A PROJECT REPORT ON RATIO ANALYSIS FOR GUJARAT ALKALIES AND CHEMICALS LIMITED Submitted to C.K.

SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT IN PARTIAL FULFILLMENT OF THE REQUIREMENT OF THE AWARD FOR THE DEGREE MASTER OF BUSINESS ADMINISTRATION UNDER Gujarat Technological University UNDER THE GUIDANCE OF
FACULTY GUIDE PROF. ISHITA ASHARA (FINANCE) COMPANY GUIDE MR.RAJKUMAR (HR OFFICER)

Submitted by AMDAWADKAR.KEDAR.SHRIPAD Enrollment No.: 107050592067 M.B.A SEMESTER III C .K .SHAH VIJAPURWALA INSTITUTE OF MANAGEMENT M.B.A PROGRAMME Affiliated to Gujarat Technological University Ahmedabad July 2011

PREFACE
The MBA programme is well structured and integrated course of management studies. The main objective of practical training at MBA level is to develop skill in students by supplement to the theoretical study of organization management in general. Industrial training helps to gain real life knowledge about the industrial environment and business practices. It is true that EXPERIENCE IS THE BEST TEACHER. Thus since the industrial training offer variety of advantages, the faculty of management studies in C.K.SHAH VIJAPURWALA INSTITUE OF MANAGEMENT affiliated with GTU offer such industrial training consist of interesting and purposeful organization visit. It is thus training programme is held for the taste of management application in Industrial world. To gain practical exposure students, of MBA SEM-2 are required to undertake industrial training of EIGHT weeks in a company. The training gives in-depth knowledge to a student about various departments: Finance, Marketing, Production, and Personnel. So as to faster the growth of the students and have an opportunity to work in the industrial environment. It gives us an immense pleasure being a part of GACL in a span of SIX weeks. This precious time of project is fruitful to correlate theoretical concept and industrial practices. I have tried to highlight what is the whole system is all about and how it works? My report plays A Role of Jack. Since I have considered each and every aspects of GACL. We thank GACL management for their sincere and honest efforts behind making our training a successful one.

ACKNOWLEDGEMENT
Through this acknowledgement, I express my sincere gratitude towards all those people have helped me in the preparation of this project, which has been a learning experience. I also appreciate the co-operation extended by the management and staff of Gujarat Alkalies and Chemicals Limited for having giving me the opportunity to visit their all the units. I have great pleasure in expressing my deep sense of gratitude to MR. Ashok Gokahle for permitting me in the training. I am also thankful to MR. Rajkumar Emmanuel (HR Officer) and MR.A K Mishra (DFM) for initiating for sparing their valuable time for initiating me in the training when I reported them and guided me in the collection of relevant material. Finally, I express my sincere thanks to Prof. Ishita Ashara who guided me throughout the project and gave me valuable suggestions and encouragement.

Signature (Amdawadkar Kedar Shripad)

DECLARATION I, Amdawadkar Kedar Shripad hereby declare that this material is prepared on the basis of vocational training at GACL for the period of 6 weeks. I ensure about the authentication of the material and give guarantee that there will not be any misuse of the data. Data used will only be taken for the academic purpose and will not be used for commercial or any other purpose.

PLACE: VADODARA DATE:

AMDAWADKAR KEDAR S.

INDEX
Sr. No. 1 2 3 4 5 5 6 7 GACL History Vision & Mission Company Profile Departments of GACL Organizational Chart Finance Department Ratio Analysis Theory Calculated Ratios A. Liquidity Ratio B. Leverage Ratio C. Profitability Ratio D. Turnover Ratio E. Valuation Ratio 8 9 10 11 12 Findings Suggestions Conclusion Bibliography Annual Report 2009-10 35 39 45 59 71 77 78 79 80 Content Page No. 1 7 8 13 14 24 30

GACL History
Gujarat Alkalies and Chemicals Limited (GACL) was incorporated on 29th March, 1973 in the State of Gujarat by Gujarat Industrial Investment Corporation Limited (GIIC), a wholly owned company of Govt. of Gujarat, as a Core Promoter. GACL has two units located at Vadodara and Dahej , both in the State of Gujarat. It has integrated manufacturing facilities for Caustic Soda, Chlorine, Hydrogen Gas, Hydrochloric Acid, Chloromethanes, Hydrogen Peroxide, Phosphoric Acid, Potassium Hydroxide, Potassium Carbonate, Sodium Cyanide, Sodium Ferrocyanide. The Dahej unit also has 90 MW Captive Power Plant (CPP) for regular and economical power supply. The Company commenced its operations in 1976 with 37,425 MTPA Caustic Soda Plant based on the then, state-of-the-art Mercury Cell process at its Plant which is situated 16 km North of Vadodara near Village Ranoli on the main Railway track route between Ahmedabad and Mumbai. Right from the inception, GACL has been following the strategy of continuous capacity expansion in core areas. The first stage expansion of the Caustic Soda Plant raising the capacity to 70,425 MTPA was undertaken in October, 1981 followed by a diversification programme to produce 2000 MTPA of Sodium Cyanide in December, 1982.

In 1984, the second stage expansion to increase the capacity of Caustic Soda Plant to 103,425 MTPA was undertaken. Simultaneously, the Company undertook the diversification project for manufacture of 10,560 MTPA of Chloromethanes using Chlorine, a coproduct of the Company and in 1991, the capacity of Chloromethanes production was doubled. As power is the major input for production of Caustic Soda and constitutes about 65% - 70% of the cost of production, the Company alongwith other Corporations like M/s. GSFC, Petrofils Co-operative Ltd. and Gujarat Electricity Board promoted a gas based power unit in Vadodara under the name of Gujarat Industrial Power Company Ltd. (GIPCL) during the year 1985. As a promoter of GIPCL, the Company gets low cost power, as the plant is gas based and is depreciated. Since production of Caustic Soda is highly power intensive, in order to reduce power cost and to eliminate mercury pollution, the Company during the year 1989 converted one of its Cell Houses producing Caustic Soda from Mercury Cell Technology to environment friendly Membrane Cell Technology, thereby eliminating the use of mercury. The Capacity of Caustic Soda was also increased to 132000 MTA. The conversion of second Mercury Cell to Membrane Cell was carried out during March, 1994, thereby eliminating the total use of mercury from the Complex for production of Caustic Soda and increasing the capacity of plant along with this conversion to 170000 MTA including Potassium Hydroxide facility.

As part of this Membrane Cell Conversion Project, a new facility for manufacture of 16500 MTA of Potassium Hydroxide Lye based on Membrane Cell was also set up. The Company has further set up facility for converting part of this Caustic Potash Lye into Potassium Carbonate with a capacity of 13200 MTA. In order to add further value to its products, the company had set up manufacturing facility for production of 11000 MTA Hydrogen Peroxide (100%) at Vadodara Complex during the year 1996 to utilize Hydrogen gas, which is a co-product from Caustic Soda Process. In 1995, as a part of diversification programme and to meet the growing demand of its products in the State of Gujarat and nearby areas, the Company had set up a plant for manufacture of Technical Grade Phosphoric Acid with capacity of 26400 MTA (85% Phosphoric Acid) at a new location at Dahej, District Bharuch. The Company also set up Membrane Cell based grass root Caustic-Chlorine Unit with a capacity of 100000 MTA at Dahej. Alongwith this, a captive 90 MW cogeneration Power Plant was set up so as to ensure uninterrupted and low cost power for its captive operations.

