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“A STUDY ON RATIO ANALYSIS MANAGEMENT TOWARDS
EXIDE INDUSTRIES LIMITED, HOSUR. ”
Submitted By HARISH KUMAR.N REG NO. n partial fulfillment for the award of degree Of MASTER OF BUSINESS ADMINISTRATION Under the Guidance of MR.RAJESH.R, MBA,M.Phill., ASSISTANCE PROFESSOR DEPARTMENT OF MANAGEMENT OF STUDIES ER.PERUMAL MANIMEKALAI COLLEGE OF ENGINEERING KONERAIPALLI, HOSUR- AN ISO 9001:2000 CERTIFIED INSTITUTION) JUNE- CERTIFICATE ER.PERUMAL MANIMEKALAI COLLEGE OF ENGINEERING, KONERIPALLI, HOSUR- Department Of Management Studies UNE- 2014 This is to certify that the report entitled “A STUDY ON RATIO ANALYSIS TOWARDS EXIDE INDYSTRIES LIMITED, HOSUR” is the Bonafied record work done. By HARISH KUMAR.N REG NO: 610812631016 Of MBA during the year 2012-
Guide Head of the Department Mr.R.RAJESH, MBA.,M.Phil Dr. A.RAVI, MBA, M. Phil, PhD Submitted for the Viva-Voce examination held on___________________
nternal Examiner External Examiner DECLARATION HARISH KUMAR N here by declare that the project report undergone by myself during his summer and the report submitted was an original one and not a replication of nything. I did my Project in EXIDE INDUSTRIES LIMITED, HOSUR. had undergone a detailed study to know about all the company and showed an enormous interests in earning each and everything. I prepared my report under the guidelines of our MBA department and submitted to The Anna University Of Technology .This is purely my original work and not submitted for the award of any diploma, fellowships, and other imilar titles.
Signature of the candidate) HARISH KUMAR.N REG No: 610812631016 certify that the declaration made above by the candidate is true
Signature of the guide) Mr. R.RAJESH, MBA.,M.Phil ASSISTANCE PROFESSOR ACKNOWLEDGEMENT am thankful to the trustee and the secretary of our college and Dr. S.CHITRA ME, M. Phil he principal of our college for permitting and encouraging me for successfully ompleting the Project work. My special words of thanks to Dr. A.RAVI, MBA, M. Phil, Ph.D. Prof & Head, Department of Management Studies, PMC-TECH or their support and helping me lot and learing my doubts in project that completed my project successfully. sincerely express my deep sense of gratitude to Mr.S.K KHAN –PERSONEL MANAGER of EXIDE INDUSTRIES LIMITED, HOSUR, or providing me all facilities and
valuable guidance throughout my project work and I would like all the employees in the ompany who had helped me to complete the project success full. proudly privilege to express my hearty thanks to our college management and my aculty guide Mr.R.RAJESH,MBA,M.Phil Department of Management Studies, Er. Perumal Manimekalai College of Engineering, Hosur Who have helped me a lot in ompleting my project through their constant encouragement and suggestions for her continuous upport for me in carrying out all my project activities. thank all my Faculties of Department of Management Studies or their continuous upport for me in carrying out all my project activities. NDEX Chapter Content Page No List of Tables List of Charts A. ntroduction A.1. Introduction to Project 1 A.2. Industry Profile 2 A.3. Company Profile 3 1 B. Design of the study B.1. Statement of the Problem 13 B.2. Objectives 14 B.3. Research Methodology 15 B.4. Limitation 16 B.5. Scope of the Study 17 A. Literature Review 18 2 B. Theoretical Overview 20 3 A. Analysis & Interpretation 26 B. Finding 56 Suggestion 57 Conclusion 58 Reference 59 Appendix 60 LIST OF TABLES Table No Name of Tables Page No. 1 Current Ratio 1 2 Quick Ratio 1
nventory Turnover Ratio
Fixed Assets Turnover Ratio
Working capital Ratio
Return on Equity Ratio
Return on investment Ratio
Return on asset Ratio
Return on Total Assets Ratio
Net Profit Ratio
ash, inventories, and short-term borrowings and lending (e.g., the credit terms extended to ustomers). Role of Financial Managers: The role of a financial manager can be discussed under the following heads:
Nature of work
Working conditions
Employment
Training, Other qualifications and Advancement
ob outlook
Earnings
Related occupations RATIO ANALYSIS RATIO: A Ratio is a mathematical relationship between two items expressed in a quantitative orm. It is defined as the systematic use of ratio to interpret the financial statements so that the trengths and weaknesses of a firm as well as its historical performance and current financial ondition can be determined. Ratios can be defined as “Relationships expressed in quantitative terms, between figures which have cause and effect relationships or which are connected with each other in some manner or the other”. Ratio analysis is an age-old technique of financial analysis. It is “the process of determining and presenting the relationship of items and groups of items in the financial tatements”. Ratio analysis is one of the techniques where ratios are used as a yardstick for evaluating the elationship between component parts of financial statements to obtain a better understanding of he firm’s position and performance.The importance of r atio analysis lies in the fact that it presents facts on a comparative basis Conclusions can be drawn regarding the liquidity position of a firm. It is useful for assessing the long-term financial viability of a firm. ADVANTAGE OF RATIO ANALYSIS: ) The advantages of ratio analysis are as follows. b) Forecasting. ) Managerial control. d) Facilitates communications. ) Measuring efficiency. STEPS IN RATIO ANALYSIS Selection of relevant information. Comparison of calculated