The group was promoted by Mr. B. K. Jhawar, who is the
Chairman of the Company. Usha Beltron Limited was incorporated on 21 May,
A Study on Ratio Analysis of UML, Ranchi

1986 as a joint venture between Usha Martin Industries Limited, Bihar State
Electronics Development Corporation Limited, AEG Kabel, Germany (now
Kabel and a member of the Alcatel group) and DEG, Germany, to manufacture
Jelly Filled Telephone Cables (JFTC). Pursuant to the Orders of the Hon'ble
High Court of Kolkata and Patna( Ranchi Bench) Usha Martin Industries
Limited merged with Usha Beltron Limited with effect from 15th May, 1998.
Thereafter the registered office was shifted from Tatisilwai, Ranchi, Bihar to
Kolkata in the State of West Bengal in the year 2000. The name of Usha
Beltron Limited was changed to Usha Martin Limited with effect from 1st
May,2003.

NATURE OF THE BUSINESS CARRIED


The business carried on by Usha Martin Company is oligopolistic in nature as
there are few producers of wire and wire rope and the price is not a major
concern. The industry of wire rope manufacturing has few major players which
compete with the limited number of competitors.

VISION, MISSION & QUALITY POLICY

Vision:-

To be a respected, world class & leadership in business, in quality,


productivity, profitability & customer satisfaction.
A Study on Ratio Analysis of UML, Ranchi

Mission:-

• To be a customer and share holder observed factory.


• To enhance value to share holders and services to all stake holders.
• To develop highly motive team with a sense of satisfaction.
• To excel as a value driven organization.
• To create the value in case of quality.
• To expand its area of its operation& utilize the raw material efficiently.

Quality policy:-
• Providing product & services that meet customer expectation .
• Continual improvement to our quality management system and process.
• Continues enrichment of the skills and knowledge through training and
training.
• Compliance to all applicable statutory and regulatory.
• Fostering the professional development of our employee.
• Our suppliers and customers are our partner in progress.

PRODUCT & SERVICE PROFILE:-


Main products of usha martin which the company produce & export.
• Wire
• Wire Rope
• Bright bar
• Conveyor cord
• Telecom cable
A Study on Ratio Analysis of UML, Ranchi

AREA OF OPERATION: - GOING GLOBAL


Level to expand: - International / Global.
With local success come global aspirations. Currently, the company has
overseas manufacturing operations in Thailand, UK, USA and Dubai. Besides a
vast network of distribution centres and marketing offices spread across the
globe to support an ever growing worldwide customer base. The company
exports over 60% of the wire rope output and about 20% of the total wire rods
produced.
Usha Martin’s future plans are focused on its operation in Jharkhand – a state
rich in mineral resources. Future priorities include product mix enrichment,
cost reduction and infrastructural improvements. Already flourishing in its
recent foray into mining operations, the company is planning to invest in its
iron ore and coal mines, sinter plant, pellet plant, power plants, while also
enhancing its steel making and value added products capacity with an
investment of Rs 2,100 crore.

OWNERSHIP PATTERN
Pattern of Shareholding (as on 31.03.2009)
A Study on Ratio Analysis of UML, Ranchi

Category No. of shares % of total shareholding

(A) Promoter Holding 11,55,10,604 46.16

(B) Public Holding

– Mutual Fund 2,81,99,333 11.27

– Financial 13,43,131 0.54


institutions/Banks

-Insurance companies 1,10,39,409 4.41

-Foreign institutional investors 5,06,53,798 20.24

-Bodies corporate 1,70,27,896 6.80

– Individuals 2,09,12,639 8.36

Total (B) 12,91,76,806 51.62

(C) GD rs 55,54,370 2.22

Grand total(A+B+C) 25,02,41,780 100.00


A Study on Ratio Analysis of UML, Ranchi

COMPETITORS INFORMATION:-

Tisco , Jamshedpur
Musco, Mumbai
Rinl, vizag
Siscol, salem
Facor, nagpur
Sun flags, Nagpur

INFRASTRUCTURAL FACILITIES :-
Usha martin is a huge conglomerate situated15km far from main city Ranchi. It
has been providing different infrastructural facility like;
➢ Accommodation for employees at lower rates.
➢ Officers association
➢ Workers association
➢ One guest house
➢ clubs for both executives & non executives
➢ medical facility
➢ fooding & transportation facility etc.

USHA MARTIN GETS TERI AWARD:-


Our Bureau
Kolkata, July 8 Usha Martin Ltd, the world's second largest wire rope
manufacturer, has received TERI Corporate Social Responsibility Award in
recognition of leadership in corporate citizenship and sustainable initiatives among
companies with a turnover exceeding Rs 500 crore, according to a statement issued
by the company. Mr B.K. Jhawar, Chairman, received the award at a function in
A Study on Ratio Analysis of UML, Ranchi

Delhi recently. The award has been given for outstanding work undertaken in Low
Birth Weight Project in rural Jharkhand. The other partners of the project were
Krishi Gram Vikas Kendra (implementing agency), ICICI Bank (strategic partner
and funding agency), Jharkhand Government (enabler and implementing partner),
Jharkhand Health Society, John Hopkins University (operations research design)
and CINI (conceptual and technical support).

WIRE AND WIRE ROPE MANUFACTURING PROCESS


FLOW DIAGRAM
A Study on Ratio Analysis of UML, Ranchi
A Study on Ratio Analysis of UML, Ranchi

FUTURE GROWTH AND PROSPECTUS:-

The companies’ business strategy is to ensure profitable growth in the future


will be through
A Study on Ratio Analysis of UML, Ranchi

• Realization of synergy gain with Usha Martin to ensure better market


position.
• Higher asset utilization across plant location, particularly leveraging the
benefits of the upgraded rolling mills as taking steps to optimize use of
ideal physical infrastructure asset enriched product makes for higher
returns from existing needs.
• Strengthening of exports with an emphasis on consolidating Usha Martin
presence in existing market while tapping new regions for export of value
added products.
• Cost control efforts including better logistics, higher operating efficiencies
and improved working capital management.
A Study on Ratio Analysis of UML, Ranchi

McKINSEY‘S 7S FRAMEWORK MODEL

‘Hard’ variables.
 Strategy: plan leading to
allocation of resources.
 Structure: Organization reporting lines, geography, etc.
 Systems: formal and informal processes used.

‘Soft’ variables:
 Staff: demographics of personnel.
 Style: behavior of managers when interacting with others.
 Skills: core competencies of the firm.
 Shared Value: culture, which is actually the core element to it all.

ORGANISATIONAL STRUCTURE
A Study on Ratio Analysis of UML, Ranchi
A Study on Ratio Analysis of UML, Ranchi

FUNCTIONAL DEPARTMENT STRUCTURE


Human Resources Development (HRD)

Head of P & A

DGM HRD
senior Manager (HRD)

HRD concentrates on developing people through trading with the objective of


changes is knowledge, skills and attitudes, resulting in changes in job
performance and ultimately changes in organizational effectiveness. Emphasis
is given to need based training with the active guidance from the corporate
office and MNTI, Ranchi.

Training programs are as follows:

FRESH ENTRANTS
➢ Induction and orientation
COMPETENCE ENHANCEMENT
➢ Technical
➢ Multi skill training
➢ Managerial
A Study on Ratio Analysis of UML, Ranchi

SPECIFIC AREA
➢ Safety
➢ Environment
➢ Cost control and deduction
➢ Quality

PERSONNEL DEPARTMENT MISSION OF PERSONNEL :-


To attain high standards in quality of work, work life and productivity through
people.
Objective:
To create and sustain a productive environment where each employee develops
to his/ her full potential and is committed to continuous improvement of the
organization’s performance through his/her effort.
Role:
• To select the right kind of people so that the individual strengths,
aptitudes and competencies meet the organizations needs.
• To provide suitable compensation package to attract and retain the
talent required for the organization.
• To train and develop employees to acquire competencies required to
meet the current and future requirement of the job and the company,
and to attain international standard of proficiency.
• To develop suitable reward systems to motivate employees to meet
continuously the organizational objectives.
A Study on Ratio Analysis of UML, Ranchi

• To encourage employee participation on major organizational issue


and value their ideas and suggestions.
• To create environment to promote teamwork.
• To facilitate vertical and horizontal communication.
• To build challenge into jobs to ensure job satisfaction.
• To identify and develop potential leaders in the organization.
• To evolve systems and procedures to facilitate smooth functioning of
the individual and the organization
• To establish an environment where Personal, Technological and
Organizational discipline is the hallmark of every operation.
• To plan continuously for optimal utilization of human resources.
• To manage external environment to attune it to organizational
requirement.
• To be sensitive to the internal and external organizational dynamics
and plan for organizational interventions.
• To strive continuously for modernization of minds to meet the
changing requirement of technology.
• To strive continuously to scale peaks of excellence in individual, team
and organizational performance
A Study on Ratio Analysis of UML, Ranchi

FINANCE DEPARTMENT

DGM - Finance

Pay and Establish Cost A/cs Central Purchase Sales A/c’s


and Branches

Mgr - Fin Mgr - Fin


Mgr-Fin Dy. Mgr-Fin
A Study on Ratio Analysis of UML, Ranchi

Jr. Mgr Mgr Fin Dy. Mgr-Fin


Dy. Mgr Jr. Mgr

Jr. Mgr

Jr. Executive Dy. Mgr/ Jr. Mgr

Finance Department

Finance means acquisition of funds and proper utilization and allocation of


funds in proper way. Finance plays a vital role in the development of any
business. Thus development of any business majorly depends on the effective
finance management. In olden days the role of financial manager was only
limited to raising funds and maintaining the books of accounts. But now the
trend is changing. The financial manger has wide scope in present scenario and
he plays a vital role in decision-making, costing,budgeting,andcontrolling

Finance Management is one of the most important functions in the


organization. It is the lifeblood of the company. Financial management
involves the preparation of budget, which will be useful for the future decisions,
and it will give information about the company’s financial position to the
customer, creditors and Government.
In Usha Martin Ltd. Finance Management Department can be divided into
different sections. General Manager is the head of the finance department and
computer section. He looks after over all activities of finance department.
A Study on Ratio Analysis of UML, Ranchi

Each section maintains the books of the accounts. The following sections deal
with their related transactions.
1. Central accounts section.
2. Purchase accounts section.
3. Sales accounts section.
4. Capital project account section.
5. Pay and Establishment section.
6. Cost and Budget account section.

MARKETING DEPARTMENT

D G M Marketing D G M Marketing
A Study on Ratio Analysis of UML, Ranchi

MKtg – WR
MKtg - Sr. Mgr Pune Reg Mgr MKtg Shipment
HQ Mktg (North)
region)

Nagpur New Dehli Dy


AGM Mktg Mgr Chennai Mgr Sr. Mgr Mgr Mgr
Bangalore Sr. Mgr

Mumbai Jr.
Dy Dy Mgr Mgr Mgr
Mgr Jr. Mgr
Mgr

MARKETING NETWORK OF USHA MARTIN Ltd.


A Study on Ratio Analysis of UML, Ranchi

Major customers

 Defense units.
 Railways.
 Engineering industries.
 ESCORTS.
 BEML units.
 Automobiles / Foreign industries.

Marketing Strategies adopted to attract and retain Customers:

 Buyer market.
 Quick delivery.
 Better quality
A Study on Ratio Analysis of UML, Ranchi

Market Segmentation
Market segmentation means dividing the market into different segments or
sector in Usha Martin Ltd., the market segmentation is on the basis of customer
wise and product wise.

By customer-wise
 Defense sectors.
 Railway sector.
 Auto and Forging sector.
 Engineering sector.
 Trade sector.

By product-wise
 Alloy steel.
 Spring steel
 Scraps Slag.

Promotional Activities
[
Kl8k.,m8,

The production is done on the basis of customer’s orders. Therefore , the


organization has not engaging in advertising activity, but as promotional
tool. It is giving.
 Quantity discount.
A Study on Ratio Analysis of UML, Ranchi

 Payment terms by credit benefits.


 Quick delivery.

Packing and labeling:

The steel products are not perishable. So it need not have any proper packing
as compared to consumer products. Binding with wire is enough for packaging
the steel products and leveling is done by metal tag and in different colors.

SKILLS

A skill refers to how smart an employee does his work with available source.
In marketing department various steps are taken for staff to develop appropriate
new skills for marketing their products.
The Company as a whole is very much skilled with the availability of huge
manpower and resources. The company is capable of accepting and producing
any type of the product and executes it well before schedule and to the
expectation of the customers. The company is able to manufacture over 200
grades of alloy and special steels to meet the specific requirement of individual
customers.
The steps taken to improve necessary skills of the employees:
1) On the job training.
 7 days training for transferred employees.
 1-year probationary period for newly recruited employees.
 Induction training to promoted employee from non-executive level to
executive level.
A Study on Ratio Analysis of UML, Ranchi

6 months probationary period for all executives who are


promoted.Training inside the factory will be having facility of O. O. D.
for the day of training . training outside the factory will be having
facility of O. O. D, TA, and DA.

1) Off the job training


 Lecture
 Group discussions, case studies
 Management games
 Developing presentation skill
 Conference
 External training
 Specific need base training etc.

STYLE

Style refers to the flow of orders or method of communication in the


organization. In Usha Martin Pvt. Ltd it is following participative style where
in subordinates and their heads will have discussions and then they will take
decision. Here in Usha Martin all middle level management employees make
discussion with their heads and take decision.
A Study on Ratio Analysis of UML, Ranchi

The management of Usha Martin Ltd., is completely employee oriented. They


receive the feedback from the workers and decide on the change in the
strategies.
1. Top Down Approach
2. Bottom Up Approach
In top down approach the corporate office plans activities and send it to
the every units. Because to know whether it is suitable or not and with
consultation decision are taken.
In bottom up approach all the units of Usha Martin Ltd., plans the
activities or recommended certain policies for their convenient and send to
the corporate office for approval, thus decisions are made. In this approach
the corporate office only takes certain decisions without consulting the
units.
In Recruitment process the corporate office makes the decisions regarding
the recruitment of executives without consulting its units. But in case of
recruitment of nonexecutives, the decisions are made by the units itself
according to their requirement and then sent for the approval of corporate
office.