Gujarat Alkalis and Chemicals Limited (GACL) were incorporated on 29th March, 1973 in the State of Gujarat by Gujarat Industrial Investment Corporation Limited (GIIC), a wholly owned company of Govt. of Gujarat, as a Core Promoter. GACL has two units located at Vadodara and Dahej, both in the State of Gujarat. It has integrated manufacturing facilities for Caustic Soda, Chlorine, Hydrogen Gas, Hydrochloric Acid, Chloromethane, Hydrogen Peroxide, Phosphoric Acid, Potassium Hydroxide, Potassium Carbonate, Sodium Cyanide, and Sodium Ferro cyanide. The Dahej unit also has 90 MW Captive Power Plant (CPP) for regular and economical power supply. The Company commenced its operations in 1976 with 37,425 MTPA Caustic Soda Plant based on the then, state-of-the-art Mercury Cell process at its Plant which is situated 16 km North of Vadodara near Village Ranoli on the main Railway track route between Ahmedabad and Mumbai.

Right from the inception, GACL has been following the strategy of continuous capacity expansion in core areas. The first stage expansion of the Caustic Soda Plant raising the capacity to 70,425 MTPA was undertaken in October, 1981 followed by a diversification programme to produce 2000 MTPA of Sodium Cyanide in December, 1982. In 1984, the second stage expansion to increase the capacity of Caustic Soda Plant to 103,425 MTPA was undertaken. Simultaneously, the Company undertook the diversification project for manufacture of 10,560 MTPA of Chloromethane using Chlorine, a co-product of the Company and in 1991, the capacity of Chloromethane production was doubled. As power is the major input for production of Caustic Soda and constitutes about 65% to 70% of the cost of production, the Company along with other Corporations like M/s. GSFC, Petrofils Co-operative Ltd. and Gujarat Electricity Board promoted a gas based power unit in Vadodara under the name of Gujarat Industrial Power Company Ltd. (GIPCL) during the year 1985. As a promoter of GIPCL, the Company gets low cost power, as the plant is gas based and is depreciated.

Since production of Caustic Soda is highly power intensive, in order to reduce power cost and to eliminate mercury pollution, the Company during the year 1989 converted one of its Cell Houses producing Caustic Soda from Mercury Cell Technology to environment friendly Membrane Cell Technology, thereby

eliminating the use of mercury. The Capacity of Caustic Soda was also increased to 132000 MTA. The conversion of second Mercury Cell to Membrane Cell was carried out during March, 1994, thereby eliminating the total use of mercury from the Complex for production of Caustic Soda and increasing the capacity of plant along with this conversion to 170000 MTA including Potassium Hydroxide facility. As part of this Membrane Cell Conversion Project, a new facility for manufacture of 16500 MTA of Potassium Hydroxide Lye based on Membrane Cell was also set up. The Company has further set up facility for converting part of this Caustic Potash Lye into Potassium Carbonate with a capacity of 13200 MTA. In order to add further value to its products, the company had set up manufacturing facility for production of 11000 MTA Hydrogen Peroxide (100%) at Vadodara Complex during the year 1996 to utilize Hydrogen gas, which is a coproduct from Caustic Soda Process. In 1995, as a part of diversification programme and to meet the growing demand of its products in the State of Gujarat and nearby areas, the Company had set up a plant for manufacture of Technical Grade Phosphoric Acid with capacity of 26400 MTA "(85% Phosphoric Acid) at a new location at Dahej, District Bharuch. The Company also set up Membrane Cell based grass root Caustic-Chlorine Unit with a capacity of 100000 MTA at Dahej. Along with this, a captive 90 MW cogeneration Power Plant was set up so as to ensure uninterrupted and low cost power for its captive operation.

Vision
To continue to be identified and recognized as a dynamic, modern and ecofriendly chemical company with enduring ethics and values.

Mission
To manage our business responsibly and sensitively, in order to address the needs of our Customers & Stakeholders. To strive for continuous improvement in performance, measuring results precisely, and ensuring GACL's growth and profitability through innovations. To demand from ourselves and others the highest ethical standards and to ensure products and

COMPANY PROFILE

NAME OF THE COMPANY

GUJRAT ALKALIES AND CHEMICAL LIMITED (GACL)

REGISTERED OFFICE / VADODRA COMPLEX

P.O. Petrochemicals-391 346 Dist. Vadodara, Gujarat, India. Phone-+91-265-2232681-2 Fax-+91-265-2232130 P.O. Petrochemicals-391 346 Dist. Vadodara, Gujarat, India. Phone-+91-265-2232681-2 Fax-+91-265-2232130

DAHEJ COMPLEX

FORM OF ORGANISATION: Joint Venture

SIZE OF ORGANISATION: Large Scale Organization

RS:

AUDITIO
Messers Prakash Chandra Jain & Co. Chartered Accountants, Vadodara

SOLICITORS:Messers Amarchand & Mangaldas & Suresh A. Shroff & Co.

COST AUDITORS: Messers Diwanji & Associate Cost Accountants Vadodara.

COMPANY SECRETARY & GENERAL MANAGER: Shri. V.L.Vyas

BANKERS: State Bank of India Central bank of India AXIS Bank Ltd.(UTI) IDBI Bank Ltd.

UCO Bank Indian Bank HDFC Bank Ltd.

REGISTRAR & SHARE TRANSFER AGENT

Messrs MCS Ltd. (Unit: GACL) Neelam Apartment, 1st Floor 88, Sampatrao Colony, Productivity Road, Vadodara-390 007 GUJARAT (INDIA) Phone: (0265)-2339397, 2314757, 2350490 E-mail: mcsbaroda@yahoo.com

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SWOT ANALYSIS OF GACL

STREANTH:
Single largest caustic soda producer in the country coin a capacity of 27000 TPA having industry share of 13.75% Leader in chlor-alkali industry Low cost power from GIPCL Baroda Integrated downstream plants In house research and development Dedicated men power Proximity to raw material source and market Excellent industry relation Strong and committed work force The company has been awarded ISO9001:2000certificated from 20thNov.2003 Nationals award by government of India 1993 for contribution of R & D department of the company in the pollution control environment protection.

WEAKNESS:
High Price. Highly power intensive products as power. Company's products are in commodity group and therefore the prices are purely market driven. The supply of natural gas for the power plants varies depending upon availability.

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OPPORTUNITY:
Foreign market the demand for company's products in foreign market is high therefore GACL has golden opportunity to gain share market by exporting its products to foreign countries. Excess capacity in power plant will help in setting up downstream projects for increasing the capacity of caustic soda production

THREATS:
The chlore alkali industry in cyclical in nature The industry has faced with over capacity in the country Dependence on the performance of consuming sectors Threats of impact of slow down Indian economic growth Highly competition market for the products of the company

GROWTH STRATEGY
To remain the largest producer. To maintain highest quality & be the first choice of customer. To remain in the lowest production through captive power. To have downstream value added products & flexibility of product mix for better margins & wide market. To ultimate good to remain leader in the chlor alkalis.

