1

CHAPTER 1

INTRODUCTION

1.1 INTRODUCTION

Financial statement analysis is largely a study of relationship among the various financial business disclosed by a single set of statements .It is a process of evaluating the relationship between component parts of financial statement to obtain a better understanding of a firm’s position and performance.Financial statements analysis is an attempt to determine the significance and meaning of the fianacial statement data so that forecast may be made of the future earnings,ability to pay interest and debt maturities and profitability of a sound investment ,sales.A number of methods or devices are used for the analysis is the balance sheet and income income statements of the Amman Agency,S.R.Raja Jewellery and S.R.Raja Agency for a period of two years(2006-07 and 2007-08).The analysis was done by using various financial tools, statistical tools.The graphs were used accordingly to support the analysis.

NEED OF THE STUDY

The financial statements are mirror which reflects the financial position and strengths or weakness of the concern .The analysis of financial statements are useful to

 Management  Investors  Creditors  Bankers  Financual Institutionn etc.. 2

1.2 SCOPE & SIGNIFICANCE OF THE STUDY

The ratio analysis of the financial statements will help the organization in knowing about the liquidity and also helps in knowing the efficiency with which the firms are managing their resources and also to understand the profitability of the two companies.

In the study the financial tool such as Ratio analysis , comparative Balance sheet, Trend analysis are performed to bring out the real financial position of the companies and to compare the various components of the financial statement in a different angle.

The purpose of the study is to enumerate the various financial opportunities and threats of the company.But this analysis is done for only three companies, and it is compared for only two years.Further analysis can be extended by comparing with other players in the market and also for a longer period 3

1.3 STSTEMENT OF THE PROBLEM

This study is to determine the efficient customer of the ,Tambaram Branch.It indicates the firm’s utilization of resources,investments,shareholder’s funds and other facilities provided by the bank.In this syudy to compare the three companies and to determine the effective customer among the three companies. 4

1.4 OBJECTIVES OF THE STUDY

The main objective of the study is to compare the financial performance of three private customers of the INDIAN OVERSEAS BANK Tambram Branch.

 To study the various components of the financial statement in relation to the profitability of the companies.

 To analyse the liquidity and overall performance of the companies.

 To study the solvency position of the companies 5

1.5 RESEARCH METHDOLOGY

Research Design

This study is analytical in nature.In analytical research that uses the facts or information already available and analyses to make a critical evaluation of the study.

Data Collection

The study is base on secondary data from Amman Agency,S.R.Raja Jewellery Private Ltd. , S.R.Raja Agency.

Secondary Data

Secondary data are based on the two years annual report from 2006-07 to 2007-08.It also consider the available data in the records,prospectus ec., 6

CHAPTER 2

PROFILE

2.1 Industry Profile

History Of Banking Sector In India Without a sound and effective banking system in India it cannot have a healthy economy. The banking system of India should not only be hassle free but it should be able to meet new challenges posed by the technology and any other external and internal factors.

For the past three decades India's banking system has several outstanding achievements to its credit. The most striking is its extensive reach. It is no longer confined to only metropolitans or cosmopolitans in India. In fact, Indian banking system has reached even to the remote corners of the country. This is one of the main reasons of India's growth process.

The government's regular policy for since 1969 has paid rich dividends with the nationalisation of 14 major private banks of India.

The first bank in India, though conservative, was established in 1786. From 1786 till today, the journey of Indian Banking System can be segregated into three distinct phases. They are as mentioned below: • Early phase from 1786 to 1969 of Indian Banks • Nationalisation of Indian Banks and up to 1991 prior to Indian banking sector Reforms. 7

• New phase of Indian Banking System with the advent of Indian Financial & Banking Sector Reforms after 1991.

Phase I

The General was set up in the year 1786. Next came Bank of Hindustan and . The East India Company established Bank of Bengal (1809), (1840) and (1843) as independent units and called it Presidency Banks. These three banks were amalgamated in 1920 and was established which started as private shareholders banks, mostly Europeans shareholders.

During the first phase the growth was very slow and banks also experienced periodic failures between 1913 and 1948. There were approximately 1100 banks, mostly small. To streamline the functioning and activities of commercial banks, the Government of India came up with The Banking Companies Act, 1949 which was later changed to Banking Regulation Act 1949 as per amending Act of 1965 (Act No. 23 of 1965). was vested with extensive powers for the supervision of as the Central Banking Authority.

During those day’s public has lesser confidence in the banks. As an aftermath deposit mobilisation was slow. Abreast of it the savings bank facility provided by the Postal department was comparatively safer. Moreover, funds were largely given to traders.

Phase II

Government took major steps in this Indian Banking Sector Reform after independence. In 1955, it nationalised Imperial Bank of India with extensive banking facilities on a large scale especially in rural and semi-urban areas. It formed to act as the principal agent of RBI and to handle banking transactions of the Union and State Governments all over the country. 8

Seven banks forming subsidiary of State Bank of India was nationalised in 1960 on 19th July, 1969, major process of nationalisation was carried out. It was the effort of the then Prime Minister of India, Mrs. Indira Gandhi. 14 major commercial banks in the country was nationalised.

Second phase of nationalisation Indian Banking Sector Reform was carried out in 1980 with seven more banks. This step brought 80% of the banking segment in India under Government ownership. Phase III

This phase has introduced many more products and facilities in the banking sector in its reforms measure. In 1991, under the chairmanship of M Narasimham, a committee was set up by his name which worked for the liberalisation of banking practices.

The country is flooded with foreign banks and their ATM stations. Efforts are being put to give a satisfactory service to customers. Phone banking and net banking is introduced. The entire system became more convenient and swift. Time is given more importance than money.

The financial system of India has shown a great deal of resilience. It is sheltered from any crisis triggered by any external macroeconomics shock as other East Asian Countries suffered. This is all due to a flexible exchange rate regime, the foreign reserves are high, the capital account is not yet fully convertible, and banks and their customers have limited foreign exchange exposure.

Scheduled Commercial Banks In India

The commercial banking structure in India consists of: • Scheduled Commercial Banks in India • Unscheduled Banks in India 9

Scheduled Banks in India constitute those banks which have been included in the Second Schedule of Reserve Bank of India(RBI) Act, 1934. RBI in turn includes only those banks in this schedule which satisfy the criteria laid down vide section 42 (6) (a) of the Act.

As on 30th June, 1999, there were 300 scheduled banks in India having a total network of 64,918 branches.The scheduled commercial banks in India comprise of State bank of India and its associates (, nationalised banks (19), foreign banks (45), private sector banks (32), co-operative banks and regional rural banks.

"Scheduled banks in India" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934), but does not include a co-operative bank".

"Non-scheduled bank in India" means a banking company as defined in clause (c) of section 5 of the Banking Regulation Act, 1949 (10 of 1949), which is not a scheduled bank". 10

2.2 COMPANY PROFILE

INDIAN OVERSEAS BANK

Established in 1937, Indian Overseas Bank (IOB) is a leading bank based in , India. IOB had the distinction of simultaneously commencing operations in three branches at Karaikudi, Chennai, and Yangon (Myanmar). Since IOB aimed to encourage overseas banking and foreign exchange operations, it soon opened its branches in Penang and Singapore. Today, Indian Overseas Bank boasts of a vast domain in banking sector with over 1400 domestic branches and 6 branches overseas.

IOB was the first bank to venture into consumer credit, as it introduced the popular Personal Loan scheme. In 1964, the Bank started computerization in the areas of inter-branch reconciliation and provident fund accounts. Indian Overseas Bank was one of the 14 major banks which were nationalized in 1969. After nationalization, the Bank emphasized on opening its branches in rural parts of India. In 1979, IOB opened a Foreign Currency Banking Unit in the free trade zone in Colombo.

In the year 2000, Indian Overseas Band undertook an initial public offering (IPO) that brought the government's share in the bank's equity down to 75%. The equity shares of IOB are listed in the (Regional), , and National Stock Exchange of India Ltd., Mumbai. Since its inception, IOB has absorbed various banks including the latest — Bharat Overseas Bank — in 2007.

The Bank's IT department has developed software, which is used by its 1200 branches to provide online banking to customers. Indian Overseas Bank also has a 11 network of about 500 ATMs throughout India. Its International Card is accepted at all ATMs belonging to the Cash Tree and NFS networks. IOB also offers Internet Banking; it's one of the banks that the Govt. of India has approved for online payment of taxes.

Indian Overseas Bank offers investment options like Mutual Funds and Shares. It provides a wide range of consumer and commercial banking services, including Savings Account, Current Account, Depositary Services, VISA Cards, Credit Cards, Debit Cards, Online Banking, Any Branch Banking, Home Loans, NRI Account, Agricultural Loans, Payment of Bills / Taxes, Provident Fund Scheme, Forex Collection Services, Retail Loans, etc.