STRATEGY:

Strategy refers to how an organization will attain its vision, mission and
respond to the threats and opportunities of the new capabilities needed in
different strategy is the determination of the basic long-term goals and
A Study on Ratio Analysis of UML, Ranchi

objectives of an enterprise and the adoption of the course of action and the
allocation of resources necessary for carrying out these goals.
1. Specializing in developing and marketing special alloy steels and
achieve possible market share in this niche are has been notable
strategy adopted by the company.
2. Market penetration by the best possible past optimization techniques
and achieving price excellence has been another strategy adopted by
the company.
3. Smart sizing of the company through introduction of Voluntary
Retirement Scheme and leveraging most advanced production has
been another major strategy adopted by the company.
4. Systemic intervention into all the processes through development and
implementation of various system has been another strategy adopted
by the company to streamline its operations.
5. Very good selection and development systems adopted coupled with
several employee welfare measures has been a notable strategy
adopted by the company for attracting and retaining the talent.
6. Discharging corporate social responsibility through several society
linkage programs in the area of health, education, and training has
been yet another significant strategy adopted by the company.
7. Discharging environmental safeguarding responsibility through
various eco-friendly measures has been another noted strategy
adopted by the company to discharge its social responsibilities to
protect the environment
A Study on Ratio Analysis of UML, Ranchi

8. Introduction of several quality systems including ISO certification has


been yet another strategy adopted by the company for maintaining
highest quality standards.

SYSTEM
System refers to the formal process and procedure used to manage the
organization, including the management control systems, performance
management measurement and record systems, performance measurement and
reward systems, planning, budgeting resource allocation systems information
system and distribution systems.

Inventory Control System

Usually a firm has to maintain several types of inventories. It is not possible to


keep the same degree of control on all the items. The firm should pay
maximum attention to these items whose value is the highest.

The firm should, therefore classify investors to identify which items should
receive the most effort on controlling. The firm should be selective in its
approach to control investment in various types of inventories. These
analytical approaches are called ABC analysis and tend to measure the
significance of each item of inventories in terms of its value.
The high value items are classified as ‘A items’ and would be under the tightest
control ‘C items’ represent relatively least value and would be under simple
A Study on Ratio Analysis of UML, Ranchi

control. ‘B items’ fall in between these two categories and require reasonable
attention of control.
The ABC analysis concentrates on important items and is also known as
“control by importance and extension”. So the items are classified as per the
importance of their relative value this approach is also known as “proportional
value analysis”.

ABC Analysis:

In most inventories a small proportion of items accounts for a very substantial


usage ( in terms of the money value of consumption ) and large proportion of
items accounts for a very small usage ( in terms of the monetary value of
annual consumption). ABC analysis is based on this empirical reality
advocates in essence a selective approach to inventory control, which calls for a
grater concentration of effort on inventory items accounting for the bulk of
usage value. This approach calls for classifying inventories in to three
categories A, B and C.

Category A:
Representing the most important items. Generally consists of 15 and 25
percent of inventory items and accounts for 60 to 75 percent of annual usage
value.

Category B:
Representing items of moderate importance. Generally consists of 20 to 30
percent of inventory items and accounts for 20 to 30 percent of annual value.
A Study on Ratio Analysis of UML, Ranchi

Category C:
Representing items of least importance generally consists of 40 to 60 percent of
inventory items and accounts for 10 to 15 percent of annual value.

STAFF

Staffs refer to the company human resource, which includes the manpower
available in the entire organization.
The people in Organization are very dedicated and work towards the
improvement of the Organization. The skill levels of the workers are work
oriented and they are specialized in their respective field of work. Most of the
workers are well experienced and well trained.
The staffs are graded from L. I to L I I for non-executives and E1 to E9 for
Executives. The qualification for the non-executive employees are SSLC, ITI,
and for executives Diploma and any degree or higher.
There is totally around 2600 staff members are there. Their average age is 51
to 52. The duties and responsibilities of staff differ from department to
department like production department to other department.

SHARED VALUE

In shared values a role of the vision statement is to impart to the organization


and externally what the organization stands for and what it believes in. Usually
this is related to the top management in which top management not only
formulate and constantly reiterate values and beliefs but also adhere to them.
A Study on Ratio Analysis of UML, Ranchi

With a Vision of being a world class, innovative, competitive and profitable


Alloy and Special Steel Plant it has used all the available resources. The
company has a common goal to all its concerns and shares the information
available in every concern. The Usha Martin Ltd., has implemented the
following main objectives,
➢ It has been able to build the lasting relationships with customers based
on trust and mutual benefit.
➢ It has been able to uphold highest ethical standards in conduct of the
business.
➢ It has been able to create and nurture a culture that supports flexibility,
learning and is proactive to change.
➢ It also charted a challenging career for employees with opportunities for
advancement and rewards.
➢ It values the opportunity and responsibility to make a meaningful
difference in people’s levels.

3.2 SWOT ANALYSIS:-

SWOT is an acronym used to describe the particular strength, Weakness,


Opportunities and Threats that are strategic factors for a specific company.
Swot analysis not only result in the identification of a corporate distinctive
competencies, the particular capabilities and resources that a firm possesses and
the superior way in which they are use, But also in the identification of
opportunities that the firm is not currently able to take advantage of due to lack
of appropriate proven to be the most enduring analytical technique used in
A Study on Ratio Analysis of UML, Ranchi

strategic management. This reflects an important issue facing strategic


managers should invest more in knowing their strength’s to make them even
stronger or should they invest in weakness to make their competitors weak?

Strengths:-

It is the potency of the company, which makes the difference from others in the
industry, the important strengths of the company are:
• Well equipped chemical and metallurgical laboratories.
• Satisfied & loyal customers.
• Location advantage with proximity to major markets (north, south, east,
west).
The company is known for its quality of alloy & special steel.
Weakness:-

• Out dated technology with regards to production.


• Being a private sector, emphasis is more on welfare measures rather than
productivity or growth of the organization.
• High overheads and fixed costs.
• Adverse age mix of workers and high average wage.
Opportunity:-

Opportunities are the openings or prospects for the future expansion or growth
of the company and to meet the objectives for which it is formed. This makes
avenue for the company to achieve goals.
• Growing in iron and steel market.
A Study on Ratio Analysis of UML, Ranchi

• Competitive environment calls for improvement and increase in


productivity.
• Cost advantage with the adoption of sophisticated technology.

Threats:-

Threats are the fear or the pressures for which are uncertain to the company and
company has to be geared up to face and to cope up with the changes from the
current state.
• Upgraded technology used by other manufacturer helps in supplying the
rates which could eat the market share.
• Too many welfare activities lead to the increase in expectations of
employees this could at some point of time become a reason for
dispute.
• Competition.

3.3 Finance Review for the year 2008-09


(Rs. in thousand)
Finance Results Current year Previous
year
A Study on Ratio Analysis of UML, Ranchi

Profit/Loss Before Tax 21,40,412 20,07,127


Loss : Provision for Tax
Current Tax: 9,10,000 5,10,300
Fringe Benefit Tax: 11,500 11,800
Differed Tax (2,46,655) 36,700

Profit/Loss After tax 14,65,567 14,48,327


Debenture redemption reserve written back - 8,06,050
Profit brought forward from previous year 4,20,792 2,09,186
Profit available for appropriation 18,86,359 24,63,563
Deduct: Provision for Proposed Dividend 2,50,242 2,50,242
Deduct: Provision for Dividend Tax 42,529 42,529
Deduct: Transfer to general reserve 12,50,000 17,50,000
Balance carried forward to Balance sheet 3,43,588 4,20,792

Interpretation:

The net profit after tax was Rs. 14,48,327 thousand in the year 2007-08
which has been increased to 14,65,567 thousand in current year. The net
increased in profit after tax is 1.19% because of increase in sales. Cumulative
profit for the last year was 4,20,792 which has been decreased to 3,43,588.

3.4 LEARNING EXPERIENCE:-


A Study on Ratio Analysis of UML, Ranchi

It was a good experience for me in carrying out the project work. It helped me
to gain practical knowledge and exposure and acted as a stepping stone to
reach the ladder of corporate world.
During the course of 8 weeks I visited the plant of Usha Martin Ltd, where I
gained practical knowledge about the working process and functioning of the
organization in accordance with the present market trends.
The main purpose of the organization study was to get acquainted with
practical knowledge about the overall functioning of the organization.
This project has also provided an opportunity to study the human behaviour
and analyze different situations, which normally would come across while on
work in the office or factory environment.

Objective of the Study:


➢ The primary objective of the organization study with respect to
Mckinsey’s 7s framework is to make the students to known the
practical applicability with respect to the theoretical concepts in
business decisions.
A Study on Ratio Analysis of UML, Ranchi

➢ To understand the behaviour, culture of the organization and to


known about the organization and its performance, and future
strategies.

During these 6 weeks of Industrial training in Usha-Martin ltd I studied and


learnt many things Carried in the organization. This Industrial training helped
me in gaining more knowledge about the work and production carried out in
the organization.
There are very strict rules followed in HR department and attendance was taken
daily to check the regularity and we used to stay from morning 10 to 5 daily
and to visit different departments daily according to their schedule.
There was good reaction and co-operation by the superiors and subordinates of
UASD. They helped me in collecting the information regarding the different
department and production process.
I got the clear picture about how the organization work is carried on and
the duties and responsibilities of the employees in the organization. I observed
the work techniques that are studied in subject being implemented and
practiced in the organization like recruitment process, welfare facility, training
techniques etc.
This training has helped me to have a thorough understanding about how
the managerial theories and techniques are applied in the real situation. It has
also helped me to know about various communication techniques used in the
plant and its importance for example, various sign boards in all over the plant.
A Study on Ratio Analysis of UML, Ranchi

The entire analysis of the plant layout has helped me to have


understanding of designing cost effective layout. The entire plant is near to the
town railway station which helps to reduce the transportation cost.
Besides the entire organizational structure, the duties and responsibilities
of every department coping with organizational mission and vision is a key
motivational factor of the employees. Also the various benefits provided to the
workers is also a key motivational factor. Analyzing various safeties, security
and shared values under McKensy’s 7S model helped me to know the
importance of all these elements in an organization.
The discipline maintained in an organization is very important to get the
things done at the right time. The relationship between superior and
subordinate, and the discipline and the honesty shown by the workers and other
subordinates are essential in an organization.
Finally this industrial training gave me the clear idea about the working
condition in the organization, which will help me in future days.
A Study on Ratio Analysis of UML, Ranchi

INTRODUCTION

Financial statements represent the snapshot of the organizational activities at he


end of the particular period. At this time managers portray the efficiency of
management to what extent it has succeed, what are their failures and it has
justifies its course of action during the period under review.

Definition and Concepts


Financial statements analysis is “A process of evaluating financial and
profitable position of an organization by comparing two or more homogeneous
figures and interpreting thereof”.
According to this definition, analysis of financial statement is a process by
which management will make an effort to draw conclusion on financial and
profit position of an organization. In order to do this process, one has to make
comparison of homogeneous figures provides certain information with which
inference or conclusion can be drawn.

STATEMENT OF THE PROBLEM

No project report begins either with problem or with an opportunity.


Each and every report has got its own objectives to be reached. The statement
of the problem in the given report is, analyzing the statements and drawing
some interpretation from the results. In the field of business world, the finance
has been renowned as the “LIFE BLOOD” of every business concern. If this is
the case, it should be properly utilized and managed so that profits can be
A Study on Ratio Analysis of UML, Ranchi

yielded to the highest extent. Once we analyze the financial data, it reveals
some interpretations to be drawn. No interpretations can be drawn, if the
analyst does not analyze the data. Analysis is an art that can be practiced and
learnt.
The report considers the different techniques of analysis and their respective
usefulness. Every analyst naturally starts taking some preventive actions once
he/she identifies some deviations in the system. But this is not correct and
hence we should be analyzing the statement continuously. In the same way
ratio analysis is used as strategy to imply some decisions. It states that
analyzing the financial statements and giving some financial instructions is of
utmost important.

OBJECTIVE OF THE STUDY


The major objective of financial statement analysis is to provide decision
makers information about business enterprises for use in decision-making.
Users of financial statement information are the decision makers concerned
with evaluating the economic situation of the firm and predicting its future
course. The major groups of users of financial efficiency of the enterprises are
whole subunits (e.g. Departments), lenders and creditors for determining the
creditworthiness and solvency position etc.
The different users and decision makers can use financial statement analysis:
 Assessment of past performance and current position.
 Prediction of Net income and Growth prospects.
A Study on Ratio Analysis of UML, Ranchi

 Prediction of bankruptcy and failure.


 Load decisions by financial institutions and Banks.

SCOPE OF THE STUDY


 This study confines itself to the analysis of Usha Martin Ltd. On the
basis of comparative, common size and ratio analysis and the analysis
covered a period of four years from 2005-06 to 2008-09.
 The data used in this analysis has been obtained from the annual reports
i.e., Balance sheets and profit & loss Account.
METHODOLOGY OF DATA COLLECTION

Data Collection Methods


Sources of data can be classified into two types they are:-
➢ Primary data
➢ Secondary data

Primary data:
Primary data may be described as those data that has been observed by the
researchers for the first time. The primary data was obtained through personal
interaction with company officials during the internship period.
A Study on Ratio Analysis of UML, Ranchi

Secondary data:
Secondary data are those data that have been complied already before
conducting the research. Secondary data may be internal data as well as
external data. Internal data are collected from the company’s records. External
data are collected from outside the company.
The various sources of secondary data are,
➢ Annual reports and financial statements of the company like (balance
sheet and profit and loss account)
➢ Company websites
Sampling Size

Sample size used in this project study relates to the financial figures, covering
the period from 2005-06 to 2008-09. Each data was already checked and
verified by the charted accountant; hence the data is straightaway taken for
analysis. The data is collected from the final account statements.
Comparatively covers the study purpose, no samples are required for the study
as it is concerned with the true financial data of the company.