ratios. nterpretation and reporting. A.2. Industry Profile The Indian storage batteries market is approximately estimated at US 500 million with he automotive batteries segment 60 to 70 percent of the overall market value. In terms of volumes, OE segment comprising around 1.2 to 1.3 million units per annum, various batteries(clock wise from bottom left)two 9-volt, two AA, one D, a handheld ham radio battery, cordless phone battery, a camcorder batter y, one C, and two AAA. A battery is one or more electrochemical cells, which store chemical energy and make it vailable as electric curr ent. There are many types of electrochemical cells, including galvanic ells, electrolytic cells, fuel cells, and voltaic cells, an electrical “battery” is two or more cells onnected together, but often a single cell is called a battery. Battery characteristics may vary due to many factors including internal chemistry, current drain, and temperature. There ar e two types of batteries, primary (disposable) and secondar y (rechargeable), both of which convert chemical energy to electrical energy. Primary batteries can only be used once because they use up their chemicals in an irreversible reaction. Secondary batteries can be echarged because the chemical reactions they use are reversible; they are recharged by running a harging current through the battery, but in the opposite direction of the discharged current. Secondary, also called rechargeable batteries can be charged and discharged many times before wearing out, after wearing out some batteries can be recycled. ABOUT BATTERY: A battery is perhaps the only gift of science where electric is stored by means of electro hemical potentials guided by electro chemical reaction. Chemical reaction initiated by lectricity. Which take place with the means of electron exchange between the reactions, as and when required the stored energy can be counted back to electro chemical reaction. In certain ases the electrical chemical reactions guiding the energy transformation is not reversible. Such batteries are called ordinary cells. Where the electro chemical reaction guiding energy transformation is reversible hence
hey can be reused through only after outing a required amount of electric energy once it gets xhausted. There batteries are called secondar y batteries. Exide is dominant player in the industrial battery segment, with a product range covering apacities from 2.5 Ah to 10000 Ah and more. Using the latest technological inputs, we manufacture industrial batteries for the power , telecom, infrastructure projects, computer ndustries, as well as the railways, mining and defence sectors as well as the railways, mining nd defence sectors. Our product range includes both flooded type lead acid batteries as well as the sealed maintenance free (SMF) VRLA type, in the mono black and 2v range to meet most applications needs. VRLA batteries are manufactured in technical collaboration with shin kobe-japan manufactures of Hitachi range of batteries. The company has a continuous process of developing new products and enhancing xisting products in our R&D centre at Kolkata. The company has massive sales and service of fice network all over india along with our dealer network all over India along with our dealer network to cater to your pre sales and sales needs. To ensure that our industrial customers have the benefit of the latest range of packaged power products, we have created the sealed maintenance free power safe battery, which ranks mong the best in its class of batteries. The company responded to defence needs with our submarine batteries-EK-202, SS-126 and FX-142 foxtrot/Romeo, for the indian navy’s german designed HDW submarines. The company endeavour to provide packaged power solutions to institutions, to fulfil heir power needs in the best possible manner, at all time. A.3. Company Profile HISTORY OF EXIDE The company was incorporated in January 1947 as Associated Battery Makers to purchase all or any of the assets of the business of manufacturers, buyers and sellers of and dealers in and repairers of electrical and chemical appliances and goods carried on by the Chloride Electric Storage Company.The name of the company was changed to Chloride India in 1972 which later got changed to Chloride Industries in 1988. Finally in 1995 the name was hanged to Exide Industries. n the year 1947, the company incorporated Chloride International Ltd. In the year 1969, he company set up their second factory at Chinchwad, Pune. In August 2, 1972, the name of the ompany was changed to Chloride India Ltd. In the year 1976, they established R&D centre at Kolkata. In the year 1981, the company set up third factory at Haldia, West Bengal. In October 12, 1988, the name of the company was again changed to Chloride Industries Ltd. In the year 1994, the company made a technical collaboration with Shin Kobe Electric Machiner y Co. Ltd. of Japan, a subsidiar y of the Hitachi Group. In August 25, 1995, the company changed their name to Exide Industries Ltd. In the year 1997, the company set up their fourth factory at Hosur, Tamil Nadu. n the year 1998, the company acquired the industrial/ manufacturing units of Standard Batteries Ltd located at Taloja&Kanjurmarg (Maharashtra), Guindy (Tamilnadu) and plant at Ahmednagar (Maharashtra) from Cosepa Fiscal Industries Ltd as a going concern. In the year 1999, they acquired 51% shareholding in Caldyne Automatics Ltd. In the year 2000, the ompany acquired 100% stake in Chloride Batteries S E Asia Pte Ltd, Singapore and 49% stake n