Indian Overseas Bank (IOB) is a one of the major bank based in Chennai, with over 1,400 domestic branches and 6 branches abroad.

India Overseas Bank was established in 1937 to encourage overseas banking and foreign exchange operations. The Indian Overseas Bank started simultaneously with three branches. They are:

• Indian Overseas Bank Chennai • Indian Overseas Bank Rangoon • Indian Overseas Bank Singapore

From the begining Indian Overseas Bank served Chettinad, Ceylon (Sri Lanka), Burma (Myanmar), Malaya, Singapore, Java, Sumatra and Saigon.

In 1960 Indian Overseas Bank absorved five weaker private sector banks including Kulitali Bank. 12

In the year 2000 India Overseas Bank India engaged in IPO which brought the government's share in the bank's equity down to 75%.

IOB International expansion 1937-38: As mentioned above, IOB was international from its inception with branches Indian Overseas Bank Rangoon, Indian Overseas Bank Penang, and Indian Overseas Bank Singapore.

1941: IOB opened a branch in Malaya that presumably closed almost immediately because of the war. 1946: IOB opened a branch in Ceylon.

1947: IOB opened a branch in Bangkok and re-opened others.

1948: United Commercial Bank (see below) opened a branch in Malaya.

1949: IOB opened a branch in Bangkok.

1963: The Burmese government nationalized IOB's branch in Rangoon.

1973: IOB, Indian Bank and United Commercial Bank established United Asian Bank Berhad. (Indian Bank had been operating in Malaysia since 1941 and United Commercial Bank Limited had been operating there since 1948.) The banks set up United Asian to comply with the Banking Law in Malaysia, which prohibited foreign 13 government banks from operating in the country. Also, IOB and six Indian private banks established Bharat Overseas Bank as a Chennai-based private bank to take over IOB's Bangkok branch. The Baharat Overseas Bank is the only private bank that the Reserve Bank of India has permitted to have a branch outside India. The ownership was: Indian Overseas Bank (30%), (16%), Vysya Bank (14.66%), (19.67%), (10%), (10%) and (8.67%). Bharat Overseas serves the Indian ethnic community in Thailand.

1977: IOB opened a branch in Seoul.

1991: Bank of Commerce (BCB), a Malaysian bank, acquired United Asian Bank (UAB). In 1999 BCB merged with Bank Bumiputra Malaysia to form Bumiputra- Commerce Bank Berhad.

Indian Overseas Bank Credit Card

Indian Overseas Bank has a credit card with the name CANCARD-VISA. This card is valid for use in India and Nepal only. Indian Overseas Bank Credit Card is acceptable in more than 1 lakh member establishments for purchase of goods and services

CONSTITUTION:

Ø The Constitution of the Board of the Bank is governed by “The Nationalized Banks (Management and Miscellaneous Provisions) Scheme, 1970, formulated by the Central Government, after consultation with the Reserve Bank of India, in exercise of the powers conferred by section 9 of “The Banking Companies (Acquisition and Transfer of Undertakings) Ac, t 1970”. 14

COMPOSITION:

Ø The Composition of the Board of Directors of a Bank is governed by “The Nationalised Banks (Management and Miscellaneous Provisions) Scheme 1970” read with “The Banking Companies (Acquisition and Transfer of Undertakings) and Financial Institutions Laws (Amendment) Act 2006” and amendment to the vide Extraordinary Gazette Notification dated 19.02.2007 of the Central Government.

CONTRIBUTION:

 Ø In terms of The Banking Companies (Acquisition and Transfer of Undertakings Act 1970, the General Superintendence, Direction and Management of the affairs and business of the Bank vests in the Board of Directors which is entitled to exercise all such powers and do all such acts and things as the Bank is authorized to exercise and do.

AMMAN AGENCY

The company had started this business in 2004 .The present limit of MCC for Rs.10lacs on 24.03.2007.At present they have requested for enhancement of limit Rs.25lacs.

The credit sales increased around 26%.The supplier IOC insisted for keeping one week stock in the bunk.The stock invoice price also increased .So they required this enhancement.Mr.B.BaluReddy Mr.B.DurgaPrasad’s father is associated with IOB for the past 15 years.He is the owner of our branch premises.He also avalled a liquidrent loan in the name of Archana Associates.

OBSERVATIONS :

Sales : Sales has been increasing over the years.The projection of 10% growth for 2009-2010 is acceptable. 15

Profitability : Profitability is very low compared to the sales turnover. S.R.RAJA JEWELLERY PRIVATE LIMITED

S.R.Raja Jewellery ,a private limited company,incorporated on 13.0502008 is engaged in trading of gold and silver ornaments/articles.The chief promoter is Mr.S.R.Raja who is a noted personality in Tambaram ,he is the sitting M.L.A representing Tambaram constituency.The companyn was originally established on 02.0702004 as a partnership concern to carry on the above business and then converted into a private limited company.Then they started making gold ornaments by appointing reputed /skilled gold smiths, in order to improve their profit margin.Mr.S.R.Raja , the promoter is interested in various business and banking with us for the past 15 years.We have sanctioned various credit facilities to these firms and the accounts are being operated satisfactorily.

The company has achived a sales turnover of Rs.145029lacs for the year 2006-2007 and Rs.901.14lacs for the year 2007-2008.Present proposal is to consider adhoc limit of Rs.40.00lacs along with the existing CC limit of Rs.40.00lacs.

Nature of Activity :

Trading in gold and silver jewellery ornaments articles etc.

S.R.RAJA AGENCY

It is a proprietary concern owned by Mr.S.R>Raja alias Rajasekar is engaged in the wholesale and retail trading of cements manufactured by various companies like Zuari ,India Cements ,Dalmia,Ultrateck etc,.The subjects meet major demand for cement in this area.They are banking with IOB for more than 15 years and enjoying credit facilities from IOB since 27.10.2000.The chief promoter is Mr.S.R.Raja who is a noted personality in Tambaram and also Ex-Chairman of Tambaram Municipality Corporation ,presently MLA of Tambaram constituency.Mr.S.R.Raja , the promote is interested in various business.The firm has achived a sale turnover of Rs.1537.70 lacs for 2007-08. 16

Nature Of Activity :

Stociest,Dealers,Agents&Distributors of all brands of cements.

CHAPTER 3

LITERATURE SURVEY

3.1 CONCEPT REVIEW

Financial performance is a term used to measures the performance of the firm in the financial viewpoint. In the financial performance determine the financial position of the company through analysis , the available loans usage of investments and shareholder’s funds.It is used to mearsur the profit maximization and wealth maximization of the company.It also determine the turnover , investments in particular period ,also determine the working capital turnover of the three companies.

3.2 RESEARCH REVIEW

A.The financial performance of reverse leveraged buyouts

- Robert W. Holthausen and David F. Larcker

Examine the accounting and market performance of reverse leveraged buyouts (i.e., firms making their first public offering after previously completing a leveraged buyout). On average, the accounting performance of these firms is significantly better than their industries at the time of the initial public offering (IPO) and for at least the following four years, though there is some evidence of a decline in performance. Cross-sectional variation in accounting performance subsequent to the IPO is related to changes in the equity ownership of both operating management and other insiders, and is unrelated to 17 changes in leverage. Finally, there is no evidence of abnormal common stock performance after the reverse leveraged buyout.

Key Words: Reverse leveraged buyouts; Capital structure; Equity ownership; Financial performance

B.The Financial Performance Of Government Trading Enterprises

- Peter Costello Treasurer

The research paper provides an independent and comprehensive analysis of the financial performance of various GTEs, most of which are owned by State and Territory Governments and operate in the electricity, water, transport and forestry sectors.

The Productivity Commission has reported that the overall financial performance of all sectors generally improved in 2005-06.

However, the Commission has found once again that about half of the monitored GTEs earned less than the average return on long-term bonds in 2005-06, with an even greater proportion failing to earn a commercial rate of return (which includes a margin for risk).

In addition the Commission reported that over 2004-05 and 2005-06, GTEs in the electricity sector paid out around $2.5 billion in dividends to State and Territory Governments, GTEs in the water sector paid out nearly $2 billion, and GTEs in the rail and ports sectors paid out over $200 million, respectively (table attached). In the case of the electricity and water sectors, dividend payouts were well in excess of 50 per cent of operating profits after tax.

The Commission quite rightly emphasises the importance of GTEs operating efficiently, given their role as significant providers of infrastructure services that are fundamental to the wellbeing of Australians.

Timely and effective implementation of COAG’s National Reform Agenda commitments, agreed between the Australian and State and Territory Governments in 18

April of this year, will go a long way towards realising the gains from improving productivity, competitiveness and efficiency in crucial infrastructure sectors.

