Ratio Analysis in Jocil

Jocil limited
INDUSTRY PROFILE
Jocil is in the business of manufacture and sale of Fatty acid, Toilet
Soap and Soap Noodles & Glycerin which fall into the category of Oleo
chemicals. It is also having co-generation Biomass Power plant to meet
its steam and power requirement and exports surplus power of sale.
Oleo Chemicals:
These are made from vegetable and animal oils & fats and
petrochemicals feedstock. They range from fatty acids, glycerin, alcohols
and metallic soaps to fatty nitriles and their derivatives. Oleo chemicals
feedstock is converted into a wide range of chemical products.
Fats containing a high proportion of saturated fatty acids are
solid at room temperature. These are commonly known as saturated fats
and are usually derived from animal sources e.g. lard, suet and butter.
Most plants fats are high in either polyunsaturated or monounsaturated
fats except palm and coconut fat which is highly saturated.
One of the most welcome features of present times is the
growing availability of vegetable fats at a phase greater than that of
population growth. This is largely due to the development of palm oil on
a massive scale in Malaysia and Indonesia. Palm oil is already the largest
internationally traded oil.
Palm oil has a composition similar to that of animal tallow and palm
kernel oil that of coconut to meet a large proportion of industrys
demands.
Mahatma Gandhi college
Jocil limited
User Industry of Oleo Chemicals

USER INDUSTRY OF OLEO CHEMICALS
Lubricants
Pharmaceuticals
Paints &coatings
Plastics
Soaps &Detergents
Food additives
Printing inks
Metal-working
Cosmetics
Leather
Rubber
other industries
Fatty Acid Industry:

These are compounds of carbon, oxygen and Hydrogen. In the fatty
acid Molecule the carbon atoms are linked together in the form of a long
chain commonly referred to as a hydrocarbon chain. According to
scientific data and nomenclature, long straight chain organic acids with
carbon atoms of more than 4 are called fatty acids, because they are
obtained from natural vegetable/animal oils/fats. However most of the
commonly used fatty acids are with carbon chain 6-24. These fatty acids
are mainly grouped into two categories viz, saturated and unsaturated
fatty acids.
Fatty Acids are having diversified application in various fields of
industries like rubber manufacturing industries, Tyres, Plastic, Cosmetics,
Foods and Pharmaceuticals.
Jocil limited
Present Status of Industry:

Present manufacture of Fatty Acids is dispersed all over the
country with units in various states. Production of fatty acid in India was
insignificant, prior to the period of second world war. Production on a
small scale was initially started in the mid forties that too with obsolete
equipment. The qualities of fatty acid coming out from these units are far
from desirable and recovery of glycerin was inefficient.
It is in 1953, the first high pressure Fat Splitting Plant in our
country went into stream in Bombay. It started production as a batchoperating unit, which was soon converted to a semi-continuous one. The
industry which started taking shape in the early fifties was established on
a firm footing within a decade, acquiring considerable know-how in
process technology.
In the year 1954, the installed capacity of Fatty Acid Plants was
below 4500 tones per annum. The annual production from the four
operating units at that time was below 1000 tones per annum. Since then
the Fatty Acid industry in India has made raid progress during the next
two decades.
Jocil limited
A Brief note on Fatty Acid Industry in AP.

The fatty acid industry is dependent on the availability of oils and
oil seeds for extraction and further processing, as mutton Tallow is
banned in India. The industry found that rice bran oil is one such source
have chosen rice bran oil as their raw material and rice bran oil extraction
units found their place meant near the raw material source rice bran even
through the customers are well spread all over the country.
The consumption pattern of rice bran oil depends on the level of free
fatty acid content available as industry grade varies from time to time
because the rice bran availability is seasonal having direct relation to the
rice cropping and harvesting schedules therefore fluctuations are
observed in the rice bran oil prices which are almost fixed in the pattern
how ever at times due to climatic conditions and temperature variations
the status of the rice bran oil changes from industrial grade to edible
grade and vice versa.
In India rice bran oil extraction is mostly available in the major rice
growing states of AP and Punjab. Fatty acids manufacturing units have
been situated in these states as they are nearer to the raw material
source Tamilnadu State, even though produces major quantities of rice,

most of it is consumed as boiled rice for local consumption. In Andhra
Pradesh there are about 70 Rice Bran Oil Extraction Units and 6 Fatty
Acid manufacturing units. Another new unit is coming up. Among all
these, M/s Jocil Limited is the second oldest and its products are well
accepted among the customers. The installed capacity sales of Stearic
Acid by these Andhra Pradesh based units account approximately for 48
per cent of the all India Sales volume.
Jocil limited
Fatty Acids for commercial uses are produced by hydrolyzing oils and
fats to fatty acid and glycerol and then further purified and modified to
suit different industrial applications. India is rich in non edible oils
resources and production of fatty acids from these oils upgrades them
suitable for manufacture of all sorts soaps and greases. This ease the
situation of edible oils for human consumption there by helping reduces
the shortage of edible grades in India.
The Fatty Acid manufacturing units in Andhra Pradesh are M/s.
Food Fats and Fertilizers Ltd., M/s. Jocil Ltd., M/s.Sudha Agro Oil and
Chemical Industries Ltd., M/s. Siris Agro Ltd., M/s. Sree Rayalaseema
Alkalies and Allied Chemicals Ltd., M/s Swastik Oleochemical Ltd., and
M/s. Golden Agro-Tech Industries Ltd., are yet to start commercial
production. All these are manufacturers of Stearic Acid and other Fatty
Acids. Some of them are utilizing portion of their capacities for captive
consumption (on all India basis about 52 per cent of Installed capacities is
used for captive consumption and about 34 per cent is idle capacity.
About 14 per cent is used for commercial sales of Fatty Acids). The idle
capacity of M/S TOMCO, KSDL and Vegetable Vitamins and Fats alone
is about 73 per cent. Andhra Pradesh State is growing industrially and
there is ample scope and potential for entry of new industries. Thus, the
Stearic Acid and other Fatty Acid using Industries like PVC, Chemical,
Rubber Retreating and related Industries are still possible to be set up in
Andhra Pradesh, is still to, grow, inspite of the competition among the
Fatty manufacturers. The idle capacity thus, is not a permanent feature.
Jocil limited
The industries using Stearic Acid in Andhra Pradesh are mostly PVC
Pipes, Rubber retrading, Hawai Chappals, Cycle Tyres, Chemical
Auxiliaries, Stearates, Cement Paints and Cosmetics. The growth rate
even though is high in cosmetics industry at 25 per cent. The volumes
are low due to lower production levels of cosmetics industry
Types of Fatty Acids:1) Saturated:
Myristic Acid
Palmitic Acid
Lauric Acid
Stearic Acid
2) Unsaturated: Oleic Acid

Linoleic Acid
The above classification is done on the basis of molecular
composition.
Raw materials that constitute fatty acids include the following:

1) Animal fats (usage of animal fats is banned in India)
a) Tallow
b) Lard
c) Inedible Grease
2) Vegetable oils
a)
b)
c)
d)
e)
Neem oil
Palm oil
Rice bran
Castor oil
Coconut oil
Jocil limited
Stearic Acid Industry:

Stearic Acid is a saturated fatty acid having diversified applications
in various industries like textiles, tyres, plastics, rubber, cosmetics, food,
surfactants, pharmaceuticals etc. Major players in Indian
Stearic Acid
industry in India are Godrej, Jocil, VVF. The average consumption by

different industries is in the range of 60000 TPA. Rubber and PVC
industry constitutes approximately 40%.
Stearic acid user industry is aware of the changes in raw material
scenario to quickly adopt and change their input material base to the
cheaper one. This has increased pressure on manufactures of stearic acid
to be more alert and adapt for sustaining the changing environment.
More than a third of the consumption of fatty acids/ Stearic Acid in
India comes from Gujarat and Maharashtra states. This could be an
advantage to the fatty acid manufactures, which are located in and around
Mumbai as transportation cost has become a major input cost for any
industry.
Jocil limited
SOAP INDUSTRY:
Personal wash market in India is very high. Everyone is using toilet

Soaps. It is one of the fast moving consumer products in personal care
segment.
The consumption percentage of toilet soaps was increased year by
year. The total consumption of toilet soaps in India is 5.3 lakh tones per
year. The growth rate is 2-3 percent per annum. But the consumption rate
of soap used per an Indian is low, when we compare with Thailand, Italy
and Brazil people. Their consumption rate is 480 gms, 700 gms and 160
gms per head in a month.
There are a number of reputed companies in the toilet soap market.
Due to increased competition, along with those companies several small
scale manufacturers are also entered in to the market. The crowded
market place has also brought to the consumer as marketers of soap have
tried to woo consumers through upgraded offerings and better quality
soaps. The marketers of toilers soaps have increased the TFM (Total
Fatty Matter) content in their brands, to offer better quality soaps at a
lower price. Industry watchers say that the IFM content on some brands
has moved up from the 50-60 per cent earlier to over 70 per cent of late.
The per capita consumption of Toilet Soap in India at present
is low as compared to many developed countries. The overall growth rate
of the industry in the recent years has been in the neighborhood of 2%
per annum.
Jocil limited
The total turnover of toilet soap industry is Rs 4500 crores.