Associated Battery Manufacturers (Ceylon) Ltd, Sri Lanka. n the year 2003, the company commissioned a plant at Bawal, Haryana. Also, they ormed a new joint venture in UK, ESPEX Batteries Ltd, with 51% holding. In the year 2004, Associated Batter y Manufacturers (Ceylon) Ltd, Sri Lanka became a subsidiary consequent to cquiring further 12.50% equity holding. n the year 2005, the company made investment in 50% shareholding of ING Vysya Life nsurance Company Ltd. In the year 2007, Caldyne Automatics Ltd became 100% subsidiary onsequent to acquiring the balance 49% shareholding. n the year 2008, the company acquired 51% stake in Lead Age Alloys India Ltd. During he year 2008-09, the company received an order for 5000 batteries for the Singapore Taxi market amidst tough competition. Honda Japan selected the company as an exclusive supplier nitially for 2 years for VRLA MC battery. The company entered into a technical collaboration with Changxing Noble Power Sourcing Co. Ltd., China for manufacture of Deep Cycling E-bike batteries for electric bicycles and scooters. During the year 2009-10, the company divested their 26% shareholding in Ceil Motive Power Pty Ltd, Australia (as associate company). n August 12, 2010, the company entered into an agreement for acquisition of 22,93, quity shares of Leadage Alloys India Ltd representing 49% of the shares in the said company. The Company held 51% of the shares in Leadage Alloys India Ltd and with this acquisition Leadage Alloys India Ltd will become a wholly owned subsidiary of Exide Industries Ltd. In anuary 2012, the company entered into technical collaboration and assistance agreements with East Penn Manufacturing Co. Inc. USA. Under these agreements, East Penn will provide technical assistance and support for the manufacture of automotive, motive power, standby, telecom, UPS, solar and traction batteries for Exide's various plants in India. This technical assistance will include a wide range of activities ncluding the enhancement of processes for manufacturing, designs, quality control, and procurement. The company has already launched Deep Cycling Electric Bike batteries for electric
money. Maintenance fr ee, fully activated factory charged. FXPO-MHD1800 Exide Xpress ranges of batteries are specially designed for Heavy Duty pplications, with ability to withstand bumps, vibration and high ambient operating conditions as prevalent in India. Ensured long trouble free services. Maintenance free, factory charged ready or fitment, magic eye. FMAO-DIN60 Exide matrix, a state of the art automobile battery that is truly maintenance free. Its international technology ensures is required no topping up and is capable of ooking after itself. This is why, Exide matrix comes to you absolutely sealed for life. You can now forget the hassles of battery maintenance and enjoy the pleasures of driving, uninterrupted. FMAO-MA354R Exide matrix, a state of the art automobile battery that is truly maintenance free. Its international technology ensures is required no topping up and is capable of ooking after itself. This is why, Exide matrix comes to you absolutely sealed for life. You can now forget the hassles of battery maintenance and enjoy the pleasures of driving, uninterrupted. FEFO-ATB-38B20R Exide freedom. India’s only all -terrain battery. Guaranteed to perform consistently on any terrain, in extreme temperatures. Especially in India. Maintenance ree, factory charged r eady for fitment, magic eye. B .Design of the study B.1.Statement of the problem The study is based on the data obtained from the annual reports of the concern i.e. balance sheet and profit and loss account. The period under study has been only for 5 financial year’s i.e. 2008 to 2013. The study doesn’t take into account the other areas such as dividend policy, capital budgeting etc Financial statements do not disclose the correct financial position of the company. nformation shown in financial statements is not precise. Statements cannot be comparable with one concern to other concern. Accounting practices and methods should differ from one company to other ompany. B.2 OBJECTIVES OF THE STUDY The main objective of the study is to test the liquidity, turnover, return, profitability, hareholder and leverage ratio of a concern. To analyse and evaluate the ratio analysis of Exide Batteries. To study the profitability and liquidity position of the organisation. To study the growth of the Exide Batteries for the past five years from 2009 to 2013. To make suggestions & recommendations for improving the financial position of Exide Batteries. B.3.RESEARCH METHODOLOGY Research is a process in which the researcher wishes to find out the end result for a given problem and thus the solution helps in future course of action. The research has been defined as A careful investigation or enquiry especially through search for new facts in branch of knowledge” The research design used in this project is Analytical in nature the procedure using, which researcher has to use facts or information already available, and analyse these to make a ritical evaluation of the performance. This is the case of EXIDE BATTERIES LTD. With particular reference to ratio analysis, or the prosecution of the study, both the primary and secondary data. DATA COLLECTION Primary Sources Data are collected through personal interviews and discussion with Finance- Executive. Secondary Sources Secondary data means that ar e already available i.e. they refer to the data which have already been collected and analysed