These reforms have the potential to boost Australia’s productive capacity at a time when we should be doing everything possible to capitalise on the favourable global economic environment.

It is also incumbent upon the States and Territories to ensure that they undertake sufficient investment in essential transport and other economic and urban infrastructure, so as to deliver the appropriate level and quality of services to Australian businesses and households.

C. The Financial Performance of World's Top 10 Dairy Companies

Increasing prices of raw materials, demand for dairy products in emerging markets and the drive for health and wellness, are putting pressure on dairy manufacturers to develop innovative but cost effective products. Key growth strategies for many of the top companies include strengthening brand portfolios and expansion in growth markets such China and India. The Top 10 Dairy Companies is a report that analyzes the innovation and growth strategies of the top 10 players in the dairy industry. This report identifies the product areas that the top 10 players are seeking to develop and also highlights the respective markets where each individual company is looking to grow. It also examines the comparative strengths, weaknesses, opportunities and threats facing the world’s leading dairy companies.

Key findings from this report...

o The global dairy industry is highly fragmented, with the top 10 companies representing about 22.4% of the total market size in 2006. o The global dairy market reached $402.5bn in 2006, representing a five-year CAGR of 3.7% and it is forecast to reach about $487.2bn in 2011, representing a five-year CAGR of 4.9%. 19

o The leading dairy companies are focussing innovation on organic and functional dairy. Other latest developments have included products that are low fat, contain natural ingredients and no preservatives. o Nestlé was the global industry leader with a 5.0% market share in 2006, followed by Danone (2.5%) and Dean Foods (2.4%). o Parmalat’s dairy business recorded revenues of R3,546m ($4,861m) for the fiscal year ended December 2007, an increase of 6.1% over 2006. Higher revenues in fiscal 2007 were mainly due to higher sales volume in Canada and Italy. The dairy revenues accounted for 91.8% of its consolidated revenues in 2007.

D. Evaluate the Financial Performance of CyberTAN Technology Inc

DUBLIN, Ireland

Technology Inc.: 2006 Contract Manufacturing Profile to their offering.

CyberTAN Technology Inc. (Taiwan, Republic of China) is a major provider of 10 Mbps NIC, Networking components/devices/appliances, Networking products: own brand, and other products. These reports include essential information for OEMs, importers, buyers and distributors.

This profile covers three main areas:

* General Company Information

* Company Contract Manufacturing Activities

* Company Financial Performance

General company information includes company contact information, a list of product lines, company brands and brand rank. In addition, each company profile includes analyst notes on the general state of company performance and future plans. In terms of contract manufacturing activities, the reports detail company customer relationships, recent 20 contract manufacturing deals, and sub-contracts, and have a special section devoted to contract manufacturing activities in China. Further, our reports provide information on company manufacturing facilities (locations, products and capacities).

Financial performance data generally includes quarterly and annual data on shipments, sales, and revenues from 2001 through the current year forecast, gross profit margin, and product mix. We also provide available data on company shareholders, investments and acquisitions, distributors and affiliates, and conclude the financial section with analyst notes on the companys financial state and investment plans. The company profiles are drawn from a database that is continually growing; the exact data set included in each profile varies. 21

CHAPTER 4

DATA ANALYSIS AND INTERPRETATION

Analysis Part – I

4.1 COMPARATIVE STATEMENT ANALYSIS

A simple method of tracing periodic changes in the financial performance of a companies is to pepare comparative statements.Comparative financial statements will contain items at least for two periods.

Changes-increase o decrease in income statements and balance sheet over period can be shown in two ways :

a.Aggregate Changes, b.Proportational Changes.

Drawing special columns for aggregate amount or percentages or both of increase and decrease can indicate aggregate changes.Recording percentages calculated in relation to a common base in special columns , on the other hand, shows relative or proportational chamges.This is kind of analysis is called vertical analysis and it indicates static relationship since relative changes are studied at a specific period. 22

Table No : 1

4.1.1 COMPARATIVE ANALYSIS FOR NET PROFIT

Particulars Net Profit Increase Or % Of Change 2007-08 2006-07 Decrease Amman 46,856 3,08,601 -2,61,745 -85 Agency S.R.Raja 1,098,262 1,83,455 9,14,807 499 Jewellery S.R.Raja 3,83,019 8,44,968 -4,61,949 -55 Agency

Interpretation :

It is inferred from the above table that in general the net profit has increased for S.R.Raja Jewellery during the project period (2007-08 & 2006-07) .The Net Profit has increased by 499% for S.R.Raja Jewellery.The Net Profit has decreased by -85% for Amman agency , -55% for S.R.Raja Agency.The company has net profit than the other companies,because of their efforts and due to more brokers or agents. 23

4.1.1 COMPARATIVE ANALYSIS FOR NET PROFIT

600 499 500

400 t i f

o 300 r P

t

e 200 N

f o

100 % 0 Amman Agency S.R.Raja S.R.Raja -100 -55 -85 Jewellery Agency -200 Particulars 24

Table No : 2

4.1.2 COMPARATIVE ANALYSIS FOR GROSS PROFIT

Particulars Gross profit Increase Or % Of Change 2007-08 2006-07 Decrease Amman 24,59,558 29,91,646 -532,088 -17.79 Agency S.R.Raja 1,664,036 295,229 1,368,807 464 Jewellery S.R.Raja 64,00,825 64,87,015 -86,190 -1.33 Agency

Interpretation :

It is inferred from the above table that in general the gross profit has increased for S.R.Raja Jewellery during the project period (2007-08 & 2006-07) .The Gross Profit has increased by 464% for S.R.Raja Jewellery.The Gross Profit has decreased by -17.79% for Amman agency , -1.3% for S.R.Raja Agency.The company has gross profit than the other companies,because of their sales is increase than their cost of sales. 25

4.1.2 COMPARATIVE ANALYSIS FOR GROSS PROFIT

464 t

i 500 f o

r 400 P 300 s s

o 200 r G

100

f -1.33 o

0 % -100 Amman-17.79 S.R.Raja S.R.Raja agecny Jewellery agency Particulars 26

Table No : 3

4.1.3 COMPARATIVE ANALYSIS FOR NET WORKING CAPITAL

Particulars Net Working Capital Increase Or % Of Change 2007-08 2006-07 Decrease Amman 2,95,369 13,33,366 -10,37,997 -78 Agency S.R.Raja 14,262,414 75,35,868 67,26,273 89 Jewellery S.R.Raja 12,297,064 -9,88,189 11,308,875 -13393 Agency

Interpretation :

It is inferred from the above table ,the S.R.Raja Jewellery has the positive working capital because the current assets exceeds the current liabilities.the other two companies like Amman agency,S.R.Raja Agency have negative net working capital because the current liabilities exceeds the current assets. 27

4.1.3COMPARATIVE ANALYSIS FOR NET WORKING CAPITAL

150 89 100 l a t i p

a 50 C

g

n 0 i k r Amman Agency S.R.Raja S.R.Raja o -50 W Jewellery Agency

t e N

-100 -78 f o

% -150 -149 -200 Particulars 28

Analysis Part -II

4.2 RATIO ANALYSIS

Ratios are highly important profit tools in financial analysis that help financial analysts implement plans that improve profitability,liquidity,financial structure,reordering,leverage and interest coverage.Although ratios report mostly on past performances,they can be predictive too,and provide lead indications of potential problem areas.

Ratio analysis is primarily used to compare a company’s financial figures over a period of time,a method sometimes called trend analysis.Through trend analysis, one can identify trends,good and bad , and adjust the business practices accordingly.

These are several considerations to be aware of when comparing ratios from one financial period to another or when comparing the financial ratios of two or more companies.

I. PROFITABILITY RATIOS

a.Return On Total Assets

This ratio is calculated to measure the productivity of total assets.

Return on Investment = Net Profit After Tax ______*100

Total Assets

b.Gross Profit Ratio 29

This ratio is also known as Gross margin or Trading margin ratio.Gross profit ratio indicates the difference between sale and direct costs.Gross profit ratio explains the relationship between gross profit and net sales.

Gross Profit Gross Profit Ratio = ______*100 Net Sales

c.Net Profit Ratio

This ratio is also called net profit to sale ratio.It is a measure of management’s efficiency in operating the business successfully from the owner’s point of view.It indicates the return on shareholder’s investments.

Net Profit After Tax Net Profit Ratio = ------*100 Net Sales

d.Operating Profit Ratio

It is the ratio of profit made from operating sources to the sales , usually shown as a percentage.It shows the operating efficiency of the firm and is a measure of the management’sefficiency in running the routine operations of the firm.

Operating Profit Operating Profit Ratio = ------*100 Sales e.Administrative Expenses Ratio 30

This ratio is also known as supporting ratio to operating ratio.They indicates the efficiency with which business as a whole functions.It is better for yhe concerns to know it is able to save or waste over expenditure in respect of administrative expenses.