The overall consumption of toilet soaps in the country has been increased
at the rate of 2% and at more than 5% per annum in rural area. The gap
between demand and supply of oils for production of toilet soap is a
matter of serious concern. The soap market is divided into Sub-popular,
popular& premium on the basis of fatty matter. But for the purpose of
market study, the market is categorized into popular and premium. The
popular segment constitutes about 87% while the premium soap makers
up the remaining 13%.
Segmentation of the Toilet Soap Market:Price Range

Rs.6-8 (for 75gms)
Soap Segment
Sub-popular
Rs.8-12(for 75gms)
popular
Rs.12+ (for 75gms)
premium
Market share of premium,popular,sub-popular

Segment
Market Share
(%)
Growth
(%)
Premium
24
Popular
45
Sub-popular
31
Jocil limited
Reasons for growth rate of sub-popular soaps:

Toilet soaps are among the highest penetrated products with in
the FMCG(Fast moving consumer goods) market, reaching an estimated
95 percent of urban and 87 percent of the rural households.The fairly high
contribution from the rural markets makes these categories sensitive to
the fortunes of the agricultural economy.The prolonged drought in the
north and west of the country(until 2000) and the sharp fall in farm
disposable incomes have switch from high-to-low-priced brands. This is
intended supported by the fact that within toilet soaps, it is the discount
segment (soap that costs between Rs.5 and Rs.8 per 75 Gms) that has
registered the highest growth rates over the past years, that is why, the
industry players commonly attribute the de-growth in the soap market due
to down trading.
A brief profile of the various players in the personal

wash market is given below :
Hindustan Unilever Ltd., (HUL)
Hindustan Unilever Ltd. has become a major player in the Indian
personal wash market. In India HUL has gained 60% of share in the total
toilet soap market. HUL gives its products in several brand names. The
brand names of HUL are Liril, Pears, Dove, Lux, Denim, Fair & Lovely,
Rexona, Lifebuoy, Hamam, Breeze, Ayush. Different brands are popular
in different regions.
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Jocil limited
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Jocil limited
HUL have brought a few benefits to the consumer as a marketer of
toilet soap have tried to woo. Consumers through upgraded offerings and
better quality soaps. As a result of sharp fall in farm disposable incomes,
the consumers persuaded low-income households to down trade, that is,
switch from high-to-low priced brands. HUL, too appears to endorse the
phenomenon of down trading.
The major competitors of HUL are Nirma, Godrej consumer care
and WIPRO, Godrej consumer care has introduced, fairness soap,
fairglow which claims to enhance fairness, has been a success too, as
against this, spawning a competitive response from HUL in the form of
Fair & Lovely soap. HUL offering to combine two benefits in a single
tablet, Breeze 2-in-1 actually offers a cost-effective replacement to
consumers who we hair wash products and soap. HUL claims Breeze is
the largest brand in the discount segment. HUL has increased Lifebuoys
market share by introducing, Lifebuoy Active, Lifebuoy Gold, Lifebuoy
Plus. HUL has gained major share in discount segment.
Now-a-days HUL has become a dominant player in the Indian
personal wash market.
WIPRO :
WIPRO has become a major player in the Indian personal wash
market. In India Wipro has gained 50% of share in toilet soap market.
Wipro gives its products in brand names of Santoor, Wipro Baby Soap,
Chadrika. It covers 1.6 million outlets across the country for its
distribution. 50 percent of Wipro consumer care business comes from the
toilet soap category.
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Jocil limited
The biggest brand of Wipro is Santoor was launched in the late 80s.
Wipro through Santoor is the leading Soap marketer in Andhra - Pradesh
with 18 percent market share. Wipro baby soft diapers gained almost 65
percent of the business from Northern Markets.
Wipro have come out with new mixes and are confident of
delivering value. The company introduced Chandrika as an Ayurvedic and
herbal product as against Medimix. The companys further interests in
naturals/ ayurvedic segment of the toiletries market.
The company faces several competitions from HUL, Godrej,
Nirma, Henko. Inspite of competition Wipro has generated consumer
satisfaction.
Nirma :
Nirma has quickly become a significant player in the domestic
toilet soap market. The companys aggressive pricing strategy has been
the key behind its performance. Launches such as Nirma have paid off
because consumers have seen the brand as offering good value for money.
The company has managed healthy top line growth in the market.
Nirma has gained major market share just a couple of years after its
entry. It tries to made brands such as Nirma available at least 10 percent
lower than its nearest competitors. The company offers its brands Nirma
Lime, Nirma premier, Nirma. The company faces competition from HUL,
Wipro, Godrej. The Nirma was succeeded within a short period due to its
aggressive pricing strategy.
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Jocil limited
Godrej Consumer Care:
With at least three entirely new launches under its belt, Godrej
consumer care has improved its market share in the personal wash
market. The companys recent restructuring exercise, offer which the
consumer products business was diverted from the Godrej industries and
vested with Godrej consumer care, has also helped pep up profitability
performance.
Fair Glow, the fairness soap from Godrej Consumer Care, which
claims to enhance fairness, has been a success too. As a relatively small
player in the business, the company has managed robust sales.
Major soap brands and its market share:
Market share in premium segment:
Brand
Liril
Market Share in percent

12
Dettol
10.3
Cinthol
Mysore sandal
Johnson&johnson
Baby soap
HUL leads 35 percent of total Rs.100 crore premium soap
market. Secondly Dettol soap is having 10.6 percrnt market shares in the
premium soap segment. Mysore sandal and Cinthol soaps are having 9
percent and 8 percent market share respectively.
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Jocil limited
Brand associations:
Every soap manufacturer is following brand associations to their
product, which boosts promotion of the soap in the market. These will
attract the customers towards the product and make them to buy. These
brand associations can separate the product from other competitive
products.
Brand positioning:
Brand
Santoor
Lux
Nirma
Liril
Hamam
Rexona
Dettol
Margo
Fair glow
Positioning
Younger looking skin, skin care
Skin care, glamour
Value
Freshness
Purity
Skin care, silky soft skin
Germy check, 100% bath
Skin protection
Fairness soap
Biomass Power:
Biomass is plant matter such as trees, grasses, agricultural crops
and other material derived from living matter. These materials are
renewable and sustainable. A biomass fuel is converted to heat energy in
a highly controlled reactor (boiler or gasified). The heat is converted to
mechanical energy in either a steam or gas turbine and the mechanical
device turns a generator that produces electricity. With regard to
feedstock, residues are the most economical biomass fuels for generating
electricity. These are the organic by products of food, fiber, agricultural
wastes, rice husk etc.
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Jocil limited
COMPANY PROFILE
History of Jocil Limited:
Jocil limited was incorporated on 20th February, 1978 as per
the Certificate of incorporation No.2260 granted by the Register of
companies A.P. Hyderabad Under the name and style of ANDHRA
PRADESH
OIL
AND
CHEMICAL
INDUSTRIES
LIMITED
(APOCIL).
Promoters of the company:
The unit was promoted as public Limited Company in joint venture
by the Andhra Pradesh Industrial Development Corporation Limited,
Hyderabad (APIDC) and Jayalakshmi Cotton and Oil Products Private
Limited, (JCOP), Perecherla, Guntur Dist .Company belongs to
Jayalakshmi Group.
Title Changes :
During the year 1982, the share of APIDC in the company has
Been reduced. Consequently the name of the company has been changed
to JAYALAKSHMI OIL AND CHEMICAL INDUSTRIES LIMITED
(JOCIL) on 12th April, 1982 as per the fresh Certificate of Incorporation
granted by the Register of Companies. Again during the year 1988, the
major shareholding of the company has been acquired by the Andhra
Sugars Limited Tanuku and the Company has become a subsidiary unit of
the Andhra Sugars Limited effective from 27 th October, 1988. Later on to
avail the benefit of the well noted brand name JOCIL and to have a
simple, easy pronunciation, the name of the company has been changed
to JOCIL effectively from 17th September, 1992, as per Fresh
Certificate of incorporation granted by the Register of Companies.
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Jocil limited
INITIAL INVESTMENT:
The Company has set up Rs.3.3 corers Fatty Acid and Soap Project
on turnkey basis through M/s. Ballestra (India) Limited, Bombay, with
technology and equipment of C.M.B., Italy.
LOCATION OF THE COMPANY:

Jocil Limited is located at Dokiparru in medikondur mandal of
Guntur District in the state of A.P.It is only 15 km from Guntur and is on
Guntur-Narasaraopet highway, With a total occupied area of about
33Acres.Now the companys geographical area is extended upto about
100 acres. The Registered office of the company is with in the factory
premises.
The location was well selected based on the following reasons:
A. Dokiparru village comes under the industrially backward area
declared by the A.P. state Government under the six point Formula
and thereby the company is entitled for the benefits like investment
subsidy, interest free sales tax and power tax rebate.
B. The land comprises of red soil and gravel which is useful for
construction of buildings and minimized costs.
C. Water resources are available.
D. Man power is available from neighboring places without loss of
time and transportation.
E. The plant is well connected to train and Road movements, making
the transportation easy and economic.
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Jocil limited
F. The main Raw Material of the point is non-edible commercial
oils/fats oil, Rice Bran Oil, Acid oil, Fatty acids ,Crude palm
stearine etc.
G. The oils are available within the district limits and also from
Krishna, East and West Godhavari Districts. Palm Fatty Acid
Distillate and Crude Palm Stearine are being imported by the
company.
Registration of the unit
The company has been registered with Directorate General of
Technical Development (DGTD), Government of India, and New
Delhi. At that time no Industrial License was required for setting up
the project since the total cost of the fixed assets of the project
envisaged was less than Rs.3.00crores. The Company has also
obtained the Industrial License No.IL: 57(83) dated 1-3-1983 from the
ministry of Industry, Government of India and New Delhi .what so
ever, due to Liberalization policy by the Govt of India, licensing is
abolished for all industrial undertakings including MRTP/FERA
Companies vide notification No.477(E) dated 25-7-1991 issued under
the Industries Act,1951 except the list of industries notified in
schedule 11, which are subject to compulsory licensing. The unit
comes under the exempted list for licensing. However, as per the
guidelines of the Govt of India, the unit has obtained the formal
approval
vide
acknowledgement
of
memorandum
bearing
No.694/37A/TMO/94 dated 3-3-1994 before going into further

expansion of the unit .
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Jocil limited
Expansion of the Plant:

The unit has commenced commercial production during the year
1981 at the rated capacity of 15 tons per day. During the year 1983-84 the
toilet soap plant and the fatty acid plant were expanded. So the capacities
of the plants were increased to 15 tons per day and 20 tons per day
respectively.
The company has further undertaken the expansion of Fatty Acid Plant
and the capacity of the plant is 100 tons per day.
Objectives of Jocil:
The main objective of the Company is manufacturing and selling of
the following products:
PRODUCTS
Fatty Acids with various grades
BYPRODUCTS
Glycerin
Toilet Soap
APPLICATIONS
Raw Materials to the
Industry
Raw Material to the Industry
Consumer product.
The company received letter of intent from department of industrial

development, Ministry of industries, Govt.of India, Delhi. Enhancing the
annual licensed capacity of fatty acids, Glycerin and toilet soap. The
company has implemented this letter by increasing installation capacity
of fatty acids plant from 6,205 M.T. per annum to 15,510 M.T. with effect
from February, 1991 this enhanced capacity came into operation. Later
the company enhanced the capacity to 37500M.T.p.a.w.e.f. March 1995.
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Jocil limited
ORGANISATIONAL STRUCTURE OWNERSHIP AND

MANAGEMENT
BOARD OF DIRECTORS:
Dr. Mullapudi Harischandra Prasad
Chairman
J. Murali Mohan
Managing Director
P. Narendranath Chowdary
Director
Mullapudi Thimmaraja
Director
Y.Narayanarao Chowdary
Director
V.S. Raju
Director
K. Srinivasa Rao
Director
M.Gopalakrishna
Director
Subbarao V.Tipirneni
Director
SENIOR EXECUTIVES:
P.Kesavulu Reddy
President & Secretary
BANKERS:
Andhra Bank
Guntur
State Bank of India
Guntur
AUDITORS:
Brahmayya & Co.,
Guntur
COST AUDITORS:
Narasimha Murthy & Co.,
Hyderabad.
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Jocil limited
REGISTERED OFFICE & FACTORY:

JOCIL LIMITED,
Dokiparru, GUNTUR 522 438,
Andhra Pradesh.
Share holding pattern as on 31st March,2008
Category
No. of
% of
Shares held
Shareholders
24,43,250
55.02
6,37,096
14.35
20,492
0.46
13,39,737
30.17
44,40,575
100.00
Promoters
TheAndhraSugarsLimited.
(HoldingCompany)
Institutions &Banks
Bodies Corporate
Public
Total
Profile of Jocil Limited :
Type of the Company
Small Scale Unit
Nature of the Unit
Manufacturing
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Jocil limited
Organisation Structure of Jocil Ltd.
Board of Directors
Managing Director
Vice
President
Dy. GM
Engg.
Marketing
Manager
DGM
Dy. Manager
(Development)
(Production)
Sr. Manager
(Electrical)
Vice President to Secretary

Finance
Manager
Stores
Executive
Purchase
Executive
Labour
Officer
Security
Officer
Asst.
Executive
Senior
Manager
Senior
Asst.
Asst. Time
Keepers
Security
Guards
Sr.
Accounts
Officer
Clerk
Costing
Office Asst.
Asst.
Accounts
Clerks
Officer
Marketing Manager
Superintendent
Marketing Officer
Asst. Clerk
Asst. Clerk
Marketing
Executive
Supervisor
Asst. Sales Supervisor
Sales
Representative
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Jocil limited
Functions of Jocil Limited:

1. To produce, manufacture, refine, process import, sell and generally
to deal in all kinds of fatty acids and soaps and in connection there
with the construction of factories and workshop.
2. To fabricate manufacture and deal in all kinds of fatty acids plants.
3. To manufacture various brands of soaps under contract basis for
HUL.
4. The company organizes annual general body meeting where it
submits all the four quarterly reports regarding the actual
performance with standard performance and predicts the courses of
variances.
5. To receive, consider and adopt the profit & loss a/c for the year
ended and prepares balance sheet as at that date.
6. To declare dividend on equity shares.
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Jocil limited
Products of Jocil :Jocil has set up a modern plant for the manufacturing of fatty acids,
toilet soaps and refined glycerin. The major equipments were imported
with latest technology. The products manufactures are of international
standards to suit different industrial users. Jocil is manufacturing two
types of products.
1. Industrial Goods (Chemicals)
2. Consumers Goods (Soaps)
Fatty Acids, refined Glycerin and other Fatty Acids Pitches fall
under the category of industrial goods whereas soaps come under the
category of consumers goods.
Fatty acids are manufactured from vegetable oils and fats. There
are different types of fatty acids for different industrial applications. The
following are the different kinds of fatty acids which can be manufacture
in JOCIL.
1. Crude Fatty Acids of Vegetable Acids & Fats.
2. Distilled Fatty Acids of Vegetable Acids & Fats.
3. Hydrogenated Fatty Acids of Vegetable Acids & fats.
Out of the above type of Fatty Acids. JOCIL is manufacturing the
following fatty acid which is a major portion of their sales.
1) Stearic Acid
2) Oleic Acid
3) Distilled & Hydrogenated Fatty acids.
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Jocil limited
Stearic Acid:
In the stearic acid, different grades are produced with standard
specifications for different industrial consumers.
The following are the different grades of Stearic acids consumed
by different industries in manufacturing their own industrial products.
VARIOUS GRADES OF STEARIC ACIDS

JOTEX GRADE-JOTEX
Used in drugs, pharmaceuticals,
SPECIAL GRADE
JOSTRIC SPECIAL GRADE
JOSTRIC GRADE
cosmetics, chemicals & plastics

Chemicals, Calcium carbonate
Metal polish, Grease, Metallic polish
JOSTRIC 9
PVC Stabilizers and Chemicals

Metal polish, Grease, Metallic polish
JOSTRIC 11
JOMEL
RUBBER GRADE
ECONOMY
PVC Stabilizers and Chemicals

PVC
Rubber, Cement and Paints
Rubber, Metallic polish
Rubber, Metallic polish, Grease
Refined Glycerin:
There varieties of refined glycerin are produced namely.
1) Chemically pure grade (C.P)
2) Industrial White (I.W)
3) Pale Straw (P.S)
Glycerin is used in pharmaceuticals, cosmetics, explosives, paints
stroke ink, chemicals, tooth paste etc.,
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Jocil limited
Oleic Acid:
Only one variety of Oleic Acid namely Commercial Gradeis
manufacture by JOCIL. It is used in fertilizers, cutting oils, liquid soaps
and other chemicals manufactures.
Distilled Fatty Acids:
The Fatty Acids of different oils are tailor made products to suit
different industrial users specifications.
At present JOCIL is manufacturing distilled hydrogenated rice bran
fatty acids, distilled cotton seed oils fatty acids, distilled coconut fatty
acids. They plans to manufacture some more varieties of fatty acids in
future.
Distilled Hydrogenated Rice Bran Fatty Acids and distilled plam
oil fatty acids are acids are also being manufactured for consumption in
soap plant for the manufacture of Toilet Soaps.
Fatty Acid Pitches:
Fatty Acid pitches are obtained during distillation of crude fatty
acids. These products are supplied to laundry soaps, grease, foundry
chemicals uses.
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Jocil limited
Process of soap Manufacturing:
Fatty Acids
Saponification
Reaction With Caustic soda
Neat soap
Spray drying(to reduce moisture to desired level)
Soap noodles
Amalgamation(addition of colour,perfume)
Mixing(homogenation)
Extrusion (caking of soap bars)
Soap bars
Cutting
Stamping
Packing
Finished soap
Source: From company record.
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Jocil limited
Main Plant Suppliers:

Ballestra(India)Ltd,Bombay in collaboration of Ballestra, S.P.A.,
Milano (Italy) based on the Technology of C.MB. S.P.A.,
Pomilla
(Rome) have supplied the main plant &equipment viz., Splitting Plant,
Distillation Plant and Hydrogenation Plant.
K.S. Krishnan Associates Pvt.Ltd. New Delhi has supplied the
equipment for Soap and Glycerine Plants.
Status of Jocil :
Andhra Pradesh is predominantly a Rice growing State and
location of Jocil is very close to the rice-bowl of Andhra Pradesh i.e.
Krishna and Godavari Districts. There are about 70 Risse Bran processing
units in and around Guntur, the location of Jocil. It is for this reason the
place has been chosen during 1978. Rice Bran Oil has been used by most
of the industries until recently. However, the Industry at present is using
products made out of Crude Palm Steatrine (CPS), Palm products like
Palm Fatty Acid Distillate (PFAD), which have become much less
expensive.
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Jocils present capacity utilization is as under:

TABLE
product
Installed
Capacity
(tons/day)
Production
2007-2008
(tons/annum)
Capacity
Utilization
(%)
Fatty Acids
200tpd
28939
48
Toilet Soap
60tpd
2405
14
Soap Noodles
150tpd
21527
48
Glycerine
4.5tpd
1113
82
Jocil is able to service its customers to their total satisfaction, as it is

aware of the quality that is required for individual customers, the type of
material that should be supplied consistently on time. That is, right
product for right customer at the right time. Keeping in view the changes
that are taking place globally, the company is in constant touch with its
customers, dealers &agents to pass on the information available for the
benefit of the customers and the Industry.
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OUT LOOK:
1. a) Fatty Acids and Soap
The production of fatty acids, soap noodles and glycerine has
come down during the year due to lack of demand from customers to
whom we have been manufacturing products on job work. As a result the
capacity utilization of fatty acid plant and glycerine plant was low. How
ever , the demand for manufacture of soap noodles and toilet soap on job
work has improved from January 2008 and therefore overall capacity
utilization of soap plant during the year is better than the previous year.
Barring unforeseen business conditions the present position in fatty acid
and soap industry is expected to continue for some more time.
b) Biomass power plant
The availability of field residues like cotton stalks, chilli stalks
etc., has been coming down drastically due to installation of more plants
close by requiring the same fuels. The company has established biomass
collection centers near the fields to improve procurement. However,due
to shortage of labour the quantity procured is not to expectations.The
power purchase price of AP Transco is not in pace with the fuel cost and
AP Transcos restriction to purchase 2.4 Mw is resulting in low capacity
utilization and high cost of generation.
c) Wind Energy Generators (WEG)
During the year 2*1.65Mw WEG Sets generated 78.96 lakhs untis
as against 83.55 lakhs units in the previous year. The low generation is
attributed to the extended rainy season during the year in which period
wind velocity was low for power generaion.
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The increase in rate for wind power supply to Tamilnadu Electricity