by someone else. Secondary data may either be published data or unpublished data. Usually published data are available in various publications of the central, state, local governments. Also in technical and trade journals, books, magazines and newspapers, reports and publications of various associations connected with business and industry, banks, stock xchanges reports prepared by research scholarsuniversities in different fields From the annual reports maintained by the company. Data are collected from the company’s website. Books and journals pertaining to the topic. B.4.LIMITATIONS OF THE STUDY Due to confidential nature of information and non-availability some data the detailed tudy in cash management has not been carried out. Since the position and performance of the company is done with the help of ration nalysis the statement of changes in financial position is omitted. All efforts were taken to collect
he data for analysis in the stipulated time. Ratio analysis suff ers from certain limitations. They re discussed below. nadequacy of standards. Ratios alone are not adequate. Difficulty in Comparison. Problems of price level changes. Window dressing. Non-Accuracy of financial information. Different interpretations – Results of the analysis may be interpreted differently by different users. Changes in price level – Ratio analysis becomes redundant during periods of heavy price luctuations. Past data cannot be the index of the future and cannot be cent percent basis for future stimation, forecasting, budgeting and planning. Practical Knowledge – The analyst should have thorough knowledge and experience bout the firm and industry. B.5.SCOPE OF THE STUDY To analyse and interpret the relevant data of the company in a balanced way by ratio Analysis. To do the study in a logical and systematic way. To make the study as reliable in nature. To provide a valuable suggestions and recommendations. To identify the basis of analysis & interpretation of the EXIDE BATTERIES. To identify the strength and weakness of a business concern. The study will help to analyse the financial status of the firm. NEED OF THE STUDY The study has great significance and provides benefits to various parties whom directly or indirectly interact with the company. t is beneficial to management of the company by providing crystal clear picture egarding important aspects like liquidity, turnover, shareholder and profitability. The study is also beneficial to employees and offers motivation by showing how ctively they are contributing for company’s growth. The investors who are interested in investing in the company’s shares will also get benefited by going through the study and can easily take a decision whether to invest or not to invest in the company’s shares. CHAPTER. A.REVIEW OF LITERATURE Review of Literature refers to the collection of the results of the various researches elating to the present study. It takes into consideration the research of the previous researchers which arerelated to the present research in any way. Here are the reviews of the previous esearches relatedwith the present study: Bollen (1999) onducted a studyon Ratio Var iables on which he f ound three diff er ent us es of ratio variables in aggregate data analysis: (1) as measures of theoretical oncepts, (2) as a meansto control an extraneous factor, and (3) as a correction for heteroscedasticity. In the use of ratiosas i ndices of concepts , a pr obl em can ar is e if it is egres sed on other indices or var iables thatcontain a common component. F or xample, the relat ions hip betwe en tw o per capital m easur es may be conf ounded with he common population com ponent in ea ch var iable. Regar di ng the second use of atios, only under exceptional conditions will ratio variables be a suitable means of controlling n extraneous factor. Finally, the use of ratios to correct for heteroscedasticity is alsoof ten mis us ed. O nl y under special condit ions will the common f orm f or ger s s oon with atio v a r i a bl e s c or r e c t f o r he t e r o s c ed a s t i ci t y. A l t er na t i ve s t o r a ti o s f o r a c h o f t he s e ca s es a r e discussed and evaluated. Cooper (2000) onducted a s tudyon F inancial Inter mediation on w hic h he obs er ved that thequantitative behaviour of business-cycle models in which the intermediation process acts either asa source of fluctuations or as a propagator of real shocks. In neither case do we find convincingevi dence that the inter mediation pr oc ess is an i mpor tant element of ggregate fl uctuations. For an e c on om y d r i v en by i nt e r m e di a t i on s ho ck s , on s um p t i on i s n ot s m o ot h er t ha n out p ut , investment is negatively correlated with output, variations in the capital stock are quite large, andinterest rates are procyclical. The model conomy thus fails to match unconditional moments for t h e U. S. e co no m y. W e al s o s t r u ct u r a l l y e s t i ma t e pa r am e t e r s o f a m o de l e co no m y i n w h i ch interm ediati on and productivit y shocks are pres ent, allowi ng for the nter medi ation proces s to propagate the real shock. Chuetal (1991) nalysed the hospital sectors to observe the differences of financial ratios groups between hospital sectors and industrial firms sectors. Their study concluded that financial atios groups were significantly different from those of industrial firms’ ratios as well these ratios
would provide sufficient insight into how efficiently the long-term funds of owners and creditors re being used.