Administrative Expenses Administrative Expenses Ratio = ------*100 Net Sales

II. TURNOVER RATIOS a.Stock Turnover Ratio

This ratio is also called stock velocity ratio.It is calculated to ascetain the efficiency of inventory management in terms of capital investment.It shows the relationship between the cost of goods sold and the amount of average inventory.Stock turnover ratio is obtained by dividing the cost of sales by average stock.This ratio is helpful in evaluating and review of inventory policy.

Cost of goods sold Stock Turnover Ratio = ------Average inventory

b.Working Capital Turnover Ratio 31

Working capital ratio measures the effective utilization of working capital.It also measures the smooth running of business or otherwise.The ratio establishes relationship between sales or cost of sales and working capital.

Sales/Cost of Sales Working Capital Turnover Ratio = ------Net Working Capital

c.Fixed Assets Turnover Ratio

This ratio determines dfficiency of utilization of fixed assets and profitability of a business concern.Higher the ratio , more is the efficiency in utilization of fixed assets.A lower ratio is the indication of under utilization of fixed assets.

Sales Fixed Assets Turnover Ratio = ------Net Fixed Assets

d.Capital Turnover Ratio

Managerial efficiency is also calculated by establishing the relationship between cost of sale or sale with the amount of capital invested in the business.

Cost of Sales/Sales Capital Turnover Ratio = ------Total Capital Employed

III.SHORT –TERM SOLVENCY RATIO 32 a.Current Ratio

The ratio of currnet asets to current liabilities is called “Current Ratio”.In order to measure the short-term liquidity or solvency of a concern,comparison of current assets and current liabilities is inevitable.Current ratio indicates the ability of a concern to meet its current obligations as and when they are due for payment. Current Assets Current Ratio = ------Current Liabilities

b.Quick Ratio

This ratio is also called “Quick” or “Acid Test” ratio.It is calculated by comparing the quick assets wiyh current liabilities.

Quick Assets Quick Ratio = ------Current Liabilities

c.Cash Position Ratio

This ratio is also called “Absolute Liquidity Ratio” or “SuperQuick Ratio”.This ia a variation of quick ratio.This ratio is calculated when liquidity is hughly restricted in terms of cash and cash equivalents.This ratio measures in terms of cash and near cash items and short-term current liabilities.

Cash and Bank Balance Cash Position Ratio = ------Current Liabilities 33

I.PROFITABILITY RATIOS

Table No : 4

4.2.1 RETURN ON TOTAL ASSETS RATIO

Particulars Net Profit After Tax Total Assets Ratio 2007-2008 2006-2007 2007-2008 2006-2007 2007-2008 2006-2007 Amman 46,856 3,08,601 45,94,102 50,13,351 1.02 6.16 Agency S.R.Raja 1,098,262 1,83,456 40,401,557 13,308,955 2.72 1.38 Jewellery S.R.Raja 3,83,019 8,44,968 44,200,137 28,057,575 0.87 3.01 Agency

Interpretation :

It is inferred from the above table that S.R.Raja Jewellery stands in return on total assets when comparing the three companies with the ratio of 2.72 in the year 2007-2008.But in the year 2006-2007 the ratio is only 1.38.There is a increase in return on total assets.This is because the company is efficiently utilizing its assets and converting into profit.

Amman Agency follows it with a ratio of 1.02 in the year 2007-2008 , When comparing with the previous year it has decreased by 5.14.S.R.Raja Agency follows it with a ratio of 0.87 on the year 2007-2008 , when comparing with previous year it has decreased by 2.14.The reason for the decrease in the return on total asstes in two companies like Amman Agency and S.R.Raja Agency is that have not utilisied the assets proprrely. 34

4.2.1 RETURN ON TOTAL ASSETS

7 6.16 6 5 Return On Total 4 3.01 Assets 3 2.72 Ratio 2 1.38 1.02 0.87 1 0 Amman S.R.Raja S.R.Raja Agency Jewellery Agency Particulars 35

Table No : 5

4.2.2 GROSS PROFIT RATIO

Particulars Gross Profit Net Sales Ratio 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Amman 24,59,55 29,91,646 10,53,60,12 17,72,62,54 2.33 1.69 Agency 8 5 3 S.R.Raja 1,664,03 295,229 90,097,523 14,549,03 1.85 2.02 Jewellery 6 6 S.R.Raja 64,00,825 64,87,015 193,596,732 153,773,543 3.31 4.22 Agecny

Interpretation :

S.R.Raja Agency follows it with a ratio of 3.31 in the year 2007-2008 , When comparing with the previous year it has decreased by 0.91.Amman Agency follows it with a ratio of 2.33 in the year 2007-2008 , when comparing with previous year it has decreased by 0.64. S.R.Raja Jewellery follows it with a 1.85 in the year 2007-08 when comparing the previous year it has decreased by 0.17.The higher ratio indicates the profitability of the company. 36

4.2.2 GROSS PROFIT RATIO o i t 5 4.22 a r

3.31

t 4 i f 2.33 o 3 2.02 r 1.69 1.85

P 2 s

s 1 o r 0 G Amman S.R.Raja S.R.Raja Agency Jewellery Agency Particulars

Table No : 6

4.2.3 NET PROFIT RATIO 37

Particulars Net Profit Sales Ratio

2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Amman 46,856 3,08,601 10,53,60,125 17,72,62,54 0.04 0.17 Agency 3 S.R.Raja 1,098,262 1,83,453 90,097,523 14,549,03 1.22 1.26 Jewellery 6 S.R.Raja 3,83,019 8,44,968 193,596,732 153,773,54 0.19 0.53 Agency 5

Interpretation :

It is inferred from the above table that S.R.Raja Jewellery first in Net Profit when comparing the three companies with the ratio of 1.22 in the year 2007-08, when comparing the year 2006-07 it has decreased by 0.04.It is followed by Amman Agency with a ratio of 0.04 in the year 2007-08,when comparing the previous year it has decreased by 0.13.S.R.Raja Agency follows it with a 0.19 in the year 2007-08,when comparing the previous year it has decreased by 0.36.

It indicates the return on Sahreholder’s investment.lower the ratio indicates the operational efficiency of the business concern.

4.2.3 NET PROFIT RATIO 38

1.4 1.22 1.26 1.2 o

i 1 t a R

0.8 t i f

o 0.55 r 0.6 P

t e 0.4 N 0.17 0.19 0.2 0.01 0 Amman Agency S.R.Raja S.R.Raja Jewellery Agency Particulars

Table No : 7

4.2.4 OPERATING PROFIT RATIO

Particulars Operating Profit Sales Ratio 2007-08 2006-07 2007-08 2006-07 2007- 2006- 08 07 39

Amman 22,41,34 5,16,92 10,53,60,12 17,72,62,54 2.13 1.42 Agency 9 3 5 3 S.R.Raja 88,417,35 14,253,80 90,097,52 14,549,03 98.14 97.97 Jewellery 5 7 3 6 S.R.Raja 64,63,13,97 5,841,39 19,35,96,73 15,37,73,54 353.85 3.80 Agency 1 0 2 5

Interpretation :

It is inferred from the above table the S.R.Raja Agency stands first in the operating profit.when comparing the three companies with the ratio of 353.85 in the year 2007- 08.But in the year 2006-07 the ratio is only 3080.There is a drastic increase in the operating profit.It shows the operational efficiency of the firm and is a measure of the management’s efficiency in running the routine operations of the firm.Amman Agency follows it with a ratio of 2.13 in the year 2007-08,when comparing the previous year it has increased by 0.71.S.R.Raja Jewellery follows it with a ratio of 98.14 in the year 2007- 08,when comparing with the previous year it has increased by 0.17.

4.2.4 OPERATING PROFIT RATIO 40

400 353.85 350 300 250 Operating 200 profit Ratio 150 98.1497.97 100 50 2.131.42 3.8 0 Amman S.R.Raja S.R.Raja Agency Jewellery Agency Particulars

Table No : 8

4.2.5 ADMINISTRATIVE EXPENSES RATIO

Particulars Administrative Expenses Net Sale Ratio 2007-08 2006-07 2007-08 2006-07 2007- 2006- 06 07 Amman 9,39,031 7,82,417 10,53,60,12 17,72,62543 0.89 0.44 41

Agency 5 S.R.Raja 73,16,055 22,88,689 90,097,52 4,549,036 8.12 15.73 Jewellery 3 S.R.Raja 64,63,13,97 56,30,016 19,35,96,73 15,37,73,54 334 3.66 Agency 1 2 5

Interpreation :

It is inferred from the above table that S.R.Raja Agency stands first in administrative expenses , when comparing the three companies with the ratio of 334 in the year 2007- 08.But in the year 2006-07 the ratio is only 3.66.There is a drastic increase in the administarative expenses.It indicates the efficieny with which business as a whole functions.It is better for concern to know how it is able to save or wate over expenditure in respect of different items of expenses.Each aspect of cost of sale and operating expenses are analysesd.Amman Agency follows it with a ratio of 0.89 in the year 2007-08,when comparing with the previous year it has increased by 0.45.