Board(TNEB) for wind mills commissioned before 15-05-2006 by
Tamilnadu Electricity Regulatory Commission (TNERC) from Rs.2.70
per unit has not come into effect from 1-4-2007 as was earlier expected. It
is now proposed by TNEB to implement the increased rate from the date
of entering into new Energy Purchase Agreement (EPA) which contains a
clause for binding the power producer for a period of 20 years. Since the
matter regarding procurement proce by TNEB is before the Honble
supreme court on the appeal filed by the TNERC on the petition filed by
Indian Wind power Association in which the company is a member, It
was decied that it is better to wait some more time before entering into
the EPA .
It I s widely expected that the demand for non-conventional energy

will increase in future due to widening gap between generation and
demand coupled with fuel shortages. Since the policy of the Government
is also favourable for promotion of non conventional energy like wind
energy and since the wind projectd are found to be econimially feasible
after considering the CDM revenues, the company set up one more WEG
of 1.5 Mw in March 2008 at Kasturirangapuram Village,TIrunelveli
District, TamilNadu. The plant was commissioned on 19-03-2008 and
25344 KWH generated up to 31-03-2008 was exported to TNEB
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d) New Business Opportunities
The Company is exploring new business opportunities to expand /
diversify the activities in the areas of business having growth potential by
effective utilization of internal generations and for this purpose various
alternatives are being explored.
Functional Areas:
Marketing:
The company mainly markets its products from its depots held at
Mumbai, Delhi, Kolkata and Bangalore and directly from the factory.
The prices are fixed basing on its competitors and the variations in the
prices of raw materials. No advertising is done for the fatty acids. As it
is an industrial product, the company does not allocate any amount on
advertisement and the consumers come to the depots or factory and place
their orders. In the case of soaps, as they are manufacturers on the
contract basis of HUL no advertising is required. Jocil leads only with
the soap production and the marketing & advertising is taken over by
HUL.
Jocil markets its products throughout the country through:
Own depots
: at Delhi,Mumbai
C&F agents
: at Chennai, Pondichery, Kottayam,

Kozhikode, Coimbatore, Banglore
Kanpur, Baroda &Faridabad
Direct Sales
: from factory without involving agents or

Dealers
Contract
: Jocil also undertakesthirdpartymanufacturing

of Toilet Soap, Soap Noodles& related
products for which it deals directly with the
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corporate customers.
Prominent customers
: Some of the prominent customers of Jocil

are Hindustan Unilever, Reckitt Benckiser,
Clariant, Johnson&johnson, Henkel SPIC,
BASF, Century Pharma, Nestle etc.
Logistics
: Jocil stores buffer stocks at Guntur and also
Manages warehouses at all points where depots/Agents are present.
Supplies are made both by Road & rail transport.
FINANCIAL PERFORMANCE:
Financial:
Jocila limited uses both its own Capital and debt to perform its
activities. The company aims at wealth maximization, rather earning
more profits. The company declares dividend to its shareholders out of its
profits and transfers the rest to general reserve. Retained earnings are
used for Re-investment such as purchase of fixed assets, investments in
fixed deposits and repayment of loans.
JOCIL LIMITED ACCOUNTING POLICIES:
1.
General
The Accounts are prepared on historical cost convention and in
accordance with normally accepted Accounting Standards.

2.
Fixed Assets
Fixed Assets are stated at historical cost less accumulated depreciation.
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3. Depreciation
Depreciation is provided on the written down value method at the
rates and in the manner specified in Schedule XIV of the Companies Act,
1956.
3.
Investments
Long term investments are stated at cost and income thereon are
accounted for on accrual. Provision towards decline in the value of long

arm investments in made only when such decline is other than temporary.
4.
Inventories
Valuations of inventories are made as under:
i)
Raw materials, work-in-process and finished
goods at cost or net realizable value whichever is lower.
ii)
Stores and spares at cost.
5.
Sales
Sales are inclusive of Excise Duty, packing charges and Sales Tax.
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HUMAN RESOURCEDETAILS
Recruitment in Jocil Ltd is mainly through internal sources
Pomotion is mainly based on senority.It has good industrial relations with
its workers, government institutions and credit institutions.
As on 31st March, 2008 the total number of persons employed by
the Company, both in factory and office was 625. The Management of the
company maintains good relations with the employees. Since the
inception of the Company in 1980 there have been no labour problems.
Retirement Benefits :
The company provides retirement benefits in the form of
provident Fund, superannuation and Gratuity etc. Contribution to
provident Fund, a defined contribution schemes, is made at the prescribed
rates to the provident Fund Commisioner is charged to the profit and loss
account. There is no other obligation other than the contribution payable.
Gratuity, a defined Benefit scheme is covered by a Group Grautity
cum Life
Assurance policy with LIC. Annual contribution to the fund as
determined by LIC is expensed in the year of contribution. The short fall
between the accumulated funds available with LIC and liability as
determined on the basis of acturial valuation is provided for as at the year
end.The acturial valuation is done as per the projected Unit Credit method
. Acturialgains /losses are immediately taken on profit and Loss account.
Contribution to Superannuation Fund, a defined contribution
scheme, is made to the LIC as per arrangement with them.
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Performance and Achievements of Jocil Limited:
1. Jocil is a leading manufacturer of all kinds of Fatty Acids. This
also manufactures soaps.
2. Jocil supplies different grades of Stearic Acid and other fatty acids
to other manufacturing companies of pharmaceuticals, chemicals,
plastic etc.
3. Jocil supplies Fatty Acids to meet their specific requirement of
Stearic Acid, Oleic Acid etc.
4. Jocil manufactures soaps on contract basis to HUL.
5. Jocil supplies soap noodles of Margo brand to M/s Calcutta
Chemicals Company.
6. Jocils production of quality goods is due to the following factors:
a. Usage of good quality raw materials like rice bran oils,
coconut oils, cotton seed oils etc.
b. The processing and purification of fatty acids is done by
using latest technology.
c. The technology and requirement of Jocil has been imported
from C.M.B., Italy.
d. Maintenance of quality control by experienced and
committed operating personnel.
e. Toilet Soaps and Glycerin are manufactured as per BISC
(formerly known as ISI) standards.
f. It uses high quality chemicals for the purification and
processing of the fatty acids.
g. It maintains international standards in manufacturing its
products so as to suit different kinds of industrial users.
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Brief highlights of the Company:

1. 25 years of experience in the field of manufacture of Stearic
Acid Flakes, Fatty Acids, Toilet Soap, Soap Noodles and
Glycerine.
2. Celebrated Silver Jublee in the year 2003.
3. A 6MW Biomass Cogeneration Power plant commissioned in
2001 to meet captive requirements of Steam & power.
4. Exports surplus power to AP Transmission Corporation.
5. Continuous unbroken dividend paying record since 1990.
6. Sales turnover as on 31-03-2008 is Rs.112.91 crores.
7. Listed in Madras and Hyderabad Stock Exchanges.
8. ISO 9001:2000 Certification by DNV in the year 2005.
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NEED OF THE STUDY

It is known fact that the success of the of any organization
depends upon its financial position. So it is very important for any
organization that they review their financial position every year by
comparing with the past year records. As finance plays a vital role in any
organization.
The financial strength and weakness of a company can be easily
understood in an easy manner through use of ratio analysis hence the
researcher felt the need to take up the study. The absolute accounting
figures Reported in financial statements do not provide a meaningful
understanding of a performance and financial position of the firm. An
accounting figure conveys meaning when it is related to some other
relevant information.
For example, an Rs.5crore net profit may look impressive, but the
firms performance can be said to be good or bad only when the firm net
profit is related firms investment. Ratios help to summaries large
quantities of financial data and to make qualitative judgment about the
firms financial performance.
To compare the current year financial information with previous year

financial information to evaluate the performance of the Jocil ltd
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OBJECTIVES OF THE STUDY

The purpose of the present study is to analyze the financial performance
of the Jocil Ltd.
To highlight and evaluate the changes in the firms financial
position from the year 2003-04-2007-08
To know different sources of funds utilized.
To forecast the contingencies.
To compare the achieved performance with pre-determined
standards.
To show the use of financial ratio to get useful information from
the financial statements.
To evaluate the liquidity and solvency position of the Jocil
Limited.
To know the debtors and creditors management system of the
firm.
To know the supply of funds to all parts of the organization or
know the system of cash management of the company.
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Jocil limited
To offer suitable suggestions on the basis of findings &conclusions
for better performance of the company
SIGNIFICANCE OF THE STUDY

The study has great significance and provides benefits to various
parties who directly or indirectly with the company.
1. It is useful to the top management of the company by providing a
clear cut idea regarding profitability, liquidity, leverage, and total
activity of the organization.
2. It helps to the investor to make a right decision while investing
through financial analysis.
3. It is useful to academicians to make further insight into the various
aspects related to ratio analysis.
4. By knowing the average collection period, the company can take
measures to restrict the credit policy so that company will not run
into bad debts
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SCOPE OF THE STUDY

Scope of the study is to cover all the financial aspects of the Jocil Ltd.
It traces out the companys position in the Indian Soap Industry,
To cover all the transactions or decisions under taken by the top
level management of the company regarding finance,
Extraction of the information from the previous year financial
statements to compare with the current year information to make
decisions regarding,
The study covers the liquidity of the firm
The study cover all the financial aspects and final information of
the firm
The study covers the evaluation of all the components of the
capitals structure of the firm.
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METHODOLOGY OF THE STUDY:

Methodology is a systematic procedure of collecting information in
order to analyze and verify the phenomenon. For the study of all the
objectives the following methodology is adopted. The collection of
information is adopted. The collection of information is done through two
principle sources.
1.Primary Source :
The information was collected from personal interviews and
discussions with various officials in the firm.
2.Secondary Source:
The rest of the information was collected from financial statements
Profit& loss Account and Balance sheets.
Period of study :
The period selected for the project study is during 2003-04 to
2007-2008. The information collected and the analysis interpreted matters
related to this period only
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LIMITATION OF THE STUDY:

As the study is based on financial Ratios it is only a Quantitative
analysis and does not the Qualitative aspect of Jocil Ltd.
Ratios are based on the past data and hence cannot be made reliable
Guide to future performances, as future is dependent
On various factors.
Data pertained to five years was considered, better analysis could be
made using data of more number of years.
1. Only the standards and conventional formula are considered

during the study. How ever, care has been taken to the
subjectivity of the research.
2. Ratios are only indicators and cannot be taken as ultimate tools

for the estimation of financial position of the company whether
good or bad.
3. The study is conducted with the availability data of Jocil Ltd

annual reports.
4. Due to insufficiency of the time It become difficult for the

detailed study of the financial information of the company.
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RATIO ANALYSIS
Introduction:
Financial statements are prepared primarily for decision-making.
They play a dominant role in setting the framework of managerial
decisions .But the information provided in the financial statements is not
an end in itself as no meaning full conclusions can draw from these
statements alone. However, the information provided in the financial
statements is of immense use in making decisions through analysis and
interpretation of financial statements. Financial analysis is the process of
identifying the financial strengths and weaknesses of the firm by properly
establishing relationship between the items of the balance sheet and the
profit and loss account. There are various methods or techniques used in
analyzing financial statements, such as comparative statements, schedule
of changes in working capital, common-size percentages, Funds analysis
and ratio analysis.
RATIO ANALYSIS:
A Ratio is defined as the indicated quotient of two mathematical
expressions. It is the relationship between two or more things.
Ratio Analysis is a powerful tool of financial analysis. A ratio is
used as an index or yardstick for evaluating the financial position and
performance of a firm .The relationship between two accounting figures
expressed mathematically is known as Financial Ratio.
Ratios help to summarize the large quantities of financial data
and to make qualitative judgments about the firms financial position.
It reveals the relationship in a more meaningful way so as to enable us
to draw conclusions from them.
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DEFINITIONS:
A ratio is an expression of the quantitative relationship between
two numbers
R. Wixon Kell and W.G. Bed Ford
A ratio is the relation of the amount a to another b, expressed as
the ratio of a to b; a:b., or as a simple fraction, integer, decimal fraction
or percentage.
E.L. Kohler.
In simple language ratio is one number expressed in terms of
another and can be worked out by dividing one number into the other.
A rationable of ratio analysis lies in the fact that it makes related
information comparable. A ratio may be expressed simply in one number
as the result of comparison between two figures.
Ratios may be expressed in any of the following 3 forms:
In a pure ratio
As a rate
As a percentage
In the area of finance ratios of the company relating to the different

subjects such as debtors, creditors, share-holders, fixed assets; current
liabilities, etc are measured through the process of ratio analysis. The
ratio will be used as a bench mark. A ratio from the point of an
accounting figure conveys the relation ship between items taken and
hence, the position of that particular relation is measured, thus analyzing
the firms position of financial stability.
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NATURE OF RATIO ANALYSIS:

Ratio analysis is a technique of analysis and interpretation financial
statements. It is the process of establishing and interpreting various ratios
for helping in making certain decisions. It involves four steps
Selection of relevant data from the financial statements depending
upon the objective of the analysis.
Calculation of appropriate ratios from the above data.
Comparison of the calculated ratios with the ratios of the same firm
in the past, or the ratios of some other firms or the comparison with
the ratios of the industry too high the firm belongs.
Standards of Comparison:Ratio analysis involves a thorough comparison of different

financial items, financial statements, etc. This comparison is used to get a
useful Interpretation of the ratios. The ratios may be a single ratio also
Comparing the standards consists of the following;
1.
2.
3.
4.
Past ratios
Competitors ratios
Industry ratios
Projected ratios
The question arising here is how the above standards of comparison

are helpful.
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Let us them in brief:
1. Past Ratios: These ratios are calculated from the past financial
statements of the same firm.
2. Competitors Ratio: These ratios are calculated from some of the
selected competitive firms and that too from the most progressive
successful competitor at the same point of time.
3. Industry Ratios: These ratios are the ratios of the industry to
which a firm belongs.
4. Projected Ratios: These are the ratios that are developed using
the projected financial statements or pro-forma financial statements
of the same firm.
There are different kinds of analysis that are used to evaluate the
firms financial performance in the ratio analysis.
They are :
1. Time Series Analysis: Tine series analysis is the easiest way to
evaluate the performance of the firm. In this, the present ratios are
compared with past ratios of the firm. When these ratios are compared
over a period of time. It is known as Time series analysis. This is
series is also called as Trend analysis. It gives an indication of
direction of change and reflects whether the firms financial
performance has improved, deteriorated or renamed constant over a
time. It also enables an analyst why the ratios have changed.
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2. Cross-Sectional Analysis: In this analysis, the ratio of one firm is

compared with some selected firms in the same industry at the same point
of time. This comparison indicates the relative financial position and
performance of the firm.
2. Industry Analysis:
In this analysis, the financial condition and
performance of a firm are determined by comparing with the average

ratios of the industry of which a firm is a member.
(a) Proforma analysis: This is also called as projected financial
analysis. In this analysis, the current ratios of the past ratios are
compared with the future ratios that are projected. This shows the
relative strengths and weaknesses of the firm in the past and in
the future. This helps in initiating actions to stabilize the firms
financial performance and position.
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Users of Financial Ratio Analysis:

Ratio analysis is used to evaluate the firms financial performance.
This performance may be in relation to its own performance, or in
relation to the competitors of in relation to the industry performance.
These ratios are used by different users.
They are:
1. Trade creditors : Creditors are interested in firms ability to meet
their claims over a very short period of time.
2. Long-term debt suppliers:
These people are concerned with
firms long-term solvency that helps to find the firms ability to

generate cash to pay interest and repay the principal amount.
3. Investors:
Investors, who have interest in their money, are
concerned about the firms earnings. They are interested in firms

financial structure to extent its influence over the firms ability and
risk.
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Advantages of Ratio Analysis:

1. Useful in financial analysis: Accounting ratios reveal the financial
position of the concern. This helps the banks, insurance companies and
other financial institutions in lending and making investment decisions.
2. Useful in simplifying accounting figures: Accounting ratios simplify,
summarize and systematize the accounting figures in order to make them
more understandable and in lucid form. They highlight the interrelationship, which exists between various segments of the business as
expresses by accounting statements. Often the figures standing alone
cannot help then convey, any meaning and ratios help them to relate with
other figures.
3. Useful in assessing the operational efficiency: Accounting ratios help
to have an idea of the working of a concern. The efficiency of the firm
becomes evident when analysis is based on accounting ratios .They
diagnose the financial health by evaluating liquidity, solvency,
profitability etc. This helps the management to assess financial
requirements and the capabilities of various business units.
4. Useful in forecasting purpose: If accounting ratios are calculated for
a number of years, then a trend if established. This trend helps in setting
up future plans and forecasting. For example, expenses as a percentage of
sales can be easily forecasted on the basis of sales and expenses of the
past years.
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5. Useful in locating the weak spots of the business: Accounting ratios

are of great assistance in locating the spots in the business even through
the overall performance may be efficient. Weakness in financial structure
due to incorrect policies in the past of present are revealed through
accounting ratios. For example, if a firm finds that, increase in
distribution expenses is more than proportionate to the results expected or
achieved, it can take remedial steps to overcome this adverse situation.
6. Useful in comparison on performance:
Through accounting ratios
comparison can be made between one departments of a firm with another

of the same firm in order to evaluate the performance of various
departments in the firm. Every Management is naturally interested in
such comparison in order to know the proper and smooth functioning of
such departments. Ratios also help to make any change in the
organization structure.
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LIMITATIONS OF RATIO ANALYSIS:
The ratio analysis is one of the most powerful tools to analyze the
financial statements. Through ratios are simple to calculate and easy
understand, they suffer from serious limitations:
1. Limited use of a single ratio:A single ratio usually does not convey much of a sense. To make a
better interpretation, a number of ratios have to be calculated which is
likely to confuse the analyst than help him in making any meaningful
conclusion.
2. Lack of adequate standards:There are no well-accepted standards or rules of thumb for all
ratios, which can be accepted as norms, it renders interpretation of the
ratios difficult.
3. Comparative Study required Ratios:
These ratios are useful in judging the efficiency of the business
only when they are compared with the past results of the business or with
the results of a similar business. However, such a comparison only
provides a glimpse of the past performance and forecasts for future may
not prove correct since several other factors like
1. Market conditions.
2. Management policies
3. Difference in the basis of inventory valuation.
4. Different depreciation methods
5. Estimated working life of assets.
6. Treatment of extraordinary items of income and expenditure.
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4. Window dressing:
Financial statements can easily be window dressed to present a
better picture of its financial and profitability position to outsides. Hence,
one has to be very careful in making a decision from ratios calculated
from such financial statements. But it may be very difficult for an
outsider to know about the window dressing made by a firm.
5. No fixed standards:
No fixed standards can be laid down for ideal ratios. For example,
Current ratio is generally considered to be ideal it current assets are twice
the Current liabilities. How ever in case of those concerns which have
adequate arrangements with their bankers for providing funds when by
required. It may be perfectly ideal if current assets are equal to or slightly
more than current liabilities.
6. Absolute figures distortive:
Ratios devoid of absolute figure may prove distortive, as ratio
analysis is primarily a quantitative analysis ans not a qualitative analysis.
7. Change in accounting procedures:Change in accounting procedure by a firm often makes ratio
analysis misleading e.g., a change in valuation of methods of inventories
from FIFOtoLIFO increases the cost of sales and reduces considerably
the value of closing stocks which makes stock turnover ratio to be
lucrative and unfavorable gross profit ratio.
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IMPORTANCE OF RATIO ANALYSIS:

The ratio analysis is one of the most powerful tools of financial
analysis. It is used as a device to analyze and interpret the financial health
of enterprise. A financial analyst analyses the financial statements with
various tools of analysis before commuting upon the financial health or
weakness of an enterprises. A ratio is known as a symptom like blood
pressures the pulse rate of the temperature of an individual. It is with the
help of ratios that the financial statements can be analyzed more clearly
and decisions made from such analysis.
1. Simplifies Financial Statements: Ratio analysis simplifies the
comprehension of financial statements. Ratio tell the whole story of
changes in the financial condition of the business.
2. Facilitates inter-firm comparison : Ratio analysis provides data for
inter-firm comparison. Ratios highlight the factors associated with
successful and unsuccessful firms. They also reveal strong firm and weak
firms overvalued and undervalued firms
3. Makes intra-firm comparison possible: Ratio analysis also makes
possible comparison of the performance of the divisions of the firm. the
ratios are helpful in deciding about their efficiency or otherwise in the
past and likely performance in the future.
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4. Helps in Planning: Ratio analysis helps in planning and forecasting.