- RETURN ON ASSET:
An indicator of how profitable a company is relative to its total assets. ROA gives an dea as to how efficient management is at using its assets to generate earnings. Calculated by dividing a company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes this is referred to as "return on investment". Return on assets = (Net income) / (Total assets)
- RETURN ON TOTAL ASSET:
A ratio that measures a company's earnings before interest and taxes (EBIT) against its otal net assets. The ratio is considered an indicator of how effectively a company is using its ssets to generate earnings before contractual obligations must be paid. Return on total asset = (EBIT) / (Total net assets). Where, EBIT = Net income + Interest expense + Taxes PROFITABILITY RATIO:
- NET PROFIT RATIO:
This measures the relationship between net profits and sales of a firm. Depending on the oncept of net profit employed the ration can be computed as Net profit/loss after interest and tax Net profit ratio =………………………………………x Sales A high net profit margin would ensure adequate return as well as enable a firm to with tand adverse economic conditions when selling price is declining cost of production is rising nd demand for the product is failing. A low net profit merging would have the opposite mplications.
- GROSS PROFIT RATIO:
t measures the relationship between gross profit and sales. It is calculated by dividing gross profit by sales. Gross profit margin or ratio = Gross profit X 100 Net sales Gross profit is the difference between sales and cost of goods sold.
- OPERATING PROFIT RATIO:
Operating profit margin or ratio establishes the relationship between operating profit and net sales. It is calculated by dividing operating profit by sales. Operating profit margin or ratio = Operating Profit X 100 Net sales Operating profit is the difference between net sales and total operating expenses. Operating profit = Net sales – cost of goods sold – administrative expenses – selling and distribution expenses.) SHAREHOLDER RATIO:
- EARNINGS PER SHARE:
t measures the profit available to the equity shareholders on a per share basis. It is omputed by dividing earnings available to the equity shareholders by the total number of equity hare outstanding Earnings per share = Ear nings after tax – Preferred dividends (if any) Equity shares outstanding LEVERAGE RATIO:
- PROPRIETARY RATIO:
The proprietary ratio (also known as net worth ratio or equity ratio) is used to evaluate he soundness of the capital structure of a company. It is computed by dividing the stockholders’ quity by total assets. Proprietar y ratio = (Stockholder’s equity) / (Total assets) * Some analysts prefer to exclude intangible assets (goodwill etc.) from the denominator of he above formula. In that case, the formula would be written as follows: Proprietary ratio = (Stockholders equity) / (Total assets – intangible assets) * The information about stockholders’ equity and assets is available from balance sheet.
- CURRENT ASSET TO FIXED ASSET RATIO:
This ratio differs from industry to industry. The increase in theratio means that trading is lack or mechanization has been used. A declinein the ratio means that debtors and stocks are ncreased too much or fixedassets are more intensively used. if current assets increase with the corresponding ncrease in profit, it will show that the business is expanding. Current asset Current asset to fixed asset = ---------------------- Fixed asset CHAPTER- 3 A.DATA ANALYSIS AND INTERPRETATION LIQUIDITY RATIO 1.1 CURRENT RATIO The current ratio is the ratio of total current assets to total current liabilities. It’s
alculated by divided current assets by current liabilities. The current assets of a firm, as already stated, represent that asset which can be, in the ordinary course of business, converted into cash within a short period of time normally not xceeding one year. Current assets Current Ratio = --------------------------- Current liabilities TABLE NO: 1. CURRENT RATIO YEAR CURRENT ASSETS CURRENT LIABILITIES RATIO 2008-09 741.58 380.73 1. 2009-10 911.82 494.33 1. 2010-11 1328.74 660.26 2. 2011-12 1541.25 789.94 1. 2012-13 1982.70 999.38 1. SOURCES: ANNUAL REPORT. FIGURE NO: 1.
CURRENT RATIO
2
RATIO
2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the current ratio is 1.947 and in the year 2009-10 is 1.844 and in the year 2010-11 it is increased to 2.012 and in the year 2011-12 it is decreased as 1.951 and in the year 2012-13 it is 1.983. nterpretation A higher current ratio is an indication that more current assets are available to meet urrent liabilities. This shows the current ratio of the company is quite satisfactory, healthy sign or the company and the company has to utilize efficient funds. 1.2 QUICK RATIO: An indicator of a company’s short-term liquidity. The quick ratio measures a company’s bility to meet its short-term obligations with its most liquid assets. For this reason, the ratio xcludes inventories from cur rent assets, and is calculated as follows: Current assets – inventories Quick ratio = ---------------------------------------- Current liabilities Or Cash and equivalents + marketable securities +accounts receivable) = --------------------------- ------------- ---- --- ---- -- ----------------------------- Current liabilities TABLE NO: 1. QUICK RATIO YEAR QUICK ASSET CURRENT LIABILITIES RATIO 2008-09 303.11 380.73 0. 2009-10 305.05 494.33 0. 2010-11 496.79 660.26 0. 2011-12 573.13 789.94 0. 2012-13 634.87 999.38 0. SOURCES: ANNUAL REPORT FIGURE NO: 1.