S.R.Raja Jewellery follows it with a ratio of 8.12 in the year 2007-08,when comparing with previous year it has decreased by 7.61.

4.2.5 ADMINISTRATIVE EXPENSES RATIO 42

350 334 300 Administar 250 tive 200 Expenses Ratio 150 100 50 15.73 0.890.44 8.12 3.66 0 Amman S.R.Raja S.R.Raja Agency Jewellery Agency Particulars

II.TUENOVER RATIOS

Table No : 9

4.2.6 STOCK TURNOVER RATIO

Particulars Cost Of Goods Sold Average Inventory Cost Ratio 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Amman 102,900,56 174,270,89 4,58,437 32,06,25 70.56 54.35 43

Agency 7 7 3 S.R.Raja 90,097,52 14,549,03 16,984,08 11,025,92 5.30 1.32 Jewellery 3 6 5 7 S.R.Raja 187,195,90 147,286,53 15,93,91 17,25,55 117.44 85.36 Agency 7 0 9 7

Interpretation :

It is inferred from the above table that S.R.Raja Agency stands first in stock turnover ratio,when comparing the three companies with the ratio of 117.44 in the year 2007- 08.But in the year 2006-07 the ratio is 85.36.There is a drastic increase in the stock turnover.Amman Agency follows it with a ratio of 70.56 in the year 2007-08 , when comparing the previous year it has increased by 16.21.S.R.Raja Jewellery follows it with a ratio of 5.30 in the year 2007-08,when comparing with the previous year it has increased by 3.98.

Stock turnover ratio indicates whether the investment in inventory is optimum.It indicates the efficiency of stock turnover ratio it should be compared over a period of time.

A high inventory ratio indicate efficient inventory management and efficiency of business operations.

4.2.6 STOCK TURNOVER RATIO 44

120 117.44

100 85.36 80 70.56 Stock Turnover 60 54.35 Ratio 40

20 5.3 1.32 0 Amman S.R.Raja S.R.Raja Agency Jewellery Agency Particulars

Table No : 10

4.2.7 WORKING CAPITAL TURNOVER RATIO

Particulars Sales Net Working Capital Ratio 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Amman 10,53,60,12 17,72,62,54 295,36 13,33,366 356.71 600.14 Agency 5 3 9 S.R.Raja 90,097,52 14,549,03 14,262,41 75,35,868 6.32 1.93 Jewellery 3 6 4 S.R.Raja 15,37,73,54 19,35,96,73 12,297,06 -988,189 12.50 -195.91 45

Agency 5 2 4

Interpretation :

It is inferred from the above table that Amman Agency stands first in working capital turnover ratio, when comparing the three companies with the ratio of 356.71 in the year 2007-08.But in the year 2006-07 the ratio is 600.14,when comparing the previous year it has decreased by 253.43.S.R.Raja Jewellery follows it with a ratio of 6.32 in the year 2007-08.when comparing the previous year it has increased by 4.39.S.R.Raja Agency follows it with a ratio of 12.50 in the year 2007-08.But it had negative ratio of -195.91 on the year 2006-07,when comparing with the ptrevious year it has increased by 208.41.

The higher ratio is the indication of lower investment of working capital and more profit.It measures the smooth running of business of the concerns.

4.2.7 WORKING CAPITAL TURNOVER RATIO 46

700 600.14 600 500 Working 400 356.71 Capital 300 Turnover 200 Ratio 100 6.321.93 12.5 0 -100 -200 -195.91 Amman S.R.Raja S.R.Raja Agency Jewellery Agency Particulars

Table No : 11

4.2.8 FIXED ASSETS TURNOVER RATIO

Particulars Sales Net Fixed Assets Ratio 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Amman 10,53,60,12 17,72,62,54 16,83,605 736,463 62.58 240.69 Agency 5 3 S.R.Raja 90,097,523 14,549,036 17,005,35 875,537 5.30 16.62 Jewellery 7 S.R.Raja 19,35,96,73 15,37,73,54 28,08,24 17,19,619 68.94 89.42 Agency 2 5 3 47

Interpretation :

It is inferred from the above table that S.R.Raja Agency stands first in fixed assets turnover ratio,when comparing the three companies with the ratio of 68.94 in the year 2007-08.But in the year 2006-07 the ratio is 89.42.There is a decrease in the fixed assets turnover.Amman Agency follows it with a ratio of 62.58 in the year 2007-08,when comparing with the previous year it has decreased by 178.11.S.R.Raja Jewellery follows it with a ratio of 5.30 in the year 2007-08,when comparing with previous year it has decreased by 11.32.

All the companies have decrease in the year 2007-08 than 2006-07.The reason for the lower ratio indicates the under utilization of fixed assets.

4.2.8 FIXED ASSETS TURNOVER RATIO 48

300 o i t

a 240.69

R 250 r e v 200 o n r u

T 150 s t

e 89.42 s 100 s 62.58 68.94 A

d 50 e 16.62 x

i 5.3 F 0 Amman Agency S.R.Raja S.R.Raja Jewellery Agency Particulars

Table No : 12

4.2.9 CAPITAL TURNOVER RATIO 49

Particulars Sales Total Assets Ratio 2007-08 2006-07 2007-08 2006-07 2007- 2006- 08 07 Amman 10,53,60,12 17,72,62,54 45,94,10 50,13,35 22.93 35.36 Agency 5 3 2 1 S.R.Raja 90,097,52 14,549,03 40,401,55 13,308,95 2.23 1.09 Jewellery 3 6 7 5 S.R.Raja 15,37,73,54 19,35,596,73 44,200,13 28,051,57 3.48 6.90 Agency 3 2 7 5

Interpretation :

It is inferred from the above table that Amma Agency stands first in the capital turnover when comparing the three companies with the ratio of 22.93 in the year 2007-08.But it has decreased by 13.03.S.R.Raja Jewellery follows it with a ratio of 2.2. in the year 2007-08,when comparing the previous year it has increased by 1.14.It indicates the higher efficiency and effective usage of capital in the firm.S.R.Raja agency follows it with a ratio of 3.48 in the year 2007-08.but it has decreased by 3.42.

The lower ratio obtains in Amma Agency and S.R.Raja Agency comparing with the previous year ratio.It indicates the ineffective usage of capital. 50

4.2.10 CAPITAL TURNOVER RATIO

40 35.36 35 o i t

a 30 R

r 22.93 e 25 v o

n 20 r u T

15 l a t i 10 6.9 p

a 3.48 C 5 2.23 1.09 0 Amman Agency S.R.Raja S.R.Raja Jewellery Agency Particulars

II.SHORT – TERM SOLVENCY RATIOS

Table No : 13

4.2.11 CURRENT RATIO

Particulars Current Assets Current Liabilities Ratio 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Amman 29,10,49 427,688 26,15,128 29,43,52 1.11 1.45 Agency 7 2 S.R.Raja 22,085,71 12,19,841 78,23,30 46,62,55 2.82 2.62 51

Jewellery 6 2 0 S.R.Raja 41,391,89 26,357,95 29,094,83 36,219,85 1.42 7.26 Agency 4 6 0 0

Interpretation :

It is inferred from the above table that S.R.Raja Jewellery has current ratio 2.82 in the year 2007-08.It has increased by 0.2 ,when comparing with the previous year.the Amman Agency has low current ratio in the year 2007-08.It has decreased by 0.34.S.R.Raja Agency has current ratio 1.42 in the year 2007-08.But it has decreased by 5.84 , when comparing with the previous year.

The higher ratio indicates the ability of a concern to meet its current obligations. The reason for decrease in the current ratio for Amman Agency and S.R.Raja Jewellery is that they have invested in current assets proportionamtely to the current liabilities in the year 2007-08.

4.2.11 CURRENT RATIO 52

8 7.26 7 6 o i t

a 5 R t 4 n e 2.82 r 2.62 r 3 u C 2 1.45 1.42 1.11 1 0 Amman Agency S.R.Raja S.R.Raja Agency Jewellery Particulars

Table No : 14

4.2.12 QUICK RATIO 53

Particulars Quick Assets Current Liabilities Ratio 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 Amman 18,74,97 498,134 26,15,12 29,43,52 0.78 0.17 agency 9 8 2 S.R.Raja 99,44,93 22,87,34 78,23,30 46,62,55 1.27 0.49 Jewellery 3 7 2 0 S.R.Raja 38,786,62 25,492,11 29,094,83 36,219,85 1.33 0.70 Agency 0 7 0 0

Interpretation :

It is inferred from the above table that S.R.Raja Agency stands first in the quick ratio, when comparing the three companies with the ratio of 1.33 in the year 2007-08.But un the year 2006-07 the ratio is 0.70.There is a increase in the quick ratio.