Over a period of time a firm or industry develops certain norms that may
indicate future success or failure.
5. Helps in decision making: financial statements are prepared primarily
for decision making.Ratio analysis helps in making decisions from the
information provided in these financial statements.
6. Operating Efficiency: It throws light on the degree of efficiency in the
management &utilization of assets. It would be recalled that various
activity ratios measure this kind of operational efficiency. In fact, the
solvency of the frim is ,in the ultimate analysis dependent upon sales
revenue generated by use of its assets total as well as its components.
7. Trend Analysis: Finally ratio analysis enables a firm to take the time
dimensions into account. The significance of trend analysis of ratios lies
in the fact that the analysist can known the direction or movement
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TYPES OF RATIO ANALYSIS

So many ratios, calculated from the accounting data can be
grouped into various according to financial activity to be evaluated. The
parties interested in financial analysis are short and long creditors, owners
and management. Short-term creditors main interest is in the liquidity
position or the short term solvency of the firm. Long-term solvency and
profitability of the firm. Owners concentrate on the firms profitability
and financial condition. Management is interested in evaluating every
aspect of the firms performance. In view of the requirement of the
various users of ratios, we classify them into the following four important
categories.
A. Liquidity Ratios
B. Leverage Ratios
C. Activity Ratios
D. Profitability Ratios
A. Liquidity ratios:
Liquidity of an organization refers to its ability to meet its current
obligations as and when they fall due for payment over a period not
exceeding one year. The liquidity ratios assess the capacity of the
company to repay its short term liability. The liquidity ratios are useful to
various parties having interest in the enterprise over a short period.
Such parties include banks, lenders, suppliers, employees and other
interested in the recovery of money due to them.
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A firm should ensure that it does not suffer from lack of liquidity
and that it not has excess liquidity. A very high degree of liquidity is also
bad, ideal assets earn nothing.
The firms funds will be unnecessarily tied up in current assets.
Therefore it is necessary to strike a proper balance between high liquidity.
Liquidity means ability of the business to pay its short-term liabilities.
The liquidity ratios are as follows:
1. Current Ratio
2. Quick ratio
3. Cash or Super quick Ratio
4. Net working Capital Ratio
1. Current Ratio:
The current ratio is an acceptable measure of the firms short term
solvency. It establishes the relationship between total current assets and
current liabilities. It indicates the availability of current assets in rupees
for every one rupee of current liability. A current ratio 2:1 is considered
satisfactory. The higher the current ratio, the greater the margin of safety;
The larger the amount of current assets in relation to current liabilities,
the more the firms ability to meet its obligations. It is a crude-and quick
Current Assets
Current ratio = ---------------------Current liabilities
Current assets:According to the Institute of Chartered Accountant of India current
assets are Cash and cash equivalents that are expected to be converted
into cash or consumed in the production of goods or rendering of services
in the normal course of business. Current assets include the following:
Cash in hand,
Cash at bank,
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Sundry Debtors,
Bills receivables,
Inventories,
Prepaid expenses and
Short-term investments etc.
Current Liabilities:Current liabilities is defined as liability including loans, deposits
and bank overdraft which fall due for payment in relatively short period,
normally not more than twelve months. Current liabilities include the
following:
Sundry creditors,
Bills payable,
Short-term loans,
Bank over draft,
Out standing expenses,
Cash credit.
2. Quick Ratio:
Quick ratio establishes a relationship between quick, or liquid,
assets and current liabilities. An asset can be called liquid if it can be
converted into Cash immediately or reasonably soon without a loss of
value. Cash is the most liquid asset .Inventories are considered to be less
liquid .Inventories normally require some time for realizing into cash;
Their value also has a tendency to fluctuate.
Quick Ratio is computed by dividing quick assets by current
liabilities.
Current Assets- inventories or quick assets
Quick Ratio = ---------------------------------Current liabilities
Generally a Quick ratio of 1:1 is considered to penetrating test
of liquidity than the current ratio, yet it should be used continuously. A
company with a high value of quick ratio can suffer from the shortage of
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funds if it has slow-paying, doubtful and long duration outstanding
debtors. A low quick ratio may really be prospering and paying its current
obligation in time.
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Quick Assets:
Quick assets are those current assets, which are convertible into
cash rather rarely, such as cash, marketable securities, and debtors and
bills receivables. Since stock is not likely to be realized early, the same
will not be considered as the quick assets.
Quick assets can be defined as the following:
Quick assets =current assets inventories.
Current Liabilities:
Current liabilities is defined as liability including loans, deposits
normally not more than twelve months.
Current liabilities include the following:Sundry creditors,
Bills payable,
Short-term loans,
Bank over draft,
Cash credit.
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3. CASH RATIO:
Cash is the most liquid asset. A financial analyst examines the cash
ratio and its equivalent to current liabilities to know the firms
performance regarding the dealings with cash. Trade investments, debtors
and marketable securities are equivalent of cash; there fore they may be
included in the computation of cash ratio.
If the company carries a small amount of cash there is nothing to
be worried about the lack of cash if the company has reserves borrowing
power. In India, firms have credit limits sanctions from banks and easily
draw cash. Cash ratio is calculated as cash and marketable securities
divided by current liabilities.
Cash Ratio =
Cash+ marketable Securities

-----------------------------------Current Liabilities
Cash ratio includes the following

Cash in hand,
Cash at bank,
Marketable securities.
Current Liabilities:Current liabilities is defined as liability including loans, deposits
normally not more than twelve months.
Current liabilities include the following:
Sundry creditors,
Bills payable,
Short-term loans,
Bank over draft,
Cash credit.
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4. Net Working Capital Ratio:Net working capital is the difference between current assets and
current liabilities. It should be noted that while calculating net working
capital, short term bank borrowings should be excluded.Net working
capital is used to measure the firms liquidity. If a firm, having a larger
net working capital, it is considered to be making greater current
obligations more efficiently.
Net Working Capital = Current assets Current liabilities.
The ratio between net working capital to its net assets is called Net
Working Capital Ratio
Networking Capital
Net Working Capital Ratio = ------------------------Net Assets
Net Assets = Fixed assets + (current assets- current liabilities)
i.e. Fixed assets + Net current assets
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B.Leverage Ratios:The short-term creditors like bankers and suppliers of raw material
are more concerned with the firms current debt paying ability. On the
other hand Long-term creditors like, debenture holders, financial
institutions are more concerned with the firms long-term financial
strength. To judge the long term financial position of the firm, financial
Leverage or Capital Structure, and ratios are calculated. These should be
an appropriate mix of debt and owners equity in financing the firms
assets. The process of magnifying the shareholders return through the use
of debt is called financial leverage, or financial gearing, or trading
on equity. Leverage ratios are calculated to measure the financial risk
and the firms ability of using debt to share holders advantage.
This ratio can help the long-term creditors to judge the soundness of the
firm on the basis of the long-term financial strength measured in terms of
its ability to pay the interest regularly as well as repay the installment of
the principal on due dates or in one lumps at the time of maturity.
The Leverage Ratios are as follows
1. Debt Ratio
2. Equity Ratio
3. Debt-Equity Ratio
4. Fixed Assets Ratio
5. Proprietary Ratio
1. Debt Ratio:Debt ratio is used to analyze the long-term solvency of the firm.
The firm may be interested in knowing the proportion of the interestbearing debt (also called funded debt) in the capital structure.
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It may, therefore, compute debt ratio by dividing total debt by
capital employed or Net assets. Total debt will include short and longterm borrowing from financial institutions, debentures/bonds, deferred
payments arrangement for buying capital equipment, bank borrowings,
public deposits and any other interest-bearing and net worth.
Capital employed will include total debt and net worth.
Total Debt
Debt Ratio = ---------------------------Total Debt + Net worth
Total Debt
i.e. ---------------------Capital employed
Here it is to be noted that, capital employed equals net assets.
Debt ratio =
Total Debt
--------------Net Assets
A high ratio means that claims of creditors are greater than those of
owner. A higher level of debt introduces inflexibility in the firms
operations due to the increasing interference and pressure from creditors.
2.Debt- Equity Ratio:
Debt-Equity ratio is used to analyze the firms long-term solvency.
It is used to know the interest-bearing debt in the total capital structure
.Capital structure is the format of a firms finance that is distributed in
various forms, which has been raised from different forms. This ratio
establishes the relationship between the borrowed funds and owners
capital. Debt equity ratio is directly computed by dividing total debt by
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networth.Lower the debt equity ratio higher the degree of the protection.
A Debt equity ratio of 1:2 is considered ideal.
Total Debt
Debt Equity Ratio = ------------Equity
Debt:Debt means long-term borrowed fund. It also includes all deferred
payment liabilities but it does not include short-term bank borrowing and
advances, unsecured deposits or loans from the public, shareholders and
employees and unsecured loans and deposits from others.
Equity:Equity means share holders funds. And this can be treated as
owners funds include equity share capital, preference share capital,
general reserves, capital reserves and surplus and balance in share
premium account and other reserves available to equity share holders.
3.Capital Equity Ratio:It is another alternative way of expressing the basic relationship
between debt and equity. Capital Equity Ratio indicates how much funds
are contributed together by lenders and owners for each rupee of the
owners contribution.
Capital Employed
Capital Equity Ratio = ----------------------Net worth
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4.Fixed Assets Ratio:The ratio establishes the relation ship between fixed assets and
shareholders funds. The ratio indicates the extent to which shareholders
funds are sunk into fixed assets.
Fixed Assets
Fixed Assets Ratio=------------------Capital Employed
Fixed Assets:
Fixed assets are the assets, which are having a long life. Fixed
assets are shown in the balance sheet of a firm. The major items under the
fixed assets are:
Land and buildings,
Plant and machinery,
Lease hold property,
It is by no mean that there to the total of other fixed assets
apart from the above stated there are many fixed assets are there
which can be disclosed on the assets side of the balance sheet of the
firm.
Capital employed:The capital employed refers to the total of owners funds and
long-term loans. And another way of measuring the capital employed is
the sum fixed of fixed assets and the working capital.
Capital employed =Equity share capital
+ Preference share capital
+ Reserves and surplus
+ Debentures and other long term
loans
- Misc.expenditure and losses
- Non-Trade investments.
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5. Proprietary ratio:
A variant to Debt-equity ratio is the proprietary ratio, which is also
known as Equity ratio or shareholders to Total Equities Ratio or Net
worth to total Assets. The ratio establishes the relationship between
shareholders funds to total assets of the firm. The components of this
ratio are share holders or proprietor funds and Total Assets.
Proprietary Funds
Proprietary Ratio =---------------------Total Assets
Proprietary Funds:
Proprietary funds include Equity share capital + preference share
capital +reserves and surplus- fictitious assets.
Total Assets:
Total assets include both the current assets and the fixed assets of the
firm.
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3.ACTIVITY RATIOS :Activity ratios are employed to evaluate the efficiency with which
the firm manages and utilizes its assets. These ratios are also called
turnover ratios because they indicate the speed with which asset are being
converted or turned over into sales. Activity ratios thus involve a
relationship between sales and assets generally reflect that assets are
managed well. Activity ratios help to judge the effectiveness of assets
utilization.
These ratios may be capital assets or working capital or average