Method of Study

➢ Discussion with the management of the company to get general


information about their activities.
➢ Study of the classification of items adopted in profit and loss account and
balance sheet and the accounting policies of the concern.
➢ Study of the annual reports for collecting data of 4 years.
➢ Analysis of their adopting techniques and methods available.
A Study on Ratio Analysis of UML, Ranchi

A. LIMITATIONS OF THE STUDY:

 Even though so many tools of analysis are available, but this study
uses comparative analysis, common size analysis, trend analysis
and ratio analysis only.

 This report is based upon the data provided by the officers of the
company and financial reports of the company.

 Since some facts and business secret’s need to be maintained


strictly, it is not possible to collect all the information related to
the financial matters of the company.

 As the concept is vast, in depth study can not be done and wide
constraints are involved.

 As it is an external study, conclusion and suggestions are not


ultimate and are based on personal judgment.

TYPES OF FINANCIAL ANALYSIS


 On the basics of the materials used for the analysis or the persons
interested in the analysis:
 External Analysis: External analysis done by the external parties(i.e.
parties who are outsiders for the business). The external parties include
A Study on Ratio Analysis of UML, Ranchi

shareholders, investors, lenders, creditors etc. , who have no access to the


books of accounts and the internal records of concern.
 Internal Analysis: internal analysis is the analysis done by the internal
parties. The internal analysis is done by the persons who have access to
the books of accounts and the internal records of concern; internal
analysis is more detailed than external analysis depends upon the
objectives to the achieved through the analysis.
 On the basics of the MODUS OPERANDI or the method of operation
followed in the analysis:
 Vertical analysis or structural analysis: when the financial statement is
relating to the just one accounting year are analysis, the analysis in
known as vertical analysis. It is a type of analysis used to study, through
ratios, the quantitative relationships of items in the financial statements
on a particular date or for one accounting year.
 Horizontal analysis or The Trend analysis: when the financial statements
of the number of years are analyzed, then it is called horizontal analysis.
It is a type of analysis in which there is comparison of the trend of each
item in the financial statement over the number of years.
Tools, techniques or Methods of financial analysis

A number of techniques or methods are available for financial analysis, but the
financial statement must be made simpler as for as possible to make the reader
understand the operating result and the financial health of the business. The
analysis of financial statement consists of study of relationship and trends to
determine whether are not the financial position of the concern and its
A Study on Ratio Analysis of UML, Ranchi

operating efficiency has been satisfying. In the process of these analyses the
financial analyst used various techniques or tools or methods. The financial
analyst can adopt one more of the following techniques or tools of financial
analysis;

 Comparative financial statements analysis.


 Common size financial statement analysis.
 Comparative trend percentage.
 Ratio analysis.
 Fund flow analysis.
 Cash flow analysis.

RATIO ANALYSIS

Ratio analysis is the most important tool of analyzing these financial


statements (profit & loss a/c and balance sheet).It helps the reader in giving
tongue to the mute heaps of figures given in financial statements. The figures
then speak of liquidity, solvency, profitability etc of the business enterprise.

OBJECTIVE AND ADVANTAGES OF RATIO ANALYSIS

(1) Helpful in analysis of financial statements: - Ratio analysis is an


extremely useful device for analyzing the financial statements. It helps the
A Study on Ratio Analysis of UML, Ranchi

bankers, creditors, investors, shareholders etc. in acquiring enough knowledge


about the profitability and financial health of the business.
(2)Simplification of accounting data:-Accounting ratio simplifies and
summarizes a long array of accounting data and makes them understandable. It
discloses the relationship between two such figures which have a cause and
effect relationship with each other.
(3)Helpful in comparative study:-With the help of ratio analysis comparison
of profitability and financial soundness can be made between one firm and
another in the same industry. Similarly, comparison of current year figures can
also be made with those of previous years with the help of ratio analysis.
(4)Helpful in locating the weak spots of the business:-Current year’s ratio
are compared with those of the previous years and if some weak spots are thus
located, remedial measures are taken to correct them.
(5) Helpful in forecasting:- Accounting ratios are very helpful in forecasting
and preparing the plans for the future.
(6) Estimate about the trend of the business:- If accounting ratios are
prepared for a number of years, they will reveal the trend of costs, sales, profits
and other important facts.
(7) Fixation of ideal standards: - Ratios help us in establishing ideal standards
of the different items of the business. By comparing the actual ratios calculated
at the end of the year with the ideal ratios, the efficiency of the business can be
easily measured.
(8) Effective control: - Ratio analysis discloses the liquidity, solvency and
profitability of the business enterprise. Such information enables management
A Study on Ratio Analysis of UML, Ranchi

to assess the changes that have place over a period of time in the financial
activities of the business.
(9) Study of financial soundness:- Ratio analysis discloses the position of
business with different view-points. It discloses the position of business with
the liquidity point of view, solvency point of view, profitability point of view
etc. With the help of such a study we can draw conclusions regarding the
financial health of the business enterprise.

Limitations of Accounting Ratios

(1)False result: - Ratios are based on financial statements, if financial


statement are incorrect then the ratio calculated from this data will also be
incorrect.
(2) Limited comparability:- The ratio of one firm can be compared with
another only if both of them adopt uniform accounting practices.
(3) Absence of standard accepted terminology:- Different term have a
different meaning to different firm like some firms calculate profit after interest
and tax while some after interest but before tax while some after interest and
tax.
(4) Price level change: - The comparability of ratios suffers, if the prices of the
commodity in two different years are not the same. Changes in price affect the
cost of production sales and also the value of assets.
(5) Limited use of a single ratio:- The analyst should not merely rely on a
single ratio. He should study several connected ratios before reaching a
A Study on Ratio Analysis of UML, Ranchi

conclusion. For example, the current ratio of a firm may be quite satisfactory,
whereas the quick ratio may be unsatisfactory.

Classification of ratios

(A) Liquidity Ratios: - Liquidity refers to the ability of the firm to meet its
current liabilities. The liquidity ratios, therefore, are also called “Short – term
Solvency Ratios”. These ratios are used to assess the short-term financial
position of the concern. They indicate the firm’s ability to meet its current
obligations out of current resources.
“Liquidity is the ability of the firm to meet its current obligations as they fall
due”
Liquidity ratios include two ratios:-
• Current ratio or Working capital Ratio

• Quick Ratio or Acid Test Ratio or Liquid Ratio

(B) Solvency ratio or Leverage ratio:- Solvency means the ability of the
business to repay its outside liabilities. These liabilities may be short term or
long term. A company must have sufficient long term funds to meet its long
term liabilities. It includes:-
• Debt equity ratio

• Total assets to debt ratio

• Proprietary ratio

• Reserve to capital ratio


A Study on Ratio Analysis of UML, Ranchi

(C) Asset management ratio or activity ratio: - It is also called turnover or


performance ratio. Turnover means sales. A sales have a direct relationship
with the performance of the business, so higher the sales, higher is the
performance of the business. It includes:-
• Debtors or receivables turnover ratio

• Working capital turnover ratio

• Inventory turnover ratio or stock turnover ratio

• Average collection period

• Fixed Asset Turnover Ratio

• Current Asset Turnover Ratio

• Payable Turnover Ratio

(D) Profitability ratio: - Profitability refers to the earning of the business to


earn profit. It shows the efficiency of the business. Profitability has direct link
with the sales, that’s why it is calculated on the basis of sales. It includes:-
• Net profit ratio

• Net profit to net worth

• Gross Profit Ratio

• Operating Ratio

• Return on Investment
A Study on Ratio Analysis of UML, Ranchi

• Earning Per Share

• Dividend Per Share

• Price Earning Ratio

. DATA ANALYSIS AND INTERPRETATION

CURRENT RATIO
The ratio explains the relationship between current assets and current liabilities
of a business. This ratio measures the solvency of the company in the short-
term. Current assets are those assets which can be converted into cash within a
year. Current liabilities and provisions are those liabilities that are payable
within a year.
• The formula for calculating the ratio is:-

Current Ratio :- Current assets/ Current liabilities


A Study on Ratio Analysis of UML, Ranchi

• Current assets include those assets which can be converted into cash
within a year’s time.
✔ Current Assets = Cash in Hand + Cash at Bank + B/R + Short-
term Investments(Marketable Securities) + Debtors(Debtors-
Provision) + Stock(Stock of Finished Goods + Raw Material +
Work in Progress) + Prepaid Expenses.
• Current Liabilities include those liabilities which are repayable in a
year’s time.

✔ Current Liabilities = Bank Overdraft + B/P + Creditors +


Provision for Taxation + Proposed Dividends + Unclaimed
Dividends + Outstanding Expenses + Loans Payable within a year

SIGNIFICANCE
The ratio is used to assess the firm’s ability to meet its short-term liabilities on
time. A current ratio of 1.33:1 is supposed to be an ideal ratio. The higher the
ratio, the better it is. If the current ratio is less than 1.33:1 it indicates loss of
liquidity and shortage of working capital.

TABLE NO-1. SHOWING CURRENT RATIO


(Rs. in thousand)
PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009
A Study on Ratio Analysis of UML, Ranchi

Current Assets
Inventories 26,21,667 33,90,551 53,24,181 40,37,100
Sundry debtors 19,82,492 22,69,104 25,63,505 32,28,548
Cash and bank 5,17,489 3,70,805 4,63,607 7,64,682
Other current assets 2,25,640 2,60,942 3,40,486 2,39,621
Loan and advances 16,48,665 21,19,931 40,24,216 27,80,155
Total current 69,95,953 84,11,333 1,27,15,995 1,10,50,106
assets(A)

Current Liabilities
Liabilities 37,69,487 46,12,543 86,09,576 98,12,920
Provision 2,10,109 2,62,565 3,81,723 3,73,392
Total current 39,79,596 48,75,108 89,91,299 1,01,86,312
liability(B)

Ratio = A/B 1.76:1 1.73:1 1.41:1 1.08:1

CHART NO-1. SHOWING CURRENT RATIO

Comments
The current ratio of UML is 1.76:1, 1.73:1, 1.41:1, 1.08:1 in financial year
2005-2006,2006-2007,2007-2008,2008-2009 respectively. As it is said that the
current ratio should be more than 1.33:1.The current ratio of UML is very
satisfactory in 2005-2006,2006-2007 &2007-2008.The current assets are on an
increase in this three years, in short it means that for every one rupee of current
liabilities there is 1.76 rupee of current assets in the year 2005-06. In the year
2006-07 for every one rupee of current liabilities there is 1.73 rupee of current
assets. And in the year 2007-08 for every one rupee of current liabilities there is
1.41 rupee of current assets. But in the year 2008-09 the current ratio has been
declined to 1.08 because of decrease in current assets and increase in current
A Study on Ratio Analysis of UML, Ranchi

liabilities compared to year 2007-08. Obviously , in this case it should not


considered to be sign of financial weakness.

QUICK RATIO
It is also called acid test ratio or liquid ratio. Quick ratio indicates whether the
firm is in a position to pay its current liabilities within a month or immediately.
As such , the quick ratio is calculated by dividing liquid assets (Quick Current
Assets) by current liabilities:-

Quick Ratio or Acid Test Ratio =Liquid Assets/Current


Liabilities

Liquid assets means those assets which will yield cash very shortly. All current
assets except stock and prepaid expenses are included in liquid assets.
Liquid assets thus include cash, debtors, bills receivable and short-term
securities.

SIGNIFICANCE
An ideal quick ratio is said to be 1:1. If it is more, it is considered to be
better .The idea is that for every rupee of current liabilities, there should at least
be one rupee of liquid assets.
A Study on Ratio Analysis of UML, Ranchi

TABLE NO-2. SHOWING QUICK RATIO

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Current assets 6995953 84,11,333 1,27,15,995 1,10,50,106


Less:-stock 2621667 33,90,551 53,24,181 40,37,100
Liquid assets(A) 4374286 50,20,782 73,91,814 70,13,006

Current 3979596 48,75,108 89,91,299 1,01,86,312


liabilities(B)

Ratio = A/B 1.10:1 1.03:1 0.82:1 0.69:1

CHART NO-2. SHOWING QUICK RATIO

Comments
A Study on Ratio Analysis of UML, Ranchi

The above table and chart shows that the quick ratio of UML is very
satisfactory in 2005-06 & 2006-07 because it is more than 1:1. It shows that for
one rupee of current liabilities there is 1.10 rupee of quick assets in the year
2005-06 while in the year 2006-07 UML has 1.03 rupee of quick assets for
every one rupee of current liabilities. But in 2007-08 & 2008-09 it has been
declined to 0.82:1 & 0.69:1 respectively, because of increase in current
liabilities. But seeing the past record we can say that UML will recover its
position.

DEBT EQUITY RATIO


This ratio expresses the relationship between long-term debts and shareholders
funds. It indicates the proportion of funds which are acquired by long-term
borrowings in comparison to shareholders funds. This ratio is calculated to
ascertain the soundness of the long-term financial policies of the firm.
• Formula for calculating this ratio is :- Debt/Equity
OR
Long Term Loans/Shareholder’s Funds
or Net Worth

Long- term Loans:- These refer to long-term liabilities which mature after
one year. These include Debentures, Mortgage Loan , Bank Loan , Loan from
financial institutions and Public Deposits etc.
Shareholder’s Funds:- These include Equity Share Capital , Preference Share
Capital , Securities Premium , General Reserve , Capital Reserve , Other
Reserves and Credit balance of Profit & Loss Account. However , accumulated
A Study on Ratio Analysis of UML, Ranchi

losses and fictitious assets remaining to be written off like preliminary


expenses , underwriting commission , share issue expenses etc. should be
deducted.