S.R.Raja Jewellery follows it with a ratio of 1.27 in the year 2007-08, when comparing with the previous year it has increased by 0.78.

Amman Agency follows it with a ratio of 0.78 in the year 2007-08, when comparing with the previous year it has increased by 0.61. 54

4.2.12 QUICK RATIO

1.33 1.4 1.27 1.2 1 o i

t 0.78 a 0.8 0.7 R

k c

i 0.6 0.49 u

Q 0.4 0.17 0.2 0 Amman Agency S.R.Raja S.R.Raja Jewellery Agency Particulars

Table No : 15

4.2.13 CASH POSITION RATIO

Particulars Cash and Bank Balance Current Liabilities Ratio 2007-08 2006-07 2007-08 2006-07 2007-08 2006-07 55

Amman 407,008 604,474 26,15,12 29,43,522 0.15 0.20 Agency 8 S.R.Raja 258,330 57,635 78,23,30 46,62,55 0.03 0.01 Jewellery 2 0 S.R.Raja 68,054 602,937 29,094,83 36,219,85 0.002 0.02 Agency 0 0

Interpretation :

It is inferred from the above table that amman agency stands first in the cash position ratio, when comparing the three companies.But when comparing with previous year it has decreased by 0.05.Since they have utilizied cash for investments.But still it has the highest cash position.Instead of keeping cash it can invest it and get more profit.

S.R.Raja Jewellery follows it with a ratio of 0.03 in the year 2007-08, when comparing with the previous year it has increased by 0.02.

S.R.Raja agency follows it with a ratio of 0.02 in the year 2007-08, when comparing with the previous year it has decreased by 0.018. 56

4.2.13 CASH POSITION RATIO

0.2 0.2 0.18 0.16 0.15 0.14 0.12 0.1 0.08 0.06 0.04 0.03 0.02 0.02 0.01 0.002 0 Amman S.R.Raja S.R.Raja Agency Jewellery Agency

Analysis Part - III

4.3 TREND ANALYSIS

“Trend” signifies a tendency and as such the review and appraisal of tendency in accounting variables are nothing but trend analysis .Trend analysis is carried out by calculating trend ratios and/ or by for forecasying and budgeting.Trend analysis discloses the changes in financial and operating data between specific periods. 57

Table No : 16

4.3.1 TREND ANALYSIS FOR AMMAN AGENCY

Particulars Stock Cash Net Profit Rs Trend % Rs. Trend % Rs. Trend % 2006-07 37,78,754 100 604,474 100 3,08,601 100 2007-08 10,35,518 27 407,008 67 46,856 15

Interpretation :

1.Stock have registered a decrease in the year 2207-08.The percentage in 2007-08 is 27 as compared with the 100 in the year 2006-07.The decrease in the stock is not satisfactory.

2.The cash balances of the company also decrease .The percentage in 2007-08 is 67 as compared the 100 in 2006-07.

3.Net Profit also decreases compared with the percentage in 2007-08 is 15 and 100 in 2006-07.

4.3.1 TREND ANALYSIS FOR AMMAN AGENCY 58

e 120 g 100 100 100 a

t 100 n

e 80 67 c r

e 60 P 40 27

d 15

n 20 e r 0 T Stock Cash Net Profit Particulars

Table No : 17

4.3.2 TREND ANALYSIS FOR S.R.RAJA JEWELLERY 59

Year Stock Cash Net Profit Rs. Trend % Rs. Trend % Rs. Trend % 2006-07 99,11,071 100 50,691 100 183,455 100 2007-08 12,140,78 122.50 86,234 170.12 10,98,262 598.65 3

Interpretation :

1.Stock have registered a increase in the current year.The percentage in 2007-08 is 122.50 as compared the 100 in 2006-07.The increse in stock is satisfactory.

2.The figures of cash have also increased from 2007-08.The increases in cash is more in 2007-08 compared with 2006-07.

3.Net Profit has increased sunstantially.In two years time it has more doubled.Further the increase in the net profit is more than proportinare to increase in sales in the year.The overall performance of the S.R.Raja Jewellery is good. 60

4.3.2 TREND ANALYSIS FOR S.R.RAJA JEWELLERY

e 800 g

a 598.65 t

n 600 e c r

e 400 P

170.12

d 200 100122.5 100 100 n e r 0 T Stock Cash Net Profit Particulars

Table No : 18

4.3.3 TREND ANALYSIS FOR S.R.RAJA AGENCY 61

Year Stock Cash Net Profit Rs. Trend % Rs. Trend % Rs. Trend % 2006-07 845,839 100 602,937 100 844,968 100 2007-08 2,605,274 308 68,054 11.29 383,019 45

Interpretation :

1.Stock have registered a increase in the project period.The percentage in 2007-08 is 308 as compared with 100 in 2006-07.The increase in stock is satisfactory. 2.Cash also decreased from 2007-08 ,because it denotes the cash position of the firm. 3.Net Profit of the company is also decreased.The decreases in 100 2006-07 is compared to 45 in 2007-08.It indicates the poor performance of the company.

4.3.3 TREND ANALYSIS FOR S.R.RAJA AGENCY 62

e 400 g

a 308 t

n 300 e c r

e 200

P 100 100 100

d 100 45

n 11.29 e r 0 T Stock Cash Net Profit Particulars

CHAPTER 5:CONCLUSIONS

5.1 RESULTS AND DISCUSSIONS

 From the comparative analysis ,it has been found that the net profit has increased by large percentage for S.R.Raja Jewellery. 63

 The Profit and Loss also increased for the companies;particularly S.R.Raja Jewellery and S.R.Raja Agency it has increased by 440% and 24%

 The net working capital has increased by 89% for S.R.Raja Jewellery in the year 2007-08.However,Amman Agency,S.R.Raja Agency have decreased net working capital in the year 2007-08,due to more current liabilities.

 From the ratio analysis ,it has been found that the return on total asset decreased for all the companies except S.R.Raja Jewellery during the project period.

 The Net Profit ratio has decreased for all the companies.Because the operational efficiency of the business concerns is ineffective during the project period.

 The Operating Profit ratio has increased for all the companies.It indicates the operational efficiency of the firms and the routine operations of the firm.

 The administrative expenses ratio of the Amman Agency and S.R.Raja Agency is high.This ratio decreased for S.R.Raja Jewellery durind the project period.

 The highest ratio indicates the efficiency and whole functions of the concerns;the lowest ratio indicates the inefficiency of the concerm.

 The stock turnover has increased for all the companies .It shows the optimum inventory of the concens and efficient inventory management ,efficiency of business operations of the companies. 64

 The working capital turnover has decreased for Amman Agency only.It indicates the higher investment of working capital and less profit.

 The fixed assets turnover has decreased for all the three companies.It indicates the under utilization of fixed assets during the project period.

 The capital turnover has decreased for Amman Agency and S.R.Raja Agency.The reason foe decreased ratio is ineffective usage of capital of the particular companies.

 The current ratio of Amman Agency and S.R.Raja Agency is low.The current ratio is increasing for S.R.Raja Jewellery from 2.62 to 2.82.

 The cash position ratio is high for S.R.Raja Jewellery.From the cash position ratio ,it has been found that Amman Agency and S.R.Raja Agency have not used current assets properely.

 The quick ratio is high for Amman Agency in the year 2007-08.S.R.Raja Jewellery has increased from 0.49 to 1.27.S.R.Raja Agency has increased from 0.70 to 1.33.

 In trend analysis the Amman Agecny have the decreases of the stock ,cash and net profit trends in 2007-08.I indicates the poor performance of the company.

 From the trend analysis,S.R.Raja Jewellery have the drastic increase in the elements of financial statement.It indicates the good performance of the company. 65

 The S.R.Raja Agency has the increase in trend only in stock.It indicates the availability of the resources .The cash balance and net profit of the company is very poor.

5.2 LIMITATIONS

The present study is subject to the following limitations:

 The study is based only on the secondary data contained in the published annual reports of Amman Agency,S.R.Raja Jewellery Private Ltd., and S.R.Raja Agency. 66

 Due to the limited time available the disposal of the researcher the study has been confined for a period of two years only.

 The analysis and interpretation are base on secondary data taken from financial reports.

 Ratio itself will not completely show the company’s good or bad financial position.

 The figures from the financial statements for analysys were historicl in nature and the time value of money is not considered.