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DEPARTMENT AT GACL
1.Technical Departments: I. II. III. IV. V. Production Department Engineering Department Quality Control Department Safety & Environmental Department Research & Development Department

2.Non- Technical Department: I. II. III. IV. V. VI. Purchase Department Marketing Department Finance Department HR Department Security Department MS Department (Management System) Secretary Department

VII.

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ORGANIZATIONAL CHART

MD

Sr.ED (Tech)

GM (HR&A)

CS & GM (Legal)

GM (MM & CFO)

CFO

Sr.ED (Commercial )

ED (Dahej)

ED (Ranoli)

ED (CPP)

CGM & CMO

CM (Engg. Service)

CM (Opera tions)

CM (Engg. Service )

CM (Security & Vigilance)

CM (Operation s)

Addn. GM (Mktg. )

CM (Engg. Service )

CM (Inst.)

CM (Engg. Service )

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TOTAL MANPOWER STRENGTH AT GACL

Manpower is the real strength of any organisation & that is so in GACL also. The total manpower strength at GACL includes both management & NonManagement Category.

Ranoli
Management Employee Non management Employee Management Trainee Non management Trainee Contractual Management Contractual Non management Apprentice management Apprentice Non management 424 366 7 21 6 44 10 56 934

Dahej
218 465 2 10 2 34 11 41 783

Total
644 831 9 31 8 78 21 97 1717

Thus, the total manpower strength at GACL has 1717 employees.

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PRODUCTS OF GACL
1) Caustic Soda Group 2) Caustic Potash Group

Caustic Soda Flakes Caustic Soda Lye Caustic Soda Prills Sodium hypo chloride Liquid Chlorine Compressed hydrogen Gas Hydrochloric Acid

Caustic Potash Flakes Caustic Potash Lye Potassium Carbonate

3) Chloromethane Group

Methyl Chloride Methylene Chloride Carbon Tetrachloride Chloroform

4) Sodium Group

Sodium Cyanide Sodium Ferro cyanide

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5) Phosphoric Acid Group

Phosphoric Acid Calcium Chloride Flakes Calcium Chloride Powder

6) Hydrogen Peroxide Group

Hydrogen Peroxide Bleach win

7) Other products

Dilute Sulphuric Acid Scale win

(Water treatment chemical) Aluminum Chloride Anhydrous
8) New products

Poly Aluminum Chloride

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LIST OF FINISHED PRODUCT MADE IN GACL

Caustic soda lye Caustic soda flakes Caustic soda prills Liquid chlorine Hydrochloric Acid Sodium Hypo chloride Sodium Cyanide Sodium Ferro Cyanide Caustic Potash lye Caustic Potash flakes Potassium Carbonate Methyl Chloride Chloroform Carbon Tetrachloride Phosphoric Acid Hydrogen Peroxide Compressed Hydrogen Gas Dilute Sulphuric Acid Scale win Methylene Chloride

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MAJOR WORKIN-PROGRESS MATERIALS USED IN INVENTORY OF GACL

Salt Barium carbonate Hydrocyanic Acid Natural gas for power plant Natural gas- for Chloromethane Potassium chloride Rock phosphate Hydrated lime ISO amyl Alcohol Aluminum ingots Aluminum Trihydrate powder Heavy normal paraffin Sulphuric Acid Caustic soda lye Chlorine gas Liquidity chlorine Hydrochloric acid Hydrogen gas Hydrogen peroxide Poly aluminum chloride Phosphoric acid

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MAJOR COMPETITORS
Atul product ltd. Comfad alkalies ltd. Century chemicals ltd. Tata chemicals ltd. Saurashtra chemicals ltd. Gujarat Heavy chemicals ltd. Southern Petrochemicals Industry ltd. Modi alkalies and chemical ltd.

CUSTOMERS Fertilizer:
GSFC GNFC IFFCO Deepak Nitrite Deepak Fertilizer

Pharmaceuticals:
Dr. Reddys Aurbide Pharma Turrent Runbuxy Cadila San Pharma Lupin Laboratory

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Textile:
Arvind Mills Ltd. Ashima Industries Ltd.

Agro-chemicals:
Gujarat Agrom Chemicals Ltd. Bildg Chemicals Arti industries Meghumani Organics Tagro

Refinery:
IOC IPCL Reliance Hajira Jamnagar Detergent HLL Godrej WF Ltd. Nepal Lever Nirma

Papers:
JK Paper Bilt Rama New Print Tamilnadu Pulp Industries

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5 S MODEL

SORT:
Clearly distinguish needed items from unneeded items. Remove all items from the work place that are not needed for current operation.

SET IN ORDER:
Arrange needed items so that they are easy to use & liable them so that they can find them & put them away.

SHINE: To keep work place swept & clean.

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STANDARDIZE:
It is the result that exists when the first three pillars are properly maintained. This integrates sort, set in order & shine into a unified one.

SUSTAIN:
To make a habit of properly maintaining correct procedures.

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FINANCE DEPARTMENT:-

Material Accounting Section

Central Accounting Section

Bank Section

Loan Section

Establishment & Cash Section

Finance Department

Income Tax & Insurance Section

Bill Passing Section

Inventory Accounting Section

Sales Accounting Section

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1. SALES ACCOUNTING:Maintain the details of Sales and Debtors account and related adjustments. Sales accounting has to deal with the external parties such as Government bodies, Sales representative and Dealers, Manufacturer, Direct Dealers, Retail Traders etc. The main function of this section is Sales collection and completes all the formalities related to Sales Tax. Excise with the due date concerned. Collects sales data and prepare all the data related to Sales with all customers keep in mind. They also look into the Sales collections on daily basis, Sales target to be meet daily with the procurement of all orders, price structure of the products and daily dispatch. The preparation of debit note and credit note prepares the discount charts. The discount given depends on the quantity the customers from the company. 2. BILL PASSING:All the bills that are raised come to his department for the sanction. Even when Raw Material are purchased the suppliers sends the bill to the purchase department which then sends to the Finance department. It is here that all particulars are checked and approved only after the bills have been approves payments will be made. Any department requiring payment of the bill needs to first send the bill here for approval. The company enjoys E-Payment for cenvat, excise and also salaries. 3. BANK SECTION:Checks out the details of banking section transaction and maintains balance of bank i.e (Bank Reconciliation Section). Bank section looks after deposits in Cash and Bank. It also collects cheques from marketing department. Banks kike HDFC,SBI etc are involved in the transaction with the GACL. Following are the basic task performance by this section:-

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To consolidate the bank account, take into account the cash credit limit. Cash credits are monitored so that in payment can be controlled. Every month cash flow statements is prepared.