TABLE NO-3. SHOWING DEBT EQUITY RATIO

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Debt
Secured Loan 67,17,748 74,41,398 86,70,608 1,46,61,503
Unsecured Loan 1,58,367 52,340 7,61,414 -
Deferred Tax 13,35,064 14,34,331 14,67,708 12,21,053
Liability
Total Debt(A) 82,11,179 89,28,069 1,08,99,730 1,58,82,556
Equity Share Capital 2,21,920 2,40,045 2,50,920 2,50,920
Reserve & Surplus 56,05,048 69,36,730 84,04,090 99,11,836
Total Equity (B) 58,26,968 71,76,775 86,55,010 1,01,62,756
Ratio = A/B 1.41:1 1.24:1 1.26:1 1.56:1

(Rs. in thousand)

SIGNIFICANCE

This ratio is calculated to assess the ability of the firm to meet its long term
liabilities.Generally, debt-equity ratio of 2:1 is considered safe. The ideal ratio
is
2:1 , meaning that long term liabilities of the business should be two times of
the shareholders fund.
CHART NO-3.DEBT EQUITY RATIO
A Study on Ratio Analysis of UML, Ranchi

Comments
The above table and chart shows that the debt equity ratio of UML is 1.41:1 in
year 2005-06 which has been declined to 1.24:1 in year 2006-07. In 2007-08 &
2008-09 it has increased to 1.26:1 & 1.56:1. The reasons being continuous
increase in secured loans and reserves & surplus and decrease in unsecured
loans.

TOTAL ASSETS TO DEBT RATIO


A Study on Ratio Analysis of UML, Ranchi

This ratio is a variation of the debt-equity ratio and gives the same indication as
the debt-equity ratio. In this ratio, total assets are expressed in relation to long
term debts . It is calculated as under:-
• Total Assets to Debt Ratio = Total Assets/ Debt or long-term Loans

✔ Total Assets:- These include all fixed as well as current assets.


Hoever , these do not include the fictitious assets appearing on the
assets side of the Balance Sheet such as Preliminary Expenses ,
Underwriting Commission , Share Issue Expenses , Discount on
Issue etc. and debit balance of Profit & Account.

✔ Long- term Loans:- These refer to long-term liabilities which


mature after one year. These include all long – term debts such as
Debentures, Mortgage Loan, Bank Loan , Loans from financial
institutions and Public Deposits etc.

SIGNIFICANCE
This ratio expresses the relationship between the long term loans and total
assets of a business enterprise. It measures the proportion of total assets
financed through long-term loans. If the percentage of total assets financed
A Study on Ratio Analysis of UML, Ranchi

through long-term loans is higher, it is generally treated an indicator of risky


financial position from the long-term point of view.

TABLE NO-4. SHOWING TOTAL ASSETS TO DEBT RATIO

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-


2009

Assets
Current Assets 69,95,953 84,11,333 1,27,15,995 1,10,50,106
Fixed Assets 95,42,787 1,09,70,665 1,44,90,841 2,33,10,700
Total Assets(A) 1,65,38,740 1,93,81,998 2,72,06,836 3,43,60,806

Debt
Secured Loan 67,17,748 74,41,398 86,70,608 1,46,61,503
Unsecured Loan 1,58,367 52,340 7,61,414 -
Deferred Tax 13,35,064 14,34,331 14,67,708 12,21,053
Liability
Total Debt(B) 82,11,179 89,28,069 1,08,99,730 1,58,82,556

Ratio = A/B 2.01:1 2.17:1 2.50:1 2.16:1


(Rs. in
thousand)
A Study on Ratio Analysis of UML, Ranchi

CHART NO-4. TOTAL ASSETS TO DEBT RATIO

Comments
The above table and chart shows that the total assets to debt ratio is increasing
from 2.01:1 to 2.50:1 in the year 2005-06 to 2007-08. But decreased to 2.16 in
the year 2008-09. The fixed assets are on an increasing trend throughout the
four years. The current assets decreased in the last year. Secured loans are on
an increasing trend and unsecured loans are on an decreasing trend throughout
the four years.
A Study on Ratio Analysis of UML, Ranchi

PROPRIETARY RATIO :-
This ratio indicates the proportion of total assets funded by owners or
shareholders.
• Formula for calculating this Ratio

Proprietary Ratio = Equity (Shareholder’s Funds)/Total Assets or


Shareholder’s Funds/Total Assets

SIGNIFICANCE
A higher proprietary ratio is generally treated an indicator of sound financial
position from long-term point of view, because it means that a large proportion
of total assets is provided by equity and hence the firm is less dependent on
external sources of finance. On the contrary, a low proprietary ratio is a danger
signal for Long-term lenders as it indicates a lower margin of safety available
to them. The lower the ratio, the less secured are the long-term loans and they
face the risk of losing their money.

TABLE NO-5. SHOWING PROPRIETORY RATIO

(Rs. in thousand)
PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Shareholders Funds
Capital 2,21,920 2,40,045 2,50,920 2,50,920
A Study on Ratio Analysis of UML, Ranchi

Equity warrants 88,740 33,278 3,34,950 -


Reserve and Surplus 56,05,048 69,36,730 84,04,090 99,11,836
Total(A) 59,15,708 72,10,053 89,89,960 1,01,62,756
Current Assets 69,95,953 84,11,333 1,27,15,995 1,10,50,106
Fixed Assets 95,42,787 1,09,70,665 1,44,90,841 2,33,10,700
Total Assets(B) 1,65,38,740 1,93,81,998 2,72,06,836 3,43,60,806

Ratio = A/B 0.36:1 0.37:1 0.33:1 0.30:1

CHART NO-5. SHOWING PROPRIETARY RATIO

Comments
The ratio shows a strong financial position of the company. The higher the
ratio, the better it is. The proprietary ratio of UML increased from 0.36:1 to
0.37:1 from year 2005-06 to 2006-07 and decrease to 0.33:1 & 0.30:1 in year
2007-08 & 2008-09. The share capital increased in first three years then it was
stable. The reserve increased in all four years. The current assets increased in
first three years but it decreased in last year. The fixed assets shows an
increasing trend from 2005-06 to 2008-09.

RESERVE TO CAPITAL RATIO


A Study on Ratio Analysis of UML, Ranchi

This ratio indicates the relationship between reserves and capital. More reserve
shows financial soundness of the firm, because it will be able to meet future
losses, if any out of reserves.
• Formula for calculating this Ratio:-

Reserve to capital ratio = Reserve/Capital

TABLE NO-6. SHOWING RESERVE TO CAPITAL RATIO.

(Rs. in thousand)

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Reserve(A) 56,05,048 69,36,730 84,04,090 99,11,836


Capital(B) 2,21,920 2,40,045 2,50,920 2,50,920

Ratio = A/B 25.26:1 28.90:1 33.49:1 39.50:1


A Study on Ratio Analysis of UML, Ranchi

CHART NO-6 . SHOWINGRESERVE TO CAPITAL RATIO

Comments

The above table and chart shows that the reverse to capital ratio was 25.26 in
the year 2005-2006 which has been increased to 28.90 in next year and it has
further increased to 33.49 and 39.50 in the year 2007-08 & 2008-09
respectively. It is showing increasing trend in the reserve to capital ratio.

DEBTORS TURNOVER RATIO


This ratio indicates the relationship between credit sales and average debtors
during the year.
• Formula for calculating this ratio :-

Debtors Turnover Ratio = Net credit sales/Average debtors


Average debtors = (opening debtor + closing debtor)/2

SIGNIFICANCE
A Study on Ratio Analysis of UML, Ranchi

This ratio indicates the speed with which the amount is collected from debtor.
The higher the ratio, the better it is, since it indicates that amount from debtors
being collected more quickly. The more quickly the debtors pay, the less is the
risk of bad debt and so it lower the expenses of collection and increase the
liquidity of the firm. A lower ratio will indicate the efficient credit sales
policies of the management. It means that credit sale have been made to
customers who do not decrease much credit.

TABLE NO-7. SHOWING DEBTORS TIRNOVER RATIO


(Rs. in thousand)

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Credit sales(A) 1,23,17,878 1,40,86,047 1,65,58,987 2,12,72,253

Opening debtor 25,13,970 19,82,492 22,69,104 25,63,505


Add:-closing debtor 19,82,492 22,69,104 25,63,505 32,28,548
Total debtor(B) 44,96,462 42,51,596 48,32,609 57,92,053

Average debtor(C)= 22,48,231 21,25,798 24,16,305 2896027


B/2
A Study on Ratio Analysis of UML, Ranchi

Ratio = A/C 5.48 times 6.63 times 6.85 times 7.35 times

CHART NO-7 . SHOWING DEBTORS TURNOVER RATIO

Comments
The above table and chart shows the increasing trend of debtors turnover ratio
of UML. Debtors turnover, which measures whether the amount of resources
tied up in debtors is reasonable and whether the company has been efficient in
converting debtors into cash. Higher the ratio, better the position. This shows
that money is being quickly recovered from the debtors. The ratio in case of
UML is very high i.e. the company is in very good position.

WORKING CAPITAL TURNOVER RATIO


This ratio measures the relationship between working capital sales. This ratio
shows the number of times the working capital result in sales.
• Formula for calculating this Ratio:-

Working Capital = Current assets – Current Liabilities


Working Capital Turnover Ratio = Net Sales/ Working Capital

SIGNIFICANCE
A Study on Ratio Analysis of UML, Ranchi

It is very significant for non manufacturing concerns where working capital is


more than fixed assets . It reflects the efficiency in the utilization of working
capital. High ratio shows Overtrading & low shows over taking.

TABLE NO-8. SHOWING WORKING CAPITAL TURNOVER RATIO.


(Rs. in thousand)

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Gross sales 1,37,71,836 1,57,37,419 1,85,27,701 2,30,72,056


Less:-Excise duty 14,53,958 16,51,372 19,68,714 17,99,803
Net sales(A) 1,23,17,878 1,40,86,047 1,65,58,987 2,12,72,253

Current Assets 69,95,953 84,11,333 1,27,15,995 1,10,50,106


Less:-Current 39,79,596 48,75,108 89,91,299 1,01,86,312
liabilities
Working Capital(B) 30,16,357 35,36,225 37,24,696 8,63,794

Ratio = A/B 4.08 times 3.98 times 4.45 times 24.63 times

CHART NO-8 .SHOWING WORKING CAPITAL TURNOVER RATIO


A Study on Ratio Analysis of UML, Ranchi

Comments
The above table and chart shows that the working capital turnover ratio is 4.08
times in the year 2005-06 which has been decreased to 3.98 times in the year
2006-07. The ratio increased to 4.45 times & 24.63 times in the year 2007-08
& 2008-09 respectively. It shows the efficient utilization of working capital.

INVENTORY TURNOVER RATIO OR STOCK TURNOVER RATIO


This ratio indicates the relationship between the cost of goods sold or sales
during the year and average stock kept during that year.
• Formula for this ratio calculating:-

Inventory Turnover ratio= Net Sales/Average Stock or Cost of Goods


Sold/Average Stock
Average Stock = Opening Stock + Closing Stock/2

SIGNIFICANCE
This ratio indicates whether stock has been efficiently used or not. It shows the
speed with which the stock is rotated into sales or the number of times the stock
is turned into sales during the year. The higher the ratio, the better it is, since it
indicates that stock is selling quickly. In a business where stock turnover ratio
is high, goods can be sold at a low margin of profit and even then the
A Study on Ratio Analysis of UML, Ranchi

profitability may be quite high. A low stock turnover ratio indicates that stock
does not sell quickly and remains lying in the godown for quite a long time.

TABLE NO-9. SHOWING INVENTORY TURNOVER RATIO


(Rs. in thousand)

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Net sales(A) 1,23,17,878 1,40,86,047 1,65,58,987 2,12,72,253

Opening Stock 28,40,534 26,21,667 33,90,551 53,24,181

Closing Stock 26,21,667 33,90,551 53,24,181 40,37,100

Total Stock(B) 54,62,201 60,12,218 87,14,732 93,61,281

Avg stock= B/2 27,31,101 30,06,109 43,57,366 46,80,641

Ratio = A/C 4.51 times 4.69 times 3.80 times 4.54 times
A Study on Ratio Analysis of UML, Ranchi

CHART NO-9 . INVENTORY TURNOVER RATIO OR STOCK TURNOVER RATIO

Comments
The above table and chart shows that the inventory turnover ratio is 4.51 times
in the year 2005-06 which has been increased to 4.69 times in the year 2006-
07. In the year 2007-08 inventory turnover ratio decreased to 3.80 times and
which has been increased to 4.54 times in the year 2008-09. This ratio indicates
how fast the inventory is converted into sales . here high ratio implies good
inventory management. In the year 2005-06 & 2006-07 the inventory
management is good. But it decreased in the year 2007-08 it the sign of
inefficient inventory management. But again it increased in the year 2008-09.