RATIO
RATIO
0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the quick ratio is 0.796 and in the year 2009-10 is 0.617 and in the year 2010-11 it is increased to 0.752 and in the year 2011-12 it is decreased as 0.725 and in the year 2012-13 it is 0.635. nterpretation From the above analysis the quick ratio of the company is not satisfactory and shows
2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the fixed assets turnover ratio is 4.951 and in the year 2009-10 is 5.310 and in the year 2010-11 it is 5.146 and in the year 2011-12 it is 5.142 and in the year 2012- 13 it is 5.764. nterpretation The per formance of the result was at the maximum of 5.764 during the year 2012-13, more sales turnover and more investment in fixed assets. It is the reason of proper management of funds also one of the reasons. Fixed assets ratio is increased from 5.142 to 5.764 it is good ign for the company. 2.3 WORKING CAPITAL TURNOVER RATIO: This ratio measures the effective utilization of working capital and smooth running of business. This ratio enables the relationship between cost of sales and working capital.This ratio s calculated as under Sales Working Capital = ------------------------------ Net working capital Higher sales in comparison to working capital indicates over trading and lower sales in omparison to working capital indicates under tr ading. TABLE NO: 2. WORKING CAPITAL TURN OVER RATIO YEAR SALES NET WORKING CAPITAL RATIO 2008-09 3393.02 360.85 9. 2009-10 3794.00 417.49 9. 2010-11 4547.33 668.48 6. 2011-12 5107.04 751.31 6. 2012-13 6071.37 983.32 6. SOURCES: ANNUAL REPORT. FIGURE NO: 2.
RATIO
10 9 8 7 6 5 RATIO 4 3 2 1 0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the working capital turnover ratio is 9.402 and in the year 2009-10 is 9.087 and in the year 2010-11 it is 6.802 and in the year 2011-12 it is 6.797 and in the year 2012- 13 it is 6.174. nterpretation ncome from services isincreased due to the extra invoice and the working capital is also ncreased due to the increase from services because the huge increase in current assets.The ncome from services is raised and the current assets are also raised together resulted in the decrease of the ratio of 2013 compared with 2008. RETURN RATIO : 3.1 RETURN ON EQUITY: This ratio signifies the return on equity share holders funds. The profit considered for omputing the r atio is taken after payment of preference dividend .This ratio is calculated as under Net profit after tax Return on Equity = ------------------------- Shareholders funds TABLE NO: 3. RETURN ON EQUITY YEAR NET PROFIT AFTER SHAREHOLDER RATIO TAX FUND 2008-09 284.39 1250.35 22. 2009-10 537.09 2219.77 24. 2010-11 666.36 2742.45 24. 2011-12 461.17 3057.32 15. 2012-13 522.78 3423.59 15. SOURCES: ANNUAL REPORT.
RATIO
30 25 20 15 RATIO 10 5 0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the return on equity is 22.744 and in the year 2009-10 is 24.195 and n the year 2010-11 it is 24.297 and in the year 2011-12 it is 15.084 and in the year 2012-13 it is 15.269. nterpretation The return on equity is increase from year 2009 to 2011 then it is decreasing due o the increase and decrease in the income from services and the shareholders funds are increased because of reserve & surplus. So, the ratio is increased in the year 2011 then it gets decreased. 3.2 RETURN ON INVESTMENT: This ratio is also called as Return on Capital Employed. It measures the sufficiency or otherwise of profit in relation to capital employed. It is used to measur e the operational and managerial efficiency. The term capital employed refers to long-term funds supplied by the creditors and owners of the firm. Here the profits are related to the total capital employed. It can be computed as Operating Profit Return on Investment = ---------------------- -- x Capital Employed The capital employed basis provides a test of profitability related to the sources of long- erm funds. The higher the ratio the more efficient is the use of capital employed. A comparison of this ratio with similar firms with the industry average and over time would provide sufficient insight into how efficiently the long-term funds of owners and creditors re being used TABLE NO: 3. RETURN ON INVESTMENT YEAR NET PROFIT AFTER TAX SHAREHOLDERS FUND RATIO 2008-09 284.39 1250.35 0. 2009-10 537.09 2219.77 0. 2010-11 666.36 2742.45 0. 2011-12 461.17 3057.32 0. 2012-13 522.78 3423.59 0. SOURCES: ANNUAL REPORT. FIGURE NO: 3.