4. LOAN SECTION:When new projects are taken up a project report is prepared, based on market survey. The report includes the present and future estimates, financial statements aspects i.e estimated cost, budgets etc. When project pass through then they goes to the financial institution for its final approval by this section. This section negotiates with bank for payment terms and rate of interest and makes long-term management for new projects. Loan of any employee as per rule is considered under this section. 5. INVENTORY ACCOUNTING SECTION:This section is concerned with the valuation of Inventory. The stores department prepares a goods receipt voucher based on this voucher, cost of inventory is calculated. This goes to say that the quantity is all checked by the stores but the amount is checked by this department based on the order placed. Thus this section needs to monitor the amount of inventory in the company. This also includes the stores and spares items in the organization. It also prepares the variance report based on the purchase order placed and the materials received. Monthly statements of inventory is send to bank for the hypothecation of the stock of capital. 6. COSTING AND BUDGETING SECTION:Make estimation of cost of the company and budget in advance and try to reduce the cost and improve efficiency. Costing is done not only for whole activity but also for individual items. This section prepares the monthly cost incurrence

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budget and monitors it. They have to ascertain the variable cost of the item being produced. This is because the knowledge of the variable cost is very essential as if an item is sold below the variable cost it would incur on the company. This section has a major hand in ascertainment of the prices of the items because it provides data about the cost of production. 7. CENTRAL ACCOUNTING SECTION:It is the heart of finance. Activities of all other sections are connected with the Central Accounting Section. The different function of this section are to prepare the balance-sheet and profitability statements. Financial statements and accounts are prepared monthly, quarterly and annually as per the requirement and send to SEBI and stock exchange. Profitability is calculated on day-to-day basis and posts it on intranet and reported to Managing Director (M.D). Verify the accounts maintain by all the departments and make financial analysis of the statement and also gives suggestions and recommendations. They also involved in preparation of Annual reports and provide all required information to the management. 8. INFORMATION TECHNOLOGY AND INSURANCE SECTION:This section takes cares of all Tax related issues. They are involved in Tax planning update all the laws with respect to taxation. This is becomes very important for the company because many decisions are taken keeping in mind its Tax implications. The budget in this report has also to be made for the payment and provision of advance Tax. Thy also manage the Insurance part. GACL basically, has the Insurance for its Fixed Assets and also a Group Insurance for the employees. For deciding on Insurance the company calls for quotations from various company and decides based on the investment and also considering the reputation. Tax laws are updated as per rules. Tax planning is under this

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department as part of prior responsibility. Insurance of all the Fixed Assets are done by the Tax consultants appointed to follow up with tax laws. 9. ESTABLISHMENT AND CASH SECTION:Do all employees related to work like prepare pay bill of employees Income tax Pension, Gratuity, Leave Encashment, LTC etc. This section works as a union with the HR department. The calculation of the salary for both management and non management are done here. All the deductions like P.F, Loans etc are also done here. They also incorporate into the salary allowances like Housing, Medical, Canteen Washing etc. The main function if this section are :Salary, Overtime, Income-Tax deductions of employees, Preparation of form 16B and 12B, Pension, Employees claims, Retirement dues like Gratuity, PF, Leave Encashment etc.

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FINANCE DEPARTMENT HIERARCHY

CFO General Manager Deputy General Manager Chief Manager Managers Deputy Managers Senior Officers Officers Union Officers Seniors Assistants Assistants

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-: RATIO ANALYSIS:Ratio Analysis is a widely used tool of financial analysis. It can be used to compare the risk, return and relationship of the firm of different sizes. It is defined as the systematic use of ratio to interpret the financial statement so that the strengths and weaknesses of a firm as well as its historical performance and current financial condition can be determined. Ratio Analysis is the calculation and comparison of ratio, which are derived from the information in a companys financial statements. The level and historical trends of these ratios can be used to make inferences about a companys financial condition, its operations and attractiveness as an investment. Ratio Analysis groups the ratio into categories which tell us about different facts of a companys finance and operations. It is imperative to note the importance of the proper context for ratio analysis. Examining a cyclical companys profitability ratios over less than a full commodity or business cycle would fail to give an accurate long term measure of profitability. Although financial ratio analysis is well-developed and the actual ratios are wellknown, practicing financial analysts often develop their own measures for particular industries and even individual companies. Analysts will often differ drastically in their conclusion from the same ratio analysis.

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ADVANTAGES OF RATIO ANALYSIS 1. To workout the profitability: Accounting ratio help to measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern. In this way profitability ratios show the actual performance of the business. 2. To workout the solvency: With the help of solvency ratios, solvency of the company can be measured. These ratios show the relationship between the liabilities and assets. In case external liabilities are more than that of the assets of the company, it shows the unsound position of the business. In this case the business has to make it possible to repay its loans. 3. Helpful in analysis of financial statement: Ratio analysis help the outsiders just like creditors, shareholders, debenture-holders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc. 4. Helpful in comparative analysis of the performance: With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them. 5. To simplify the accounting information: Accounting ratios are very useful as they briefly summaries the result of detailed and complicated computations. 6. To workout the operating efficiency: Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilizing the resources.

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7. To workout short-term financial position: Ratio analysis helps to workout the short-term financial position of the company with the help of liquidity ratios. In case short-term financial position is not healthy efforts are made to improve it. 8. Helpful for forecasting purposes: Accounting ratios indicate the trend of the business. The trend is useful for estimating future. With the help of previous years ratios, estimates for future can be made. In this way these ratios provide the basis for preparing budgets and also determine future line of action.

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LIMITATIONS OF RATIO ANALYSIS 1. Limited Comparability: Different firms apply different accounting policies. Therefore the ratio of one firm can not always be compared with the ratio of other firm. Some firms may value the closing stock on LIFO basis while some other firms may value on FIFO basis. Similarly there may be difference in providing depreciation of fixed assets or certain of provision for doubtful debts etc. 2. False Results: Accounting ratios are based on data drawn from accounting records. In case that data is correct, then only the ratios will be correct. For example, valuation of stock is based on very high price, the profits of the concern will be inflated and it will indicate a wrong financial position. The data therefore must be absolutely correct. 3. Effect of Price Level Changes: Price level changes often make the comparison of figures difficult over a period of time. A change in price affects the cost of production, sales and also the value of assets. Therefore, it is necessary to make proper adjustment for price-level changes before any comparison. 4. Qualitative factors are ignored: Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision making. For example, average collection period may be equal to standard credit period, but some debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis. 5. Effect of window-dressing: In order to cover up their bad financial position some companies resort to window dressing. They may record the accounting data according to the convenience to show the financial position of the company in a better way.

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6. Costly Technique: Ratio analysis is a costly technique and can be used by big business houses. Small business units are not able to afford it. 7. Misleading Results: In the absence of absolute data, the result may be misleading. For example, the gross profit of two firms is 25%. Whereas the profit earned by one is just Rs.5,000 and sales are Rs.20,000 and profit earned by the other one is Rs.10,00,000 and sales are Rs.40,00,000. Even the profitability of the two firms is same but the magnitude of their business is quite different. 8. Absence of standard university accepted terminology: There are no standard ratios, which are universally accepted for comparison purposes. As such, the significance of ratio analysis technique is reduced.