AVERAGE COLLECTION PERIOD


A Study on Ratio Analysis of UML, Ranchi

The average collection period represents the average number of days for which
a firm has to wait before their receivables are converted into cash. It measures
the quality of the debtor, generally, shorter the collection period, the better is
the quantity of the debtors. As a short collection period impels quick payment
by debtors. Similarly a high collection period impels in efficient collection
performance, which in turn adversely affect the liquidity or short term paying
capacity of a firm out of its current liabilities. Moreover, longer the collection
period, longer are the chances of bad debt. But precaution is needed while
interpreting a very short collection period because of very low collection period
may imply a firm conservative policy to sales on credit or its unavailability to
allow credit to its customers and thereby loosing sales and profit.
• Formula for calculating this Ratio:-Average collection period =
(average debtors/credit sales)×365
A Study on Ratio Analysis of UML, Ranchi

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Opening debtor 25,13,970 19,82,492 22,69,104 25,63,505


Add:-closing debtor 19,82,492 22,69,104 25,63,505 32,28,548
Total debtor(A) 44,96,462 42,51,596 48,32,609 57,92,053

Average debtor(B)= 22,48,231 21,25,798 24,16,305 2896027


A/2

Credit sales(C) 1,23,17,878 1,40,86,047 1,65,58,987 2,12,72,253

ACP = (B/C)×365 66 days 55 days 55 days 51 days

TABLE NO-10. SHOWING AVERAGE COLLECTION PERIOD

(Rs. in thousand)
A Study on Ratio Analysis of UML, Ranchi

CHART NO-10. SHOWING AVERAGE COLLECTION PERIOD

Comments
As a standard, debtor collection period is not more than 90 days. Debtor
collection period of UML is satisfactory during the study period. It fluctuates
widely due to change in economic condition. The overall the average period
during the study period is below 90 days which shows consistent position.

PARTICULARS 2005- 2006 2006-2007 2007-2008 2008-2009

Net Sales 12317878 14229308 16558987 21272253


Fixed Assets
Gross Block 14914639 15739283 16807170 19383467
(-)Depreciation 5879443 6551753 7209382 8018284
(-)Impairment 1,88024 1,87451 140835 140835
Net Block 8847172 9000079 9456953 11224348
Capital Work in 695615 1970586 5033888 12086352
Progress
Total(B) 95442787 10970665 14490841 23310700
Ratio(A/B) 1.29 1.29 1.14 0.91

FIXED ASSEST TURNOVER RATIO


A Study on Ratio Analysis of UML, Ranchi

Chart no.11 Fixed assets turnover ratio

Fixed Asset Turnover Ratio: The relationship between sales and assets is
called Assets Turnover Ratios. Fixed Assets Turnover Ratio expresses the
number of times fixed assets are being turned-over in a started period.

Formula for calculating this ratio:


Fixed Assets Turnover Ratio=Cost of Goods or Net Sales/Net Fixed Assets

Significance : Assets are used to generate sales. Therefore, a firm should


manage its assets efficiently to maximize sale. Higher the ratio better for the
company.
A Study on Ratio Analysis of UML, Ranchi

Comments : The ratio from the year 2005-2006 have decreased from 1.29 to
0.91 which is not good for the company but we hope that in future company
will overcome this situation.

Current asset turnover ratio.

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Net Sales(A) 12317878 14086047 16558987 21272253


Current Sales (B) 6995953 8411333 12715995 11050106
Ratio (A/B) 1.76 1.67 1.30 1.92

Chart no.12 Current assets turnover ratio

Current Assets Turnover Ratio- Current assets turnover ratio express the
relation between sales and current assets.The firm can compute current assets
turnover ratio simply by dividing sales by current assets.
A Study on Ratio Analysis of UML, Ranchi

Formula for calculating this ratio- net sales/current assets

Significance-Higher the current assets turnover ratio of a company better is it


for the financial position of the company.

Comments-
From 2005-2006 the ratio is increased to 1.76 to 1.92 due to the increase in the
set sales or turnover of usha martin because of market condition and usha
martin policies.
A Study on Ratio Analysis of UML, Ranchi

TABLE NO-2. SHOWING Payable turnover RATIO

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Net credit
purchase(A)

Purchase of general 9616 15302 19899 35489


Merchandise

(+)purchase 5146539 6175534 8996556 8085302


Total(A) 5156155 6190836 9016455 8120791
Amount Payable:-
Opening:-
Acceptance 2741690 1862142 1940128 5175146

Sundry Creditors 1431326 1701248 2449171 3177594

Opening Balance(B) 4173016 3563390 44389299 8352740


Closing:-
Acceptance 1862142 1940128 5175146 6733086
Sundry Creditors 1701248 2449171 3177594 2743248
Closing Balance(C) 3563390 4389299 8352740 9476334
Avg.Amount Payable 3868203 3976344.5 6371019.5 8914537
D=(B+C)/2
Ratio = A/B 1.33 times 1.56 times 1.42 times 0.91 times
A Study on Ratio Analysis of UML, Ranchi

Chart no .13 payable turnover ratio


A Study on Ratio Analysis of UML, Ranchi

Payable turnover ratio indicates the velocity with which the creditors are turned
over in relation to purchrsase.

Formula for calculating this ratio= Net Credit Annnual Shift/ Average trade
Creditors

Significance- for any organization generally higher the creditors velocity


better it is or otherwise lower the creditors velocity less favourable are the
results.
Comment- The creditors turnover ratio of UML is 1.33:1,1.56:1 1.42:1 ,0.91:1
in financial year 2005-06,2006-07,2007-08,2008-09.respectively. The analysis
for creditors turnover is basically the same as of debtors turnover ratio expect
that in place of average daily sales, average daily purchase are taken as the
other component of the ratio .

Gross profit Ratio


PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009
Gross Profit (A)

Net Profit 649641 1014760 1448327 1465567


(+)selling & Distribution 4850660 5801012 6036422 8150137
expenses
(+)Interest 730603 713016 803752 1233483
(-)Income 94846 143261 156401 135315
Total (A) 6136058 7385527 8132100 10713872
NET sales(B) 12317878 14086047 16558987 21272253
Ratio (A/B) (in%) 49.81 52.43 49.11 50.36
A Study on Ratio Analysis of UML, Ranchi

Chart no.14 Gross profit ratio

Gross profit ratio measure the relationship of gross profit to net sales and is
usually represented as a percentage.Thus it is calculated by dividing the gross
profit by sales :

Formula for calculating this ratio :Gross profit Ratio = (gross profit/net
sales)*100

Significance- The gross profit ratio indicates the extent to which selling
prices of goods per units may decline without resulting in losses on operation
of a firm.
A low gross profit ,generally indicates high cost of goods sold due to
unfavourable purchasing policies,lesser sales, lower selling prices, excessive
competition,over- investment in plant and machinery.
Comment- G/P ratio is one of the very important ratio for measuring
profitability of a firm.A low gross profit ratio ,generally indicates high cost of
good sold due to unfavourable purchasing policies,lesser sales,lower selling
prices, excessive competition, over- investment in plant and machinery.
A Study on Ratio Analysis of UML, Ranchi

Operating Ratio

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009


Percent(A) 100 100 100 100
(-)Net Profit(B) 5.27 7.20 8.75 6.89
Ratio = (A-B) 94.73 92.8 91.25 93.11
(in times)

Chart no.15 Operating ratio

OPERATING RATIO-Operating ratio establishes the relationship between


cost of goods sold and other operating expenses on the one hand and and the
sales on the hand.In other words,it measure the cost of operations per rupee of
sales.The ratio is calculated by dividing operating costs with the net sales and
its generally represented as a percentage

Formula for calculating this ratio :

OPERATING RATIO= Operating Cost/Net Sales*100

SIGNIFICANCE-Operating ratio indicates the percentages of net sales that is


consumed by operating cost.Obviously ,higher the operating ratio,the less
favourable it is, because, it would have a small margin(operating profit) to
cover interest, income-tax, dividend and reserves.

Comment- operating ratio is considered to be a yardstick of operating


efficiency but it should be used cautiously because it may be affected by a
number of uncontrollable factors beyond the control of the firm .
A Study on Ratio Analysis of UML, Ranchi

There is no rule of thumb for this ratio as it may differ from to firm depending
upon the nature of its business and capital structure . However ,75 to 85 %may
be considered to be a good ratio in case of manufacturing undertaking .So
being a manufacturing undertaking UML’s operating ratio is above 90 % which
is considered not only good but better.

Return on Investment
PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009
PBT 1007385 1383960 2007127
(+) Intrest 730630 713016 803752 2140412
PBIT(A) 1737988 2096976 2810897 1233483
Shareholders
fund(B)
Capital 221920 240045 250920 3373895
Equity Warrent 88740 33278 334950 250920
Reserve and 5605048 6936730 8404090 9911836
suurplus
Total(B) 5915708 7210053 8989960 10162756

Ratio(A/B)*100 29.38 29.08 31.26 33.20

Chart no.16 Return on investment


A Study on Ratio Analysis of UML, Ranchi

RETURN ON INVESTMEMT(ROI)-Return on shareholder’s investment,


popularly known as ROI or return on share holder/proprietors’ funds is the
relationship between net profit(after interest & tax) and the proprietors’funds.

Return on shareholders Investment=Net Profit (after interest&tax)


/shareholders Funds

SIGNIFICANCE- This ratio is one of the most important ratio used for
measuring the overall efficiency of a firm.
This ratio is of great important to the present and prospective shareholders as
well as the management of the company.

COMMENT-As we know that ROI is one of the most important ratios to


measures the overall efficicecy of a firm.The primary objective of business is to
maximize its earnings, this ratio indicates the extent to which this primary
objectives of business is being achieved.From the above calculation it is seen
that in all last 4 years there is not much difference between the ROI.But in last
year ROI is 33.20,it means the present and propective shareholders as well as
the management of the company get the maximum benefit in 2008-2009
period.

Earning per share

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009


Net Profit After 649641 1014760 1448327 1465567
Tax(A)
Number of 47873356 47873356 250241780 250241780
equity shares(B)
Ratio = 13.57 22.19 5.79 5.86
(A/B)*100
(in times)

Chart no.17 Earning per share


A Study on Ratio Analysis of UML, Ranchi

Earning Per Share- E.P.S is a small variation of return on equity capital


and is calculated by dividing the net profit after taxes and preference dividend
by the total number of equity shares.

Formula for calculating this ratio= Net profit after tax preference
dividend/no of share equity.

Significance- The E.P.S is a good measure of profitability and when compare


with E.P.S of similar other companies its gives a view of the comparision
earning power of firm . E.P.S calculated for a number of years indicates
whether of net earning power of the company has increased.

Comment-E.P.S play a vital role to know about the net earning power of the
company.If the E.P.S of the company increased,net earning power of the
company also increased.From the above calculation we can says that during
2005-2006 E.P.S was 13.57 but in 2006-2007 E.P.S was 22.19.So compare to
2005-2006 and 2006-2007,it can be seen that net earning power of the company
has increased in 2006-2007.Again in 2007-2008, E.P.S was decrease upto 5.79
and in the year 2008-09 it again increase to 5.86.By seeing the past record we
can say that UML

Dividend per share


PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009
Dividend paid 121683 187681 250242 250242
A Study on Ratio Analysis of UML, Ranchi

to equity
shareholders(A)
Number of 47873356 47873356 250241780 250241780
equity shares(B)
Ratio = 2.54 3.92 1.00 1.00
(A/B)*100
(in times)

Chart no.18 Dividend per share

Dividend Per Share – Net profit after taxes belongs to shareholders out of
which dividend is declared. The dividend per share is the earnings distribution
to equity shareholders dividend by the number of equity shares.

FORMULA-Dividend per share is calculated by using the following formula:-


DPS= dividend paid equity shareholders/number of equity share

Significance: Dividend per Share ratio indicates the dividend paid by the
company to its equity shareholders. Greater is the ratio better it is for the
company as it shows that the company is earning sufficient profit and the
investors would be loyal to the company.

Comment : In the year 2005-2006 the DPS was 2.54 and in year 2006-2007 it
was 3.92, but in the years 2007-2008 and 2008-2009 it decreased to Re.1 .The
reason behind this is Usha Martin issuing its shares at Rs. 5/share. But from
2007-08 Usha Martin divided its share into Re.1/share.
A Study on Ratio Analysis of UML, Ranchi
A Study on Ratio Analysis of UML, Ranchi

Price Earning Ratio

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009


Current Market 200.70 192.75 95.05 83.75
Price per
Share(A)
Earning per 13.57 21.19 5.79 5.86
shares(B)
Ratio = 14.79 9.09 16.05 14.29
(A/B)*100
(in times)

Chart no.19 Price earning ratio

PRICE-EARNING RATIO-Price earning ratio is the between market price


per equity share and earnings per share.The ratio is calculated to make an
estimate of appreciation in the value of a share of a company and is widely
used by investors to decide whether or not to buy shares in a particular
company.The ratio is calculated as:

PRICE EARNING RATIO= Market price equity share/Earning per share

SIGNIFICANCE- 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

COMMENT- In price-earning ratio,it is assumed that higher the ratio better it


is.So, from the above calculation it was seen that during 2005-2006 P.E.R was
14.79 which is far better than next 3 years price earning ratio.So during 2005-
2006,company position is better than next 3 years.
A Study on Ratio Analysis of UML, Ranchi

NET PROFIT RATIO


and This Ratio shows the relationship between Net profit Net sales
• Formula for calculating this Ratio:-

Net profit ratio = Net profit/Net sales × 100

TABLE NO-11. SHOWING NET PROFIT RATIO


(Rs. in thousand)

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Net profit(A) 6,49,641 10,14,760 14,48,327 14,65,567

Net sales(B) 1,23,17,878 1,40,86,047 1,65,58,987 2,12,72,253

Ratio = A/B×100 5% 7% 9% 7%

CHART NO-19. SHOWINGNET PROFIT RATIO


A Study on Ratio Analysis of UML, Ranchi

Comments

The above table and chart shows that net profit ratio is in the increasing order
in the year 2005-06, 2006-07 & 2007-08. But it decreased to 7% in the year
2008-09 due to the increase in the expenditure. On the basis of the first three
year we can say that the company is having sufficient profit which can be
easily used at the time of crisis.