inventory. These ratios are usually calculated with reference to sales of
cost of goods sold and are expressed in terms of rate of times.
The activity ratios can also be called as the turnover ratios or
performance ratios. The activity ratios are as follows :
1. Inventory Turnover Ratio.
2. Raw material Inventory Turnover Ratio.
3. Work -in- process Inventory Turnover Ratio.
4. Debtors Turnover Ratio.
5. Average Collection period.
6. Net Assets Turnover Ratio.
7. Total Assets Turnover Ratio.
8. Fixed Assets Turnover Ratio.
9. Current Assets Turnover Ratio.
10.Working Capital Turnover Ratio.
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1.Inventory Turnover Ratio:Inventory turnover ratio is also known as stock turnover ratio,
which establishes the relationship between the cost of goods sold during
the year and average inventory held during the year.
This ratio indicates the efficiency of the firm in producing and
selling its product. It is calculated by dividing the cost of goods sold by
the average inventory.
Sales
Inventory turnover ratio = --------------------Average inventory
Average inventory:Generally inventory refers to the stock of raw material with the
firm. It may be opening stock, work-in-progress or closing stock.
The average inventory refers to the average of the opening stock
and closing stock. This can be shown as:
Opening stock +closing stock
Average inventory= -----------------------------------2
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2. Raw Material Inventory Turnover Ratio:
Raw material inventory turnover ratio indicates the efficiency with
the firm converts raw material into work-in-process and work-in-process
into finished goods. Raw material inventory is related to materials
consumed. Material consumed can be found out as opening balance of
raw material plus purchase minus (-) closing balance of raw material.
Material Consumed
Raw Material Inventory Turnover Ratio =--------------------------Average Raw material
3. Work-in-process Inventory Turnover Ratio:
Work-in-process inventory turnover ratio indicates the efficiency
with the firm converts work-in-process into finished goods. The work-inprocess should be related to cost of production. Cost of production is
determined as material consumed plus other manufacturing expenses plus
opening balance minus closing balance of work-in-process.
Cost of production
Work-in-process Inventory Turnover Ratio = -------------------------- -Average work-in-process
4. Debtors Turnover Ratio:A firm sells goods for cash and credit. Credit is used as marketing
tool by a number of companies. When the firm extends credits to its
customers, debtors are created in the firms accounts. Debtors turnover
indicates the number of times debtors turnover, the more efficient is the
management credit. Debtors turnover is found by dividing credit sales by
average debtors.
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The purpose of this ratio is to measure the liquidity of the
receivables or to find out the period over which receivables remain
uncollected.
This ratio is also called as receivables turnover ratio.

Credit Sales
Debtors Turnover Ratio = --------------------Average Debtors
5. Average Collection period:The average number of days for which debtors remain outstanding
is called Average collection period in other words its debtors remains
outstanding for 12 months. The average collection period measures the
quality of debtors since it indicates the speed of their collection.
Average Collection Period
Debtors* 360
=-----------------Sales
6. Net Assets Turnover ratio:

Assets are used to generate sales therefore a firm should manage its
assets efficiency to maximize sales. The relationship between sales and
assets is called assets turnover. firms ability to produce a large volume of
sales for a given amount of net assets is the most important aspects of its
operating performance.
Sales
Net Assets Turnover Ratio= -----------Net Assets
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7. Total Assets Turnover Ratio :Some analysis likes to compute the total assets turnover in addition
to or instead of the net assets turnover. This ratio shows the firms ability
in generating sales from all financial resources committed to total assets.
Sales
Total Assets Turnover Ratio = ----------Total Assets.
8. Working Capital Turnover Ratio:
A firm may also like to relate net current assets or net working
capital to sales. Working capital turnover indicates for one rupee of sales
the company needs how many net current assets. This ratio indicates
whether or not working capital has been effectively utilized in market
sales.
Net Sales
Working Capital Turnover Ratio = --------------------Working Capital
9.Fixed Assets Turnover Ratio:
The firm may wish to know its efficiency of utilizing fixed assets
and current assets separately. The use of depreciated value of fixed assets
in computing the fixed assets turnover may render comparison of firms
performance over period or with other firms.
Sales
Fixed Assets Turnover Ratio =--------------------Net Fixed Assets
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10. Current Assets Turnover Ratio:The firm may wish to know its efficiency of utilizing current assets
in the organization.
Sales
Current Assets Turnover Ratio = ---------------Current Assets
D .PROFITABILITY RATIOS :Every business enterprise operates with an objective to earn profit.
Profit is necessary for the survival and growth of the business enterprise.
Profitability ratios measure the profit earning capacity of the firm. Profit
is the difference between revenues and expenses over a period of time.
Profitability ratios are calculated to measures the operating
efficiency of the company. Besides management of the company,
creditors and owners are also interested in the profitability of the firm.
Creditors want to get interest and repayment of principle regularly.
Generally, two major types of profitability ratios are calculated:
Profitability in relation to sales.
Profitability in relation to investment.
1. Gross Profit Ratio.
2. Net Profit Ratio.
3. Operating Expenses Ratio.
4. Return on Equity.(ROE)
5. Earning per share.(EPS
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1. Gross Profit Ratio:The first profitability ratio in relation to sales is the gross profit
margin ratio, it reflects the efficiency with which management produces
each unit of product .This ratio indicates the average spread between the
cost of goods sold and the sales revenue. When we subtract the gross
profit margin from 10percent, we obtain the ratio of cost of goods sold to
sales. A high gross profit margin ratio is a sign of good management. A
gross margin ratio may increase due to any of the following factors:
Higher sales prices cost of goods sold remaining constant, lower

cost of goods sold, sales price remaining constant. Allow gross profit
margin may reflect higher cost of goods sold, sales price remaining
constant. A low gross profit margin may reflect higher cost of goods sold
due to the firms inability to purchase raw material at favorable terms
inefficient utilization of plant and machinery, or over investment in plant
and machinery, resulting in higher cost of production or due to fall in
prices in the market.
Gross Profit
Gross Profit Ratio= -----------------Sales
Gross Profit:Gross profit refers to the gross margin of the firm, which will be
obtained by deducting all the operating and direct expenses from the sales
revenue.
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2. Net Profit Ratio:
Net Profit is obtained when operating expenses, interest and taxes
are subtracted from the gross profit.Net profit margin ratio establishes a
relationship between net profit and sales and indicates managements
efficiency in manufacturing, administrating and selling the products. This
ratio is the overall measures of the firms ability to turn each rupee sales
into net profit.
This ratio also indicates the firms capacity to withstand adverse
economic condition. A firm with a high net ratio would be in an
advantageous position to survive in the face of falling prices, rising.
Profit after Tax
Net profit (PAT) Ratio=----------------------Sales
Net Profit:
Net profit refers to the profit, which is obtained by deducting the
all the indirect expenses from the gross margin of the firm.
3. Operating Expenses Ratio:
The operating expenses ratio explains the changes in the profit
margin ratio. A higher operating expenses ratio is unfavorable since it will
leave a small amount of operating income meet interest, dividends.
Operating expenses ratio is a yardstick of operating efficiency, but it
should be used cautiously .It is affected by a number of factors, such as
external uncontrollable factors, internal factors.
This ratio is computed by dividing operating expenses by sales.
Operating Expenses
Operating Expenses Ratio = ------------------------Sales
Operating Expenses = Cost of goods sold + Selling Expenses and
general administrative expenses
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4. Return on Equity (ROE):
A return on shareholders equity is calculated to see the
profitability of owners investment. ROE indicates how well the firm has
used the resources of owners. This ratio is one of the most important
relationships in financial analysis. The ratio of net profit to owners
equity reflects the extent to which this objective has been accomplished.
This ratio is of great interest to the present as well as prospective
shareholders and also of great concern to management, which has the
responsibility of maximizing the owners welfare.
Profit after Taxes
Return on Equity = --------------------Net Worth
5. Earning Per Share(EPS):The profitability of the common shareholders investment can also
be measured in many other ways, One measure is to calculate the EPS.
Earning per Share indicates whether or not the firms earnings power on
per share has increased or not. EPS simply shows the profitability of the
firm on a share basis. It does not reflect how much is paid as dividend and
how much is retained in the business. But, as profitability index, it is
valuable and widely used ratio. It also helps in estimating the companys
capacity to pay dividend to its equity share holders.
Profit after Tax Preference Dividend
1. Earning Per Share = -----------------------------------------------No. of Equity Shares
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RATIO ANALYSIS OF JOCIL