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LIQUIDITY RATIOS 1. CURRNET RATIO :It establishes the relationship between Current Assets and Current Liabilities. It is to measures the ability of the firm to meet its short term objectives and to reflect the short term financial solvency of a firm, in other words to measures margin of safety for short term creditors. The formula of Current Ratio is (Current Ratio = Current Assets / Current Liabilities). Particulars Current Assets Current Liabilities Answer 1.86 1.72 1.51 1.41 1.56 23677.87 31135.27 41440.03 53322.03 50064.90 2005 2006 44026.73 2006 2007 53696.53 2007 2008 62392.7 2008 2009 75128.04 2009 2010 78306.63

Current Ratio
2 1.5

Answers

1 0.5 0 2005 2006 2006 2007 2007 2008 Years 2008 2009 2009 2010

Answer

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CONCLUSION:It indicates rupee of Current Assets available for every rupee of Current Liabilities. Higher the ratio greater the margin for short term creditors and vice versa. Also too high and too low Current Ratio calls for further investigation funds as high Current Ratio indicates idle funds and low Current Ratio is 2:1. Here the companys Current Assets and Current Liabilities both are increasing but Current Liabilities are increasing rapidly than the Current Assets so the ratio is decreasing which is not good for the company.

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2. Quick Ratio:It establishes the relationship between Quick Assets and Liquid Liabilities. It is to measure absolute liquidity by comparing Quick Assets with Liquid Liabilities. It is also known Absolute Liquidity Ratio and Acid Test Ratio. The formula of Quick Ratio is (Current Assets Inventories / Current Liabilities). Particulars C.A Current Liabilities Answer 1.54 1.42 1.25 1.09 1.28 () Inventories 7540.86 9549.36 10472.23 17057.29 50064.90 2005 2006 44026.73 2006 2007 53696.53 2007 2008 62392.7 2008 2009 75128.04 2009 2010 64281.75

Quick Ratio
1.8 1.6 1.4 1.2 1 0.8 0.6 0.4 0.2 0 2005 2006 2006 2007 2007 2008 Years 2008 2009 2009 2010

Answers

Answer

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CONCLUSION:Quick Ratio establishes the relationship between Quick Assets and Liquid Liabilities. Its comparing Quick Assets with Liquid Liabilities. Its ideal ratio is 0.5:1. Here also companys Current Assets after deductions of Inventory increasing but not as Current Liabilities so the companys ratio decreasing which is not good for the company.

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LEVERAGE RATIOS 1. DEBT EQUITY RATIO:This ratio is indicating relationship between loan funds and net worth of the company, which is known as gearing. If the proportion of debt to equity is low, a company is said to below geared and vice versa. A debt equity ratio of 2:1 is the normally accepted by financial institution for financing of project. Higher the debt equity ratio may be permitted for highly capital intensive industries like petrochemicals, fertilizers, power etc. Higher the gearing, the more volatile the return to share-holders. The formula of Debt Equity Ratio is (Total Debt / Net Worth excluding Preference Shares). Particulars Total Debt Net Worth ( ex Pref. Shares) Answer 0.65 0.45 0.29 0.27 0.23 2005 2006 47260.33 72308.00 2006 2007 40062.96 107842.85 2007 2008 31546.96 107842.85 2008 2009 33522.69 124492.59 2009 2010 32323.81 139107.95

Debt Equity Ratio

0.7 0.6 0.5 0.4 0.3 0.2 0.1 0 2005 2006 2006 2007 2007 2008 Years 2008 2009 2009 2010 Answer

Answers

39

CONCLUSION:A high debt equity ratio means less protection for creditors. A low ratio indicates a wider safety for creditors. That is good for the company. Lower the debt equity ratio is better for the company. Here the companys debt and net worth both are increasing but net worth is increasing rapidly than the debt so the debt equity ratio is decreasing which is good for the company.

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2. CAPITAL EMPLOYEE TO NET WORTH RATIO:This ratio compares long term debt to the net worth of the firm i.e the capital and free reserves less tangible assets. This ratio is finer than the debt equity ratio and includes capital which is invested in fictitious assets like deferred expenditure and carried forward losses. This ratio would be contributories of long term finance to the firm, as the ratio gives a factual idea of the assets available to meet the long term liabilities. The formula to calculate capital employee to net worth is (Capital Employee / Net Worth including Preference Shares). Particulars Capital Employee Net Worth ( ex Pref. 1.95 1.70 1.51 1.49 1.46 Shares) Answer 72308.0 107842.85 107842.85 124492.59 139107.95 2005 2006 140900.0 2006 2007 151051.0 2007 2008 163318.0 2008 2009 185925.0 2006 2010 172031.89

Capital Employee to Net Worth Ratio

2.5 2

Answers

1.5 1 0.5 0 2005 2006 2006 2007 2007 2008 Years 2008 2009 2009 2010

Answer

41

CONCLUSION:Capital employee to net worth ratio shows that the proportion between total capitals employed to the net worth. Higher the ratio better is the situation in terms of capital employee to net worth. Here the companys ratio is going down which is not good for the company so company will require further investigation.

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3. FIXED INTEREST COVERAGE RATIO:The interest coverage ratio shows how many times interest charges are covered by funds that are available for payment of interest. An interest covers of 2:1 is considered reasonable by financial institutions. A very high ratio indicates that the firm is conservative in using debt and a very low ratio indicates excessive use of debt. The formula to calculate fixed interest coverage ratio is (EBIT / INTEREST). Particulars EBIT INTEREST Answer 2005 2006 41252 3935.88 10.48 2006 2007 39880 3773 10.57 2007 2008 39884 2532.52 15.75 2008 2009 40191 2459.40 16.34 2009 2010 15116.53 1747.60 8.65

Fixed Interest Coverage Ratio

18 16 14 12 10 8 6 4 2 0 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years

Answers

Answer

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CONCLUSION:This ratio is continuously decreasing. It signifies that the companys profit before tax and interest fluctuating where the interest continuously decreasing so that the companys interest coverage ratio decreases which indicates that the company is using excessive debt.

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PROFITABILITY RATIOS 1. GROSS PROFIT RATIO:This ratio establishes the relationship between profit and net sales. It is to find the amount of gross profit earned at the end of the year. Gross Profit Ratio provides guidelines to the concern whether it is earning sufficient profit to cover administration and marketing expenses and is able to cover its fixed expenses. The minor change in the ratio from year to year may be ignored but in case there is big change, it must be investigated. This investigation will be helpful to know about any departure from the standard mark up and would indicate losses on account of theft, damage, bad stock etc. The formula to calculate gross profit ratio is (Gross Profit / Net Sales)*100. Particulars Gross Profit Net Sales Answer 94410.38 56.09% 104483.51 50.43% 113363.04 45.46% 138682.11 37.0% 127807.33 22.71% 2005 2006 52958.03 2006 2007 52692.56 2007 2008 51526.63 2008 2009 51324.25 2009 2010 29019.00

Gross Profit Ratio

60.00% 50.00%

Answers

40.00% 30.00% 20.00% 10.00% 0.00% 2005 2006 2006 2007 2007 2008 Years 2008 2009 2009 2010 Answer

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CONCLUSION:There is no ideal ratio but the increase in the gross profit is better for the company and vice versa. Here the companys gross profit and net sales both are fluctuating so the gross profit ratio is also fluctuating. Gross profit is decreasing in the 2006 but after that it is decreasing rapidly which indicates there is loss to the company. This shows that the company is not able to maintain the gross profit from a long time.