NET PROFIT TO NET WORTH RATIO


This ratio indicates the relationship between Net Profit & Net Worth
• Formula for calculating this Ratio:-

Net profit to net worth ratio = (net profit after interest but before
tax/net worth)×100
Net worth ratio = Equity and preference share capital + Reserves +
Accumulated Profit

TABLE NO-20. SHOWING NET PROFIT TO NET WORTH


(Rs. in thousands)
A Study on Ratio Analysis of UML, Ranchi

PARTICULARS 2005-2006 2006-2007 2007-2008 2008-2009

Net profit after 10,07,385 13,83,960 20,07,127 21,40,412


interest but
before tax (A)

Net worth
Share capital 2,21,920 2,40,045 2,50,920 2,50,920

Reserve 56,05,048 69,36,730 84,04,090 99,11,836

Net worth(B) 5826968 7176775 8655010 1,01,62,756

Ratio = A/B×100 17:1 19:1 23:1 21:1

CHART NO-21. SHOWING NET PROFIT TO NET WORTH RATIO

Comments
The above table and chart shows that the net profit to net worth ratio is an
increasing trend. It increased from 17:1 to 23:1 from 2005-06 to 2007-08. But
A Study on Ratio Analysis of UML, Ranchi

net profit to net worth ratio decreased to 21:1 in the year 2008-09. The net
profit after interest but before tax and reserves increased from 2005-06 to 2008-
09. The share capital has increased in the year 2007-08 compare to year 2005-
06. And it has remained constant in the year 2008-09

COMPARATIVE BALANCE SHEET AS ON 2007-08 & 2008-09


(Rs. in thousand)
A Study on Ratio Analysis of UML, Ranchi

COMPARATIVE BALANCE SHEET AS ON 2007-08 & 2008-09

Particulars 31-03-2009 31-03-2008 ABSOLUTE CHANGES


CHANGES In %
SOURCE OF FUNDS
Shareholders’ Funds
Capital 2,50,920 2,50,920 - -
Equity warrants - 3,34,950 -3,34,950 -100
Reserve and Surplus 99,11,836 84,04,090 15,07,746 17.94

Loan Funds:
Secured Loans 1,46,61,503 86,70,608 59,90,895 69.09
Unsecured Loans - 7,61,414 -7,61,414 -100
Net Deferred Tax Liabilities 12,21,053 14,67,708 -2,46,655 -16.81
Total 2,60,45,312 1,98,89,690 61,55,622 30.95
APPLICATION OF FUNDS
Fixed Assets:
Gross Block 1,93,83,467 1,68,07,170 25,76,297 15.33
Less: Depreciation 80,18,284 72,09,382 8,08,902 11.22
Impairment Loss 1,40,835 1,40,835 - -
Net block 1,12,24,348 94,56,953 17,67,395 18.68
Capital Work In Progress 1,20,86,352 50,33,888 70,52,464 140.09
Investment 18,63,513 16,58,014 2,05,499 12.39
Current assets, Loans and
advances:
Inventories 40,37,100 53,24,181 -12,87,081 -24.17
Sundry Debtors 32,28,548 25,63,505 6,65,043 25.94
Cash and Bank Balance 7,64,682 4,63,607 2,71,075 58.47
Other Current Assets 2,39,621 3,40,486 -1,00,865 -29.62
Loans and Advances 27,80,155 40,24,216 -12,44,061 -30.91
Total current assets 1,10,50,106 1,27,15,995 -16,65,889 -13.10
Less: Current Liabilities and 1,01,86,312 89,91,299 11,95,013 13.29
provisions
Net Current Assets 8,63,794 37,24,696 -28,60,902 -76.81
Miscellaneous Expenditure:
Deferred Revenue 7,305 16,139 -8,834 -54.74
Expenditure
Total 2,60,45,312 1,98,89,690 61,55,622 30.95
A Study on Ratio Analysis of UML, Ranchi

COMPARATIVE BALANCE SHEET AS ON 2006-07 &2007-08


(Rs. in thousand)
A Study on Ratio Analysis of UML, Ranchi

Particulars 31-03-2008 31-03-2007 ABSOLUTE CHANGES


CHANGES In %
SOURCE OF FUNDS
Shareholders’ Funds
Capital 2,50,920 2,40,045 10,875 4.53
Equity warrants 3,34,950 33,278 3,01,672 906.52
Reserve and Surplus 84,04,090 69,36,730 14,67,360 21.15

Loan Funds:
Secured Loans 86,70,608 74,41,398 12,29,210 16.52
Unsecured Loans 7,61,414 52,340 7,09,074 1,354.75
Net Deferred Tax Liabilities 14,67,708 14,34,331 33,377 2.33
Total 1,98,89,690 1,61,38,122 37,51,568 23.25
APPLICATION OF FUNDS
Fixed Assets:
Gross Block 1,68,07,170 1,57,39,283 10,67,887 6.78
Less: Depreciation 72,09,382 65,51,753 6,57,629 10.04
Impairment Loss 1,40,835 1,87,451 -46,616 -24.86
Net block 94,56,953 90,00,079 4,56,874 5.07
Capital Work In Progress 50,33,888 19,70,586 30,63,302 155.45
Investment 16,58,014 16,00,805 57,209 3.57
Current assets, Loans and
advances:
Inventories 53,24,181 33,90,551 19,33,630 57.03
Sundry Debtors 25,63,505 22,69,104 2,94,401 12.97
Cash and Bank Balance 4,63,607 3,70,805 92,802 25.02
Other Current Assets 3,40,486 2,60,942 79,544 30.48
Loans and Advances 40,24,216 21,19,931 19,04,285 89.83
Total current assets 1,27,15,995 84,11,333 43,04,662 51.17
Less: Current Liabilities and 89,91,299 48,75,108 41,16,191 84.43
provisions
Net Current Assets 37,24,696 35,36,225 1,88,471 5.33
Miscellaneous Expenditure:
Deferred Revenue 16,139 30,427 -14,288 -46.95
Expenditure
Total 1,98,89,690 1,61,38,122 3751568 23.25
A Study on Ratio Analysis of UML, Ranchi

COMPARATIVE BALANCE SHEET AS ON 2005-06 &2006-07


(Rs. in thousand)

Particulars 31-03-2007 31-03-2006 ABSOLUTE CHANGES


CHANGES In %
SOURCE OF FUNDS
Shareholders’ Funds
Capital 2,40,045 2,21,920 18,125 8.17
Equity warrants 33,278 88,740 -55,462 -62.50
Reserve and Surplus 69,36,730 56,05,048 13,31,682 23.76

Loan Funds:
Secured Loans 74,41,398 67,17,748 7,23,650 10.77
Unsecured Loans 52,340 1,58,367 1,06,027 66.95
Net Deferred Tax Liabilities 14,34,331 13,35,064 99,267 74.35
Total 1,61,38,122 1,41,26,887 20,11,235 14.24
APPLICATION OF FUNDS
Fixed Assets:
Gross Block 1,57,39,283 1,49,14,639 8,24,644 5.53
Less: Depreciation 65,51,753 58,79,443 6,72,310 11.43
Impairment Loss 1,87,451 1,88,024 -573 -0.3
Net block 90,00,079 88,47,172 1,52,907 1.73
Capital Work In Progress 19,70,586 6,95,615 12,74,971 183.29
Investment 16,00,805 15,25,755 75,050 4.92
Current assets, Loans and
advances:
Inventories 33,90,551 26,21,667 7,68,884 29.33
Sundry Debtors 22,69,104 19,82,492 2,86,610 14.45
Cash and Bank Balance 3,70,805 5,17,489 -1,46,684 -28.34
Other Current Assets 2,60,942 2,25,640 35,302 15.64
Loans and Advances 21,19,931 16,48,665 4,71,266 28.58
Total current assets 84,11,333 69,95,953 14,15,380 20.23
Less: Current Liabilities and 48,75,108 39,79,596 8,95,512 22.50
provisions
Net Current Assets 35,36,225 30,16,357 5,19,868 17.23
Miscellaneous Expenditure:
Deferred Revenue 30,427 41,988 -11,561 -27.53
Expenditure
Total 1,61,38,122 1,41,26,887 20,11,235 14.24
A Study on Ratio Analysis of UML, Ranchi

COMPARATIVE INCOME STATEMENT FOR THE YEAR ENDED 31st March


2007-08 & 2008-09
(Rs. in thousand)
Particulars 31-03-2009 31-03-2008 Increase/ CHANGES
Decrease In %
INCOME
Turnover(Gross) 2,30,72,056 1,85,27,701 45,44,355 24.53
Less: Excise Duty 17,99,803 19,68,714 -1,68,911 -8.58
Turnover(Net) 2,12,72,253 1,65,58,987 47,13,266 28.46
Other Income 1,35,315 1,56,401 -21,086 -13.48
Total 2,14,07,568 1,67,15,388 46,92,180 28.07
EXENDITURE
Purchase of General Merchandise 35,489 19,899 15,590 78.34
Raw Material Consumed 93,36,337 74,78,097 18,58,240 24.85
(increase)/ Decrease in Stock-in- (2,08,849) (2,95,476) -86,627 -29.32
Trade
Manufacturing, Selling and 81,50,137 60,36,422 21,13,715 35.02
Administrative Exp.
Depreciation 8,50,402 7,59,209 91,193 12.01
Interest 12,33,483 8,03,752 4,29,731 53.46
Adjustment for items Capitalized (1,29,843) (93,642) 36,201 38.66
and Departmental orders for own
Consumption
Total 1,92,67,156 1,47,08,261 45,58,895 30.99

PROFIT BEFORE TAXATION 21,40,412 20,07,127 1,33,285 6.64


Current Tax 9,10,000 5,10,300 3,99,700 78.33
Fringe benefit tax 11,500 11,800 -300 -2.54
Deferred Tax (2,46,655) 36,700 -2,83,355 -772.08

PROFIT AFTER TAX 14,65,567 14,48,327 17,240 1.19


Debenture redemption reserve - 8,06,050 -806050 -100
written back
Profit brought forward from 4,20,792 2,09,186 2,11,606 101.16
previous year
PROFIT AVAILABLE FOR 18,86,359 24,63,563 -5,77,204 -23.43
APPROPRIATION

APPROPRIATION
Transfer to General Reserve 12,50,000 17,50,000 -5,00,000 -28.57
A Study on Ratio Analysis of UML, Ranchi

Proposed Dividend on Equity 2,50,242 2,50,242 - -


Shares
Provision for Dividend Tax 42,529 42,529 - -
Balance carried to Balance Sheet 3,43,588 4,20,792 -77,204 -18.35

COMPARATIVE INCOME STATEMENT FOR THE YEAR ENDED 31st March


2006-07& 2007-08
(Rs. In
thousand)
Particulars 31-03-2008 31-03-2007 Increase/ CHANGES
Decrease In %
INCOME
Turnover(Gross) 1,85,27,701 1,57,37,419 27,90,282 17.73
Less: Excise Duty 19,68,714 16,51,372 3,17,342 19.22
Turnover(Net) 1,65,58,987 1,40,86,047 24,72,940 17.56
Other Income 1,56,401 1,43,261 13,140 9.17
Total 1,67,15,388 1,42,29,308 24,86,080 17.47
EXENDITURE
Purchase of General Merchandise 19,899 15,302 4,597 30.04
Raw Material Consumed 74,78,097 58,16,061 16,62,036 28.58
(increase)/ Decrease in Stock-in- (2,95,476) (2,38,579) 56,897 23.85
Trade
Manufacturing, Selling and 60,36,422 58,01,012 2,35,410 4.06
Administrative Exp.
Depreciation 7,59,209 7,62,804 -3,595 -0.47
Interest 8,03,752 7,13,016 90,736 12.72
Adjustment for items Capitalized (93,642) (24,268) 69,374 285.87
and Departmental orders for own
Consumption
Total 1,47,08,261 1,28,45,348 18,62,913 14.50

PROFIT BEFORE TAXATION 20,07,127 13,83,960 6,23,167 45.03


Current Tax 5,10,300 2,58,600 2,51,700 97.33
Fringe benefit tax 11,800 11,333 467 4.12
Deferred Tax 36,700 99,267 -62,567 -63.03
PROFIT AFTER TAX 14,48,327 10,14,760 4,33,567 42.73
Debenture redemption reserve 8,06,050 - 8,06,050 100
written back
Profit brought forward from 2,09,186 4,14,004 -2,04,818 -49.47
previous year
PROFIT AVAILABLE FOR 24,63,563 14,28,764 10,34,799 72.43
APPROPRIATION
A Study on Ratio Analysis of UML, Ranchi

APPROPRIATION
Transfer to General Reserve 17,50,000 10,00,000 7,50,000 75.00
Proposed Dividend on Equity 2,50,242 1,87,681 62,561 33.33
Shares
Provision for Dividend Tax 42,529 31,897 10,632 33.33
Balance carried to Balance Sheet 4,20,792 2,09,186 2,11,606 101.16

COMPARATIVE INCOME STATEMENT FOR THE YEAR ENDED 31st March


2005-06 & 2006-07
(Rs. in
thousand)
Particulars 31-03-2007 31-03-2006 Increase/ CHANGES
Decrease In %
INCOME
Turnover(Gross) 1,57,37,419 1,37,71,836 19,65,583 14.27
Less: Excise Duty 16,51,372 14,53,958 1,97,414 13.58
Turnover(Net) 1,40,86,047 1,23,17,878 17,68,169 14.35
Other Income 1,43,261 94,846 48,415 51.04
Total 1,42,29,308 1,24,12,724 18,16,584 14.63
EXENDITURE
Purchase of General Merchandise 15,302 9,616 5,686 59.13
Raw Material Consumed 58,16,061 52,50,697 5,65,364 10.77
(increase)/ Decrease in Stock-in- (2,38,579) (1,55,097) 83,482 53.82
Trade
Manufacturing, Selling and 58,01,012 48,50,660 9,50,352 19.59
Administrative Exp.
Depreciation 7,62,804 7,60,996 1,808 0.24
Interest 7,13,016 7,30,603 -17,587 -2.41
Adjustment for items Capitalized (24,268) (42,136) -17,868 -42.41
and Departmental orders for own
Consumption
Total 1,28,45,348 1,14,05,339 14,40,009 12.63