5.3 SUGGESTIONS

 The companies should efficiently utiise their assets properely.

 The companies should increase the return on shareholder’s investment. 67

 The companies should invest more in current assets.The current assets should be in proporatin to the current liabilitiws.

 The companies have got low profit.They should increase the profit by increasing the number of customers.

 They should appoint more agents and brokers.

 The companies should increase the operationg sources to sales.Also ,increase the routine operations of the firm.

 The companies also known how it is able to save or waste over expenditure in respect of different items of expenses.

 The companies to judge the efficiency of stock turnover ratio it should be compared over a period of time.

 The companies should increase the inventory level to current position.

 The companies should maintain lower investment of working capital and get more profit.

 The companies should increase the effrctive utilization of ifxed assets.

 To increase the stock level the companies increase the stock exchanges;and also increase the level of stock. 68

 To increase cash position of the companies to invest and deposit in the banks is the assets of the companies.

 Also increase the profit of the company through their efficient management system.

5.4 CONCLUSION

The main objective of the study is to analyse the financial perfomance of the three companies for a period of two years 2006-07 and 2007-08. 69

From the study is concluded that S.R.Rja Jewellery has maintained very good performance throughout the study period.The growth of S.R.Raja Jewellery is due to more and more investments in the year of 2007-08 and also it has more return on total assets,net profit,cash position,trend analysis.

This syudy can be further extended by comparing it with other companies of Indian Ovearseas Bank.

BIBILOGRAPHY 70

• Financial Management –I.M.Pandey,Eigth Edition,Vikas Publishnig House Private Ltd.

• Einancial Management Accounting-T.S.Reddy & Y.Hari Prasad Reddy,Fourth Edition, Margham Publications.

APPENDIX Amman Agency Trading,Profit And Lloss Account for The Year Ended 31.03.2007 Particulars Amount Amount Particulars Amount Amount 71

To Opening By Sales: stock : Tambaram 11,21,76,646 Tambaram 21,17,216 Kottivakkam 6,50,85,897 Kottivakkam 16,61,538 17,72,62,543 37,78,754 By Closing To Purchase: Stock : Tambaram 10,89,75,091 Tambaram 26,33,752 Kottivakkam 6,41,50,084 Kottivakkam Nil 17,31,25,895

To Gross Profit 29,91,646 17,98,96,295 17,98,96,295

To Salaries 15,52,500 To Uniform to By 29,91,646 staffs 98,350 Gross profit To bonus&Ex- b/d Gratia 1,25,000 To Electricity Charges 1,15,850 To Bank Charges 1,32,000 To Generator Maintennance 1,15,950 To rates&Taxes 500 To Telephone Charges 34,600 To ESI Contribution 9,500 To Pump Stamping 45,200 To Finance Charges 28,956 To Staff welfare 86,438 To Conveyance To Office 39,435 Maintennance 73,810 To printing & stationery To Depreciation 58,834 72

To Net Profit 1,66,122

3,08,601 29,91,646 29,91,646 73

Balance Sheet As On 31.03.2007 Liabilities Amount Amount Assets Amount Amount

Partner’s Cash in hand 2,96,375 Capital A/c : IOB(Kotti) 29,329 Opening Cash at 2,78,770 Balance 15,76,348 Banks(card Add:Net Profit 3,08,601 sales) Closing stock 26,33,752 OD:IOB 18,84,949 Sundry 10,38,662 Sundry 9,81,888 Debtors Creditors: IOC deposit 2,00,000 IOC Ltd EB deposit 32,450 Prajwal 10,79,984 Sales Tax 2,500 Enterprises 8,81,650 Deposit Telephone 3,000 19,91,634 Deposit MPL Staff Advance 10,500 Automobile 4,33,330 Car Loan Furniture 51,075 Less: Depreciation 5,108 45,967

Generator 34,510 Less: 5,176 Depreciation 29,334 10,540 Density Less: 1,581 Depreciation 8,959 7,71,284 Car Aveo Less: 1,54,257 Depreciation 6,17,013

Water Cooler 35,190

TOTAL 52,61,801 TOTAL 52,61,801

74

Sundry Debtors AsOn 31.03.2007

S.No Sundry Debtors Rs. 1. JCPL 97,500 2. Central Excise 16,667 3. S.K.Transports 82,250 4. Mccoy Clothing 74,183 5. Varadha Reddy 95,260 6. SRC Transport 58,651 7. Mercury 39,632 8. Advani Arlicon Ltd 34,856 9. Srinivasa Lorry service 64,392 10. Arumaidoss Borewell 63,650 11. Suresh Lorry Service 43,963 12. Nithya Cabs 48,186 13. Devika Cabs 48,653 14. Srinivasa Transport 35,186 15. State Bank Of India 7,850 16. K.V.Cabs 83,186 17. Bala Tours&Travels 48,123 18. G.G.Tours&Travels 69,985 19. Shanu Enterprises 26,489 75

Trading , Profit And Loss Account For The Year Ended 31.03.2008 Particulars Amount Particulars Amount To Opening Stock 10,35,518 By Sale: 10,20,51,459 Petrol&Disel To Purchase: Lubricants 33,08,666 Petrol&Disel 10,04,36,917 By Closing Stock 18,81,355 Lubricants 33,09,487 To Gross Profit c/d 24,59,558 ______10,72,41,480 10,72,41,480

To Staff Salaries 12,35,600 By Gross Profit b/d 24,59,558 To Uniforms to 76,485 By Profit on Sale of 21,299 Staffs Aveo Car To Bonus & Ex- 82,625 Gratia To Electricity 1,19,277 Charges To Generator 96,436 Maintennance To Bank 2,21,490 Charges&Interest To Telephone 71,486 Charges To ESI Contibution 8,810 To Car Insurance 73,814 To Interest on car 44,758 loan To Stakk Welfare 1,02,484 To Travelling& 36,485 Conveyance To Office 35,284 Maintennance To Pump Stamping 13,150 To printing & 23,165 Stationery To Depreciation 1,92,652 To net Profit 46,856

24,80,857 24,80,857 76

Balance Sheet As On 31.03.2008 Liabilities Amount Amount Assets Amount Amount

B.Durgaprasad’s Cash in hand 3,37,94 Capital Account Cash at bank 0 IDBI 24, Opening Balance 2,39,411 ICICI 988 Add : 6,50,000 44, 8,89,411 080 Add:Net Profit 46,856 69,068 9,36,267 Less:Drawings 60,000 Fixed Assets 16,83,605 8,76,267 (as per enclosure) Closing stock 18,81,355 Old Partner 57,564 Sundry debtors 6,22,134 Capital A/c Advances&Deposits OD:IOB 9,04,083 IOC Deposit 2,00,000 Indian Oil 10,67,000 EB Deposit 35,320 Corporation Sales Tax 2,500 Prajwal 6,44,045 Telephone Deposit 3,000 Enterprises Staff Advances 25,480 13,11,443 [Skoda Car Loan]

TOTAL 48,60,402 TOTAL 48,60,402 77

S.R.RAJA JEWELLERY (P) Ltd Trading ,Profit And Loss Account For The Year Ended 31.03.2008 Particulars 31.03.2008 31.03.2007 Amount Rs. Amount Rs. Income : Sales 90,097,523 14,549,036 Miscellenous Income 16,617 ------

Total 90,114,140 14,549,036

Expenditure : 79,088,929 11,227,118 Material Consumed 1,202,371 360,000 Salary & Bonus 810,000 378,000 Director Remuneration Administrative 7,316,055 378,000 Expenses 32,749 ------Depreciation

Total 88,450,104 14,253,807 Profit Before Tax(Gross 1,664,036 295,229 Profit) Less: Provisions For Income Tax 545,000 99,374 Provisions For Fringe Benefit Tax 20,774 12,400

Net Profit For The Year 1,098,262 183,455

Add: Balance b/f From Previous 249,120 65,665 Year Net Profit For The Year 1,347,382 249,120 Carried To B/S

1.80 24.91 Earning Per Share 78

Schedules Of Profit And Loss Account For The Year Ended 31.03.2008 Particulars 31.03.2008 31.03.2007 Amount Rs. Amount Rs. Rawmaterial Consumption : Opening Stock Add:Purchase 12,140,783 9,911,071 88,775,532 13,456,830 Sub-Total Less: Closing Stock 100,916,315 23,367,901 Consumption For The Year 21,827,386 12,140,783 Administrative Expenses: 79,088,929 11,227,118 Making Charges Jewel Box 2,014,697 805,921 Bar Code Ribbon 48,464 17,900 Electricity Charges 0 7,482 Rent 147,832 136,534 Insurance 80,000 62,400 Office Maintennance 16,124 35,636 Staff Welfare 116,840 32,772 Printing & Stationery 220,219 94,751 Telephone 52,153 194,145 Petrol Expenses 84,307 21,091 Accounting Charges 99,327 4,697 Audit fees 27,750 12,000 Sales Promotion 0 16,836 (Bonus on Chit) General Expenses 132,827 42,775 Advertisement 32,251 23,150 Sales Tax /VAT Tax 1,054,738 163,099 Commission On Sale 62,959 131,229 Turnover Rebate & Discount 1,577,700 ------Repairs & 16,271 ------Maintennance Security Charges 438,044 ------Travelling Expenses 76,460 ------Office Renovation 301,897 ------Bank Interest/Charges 309,120 ------406,075 396,371 Total 7,316,055 2,288,689 79