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2. NET PROFIT RATIO:Net Profit Ratio establishes the relationship Net Sales and Profit after tax. It is to determine overall profitability after taking into account various expenses and other factors. This ratio is helpful to determine the operational ability of the concern. While comparing the ratio to previous years ratios, the increment shows the efficiency to the concern. The formula to calculate the Net Profit Ratio is (PAT / Net Sales)*100. Particulars PAT Net Sales Answer 2005 2006 19797 94410.38 20.97% 2006 2007 18656 104483.51 17.86% 2007 2008 22408 113363.04 19.77% 2008 2009 19227 138682.11 13.86% 2009 2010 17184.38 127807.33 13.45%

Net Profit Ratio

25.00% 20.00%

Answers

15.00% 10.00% 5.00% 0.00% 2005 2006 2006 2007 2007 2008 Years 2008 2009 2009 2010

Answer

47

CONCLUSION:This ratio shows the profitability of the firm. High the Net Profit ratio shows that the company is in the better position. Here the companys Net Profit ratio is high. Moreover, the companys ratio is fluctuating because PAT of the company is going up and down and Net Sales is decreasing in the year 2006 after that it is increasing so that its ratio is going up and down.

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3. OPERATING PROFIT RATIO:A ratio used to measure a companys pricing strategy and operating efficiency. Operating margin is a measurement of what proportion of a companys revenue is left over after paying for variable cost of production such as wages, raw materials etc. A healthy operating margin is required for a company is to be able to pay for its fixed costs, such as interest on debt. Operating Profit Ratio is called as Operating Profit Margin or Net Profit Margin. The formula to calculate Operating Profit Ratio is (EBIT Other Income / Net Sales). Particulars EBIT O.I Net Sales Answer 2005 2006 38497.31 94410.38 0.41 2006 2007 35828.68 104483.51 0.34 2007 2008 32909.32 113363.04 0.29 2008 2009 38865.73 138682.11 0.26 2009 2010 10680.57 127807.33 0.08

Operating Profit Ratio

0.45 0.4 0.35 0.3 0.25 0.2 0.15 0.1 0.05 0 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years

Answers

Answer

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CONCLUSION:Operating Profit Ratio gives an idea of how much a company makes profit on each rupee of a sale. If a companys profit is increasing, it is earning more per rupee of a sale. The higher is the ratio is better for the company. Here the companys EBIT after deductions of the Other Income is decreasing but in 2009 it is increasing, while Net Sales is decreasing in the year 2006 after that it is increasing so that its ratio is decreasing continuously which shows that the company will require further investigation.

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4. EXPENSE RATIO:The Expense Ratio of a stock or assets fund is the total percentage of fund assets used for administrative management, advertising and all other expenses. An expenses ratio of 1% per annum means that each year 1% of the funds total assets will be used to cover expenses. The expense ratio doesnt include sales loads or brokerage commission. The formula to calculate the Expense Ratio is (Total Expenses /Net Sales)*100. Particulars Total Expenses Net Sales Answer 94410.38 75.36% 104483.51 81.51% 113363.04 86.24% 138682.11 88.62% 127807.33 92.53% 2005 2006 71149.46 2006 2007 85159.47 2007 2008 97875.82 2008 2009 122893.85 2009 2010 118254.84

Expense Ratio
100.00% 80.00%

Answers

60.00% 40.00% 20.00% 0.00% 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years

Answer

51

CONCLUSION:In the year 2005, 2006, 2007, 2008, 2009 and 2010 the companys expenses ratio for every rupees 100 is 75.36%, 81.51%, 86.24%, 88.62% and 92.53% respectively which is very nearly to each other but lesser the ratio is better for the company. Here every year the companys ratio is going up and down that isnt good for the company. It shows that the companys expenses every year increases except in 2006 and the sales of the company also increasing but the expenses are increasing more faster than the sales of the company so that the ratio is fluctuating so company will require further investigation.

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5. RETURN ON SHAREHOLDERS FUNDS:Profit after Tax divided by Net worth; this is the final measure of profitability to evaluate overall return. This ratio measures return relative to investment in the company. Putting in another way Net worth indicates how well a companys leverage investment is in the company. It may appear higher for start up and sole proprietorship due to owner compensation draws accounted as Net profit. The formula to calculate Return on shareholders funds (PAT / Shareholders Funds)*100. Particulars PAT SH. Funds Answer 2005 2006 19797 72307.34 27.38% 2006 2007 18656 88847.68 20.99% 2007 2008 22408 107842.85 20.78% 2008 2009 19227 124492.59 15.44% 2009 2010 17184.38 139107.95 12.35%

Return on Share Holder's Fund

30.00% 25.00%

Answers

20.00% 15.00% 10.00% 5.00% 0.00% 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years Answer

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CONCLUSION:The return on shareholders fund for the year from 2005 2009 is 26.63% to 15.44% respectively. The company is able to earn RS.26.63 to RS. 15.44 for every RS.100 invested by the shareholders. Higher the ratio is better for the investors because by its they can earn more interest. Higher the ratio represents sound financial position and companys ability to earn profit on shareholders fund. But here the companys ratio is fluctuating so its require to further investigate.

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6. RETURN ON TOTAL ASSETS:A ratio that measures a companys earning before Interest and Taxes (EBIT) against its total net assets. The ratio is considered as indication of how effectively a company is using its assets to generate earnings before contractual obligations must be paid. The formula to calculate Return on Total Assets is (PAT / Fixed Assets + Current Assets + Investments)*100. Particulars PAT Answer 2005 2006 19797 13.80% FA+CA+INVST 143436.58 2006 2007 18656 168327.71 11.09% 2007 2008 22408 198291.24 11.30% 2008 2009 19227 227172.16 08.46% 2009 2010 17184.38 239203.11 07.18%

Return on Total Assets

16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years

Answers

Answer

55

CONCLUSION:Higher the ratio is the better for the company because it shows the companys efficiency in using its Total Assets. The higher return is better because the company is earning more money on less investments and vice-versa. Here the companys ratio is fluctuating because Total Assets of the company increases but PAT of the company is fluctuating so it an say that the company isnt in better position because in other years it is decreasing which isnt good for the company.

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7. RETURN ON CAPITAL EMPLOYED:The return on capital employed ratio tells us how much profit we earn from the investments that shareholders have made in their company. The formula to calculate Return on Capital Employed is (PAT / Capital Employed)*100. Particulars PAT Capital Employee Answer 14.05% 12.35% 13.72% 10.34% 10.02% 2005 2006 19797 140900 2006 2007 18656 151051 2007 2008 22408 163318 2008 2009 19227 2009 2010 17184.38

185925 172031.89

Return on Capital Employed

16.00% 14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years

Answers

Answer

57

CONCLUSION:The higher ratio, the higher is return and profitability of the business. In years from 2005, 2006, 2007, 2008, 2009 and 2010 for every RS.100 Capital Employee returns are 14.05% to 10.02% respectively. Here, the companys Total Capital Employee is increasing where as PAT is fluctuating which shows company isnt in a better position.