PROFIT BEFORE TAXATION 13,83,960 10,07,385 3,76,575 37.38


Current Tax 2,58,600 85,000 1,73,600 204.23
Fringe benefit tax 11,333 12,200 -867 -7.11
Deferred Tax 99,267 2,60,544 -1,61,277 -61.90
PROFIT AFTER TAX 10,14,760 6,49,641 3,65,119 56.20
Debenture redemption reserve - -
A Study on Ratio Analysis of UML, Ranchi

written back
Profit brought forward from 4,14,004 4,03,112 10,892 2.70
previous year
PROFIT AVAILABLE FOR 14,28,764 10,52,753 3,76,011 35.72
APPROPRIATION

APPROPRIATION
Transfer to General Reserve 10,00,000 5,00,000 5,00,000 100
Proposed Dividend on Equity 1,87,681 1,21,683 65,998 54.24
Shares
Provision for Dividend Tax 31,897 17,066 14,831 86.90
Balance carried to Balance Sheet 2,09,186 4,14,004 14,40,009 12.63

COMMON SIZE BALANCE SHEET AS ON 2008-09 & 2007-08


A Study on Ratio Analysis of UML, Ranchi

Particulars 31-03-2009 % GE 31-03-2008 % GE


SOURCE OF FUNDS
Shareholders’ Funds
Capital 2,50,920 0.96 2,50,920 1.26
Equity warrants - 3,34,950 1.68
Reserve and Surplus 99,11,836 38.06 84,04,090 42.26

Loan Funds:
Secured Loans 1,46,61,503 56.29 86,70,608 43.59
Unsecured Loans - 7,61,414 3.83
Net Deferred Tax Liabilities 12,21,053 4.69 14,67,708 7.38
Total 2,60,45,312 100.00 1,98,89,690 100.00
APPLICATION OF FUNDS
Fixed Assets:
Gross Block 1,93,83,467 1,68,07,170
Less: Depreciation 80,18,284 72,09,382
Impairment Loss 1,40,835 1,40,835
Net block 1,12,24,348 43.10 94,56,953 47.55
Capital Work In Progress 1,20,86,352 46.40 50,33,888 25.31
Investment 18,63,513 7.15 16,58,014 8.34
Current assets, Loans and
advances:
Inventories 40,37,100 53,24,181
Sundry Debtors 32,28,548 25,63,505
Cash and Bank Balance 7,64,682 4,63,607
Other Current Assets 2,39,621 3,40,486
Loans and Advances 27,80,155 40,24,216
Total current assets 1,10,50,106 1,27,15,995
Less: Current Liabilities and 1,01,86,312 89,91,299
provisions
Net Current Assets 8,63,794 3.32 37,24,696 18.72
Miscellaneous Expenditure:
Deferred Revenue 7,305 0.03 16,139 0.08
Expenditure
Total 2,60,45,312 100.00 1,98,89,690 100.00
A Study on Ratio Analysis of UML, Ranchi

COMMON SIZE BALANCE SHEET AS ON 2005-06 & 2006-07

Particulars 31-03-2007 % GE 31-03-2006 % GE


SOURCE OF FUNDS
Shareholders’ Funds
Capital 2,40,045 1.49 2,21,920 1.57
Equity warrants 33,278 0.21 88,740 0.63
Reserve and Surplus 69,36,730 42.98 56,05,048 39.68

Loan Funds:
Secured Loans 74,41,398 46.11 67,17,748 47.55
Unsecured Loans 52,340 0.32 1,58,367 1.12
Net Deferred Tax Liabilities 14,34,331 8.89 13,35,064 9.45
Total 1,61,38,122 100.00 1,41,26,887 100.00
APPLICATION OF FUNDS
Fixed Assets:
Gross Block 1,57,39,283 1,49,14,639
Less: Depreciation 65,51,753 58,79,443
Impairment Loss 1,87,451 1,88,024
Net block 90,00,079 55.77 88,47,172 62.63
Capital Work In Progress 19,70,586 12.21 6,95,615 4.92
Investment 16,00,805 9.92 15,25,755 10.80
Current assets, Loans and
advances:
Inventories 33,90,551 26,21,667
Sundry Debtors 22,69,104 19,82,492
Cash and Bank Balance 3,70,805 5,17,489
Other Current Assets 2,60,942 2,25,640
Loans and Advances 21,19,931 16,48,665
Total current assets 84,11,333 69,95,953
Less: Current Liabilities and 48,75,108 39,79,596
provisions
Net Current Assets 35,36,225 21.91 30,16,357 21.35
Miscellaneous Expenditure:
Deferred Revenue 30,427 0.19 41,988 0.30
Expenditure
Total 1,61,38,122 100.00 1,41,26,887 100.00
A Study on Ratio Analysis of UML, Ranchi

Trend Analysis
A Study on Ratio Analysis of UML, Ranchi

Particulars 2008-09 % 2007-08 % 2006-07 % 2005-06 %

Shareholders’
Funds
Capital 2,50,920 113.07 2,50,920 113.07 2,40,045 108.17 2,21,920 100

Equity warrants - 3,34,950 377.45 33,278 37.50 88,740 100

Reserve and 99,11,836 176.84 84,04,090 149.94 69,36,730 123.76 56,05,048 100
Surplus

Loan Funds:
Secured Loans 1,46,61,503 218.25 86,70,608 129.07 74,41,398 110.77 67,17,748 100

Unsecured Loans - 7,61,414 480.79 52,340 33.05 1,58,367 100

Net Deferred Tax 12,21,053 91.46 14,67,708 109.94 14,34,331 107.43 13,35,064 100
Liabilities
Total 2,60,45,312 184.37 1,98,89,690 140.79 1,61,38,122 114.23 1,41,26,887 100

APPLICATION
OF FUNDS
Fixed Assets:
Gross Block 1,93,83,467 129.96 1,68,07,170 112.69 1,57,39,283 105.53 1,49,14,639 100

Less: 80,18,284 136.38 72,09,382 122.62 65,51,753 111.43 58,79,443 100


Depreciation
Impairment Loss 1,40,835 74.90 1,40,835 74,90 1,87,451 99.69 1,88,024 100

Net block 1,12,24,348 126.86 94,56,953 106.89 90,00,079 101.73 88,47,172 100

Capital Work In 1,20,86,352 1737.5 50,33,888 723.66 19,70,586 283.29 6,95,615 100
Progress 1

Investment 18,63,513 122.14 16,58,014 108.67 16,00,805 104.92 15,25,755 100

Current assets,
Loans and
advances:
Inventories 40,37,100 153.99 53,24,181 203.08 33,90,551 129.33 26,21,667 100

Sundry Debtors 32,28,548 162.85 25,63,505 129.31 22,69,104 114.46 19,82,492 100

Cash and Bank 7,64,682 147.77 4,63,607 89.59 3,70,805 71.65 5,17,489 100
Balance
Other Current 2,39,621 106.19 3,40,486 150.89 2,60,942 115.65 2,25,640 100
A Study on Ratio Analysis of UML, Ranchi

cc

SUGGESTIONS
• The company has to focus on the reducing cost by reducing the
unproductive expenses. For that purpose the company has to divide its
overheads into sub heads so the company can know that which expenses
A Study on Ratio Analysis of UML, Ranchi

is high and how can reduce. As well as the company should compare its
standard cost with actual cost. By doing this practice the company has
been successful in reducing many of the unnecessary expenses.
• There has been manpower rationalization i.e. a reduction in duplication
of work and consequent under utilization of human capacity. The result
of this was improved efficiency.
• UML is committed to add value to the products it makes, de-
bottlenecking its capacities with intelligence so that the production cost
gets reduced, utilizing the resources more efficiently.
• The company is focusing on its integrated steel and steel products
business with an increased focus on exports to neighbouring countries.
To improve competitiveness in the global market, the company has
planned to make strategic investment in steel to reduce the cost of
products by leveraging the availability of raw materials from within the
region. The company is also focusing on an improvement in the
realization of products like wires, wire ropes, strands and by migrating to
high value branded products.
• To meet the challenges of the loss of cable business, the company has
embarked on the strategy to make the use of productive assets for
diversification into value added products.
• The company is strengthening its international marketing capability
through an intelligent combination of initiatives like the expansion of its
distribution outlets marketing offices and strategic alliances.
A Study on Ratio Analysis of UML, Ranchi

• UML is a huge organization that has been the market leader for many
years and has stood the tests of time and emerged out of adverse and
unfavourable market situation successfully.
A Study on Ratio Analysis of UML, Ranchi

BIBLIOGRAPHY

➢ A Text Book Of Accountancy S.K Singh


➢ Financial Management I.M Pandey
➢ Financial Management Khan and Jain

➢ www.ushamartin.com
➢ Google search
A Study on Ratio Analysis of UML, Ranchi

CONCLUSION

➢ Usha martin limited is the only leading company in india and the 2nd
largest company in the world which deals in wire and wire ropes.
➢ The company has continued to pursue its long term strategy of creating a
critical mass intregated business of speciality steel and value added steel
product, with key focus on wire ropes, cords, strands, wire and bright
bars.
➢ The intergrated business of captive minerls ,speciality steel and global
wire ropes manufacturing, marketing and distribution with rich product
mix and focus on development has given significant strength of the
company.
➢ Capital expenditure programme to increase capacity in mining, power
generation, DRI, blast furnace route iron making, steel melting, stages of
implementation and is likely to be commissioned in phased manner in
current and next6 financial year.
➢ On standalone basis, the company achieved a net turnover of
Rs.2127.23Crs. with a growth of 28.5%over previous year. The gross
profit has also increased by 18.3%toRs.422.43Crs. from
Rs357.01Crs.The profit before tax and profit after tax,record in the year
by the company are Rs.214.04Crs.and Rs.146.56Crs.respectively. The
company has achived significant growth of 29.0% over previous year.
➢ On consolidated basis the company and its subsidiaries have achieved a
net turnover, profit before tax and profit after tax of Rs 2949.85Crs. and
Rs.280.59Crs.and Rs.185.34Crs. respectively.These figure are
significantly higher over those of previous year by 27.8%,13.7% and
5.7% respectively. Gross sales stood at Rs499.41Crs. which is higher by
30.0% over the previous year.
A Study on Ratio Analysis of UML, Ranchi

➢ The government of India, Ministry of corporate Affairs, has issued


notification dated 31stMarch,2009 under which the Company, by opting
for alternative accounting could havecapitalised and defferd net charges
of such losses to the extent of about Rs73.00Crs. The company has
however decided not to avail this option and instead follow an approach
of accounting for such changes in forign currency rates through Profit &
loss account.
A Study on Ratio Analysis of UML, Ranchi


STEPS TAKEN BY THE MANAGEMENT

➢ The company has become cost conscious and has embarked on the
exercise to cut the overheads. The expense item are broken down into
various subheads and an online cost management system has been
developed so that alert signals are received as soon as there is any major
deviation from the monitored budgets appropriate remedial action should
be taken. The company has been successful in reducing many of the
unnecessary expenses like reduction in travel expenses personal and
administration cost.
➢ There has been manpower rationalization i.e.reduction duplication of
work and consequent under utilization of human capacity. The result of
this was improved efficiency. Lower manpower and also surplus, which
was liquidated thus saving a budget Rs 150 Crore in recent in a year.

➢ UML is committed to add value to the product it makes de-bottlenecking


in capacities with intelligence to that the production costs get reduced,
utilizing the assets more efficiently extracting attracting value out of its
TPM program at all plants and reaping the benefit of ERP reduce its
inventory and incorporate a lot more science in the management
processes. It has been observed that benefit of ERP start occurring after
few years of its implementation. UML has successfully implemented
ERP and so far the result is positive
.
➢ To meet the challenges of the loss of cable business the company has
embarked on the strategy to make the value of productive assets for
diversification into value branded products

➢ The company is strengthening its international marketing capability


through an intelligence combination of initiatives like the expansion of
the distribution outlets marketing offices and there alliances.
A Study on Ratio Analysis of UML, Ranchi

➢ UML is a huge Organisation that has been the market leader for many
years and has stored the rest of the time and emerged out of unfavourable
marketing situation successfully.
A Study on Ratio Analysis of UML, Ranchi

USHA MARTIN LIMITED


In our chosen business we shall retain market leadership in india and shall
be globally competitive through customer orientation and excellence in
quality, innovation and technology.

LOOKING BACK A BRIEF HISTORY

1960- The company was incorpated as Usha Martin Black Limited having
its wire rope plant at Ranchi. The name was change Usha Martin Ltd in
1979 and further changed to Usha Martin Industries Ltd in 1983.(UMIL)

1965- UMIL promoted Usha Ismal Ltd.(UIL) in collaboration with CCL


System Ltd of UK for the manufacture of fittings and accessories,
equipment for pre-stressed concrete system, wire ropes and wire ropes
splicing equipment at Ranchi.

1971-UMIL promote Usha Alloy Steels Limited (USAL) for the


manufacture of billets at Jamshedpur USAL merged with UMILin 1988.

1975-UASL acquired in ongoing rolling mill at Agra.

1975-UASL set up its Machinery Division at Banglore for the manufacture


of wire drawing and allied machines in technical collaboration with
Marshall Richards Barcro Limited of UK.

1979-In order to obtain steady supply of wire rods for its wire rope
plant,UASL set up a wire Rod Rolling Mill at Jamshedpur.

1987-UMIL,along with Bihar State Electronics Development Corporation,


promoted Usha Beltron Ltd(UBL)in collaboration with AEGKABEL of
Germany for the manufacture of Jelly Filled Telephone Cables.

1997-UMIL merged with UBL w.e.f 1st oct 1997.


A Study on Ratio Analysis of UML, Ranchi
A Study on Ratio Analysis of UML, Ranchi

2000-Acquisition of specialty wire rope manufacturing plant in UK


“BruntonShaw”

2000- Commissioning of 25 MW thermal power plant for captive


consumption.

2001-Commissioning of 2nd SMS to enhance capacity and produce quality


specialty steel.