Balance Sheet As At 31.03.2008 Particulars 31.03.2008 31.03.2007 Amount Rs. Amount Rs. Source Of Funds (A): Share Capital 6,100,000 6,100,000 P&L Account 1,347,382 249,120

7,447,382 6,349,120

Loan funds (B): 5,765,618 1,262,772 Secured Loan 3,792,357 1,140,645 Unsecured Loan

Total 9,557,975 8,403,417

Application Of Funds(A+B) Fixed Assets 17,005,357 14,752,537 Current Assets 2,143,324 1,126,760 Loans&Advances: Closing Stock Cash&Bank Balances 21,827,386 12,140,783 Loans&Advances 258,330 27,635 1,310,484 235,000 Sub-Total (A) 23,396,200 12,433,418 Less:Current Liabilities&Provisions: Chit Payable 3,947,300 4,015,070 Sundry Creditors 3,876,002 647,480 Provisions 710,865 145,091

Sub –Total (B) 8,534,167 4,807,641 Net Current Assets(A-B) 14,862,033 8,625,777 Total 17,005,357 14,752,537

Schedules To Balance Sheet As 31.03.2008 80

Particulars 31.03.2008 31.03.2007 Amount Rs. Amount Rs. Share Capital Authorised Capital : 900000 equity shares of 9,000,000 9,000,000 Rs.10/- each

Issued & Subscribed Capital : 610000 equity shares of Rs.10/- each for cash at par 6,100,000 100,000 fully paid-up Share application money 0 6,000,000 received 6,100,000 6,100,000

Secured loans : 4,778,618 1,262,772 From IOB CC Account 987,000 Nil HDFC Car Loan 5,765,618 1,262,772

Unsecured Loans from Directors : S.Rajasekar 1,737,895 237,895 Kamaraj 90,000 90,000 R.Nithyakalyani 1,102,253 430,855 S.Arularasan 862,209 381,895

3,792,357 1,140,645

Cash&Bank Balances : 86,234 50,691 Cash in hand Balances with scheduled 172,096 6,944 banks in current accounts 258,330 57,635

Loans & Advances : 1,00,000 1,00,000 Rent advance 701,670 135,000 Advance I.T paid/TDS 53,413 Prepaid Expenses Prepaid interest car loan 141,167 Fringe Benefit Tax 33,544 Salary advance 52,030

Amount to be received 183,375 from customers 81

Arasu Arts 1,030 Bhavani Flex 1,022 Clasic adds 445 Poovai Mani 1,414 R.Kumar 648 R.R.Products 1,638 Talk Media (P)Ltd 611 Zigma Marketing 680 Electricity Deposit 12,600 Rajasekaran 25,197

1,310,484 23,500

Current Liabilities : 3,947,300 4,015,070 Chit Payable 3,876,002 647,480 Sundry Creditors 710,865 Nil Provisions 8,534,167 4,662,550

Schedules To Current liabilities : Sundry creditors : Ambika Jewellery 44,953 Jewel Craft 47,222 Moharld Jewellers 24,730 N.S.Jewellers 43,005 Swarna Shilipi 32,128 Gitanjali Gems 55,816 Shanthi Jewellery 38,000 S.P.Jewellery 73,000 V.L.Jewellery 44,000 Creditors for expenses 3,539,158 3,942,012 Less Debit Balance in Creditors : Sree Lakshmi 60,810 Jewellers S.Lakshmipathy 5,200

3,876,002

Creditors For Expenses : SRR Pavithra 289,185 82

Gajendran 198,818 Guru Achari 286,272 Kesavan Achari 194,705 Kumar Achari 193,452 A.Parvathy 625,945 Bhagyalakshmi 182,988 Advance against order 44,077 Ramani 185,125 Sulochana 178,975 V.Krishnaveni 174,296 M.Selvarasu 222,610 Neelakandan 196,957 Radha agencies 9,813 Ramu Achari 195,096 R.Vasu 217,088 Salary payable 120,000 Security Payable 3,933 TDS 1,229 TDS on salary 307,631 TDS on advertisement 7,767 Telephone Charges Payable 963 Duties & Taxes 2,253

3,539,158

S.R.RAJA AGENCIES 83

Trading,Profit And Loss account for the year ended 31.03.2007 Particulars Amount Amount Particulars Amount Amount Rs. Rs. Rs. Rs. To Opening 8,458,839 By Sales 153,773,545 Stock By Closing 2,605,274 To Purchase 145,578,263 stock Less:Discount 8,962,721 On Purchase 136,615,542

To Freight on 12,430,423 Purchase To Gross 6,487,015 Profit 156,378,819 156,378,819

To indirect 5,630,016 By Gross 6,487,015 Expenses Profit To 211,374 By Other 199,343 depreciation income To 844,968 Net Profit

6,686,358 6,686,358

Balance Sheet As At 31.03.2007 84

Liabilities Amount Assets Amount Rs. Rs. Goods Account 906 Fixed Assets 1,719,619 Assessess capital A/c 1,713,965 Loans,advances 13,927,859 Secured Loan 4,050,712 &Deposits Current 36,219,850 Cash and Bank 602,937 Liabilities&Provisions balances Sundry debtors 23,129,745 Stock On hand 2,605,574

41,985,433 41,985,433

Trading,Profit and Loss Account for the year ended 31.03.2008 85

Particulars Amount Amount Particulars Amount Amount Rs. Rs. Rs. Rs.

Opening Stock 26,05,274.0 Sales A/c 19,35,96,732.08 Purchase accounts: 18,55,87,822.2 0 Direct 77,72,461.05 Cement purchases 4 incomes Purchases 27,78,792.3 Closing 1 stock: 5,82,564.15 Direct Expenses: 18,83,66,614.5 Cement Cartage expenses 5 Lorry freight 5,40,874.1 Discount allowed 8 Transport 9,27,897.0 charge&loading,unloading 0 Wages 16,23,367.7 Wage on freight 0

8,98,833.5 Gross profit c/d 0 45,79,043.17 4,76,232.0 0 64,00,825.56 20,19,51,757.28 1,11,838.7 Indirect expenses 9 20,19,51,757.2 Net Profit 8 Gross 64,00,825.56 Profit b/f 64,63,139.7 Other 4,45,333.52 1 income(own 3,83,019.3 lorry freight 7 income)

68,46,159.08

68,46,159.0 8 86

Balance Sheet as at 31.03.2008 Liabilities Amount Amount Assets Amount Amount Rs. Rs. Rs. Rs. Capital A.c 15,12,094.37 Fixed assets: Loans(liability): Cellphone 12,121.00 IOB OD a/c 63,11,591.85 Computer 18,353.00 Unsecured Loan 62,94,191.00 EPBAX 4,577.00 HDFC Bank Ltd Furniture&Fittings 38,361.00 Eicher loan 9,87,429.04 Generator 5,147.00 1,35,93,211.89 Godown 1,23,534.00 Current Liabilities: Land&Buliding 6,89,744.00 Duties&taxes Motor cycle 49,611.00 Provisions Printer 14,788.00 Sundry Creditors 1,71,438.43 Refrigerator 988.00 Goods a/c 5,55,804.00 Stabilizer 1,456.00 2,83,67,166.71 TN22AC 6066 Car 4,30,046.00 TN22AJ190 Car 1,91,958.00 421.69 TN22Y1848 Eicher 6,03,875.00 Profit&Loss A/c: 2,90,94,830.83 TN22AY1863 6,03,875.00 Opening balance 3,83,019.37 Eicher Current Period Weighing machine 19,809.00 Less:Transferred 3,83,019.37 28,08,243.00 Current assets: 0 Stock in hand 5,82,564.1 Deposits(assets) 5 Loans&advances 1,62,72,644.8 (assets) 3 Sundry debtors 12,64,928.0 Cash in hand 0 Petty cash S.R.Raja Jewellery 2,15,21,282.0 (share) 0 Stock in transit 68,054.0 UTI Bank 0 34,607.0 4,13,91,894.09 0 3,50,000.0 4,42,00,137.09 0 4,42,00,137.09

12,87,597.0 0 87

10,217.1 1