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TURNOVER RATIOS 1. INVENTORY RATIO:It refers to the no. of times the inventory is sold and replaced during the accounting period. It reflects the efficiency of inventory management. The higher the inventories and vice-versa. However, a high inventory turnover may also results from a low level of inventory which may lead to frequent stock outs and loss of sales and customers goodwill. For calculating Inventory Turnover Ratio, the average of inventories at the beginning and at the end of the years is taken. In general average may be used when a flow figures is related to a stock figure. The formula to calculate the Inventory Ratio is (Cost of Goods Sold / Average Inventory). Particulars COGS Avg. Inventory Answer 08.04 08.05 08.06 07.63 05.61 2005 2006 56437.68 7020.37 2006 2007 68818.13 8545.11 2007 2008 80701.96 10010.80 2008 2009 105088.33 13764.76 2009 2010 87119.47 15541.09

Inventory Ratio
9 8 7 6 5 4 3 2 1 0 2005 2006 2006 2007 2007 2008 2008 2009 Years 2009 2010

Answers

Answer

59

CONCLUSION:The increasing ratio is better for the company. Here the companys Inventory Ratio in year from 2005 2009 is 08.04 to 05.61 respectively. It shows that companys ratio is increasing in the year 2006 and 2007 as compared with 2005 but in the year 2008 again it is increasing and decrasing so the company will require further investigation.

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2. FIXED ASSETS TURNOVER RATIO:The Fixed Assets Turnover ratio measures the net sales per rupee of investment made in Fixed Assets. This ratio measures the efficiency with which Fixed Assets are employed. A high ratio indicates a high degree of efficiency in assets utilizations while a low ratio reflects an inefficient use of assets. However, this ratio should be used with caution because when the fixed assets of a firm are old and substantially depreciated, the fixed assets turnover ratio tends to be high. The formula to calculate the Fixed Assets Turnover Ratio is (Net Sales / Net Fixed Assets). Particulars Net Sales Net FA Answer 2005 2006 94410.38 87160.94 01.08 2006 2007 104483.51 102999.67 01.01 2007 2008 113363.04 123847.68 0.92 2008 2009 138682.11 140316.60 0.99 2009 2010 127807.33 160896.48 0.79

Fixed Asset Turnover Ratio

1.2 1

Answers

0.8 0.6 0.4 0.2 0 2005 2006 2006 2007 2007 2008 2008 2009 Years 2009 2010 Answer

61

CONCLUSION:A high ratio indicates a high degree of efficiency in assets utilizations while low ratio indicates inefficient use of assets. These ratio are continuously decreasing in 2008 and increasing in 2009. It signifies that the companys sales are enough as compared to the fixed Assets. Companys Fixed Assets Turnover ratio has improved since last year, it means the Fixed Assets are being used effectively to earn profits in the business. The company should try to increase the ratio so that it may utilize Fixed Assets fully.

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3. WORKING CAPITAL TURNOVER RATIO:A measurement comparing the depletion of Working Capital to the generation of sales over a given period. This provides some usefulness information as to how effectively a company is using its Working Capital to generate sales. A company uses Working Capital to fund operations and purchases inventory. These operations and inventory are then converted into sales revenue for the company. The Working Capital Turnover Ratio is used to analyze the relationship between the money used to fund operations and the sales generated from these operations. In a general sense, the higher the working capital turnover, the better because it means that the company is generating a lot of sales compared to the money it uses to fund the sales. The formula to calculate the Working Capital Turnover ratio is (Net Sales / Net Working Capital). Particulars Net Sales Net WC Answer 2005 2006 94410.38 20348.86 04.64 2006 2007 104483.51 22561.26 04.63 2007 2008 113363.04 20952.67 05.41 2008 2009 138682.11 21806.01 06.36 2009 2010 127807.33 28241.73 04.53

Working Capital Turnover Ratio

7 6 5

Answers

4 3 2 1 0 2005 2006 2006 2007 2007 2008 2008 2009 Years 2009 2010

Answer

63

CONCLUSION:In the year 2005 2009 the companys Working Capital Turnover ratio is 04.64 to 04.53 respectively which shows the companys Working Capital Turnover ratio is increasing every year. Higher the better for the company even it will require further investigation.

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4. TOTAL ASSTES TURNOVER RATIO:Total Assets Turnover Ratio is the ratio between the Net sales and the average Total Assets. The ratio of total sales (on your income statement) to Total Assets (on your Balance-Sheet) indicates how will you are using all your business assets to generate revenue. A high assets turnover ratio means a higher return on assets which can compensate for a low profit margin. In computing the ratio, you might compute total assets by average the total assets at the beginning and end of the accounting period. The formula to calculate the Total Assets Turnover Ratio is (Net Sales / Total Assets) Particulars Net Sales Total Assets Answer 0.66 0.62 0.57 0.61 0.50 2005 2006 94410.38 143436.58 2006 2007 104483.51 168927.71 2007 2008 113363.04 198291.24 2008 2009 138682.11 227172.16 2009 2010 127807.33 253253.69

Total Assets Turnover Ratio

0.7 0.6 0.5

Answers

0.4 0.3 0.2 0.1 0 2005 2006 2006 2007 2007 2008 2008 2009 Years 2009 2010

Answer

65

CONCLUSION:In years from 2005 2010 companys Total Assets Turnover Ratio is from 0.66 to 0.50 respectively. It shows that the companys ratio is decreasing till 2008 and slight increased in 2009. Higher the ratio is better for the company. But here the companys ratio isnt high so company will require further investigation.

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5. NET WORTH TURNOVER RATIO:The ratio establishes the relationship between Net Sales and Net Worth. It includes Net Worth excluding Preference Shares Capital because this is the ratio which shows the contribution of Net Sales in the owners equity. So, as the equity shareholders are the real owners of the firm. The formula to calculate Net worth Turnover Ratio is (Net Sales / Net Worth excluding Preference Shares). Particulars Net Sales Net (ex Answer Pref 01.31 Times 01.18 Times 01.05 Times 01.11 Times 0.92 Times 2005 2006 94410.38 Worth 72308 2006 2007 104483.51 107842.85 2007 2008 113363.04 107842.85 2008 2009 138682.11 124492.59 2009 2010 127807.33 139107.95

Shares)

Net Worth Turnover Ratio

1.4 1.2 1

Answers

0.8 0.6 0.4 0.2 0 2005 2006 2006 2007 2007 2008 2008 2009 Years 2009 2010

Answer

67

CONCLUSION:This ratio is decreasing continuously till 2009 which means that the company hasnt enough sales so it can not earn easily. Nut in the year 2009 it is 1.11 times and it is more than previous years. So it is good for the company because in the year 2010 it has again decreased. So here the company requires further investigation.