RATIO
RATIO
0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the return on investment ratio is 0.227 and in the year 2009-10 is 0.241 and in the year 2010-11 it is 0.242 and in the year 2011-12 it is 0.150 and in the year 2012- 13 it is 0.152. nterpretation This is the ratio between net profits and shareholders funds. The ratio is generally alculated as percentage multiplying with 100. The net profit is increase from year 2009 to 2011 then it is decreasing due to the ncrease and decrease in the income from services and the shareholders funds are increased because of reserve & surplus. So, the ratio is increased in the year 2011 then it gets decreased. 3.3 RETURN ON ASSET: An indicator of how profitable a company is relative to its total assets. ROA gives an idea s to how efficient management is at using its assets to generate earnings. Calculated by dividing company's annual earnings by its total assets, ROA is displayed as a percentage. Sometimes his is referred to as "return on investment". Net income Return on assets = ------------------------- Total assets Note: Some investors add interest expense back into net income when performing this alculation because they'd like to use operating returns before cost of borrowing. TABLE NO: 3. RETURN ON ASSET
This measures the relationship between net profits and sales of a firm. Depending on the oncept of net profit employed the ration can be computed as Net profit/loss after interest and tax Net profit ratio =………………………………………x Sales A high net profit margin would ensure adequate return as well as enable a firm to with tand adverse economic conditions when selling price is declining cost of production is rising nd demand for the product is failing. A low net profit merging would have the opposite mplications. TABLE NO: 4. NET PROFIT RATIO NET PROFIT AFTER YEAR TAX SALES RATIO 2008-09 284.39 3393.02 8. 2009-10 537.09 3794.00 14. 2010-11 666.36 4547.33 14. 2011-12 461.17 5107.04 9. 2012-13 522.78 6071.37 8. SOURCES: ANNUAL REPORT. FIGURE NO: 4.
RATIO
16 14 12 10 8 RATIO 6 4 2 0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the net profit is 8.381 and in the year 2009-10 is 14.156 and in the year 2010-11 it is increased to 14.653 and in the year 2011-12 it is decreased as 9.030 and in the year 2012-13 it is 8.610. nterpretation The performance of the result was at maximum of 14.65%, during the year 2011-12 the net profit is decreased compare to last 3 years. A net profit is not showing good sign for the ompany and net profit are decreased over year. 4.2 GROSS PROFIT RATIO: t measures the relationship between gross profit and sales. It is calculated by dividing gross profit by sales. Gross profit Gross profit margin or ratio = -------------------------- * 100. Net sales Gross profit is the difference between sales and cost of goods sold. TABLE NO: 4. GROSS PROFIT RATIO YEAR GROSS PROFIT NET SALES RATIO 2008-09 435.39 3393.02 12. 2009-10 810.59 3794.00 21. 2010-11 940.16 4547.33 20. 2011-12 645.17 5107.04 12. 2012-13 742.28 6071.37 12. SOURCES: ANNUAL REPORT FIGURE NO: 4.
RATIO
25 20 15 RATIO 10 5 0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the Gross profit ratio is 12.831 and in the year 2009-10 is 21.365 and n the year 2010-11 it is decreased to 20.674 and in the year 2011-12 it is decreased as 12. nd in the year 2012-13 it is 12.225. nterpretation
The performance of the result was at maximum of 21.36%, during the year 2009-10 and gain the gross profit is decreased in succeeding year. The following liquidity position of this ompany shall not be able to pay its current liabilities without difficulty. 4.3 OPERATING RATIO: Operating profit margin or ratio establishes the relationship between operating profit and net sales. It is calculated by dividing operating profit by sales. Operating Profit Operating profit margin or ratio = ----------------------------- Net sales Operating profit is the difference between net sales and total operating expenses. Operating profit = Net sales – cost of goods sold – administrative expenses – selling and distribution expenses.) TABLE NO: 4. OPERATING RATIO YEAR OPERATING PROFIT SALES RATIO 2008-09 861.52 3393.02 0. 2009-10 753.39 3794.00 0. 2010-11 1032.31 4547.33 0. 2011-12 904.55 5107.04 0. 2012-13 554.73 6071.37 0. SOURCES: ANNUAL REPORT. FIGURE NO: 4.
RATIO
RATIO
0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the Gross profit ratio is 12.831 and in the year 2009-10 is 21.365 and n the year 2010-11 it is decreased to 20.674 and in the year 2011-12 it is decreased as 12. nd in the year 2012-13 it is 12.225. nterpretation The operating profit ratio is used to measure the relationship between net profits nd sales of a firm. Depending on the concept, it will decide. The operating profit ratio is increasing and decreasing comparing with the years. The earnings are increased due to the increase in the income from services. So, the ratio is ncreasing slightly and decreasing from one year compared with the previous year. SHAREHOLDER RATIO : 5.1 EARNING PER SHARE: tmeasure the profit available to the equity shareholders on a per share basis. It is omputed by dividing earnings available to the equity shareholders by the total number of equity hare outstanding Earnings after tax- Preferred dividends (if any) Earnings per share = -------------------------------------------------- Equity shares outstanding TABLE NO: 5. EARNINGS PER SHARE YEAR NET PROFIT AFTER TAX NO OF EQUITY SHARES RATIO 2008-09 284.39 85.00 3. 2009-10 537.09 85.00 6. 2010-11 666.36 85.00 7. 2011-12 461.17 85.00 5. 2012-13 522.78 85.00 6. SOURCES: ANNUAL REPORT FIGURE NO: 5.