2003-Usha Belton Ltd changed its name to “Usha Martin Limited”. UML
created Fine Cord Plasticated coated Fine wires, household wire, Polymer
coated wire, Fine Ropes & Bright manufacturing facilities in Tatisilwai-
Ranchi.
A Study on Ratio Analysis of UML, Ranchi

COMPANY PROFILE

➢ UML is the 2nd largest wire and rope manufacturer in the world
and has the largest variety in South East Asia.

➢ It is multi product, diversified engineering conglomerate with 10


production units in India, 1 in Thailand, 1 in UK and 1 in Dubai.

➢ It is saving valuable foreign exchange by exporting its products to 42


countries like USA,Africa and Middle East, confirming to the strictest
product quality standards.

➢ It got the ISO 9000 Certificate by BVOJ in1994.

➢ ICICI did the business process re-engineering in1996 and line system
was set up to enhance performance.

➢ With the modern concept like JPM,value engineering,QC,customer


satisfaction and human resource development, UML is trying to reach
un paralled heights
A Study on Ratio Analysis of UML, Ranchi

FINDINGS

➢ The liquidity ratio i.e. current ratio and quick ratio of UML are quite
healthy. The company can manage to use some portion of current
Assest in other Productive activities.
➢ The debt equity ratio is also in a higher side i.e. 2:1 or more than
that .The company has made strategic investment through the capital
expenditure which has financed through public borrowing when the
industry was in a recession. The management has taken a number of
steps to improve the ratio.
➢ Profitability Ratio is also satisfactory. The net profit ratio increased
from 2%to 8% over the period of last five years. The increase in the
profitability ratio should be maintained as it makes the Company
healthy.
➢ The reserve to capital ratio of UML has increased from 22%to 31%
from 2005-2006 to 2008-2009 which ensure that UML has sufficient
reserve which it can use at any point of prises in future time period.
➢ The working capital turnover ratio of any firm should be normal
Excess ratio indicates over trading while a lower ratio indicates
overtaking. The ratio in2005-2006 was 2.2 which increased to 4.45
which is quite high. This shows UML is utilizing their working
capital efficientlywhich results increase in the net turnover.
➢ The fixed assest ratio should always be more than 1:1 ratio less than 1
indicates that the firm is purchasing its fixed assest out of working
capital which is wrong policy. The ratio is 0.88:1 in 2004-2005 which
then increased to 1.14:1 in 2008-2009 which is greater than 1.this
shows better performance of UML.
A Study on Ratio Analysis of UML, Ranchi

FINDINGS

➢ The liquidity ratio i.e. current ratio and quick ratio of UML are quite
healthy. The company can manage to use some portion of current
Assest in other Productive activities.
➢ The debt equity ratio is also in a higher side i.e. 2:1 or more than
that .The company has made strategic investment through the capital
expenditure which has financed through public borrowing when the
industry was in a recession. The management has taken a number of
steps to improve the ratio.
➢ Profitability Ratio is also satisfactory. The net profit ratio increased
from 2%to 8% over the period of last five years. The increase in the
profitability ratio should be maintained as it makes the Company
healthy.
➢ The reserve to capital ratio of UML has increased from 22%to 31%
from 2005-2006 to 2008-2009 which ensure that UML has sufficient
reserve which it can use at any point of prises in future time period.

➢ The working capital turnover ratio of any firm should be normal


Excess ratio indicates over trading while a lower ratio indicates
overtaking. The ratio in2005-2006 was 2.2 which increased to 4.45
which is quite high. This shows UML is utilizing their working
capital efficientlywhich results increase in the net turnover.

➢ The fixed assest ratio should always be more than 1:1 ratio less than 1
indicates that the firm is purchasing its fixed assest out of working
capital which is wrong policy. The ratio is 0.88:1 in 2004-2005 which
then increased to 1.14:1 in 2008-2009 which is greater than 1.this
shows better performance of UML.
A Study on Ratio Analysis of UML, Ranchi

EVALUATION OF THE COMPANY

➢ Mr. B.K. Jhawar, the Chairman , establishes Usha Martin Limited in


1960 with the Wire Ropes Plan, Ranchi.
➢ The firm was initially called Usha Martin Black as it started with
collaboration between M/S Martin Black and Usha Automobiles &
Engineering Pvt. Ltd., Calcutta in 1960.
➢ In 1965, it backed Usha Ismal Ltd to manufacture rope accessories &
splicing equipment and merged with it in 1990.
➢ In 1969, it backed Usha Breco Ltd, to design, construct and erect Aerial
Ropeways.
➢ In 1971, it backed Usha Alloys & Steel Ltd, to produce steel billets as
backward integration and merged with it in 1988.
➢ The collaboration with Martin Black broke up in 1975 and the company
was hence called Usha Martin Industries.
➢ The company set up an electrical furnace steel plant at Jamshedpur in
1973, followed by a rod mill in 1976.
➢ In 1980, it promoted Usha Siam Steel Industries Ltd, Thailand to
produce wire , wire ropes & auto con
A Study on Ratio Analysis of UML, Ranchi

EVALUATION OF THE COMPANY

➢ Mr. B.K. Jhawar, the Chairman , establishes Usha Martin Limited in


1960 with the Wire Ropes Plan, Ranchi.
➢ The firm was initially called Usha Martin Black as it started with
collaboration between M/S Martin Black and Usha Automobiles &
Engineering Pvt. Ltd., Calcutta in 1960.
➢ In 1965, it backed Usha Ismal Ltd to manufacture rope accessories &
splicing equipment and merged with it in 1990.
➢ In 1969, it backed Usha Breco Ltd, to design, construct and erect Aerial
Ropeways.
➢ In 1971, it backed Usha Alloys & Steel Ltd, to produce steel billets as
backward integration and merged with it in 1988.
➢ The collaboration with Martin Black broke up in 1975 and the company
was hence called Usha Martin Industries.
➢ The company set up an electrical furnace steel plant at Jamshedpur in
1973, followed by a rod mill in 1976.
➢ In 1980, it promoted Usha Siam Steel Industries Ltd, Thailand to
produce wire , wire ropes & auto con
A Study on Ratio Analysis of UML, Ranchi

RATIO ANALYSIS

MEANING OF ACCOUNTING RATIO

A ratio analysis is a powerful tool of financial analysis. A ratio is a simple


arithematic expression of one number to another. It is expressed when one
figure is divided by one figure.

Analysis means examination interpretation of numerical relationship of two


numbers. Ratio analysis therefore means examination and interpretation of
numerical relationship of two numbers.
It should be noted that the ratios based on financial statement are called
‘Financial Ratio’ or ‘Accounting Ratios’.

OBJECTIVES /PURPOSE OF ACCOUNTING RATIOS

The following are the main objects of Ratio Analysis:


1. To measure the profitability of the concern: The
profitability can be measure by gross profit,net
profit,operating profit ratios.
2. To determine the operating efficiency of the
business:Operational efficiency of the business can be
judge by calculating operating/activity ratios.
3. To assess the solvency of the business:Solvency or
otherwise of the business can be assessed by calculating
solvency ratios.
4. To help in forecasting and budgeting:Ratio analysis
help in getting knowledge of the profitability and financial
position of the business undertaking.It also reveals the
strength and weakness of the business concern.It helps in
forecasting,budgeting and making plan for the future.
A Study on Ratio Analysis of UML, Ranchi

5. To Simplify and Summarise Accounting


Information:Ratio analysis makes the accounting
information meaningful.
6. To facilitate comparative analysis.
7. To help the management in decision making.
8. To help in financial planning.
A Study on Ratio Analysis of UML, Ranchi

IMPORTANCE OF ACCOUNTING RATIO

The Ratio analysis is one of the most powerful


tools of financial analysis. It is used as a device to
analyse and interpret the financial of an enterprise
. just like a docter, as he examines his patient by
recording his body temperature, blood
pressure,etc
Before making his conclusion regarding the illness
and before giving his treatment,financial analyst
analysis financial statement with various tools of
analysis before commenting up on the financial
position or weakness of enterprise. A Ratio acts as
symptom like blood pressure, the pulse rate or the
temperature of the individual. The ratio analysis
proves to be useful not only for the management
of an enterprise, but it also important for other
persons like share holders,
creditors,investors,banks etc

(A) Importance for management


• Accounting ratios make the figure simple and understandable .
• Accounting ratio provide basis for preparing budgets and also
determining future line of action i.e. forcasting.
• Accounting ratios facilitate comparative analysis of the performance
A Study on Ratio Analysis of UML, Ranchi

• Accounting ratios help in making decisions from information provided in


these financial statements.
• Accounting ratios indicate efficiency and profitability of the business
concern
• The financial strength and weaknesses of a firm are communicated in a
more easy and understandable manner by the use of ratios.
• Accounting ratios help in assessing solvency position of the business.

(B) Importance to investors

An investors in the company will like to assess the financial position of


the concern where he is ginng to invest his funds. The investors will feel
satisfied only if the concern have sufficient asset, long term solvency ratio will
help him in financial positon of the concern. Profitability ratio, on the other
hand ,will be useful to determine the profitability position of the concern.Thus,
financial analysis will be useful to investors in making up his mind whether
present financial position of the concern warrants further investment or not.

(C)Importance to Government
Government is interested to know overall strength of the industry. Various
financial statement published by industrial units are used to calculate ratios for
determining short -term,long-term and overall financial position of the
concerns. Profitability indices can also prepared with the help of ratios.
Government may base its future policies on the basis of industrial information
available from various units. The ratios may be used as indicators of overall
financial strength of public as well as private sector. In the absence of the
reliable economic information, governmental plans and policies may not prove
successful.
A Study on Ratio Analysis of UML, Ranchi

THE SWOT ANALYSIS OF UML

STRENGTHS

➢ UML is the FOURTH largest producer or wire and wire ropes in the
world and the market leader in India for many years .

➢ UML was the first steel company in India to receive the JIIM award .

➢ UML has got sufficient capacity to produce in world that produces


specialities products in huge qualities .

➢ UML has a good brand image .

➢ UML produces quality products .

➢ UML is one of the few producers in the world that produces specific
wire and wire rope products .

➢ UML has wide product range .

➢ UML has a large number of consumers like SAIL, TISCO, ONGC,


ACC, CCL, BHEL, and L$T .

➢ UML has a good infrastructure .

➢ UML provide many facilities to their employees such as free medical


facility transportation facility and several other welfare facilities that
help to improve employees satisfaction and motivation .

➢ UML has environment management as one of the core priorities and its
practices confirm to the standards prescnbed by the various regularity
authorities , this proves UML’S concerns towards environment
protection and this as earned its goodwill among various securities of
society and Government .
A Study on Ratio Analysis of UML, Ranchi

WEAKNESSES

➢ UML has overlooked small consumers .


➢ UML has large overheads .
➢ UML products are available at high prices . it lacks warehouses and
distribution centres .
➢ UML has shown lack or coordination among the production sales and
marketing departments .
➢ UML’S Tools and machines have become old and obsolete .
➢ Non effective advertisement image .
➢ Lack of professionalism and work ethics in employees .
➢ As its pricing strategy is completely different from other competitors in
this field generally known certain customary .
➢ Surplus employees with an average age over forty years , lack of young
dynamic blood at work .

OPPORTUNITY

➢ UML has increased its sales by reducing costs.


➢ UML can strengthen its position in the market by making alliances and
other give with small rivals ,which are doing well across the country .
➢ UML can increase its profit if it gives more emphasis on getting the
customers .
➢ UML can improve its global market share .
➢ UML can develop elevator rope with maximum breaking load .
➢ UML can look for regions where there are no or less competitors .
A Study on Ratio Analysis of UML, Ranchi

➢ UML can look for new range of products taking their feasibility with
diversification .
➢ Government is planning regarding the expensive hanging bridge like
nani bridge in uttar Pradesh , vidya sager setu on Hooghly river in
kolkata .
➢ New opportunity in the sail offshore field especially in oil drilling ropes
as reliance has found crude oil in Krishna – Godavari in
south Basin .
➢ Fishing developing in southern coastal cities so UML should take visit to
these markets .
➢ Comprtitors are not as strong as UML.

THREATS

➢ Small rivals are emerging in different parts of the Countries.


➢ Low prices of the rival’s products are the great threats.
➢ Timely delivery of the products by the competitiors has put pressure on
UML to improve its efficiency.
➢ Changes in Government policies regarding import duties, export
subsidies do changes in regular basis thereby increasing the risk for
UML.
➢ Fluctuation in exchange rate.
➢ Poor infrastructure of the state.
➢ As U.S has imposed anti dumping duties in steel product from India,
China and Malaysia etc.
➢ Resistances from the state and central government of India.
➢ Frequently bands and strikes in Jharkhand which delays the delivery and
hinder the availability of raw material.
A Study on Ratio Analysis of UML, Ranchi

➢ Local political instability.


➢ Excess work force less automated procedure.
➢ Price a key factor deciding overall rates and market policies.
A Study on Ratio Analysis of UML, Ranchi

SUGGESTION

➢ UML should focus on the advertisement department.


➢ UML should develop prpper warehouse.
➢ UMLshould increase the number of employees in finance department.
➢ Employee should be professional and work ethic.
➢ UML has shown lack of coordination among the production, sales and
marketing department.
➢ As its pricing strategy is completely different from other competitors in
this field it may lose their customers.
➢ Surplus employee with an average over 40 years , lack of young dynamic
blood at work.
➢ UML’s tools and machines have become old and obsolete.
A Study on Ratio Analysis of UML, Ranchi

DECLARATION
I…………………………………………..student of New Delhi Instution
of Management ………………batch(………………….) declare that
every part of the Project Report………………………………that I have
submitted is original.
I was in regular contact with the nominated guide and contacted ……..
times for discussing the project.

Date of project submission…………………………….

Faculty’s Comments:
……………………………………………………………………………
……………………………………………………………………………
……………………………………………………………………………

Signature of faculty guide:

Shweta Singh