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6. DEBTORS TURNOVER RATIO:It is calculated by dividing the net credit sales by average debtor outstanding during the years. It measures the liquidity of a firms debts. Net credit sales are the gross credit sales minus returns, if any, from customers. Average Debtors are the average debtors at the beginning and at the end of the year. This ratio shows how rapidly debts are collected. The higher the Debtor Turnover Ratio the better of its organization. The formula to calculate Debtors Turnover Ratio is(Net Sales / Debtors + Bills Receivables). Particulars Net Sales Debtors + BR Answer 05.88 06.12 05.85 05.59 04.85 2005 2006 94410.38 16061.27 2006 2007 104483.51 17072.72 2007 2008 113363.04 19391.32 2008 2009 138682.11 24810.49 2009 2010 127807.33 26355.19

Debtor's Turnover Ratio

7 6 5

Answers

4 3 2 1 0 2005 2006 2006 2007 2007 2008 2008 2009 Years 2009 2010

Answer

69

CONCLUSION:It establishes relationship between Net credit sales and Debtors. Generally the lesser debt collection period indicates prompt payment by debtors and viceversa. There could not be too high or too low debt collections period. Here, the companys ratio in the years from 2005 2010 is 05.88 to 04.85.respectively which is going up and down. The companys Debtors ratio is very low so will require further investigation.

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VALUATION RATIOS: 1. Dividend Yield Ratio:It is closely related to the dividend per share, while the dividend per share is based on the book-value per share, the yield is expressed in terms of the market valued share. The dividend yield is computed by dividing the cash dividend per share by the market value per share. The formula to calculate Dividend Yield ratio is (Dividend Per Share / Average Market Price Share) Particulars DPS Average MPS Answer 01.30% 01.39% 01.88% 02.22% 02.75% 2005 2006 02 154.15 2006 2007 02.50 180.29 2007 2008 03.50 186.52 2008 2009 03.00 135.43 2009 2010 03.00 109.00

Dividend Yield Ratio

3.00% 2.50%

Answers

2.00% 1.50% 1.00% 0.50% 0.00% 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years Answer

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CONCLUSION:Here the companys dividend yield ratio in the years from 2005 2010 is 01.30% to 02.75% respectively, which shows that it is fluctuating. It means that the companys share average market price in year 2005 is 87.84 and company gives as a dividend RS 01.5 that is good for the company. In 2006 its average market price share is 154.15and dividend of RS 02.00. In 2007 its average market price share is 180.29 and dividend of RS 02.50. In 2008 its average market price share is 186.52 and dividend of RS 03.50. In 2009 its average market price share is 135.43 and dividend of RS 03.00.

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2. DIVIDEND PAYOUT RATIO:It is also known also Payout ratio. It measures the relationship between the earnings belonging to the ordinary shareholders and the dividend paid to them. In other words the Dividend Payout ratio shows what percentage share of the net profits after tax and preference dividend is paid out as dividend to the equity holders. It can also found out by dividing the Dividing Per Share by the Earning Per Share. The formula to find Dividend Payout Ratio is (Dividing Per Share by the Earning Per Share). Particulars DPS EPS Answer 2005 2006 02 27 07.41% 2006 2007 02.50 25 10.00% 2007 2008 03.50 30 11.67% 2008 2009 03.00 26 11.54% 2009 2010 03.00 23.40 12.82%

Dividend Payout Ratio

14.00% 12.00% 10.00% 8.00% 6.00% 4.00% 2.00% 0.00% 2005 2006 2006 2007 2007 2008 2008 2009 2009 2010 Years Answer

Answers

73

CONCLUSION:Here the companys Dividend Payout Ratio from years 2005 2010 is 07.41% to 12.82% from this we can say that the company is having more profit than it gives, so it is better for the company. The company gives profit to its shareholders as dividend between RS. 02.00 and RS.03.50. This shows that the company earns more than its distributed as a dividend so it is good for the company.

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3. PRICE EARNING RATIO:It is the ratio between the market price of the shares of a firm and the firms earnings per share. The Price Earning Ratio indicates the growth prospects, risk characteristics, degree of liquidity, shareholders orientation and corporate image of a company. Particulars Average MPS EPS Answer 27 05.71 Times 25 07.21 Times 30 06.22 Times 26 05.21 Times 23.40 04.66 Times 2005 2006 154.15 2006 2007 180.29 2007 2008 186.52 2008 2009 135.43 2009 2010 109.00

Price Earning Ratio

8 7 6

Answers

5 4 3 2 1 0 2005 2006 2006 2007 2007 2008 2008 2009 Years 2009 2010 Answer

75

CONCLUSION:In this company Price Earning ratio in 2005 is 05.71 times and in 2010 is 04.66 times which shows that the companys ratio is increasing in the year 2006 and 2007 and after that it is decreasing. If the Price Earning ratio is less than 10 than it is attractive. Here the company ratio is less than 10 which is good for the company.

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FINDINGS: GACL is an organization governed by government of Gujarat thus, it has all the features of a public sector company i.e economies of scale, trust worthiness, huge credit limit of 150 cores per day and also has good features of Private sector organization like fast pace workforce, target based performance, various new and innovative methods of growth and profit increasing etc. GACL does as much export as possible but the imports are also huge thus, the imports investment are covered by the export earning and the added advertisement given by the exports are poured in the imports to nullify the effects of imports investment. GACL has increased its market share by applying Performance Management System (PMS) strategy. This strategy has increased the productivity of the company and it has also enhanced companys image in the global market. Companys exports have increased from RS 45 cores in the year 2007 2008 to about RS 100 cores in the year 2009 2010.GACL is a leading company in Chloe-Alkali producing industry and it is largest caustic soda producer in Asia. In year 2009, the companys sales is increasing which is good for the company but the input cost of the company which is also increasing so that almost all the ratio o0f the company are decreasing in the year 2009.

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SUGGESTIONS: The company should increase its marketing through advertisement because GACL has never gone much in advertisement and have always relied on the word of mouth publicity strategy. The company should take up exports also as a profit making department and should not think exports only relationship building. GACL should increase the share of Performance Management System i.e more than 15% because the employees are well paid and even 85% salary is a high pay thus, because of this Performance Management System effects are debited and hence the growth does not take as expected. The company should try to decrease the import of Potassium Chloride because it is very costly product and hence affects the import figures to a large extents. The company should take up imports and exports as marketing units because it always affects the marketing strategies of the company and have always helped the company to grow in the global market by use of different innovative strategies.

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CONCLUSION:During one and half month of training I explore my knowledge of corporate field. I also know that how to implement theory in practice. I also got chance to study all the department of GACL so that it improves my convincing power and also give chance to meet different people. It also increased my confidence. It is a memorable experience to be a part of GACL PARIVAR. I am always thankful to them. Finally, I would like to conclude that through its uniqueness and providing higher quality of products GACL has made its name felt. Though it is governed by Government of Gujarat it acts both ways i.e working as a public sector company with innovations and work methodology as Private Sector Company. It is a company which takes care of all the environment protection acts and strategies. GACL uses all sorts of environment friendly strategies without thinking of the cost involved in it, It is a company which has succeeded due to the hard work and sincerity of its employees. So, it is truly an employee company. Its success also lies in the co-ordination of its different departments. This summer training was an enlightening experience for me to understand observe associate and finally establishes a link between the theoretical and practical concepts involved in management. Its strength lies in its economy of size of the art technologies, low cost power from GIPCL at Vadodara captive cogenerate downstream plants, a well established network for marketing and distribution, in house research and development and manpower.

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BIBLIOGRAPHY
www.gacl.com www.google.com Annual Reports of GACL for the year of 2009-10.

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