RATIO
9 8 7 6 5 RATIO 4 3 2 1 0 2008-09 2009-10 2010-11 2011-12 2012- Analysis
RATIO
2
1 RATIO
0 2008-09 2009-10 2010-11 2011-12 2012- Analysis n the year 2008-09 the current asset to fixed asset ratio is 1.082 and in the year 2009- s 1.276 and in the year 2010-11 it is 1.503 and in the year 2011-12 it is as 1.551 and in the year 2012-13 it is 1.882. nterpretation Current assets are increased due to the increase in the sundry debtors and the net fixed ssets of the firm also increased due to the charge of depreciation and there is no major ncrement in the fixed assets. The increment in current assets and the increase in fixed assets esulted an increase in the ratio compared with the previous year. CHAPTER - FINDINGS: The study conducted at Exide industries ltd. The following findings are made Asia’s largest batter y manufacturer. The only organization in the world manufacturing all types of lead acid batteries. Exide is a super brand and having wide distribution network. The company is providing the necessary welfare facilities for the employees in comport one and increasing the relation level of the company. Good HR practices and policies are followed. Exide has very good environment management. The working capital turnover ratio of the company in the year 2008-09 is 9.40 it has been decreased in the year is 2009-10 is 9.08 and corresponding years also decreasing in the working capital turnover ratio. The current ratio of the company was varying from year to year. Among the study, which had been for 5 years current ratio is favour able and the company is quite satisfactory. The fixed assets turnover ratio of all the 5 years is moderate. SUGGESTIONS & RECOMMENDATION The company should reduce employee turnover. The company can invest more in current assets to meet the available current liabilities. The company should try to improve the liquid ratio to the standard ratio 1:1 by reducing he current liabilities. The company can increase their net profit by reducing the operating and other expenses. Management of inventory can be improved further by increasing sales. There would be more efficient utilization of current assets by management. ncrease in sales should correspond to increase in current assets. The company should try to increase the net profit so as to give better returns to the hareholders. The company should maintain the present proprietary ratio, so that the solvency position of the company is maintained. CONCLUSION The study is done on the ratio analysis at Exide industries limited. Exide industry is a largest battery manufacturer. Exide is a super brand and it has wide distribution network. The company s having good control over the current liabilities as its current ratio is almost equal to the tandard ratio 2:1. The liquid ratio is not up to the standard indicating the limited liquid assets available to meet the current liabilities. The company able to have turnover of stock almost equal to 5times which is satisfactory. Overall ratio analysis of the company is satisfactory as they are maintaining current assets and current liabilities in the proper position. To conclude, would like o maintain the face value that ratio analysis here is good but still improve if the company follow uggestion given by the researcher. CHAPTER- 4 APPENDIX BIBLIOGRAPHY BOOKS:
- M.Y.KHAN & P.K.JAIN.
Financial Management.4thedition Tata MCGrawHill. New Delhi.
- RAMACHANDRAN & SRINIVASAN Management Accounting. S.CHAND &
COMPANY LTD. 1 st edition 2004 New Delhi.
- T.S. REDDY & Y. HARI PRASAD REDDY Management Accounting.
WEBSITE:
1.www.exideindustries.com 2.www.Exide-Industries-Ltd/Company/Balance-Sheet. REPORTS: AUDITED ANNUAL REPORTS OF EXIDE INDUSTRIAL LTD PROFIT AND LOSS ACCONUT FOR THE YEAR ENDING MARCH 2009- 2013. Profit and loss accountRs.in crores 2008-09 2009- ncome Gross sales 4233.35 4541. Less: Exide duty 464.41 328. Less: Sale tax, vat and octroi 375.92 419. Net sales 3393.02 3794. Other income 6.47 12. Total 3399.49 3806. Expenditure ncreased or decr ease in stocks 25.95 49. Material consumed 2201.2 2201. Purchase of trading goods 12.21 6. Personnel cost 170.90 236. Expenses 429.01 510. nterest &finance cost 47.89 10. Depreciation/ amortization 67.94 80. 2964.10 2995. Total Profit before tax 435.39 810. Taxation(net) 151 273. Profit after tax 284.39 537. Balance brought forward 281.30 324. Profit available for appropriation 565.69 861. Appropriation General reserve 185 250 nterim dividend 32 48 Tax on interim dividend 5.44 8. Proposed dividend 16 34 Tax on above dividend 2.66 5. Surplus carried to balance sheet 324.59 516. Grand total 565.69 861. Profit and loss account Rs.in crores 2010-11 2011- ncome Gross sales 5040.31 5668. Less: Exide duty 492.98 561. 4547.33 5107. Net sales Other income 104.14 67. Total 4651.47 5174. Expenditure Material consumed 2962.36 3457. Purchase of trading goods 61.49 7. Work-in-progress and traded goods (200.86) (32.03) Employee benefit Expenses 282.85 286. Finance cost 6.03 5. Depreciation/ amortization 83.46 100. Other expenses 562.91 703. Total 3758.24 4529. Profit before exceptional item &tax 893.23 645. Exceptional item 46.93 - Profit after tax 940.16 645. Tax expenses Current tax 265.30 169. Deferred tax 8.50 15. Grand total