A. Liquidity ratios:1. Current Ratio:The Ratio between all current assets and all current liabilities is
another way of expressing liquidity. It is a measure of firms short-term
solvency. It indicates the availability of current assets in rupees for every
one rupee of current liability. A ratio is greater than one means that the
firm has more current assets than current claims against them.
Current Assets
Current Ratio = -------------------Current Liabilities
Table Showing the Current Ratio
(in crores)
year
Current Assets
(Rs)
Current Liabilities
(Rs)
Ratio
2003-2004
63,50,60,000
21,07,98,637
3.01
2004-2005
62,44,61,285
17,06,96,030
3.65
2005-2006
50,51,15,978
16,88,62,312
2.99
2006-2007
64,48,48,761
20,28,29,598
3.17
2007-2008
62,48,66,578
19,04,79,571
3.28
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Graph:1
Interpretation of Current Ratio:

The
current
ratio
represents
margin
of
safety
for
creditors. The higher the current ratio the greater the margin of safety.
The current ratio measures only total rupees worth of current assets and
total rupees worth of current liabilities. It does not measure the quality of
assets.
The ideal ratio is 2:1 on the basis of above diagram the current ratio of
2003-04 was 3.01. In the year 2004-05 the current ratio increased
from3.01 to 3.65 later on in the year 2005-06 the ratio slightly decreased
from 3.65 to 2.99. Then the ratio went from 2.99 to 3.17 and from 3.17 in
2006-07 there is marginal increase to 3.28 in the year 2007-08. By
comparing and analyzing the ratio of 2003-2008 the company has in a
Position to meet short term obligations and commitments.
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2.Quuick Ratio:
Quick Ratio is also called Acid-Test ratio, establishes the
relationship between quick or liquid, assets and current liabilities. An
asset can be called liquid if it can be converted into Cash immediately or
reasonably soon without a loss of value. The quick ratio is found out by
dividing quick assets by current liabilities.
Current Assets -Inventories

Quick Ratio = ------------------------------------Current Liabilities
Table Showing the Quick Ratio
year
Quick Assets
(Rs)
Current Liabilities
(Rs)
Ratio
2003-2004
446173063
21,07,98,637
2.11
2004-2005
493056255
17,06,96,030
2.88
2005-2006
399824543
16,88,62,312
2.36
2006-2007
510903738
20,28,29,598
2.51
2007-2008
485948545
19,04,79,571
2.55
Graph:2
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Interpretation of Quick Ratio:A quick ratio of 1:1is considered to represent a satisfactory current
financial position. Although quick ratio is a more penetrating test of
liquidity than the current ratio. A quick ratio of 1:1or more does not
necessarily imply sound liquidity position. It should be remembered that
all debtors may not be liquid, and cash may be immediately needed to
pay operating expenses.
The Quick ratio was noticed 2.11in the year 2003-04.In the
year2004-05 the ratio increased from 2.11to 2.88 .Later on there is
decreased from 2.88to 2.36 in 2005-06.then improvement from
2.36to2.55 in the years 2006-08.
The Jocil Limited has a quick ratio of 2.55:1 in the year 2007-08 it
represents satisfactory position.
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3.Cash ratio:Cash Ratio indicates the most liquidity position of the firm. It can
be computed by dividing the most liquidity items (cash and marketable
securities) by current liabilities.
Cash +Marketable securities

Cash Ratio = ------------------------------------Current Liabilities
Table Showing the Cash Ratio
year
Cash & Mkt

securities
(Rs)
Current
Liabilities
(Rs)
Ratio
2003-2004
74,00,120
21,07,98,637
0.03
2004-2005
4,37,80,275
17,06,96,030
0.25
2005-2006
2,55,94,348
16,88,62,312
0.15
2006-2007
12,10,34,896
20,28,29,598
0.59
2007-2008
6,47,96,749
19,04,79,571
0.34
Graph: 3
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Interpretation of Cash ratio:If the company carries a small amount of cash there is nothing to
be worried about the lack of cash if the company has reserves borrowing
power. In India, firms have credit limits sanctioned from banks and easily
draw cash.
The cash ratio was 0.03 in the year 2004 and it was increased to
0.25 in the year 2005 and again it was decreased to 0.15 in the year 2006.
In the year 2007 the ratio was 0.59 and in the year 2008 the ratio is
decreased to 0.34.
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4.Net working Capital Ratio:The difference between current assets and current liabilities
excluding short-term bank borrowing is called net working capital or net
current assets.
Net working capital

Net Working Capital Ratio = ----------------------------Net Assets
Table Showing the Net Working Capital Ratio
Year
Net Working Capital

(Rs)
Net Assets
(Rs)
Ratio
2003-2004
424261363
822142760
0.52
2004-2005
453765255
833334102
0.54
2005-2006
336253666
868214844
0.39
2006-2007
442019163
920213490
0.48
2007-2008
434387007
963233154
0.45
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Graph: 4
Interpretation of Net Working Capital Ratio:Net Working Capital is sometimes used as a measure of a firms
liquidity. The larger working capital has the greater ability to meet its
current obligations.
Working capital ratio indicates how much capital is required to net
assets. The working capital ratio of Jocil is 0.52in 2003-04 and in 2005
the ratio was increased to 0.54. Again the ratio was decreased to 0.39 in
the year 2006 and in the year 2008 the ratio is 0.45.
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B.Leverage Ratios:1.Debt Ratio:Debt ratio is used to analyze the long-term solvency of the firm.
The firm may be interested in knowing the proportion of the interestbearing debt (also called funded debt) in the capital structure.
Total Debt
Debt Ratio = ---------------------------Total Debt + Net worth
Total Debt
i.e. ---------------------Capital employed
Table Showing the Debt Ratio
year
Total Debt
(Rs)
Capital Employed
(Rs)
Ratio
2003-2004
79133145
822142760
0.10
2004-2005
16889321
833334102
0.02
2005-2006
35633384
868214844
0.04
2006-2007
33360536
920213490
0.04
2007-2008
27066017
963233154
0.03
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Graph: 5
Interpretation of Debt Ratio:This ratio expresses the relationship between total debt and net
assets. A high ratio means that claims of creditors are greater than those
of owner. A higher level of debt introduces inflexibility in the firms
operations
due to the increasing interference and pressure from
creditors.
The debt ratio of Jocil is 0.03 in the year 2008. It means that
lenders have financed 3% of net assets (capital employed). It obviously
implies that owners have provided the remaining finances.
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2.Debt- Equity Ratio:Debt Equity Ratio shows the relationship between borrowed funds
and owners capital. It is a popular measure of the long-term financial
solvency of a firm. This ratio indicates the relative proportions of debt
and equity in financing assets of the firm.
Total Debt
Debt Equity Ratio = ------------Equity
Table Showing the Debt -Equity Ratio
Year
Total Debt
(Rs)
Equity
(Rs)
Ratio
2003-2004
79133145
681649615
0.12
2004-2005
16889321
762273839
0.02
2005-2006
35633384
766363722
0.05
2006-2007
33360536
791351367
0.04
2007-2008
27066017
831059862
0.03
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Graph:6
Interpretation of Debt Equity Ratio:The debt equity ratio is an important tool of financial analysis to
appraise the financial structure of a firm. It has important implications
from the view point of the creditors, owners and the firm itself. A high
ratio shows a large share of financing by the creditors of the firm, a low
ratio implies a smaller claim of creditors.
The Debt equity ratio indicates the margin of safety to the creditors.
A debt equity ratio of 1:2 is considered ideal. It means for every one
rupee of outside liability, the firm has two rupees of owners capital.
The debt Equity ratio of Jocil is 0.12 in the year 2005. In the year
2006&2007 it was 0.02&0.05. In the year it was decreased to 0.04.In the
year 2008 the ratio is 0.03, it means there is a high margin of safety.
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3.Capital Equity Ratio:It is another alternative way of expressing the basic relationship
between debt and equity. Capital Equity Ratio indicates how much funds
are contributed together by lenders and owners for each rupee of the
owners contribution.
Capital Employed
Capital Equity Ratio = -----------------------Net worth
Table Showing the Capital Equity Ratio
year
Capital employed
(Rs)
Net Worth
(Rs)
Ratio
2003-2004
822142760
681649615
1.21
2004-2005
833334102
762273839
1.09
2005-2006
868214844
766363722
1.13
2006-2007
920213490
791351367
1.16
2007-2008
963233154
831059862
1.16
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Graph: 7
Interpretation of Capital Equity Ratio:One may want to know how much funds are being contributed
together by lenders and owners for each rupee of the owners
contribution.
The Capital Equity ratio of Jocil was 1.21 in 2004 it was decreased
to1.09 in 2005.It was increased from 1.13in 2006 to 1.16 in the years
2007&2008.
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4. Fixed Assets Ratio:The ratio establishes the relation ship between fixed assets and
shareholders funds. The ratio indicates the extent to which shareholders
funds are sunk into fixed assets.
Fixed Assets
Fixed Assets Ratio=------------------Capital Employed
Table Showing the Fixed Assets Ratio
year
Fixed Assets
(Rs)
Capital employed
(Rs)
Ratio
2003-2004
395747897
822142760
0.48
2004-2005
3774355347
833334102
0.45
2005-2006
529624998
868214844
0.61
2006-2007
475858147
920213490
0.52
2007-2008
522589967
963233154
0.54
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Graph: 8
Interpretation of Fixed Assets Ratio:The fixed assets ratio of Jocil was decreased from 0.48 to 0.45 in
2004-05.It was increased to 0.61 in 2006.It was decreased to 0.52 in
2007.
And the year 2008 is 0.54
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5.proprietary ratio:A variant to Debt-equity ratio is the proprietary ratio, which is also
known as Equity ratio or shareholders to Total Equities Ratio or Net
worth to total Assets. The ratio establishes the relationship between
shareholders funds to total assets of the firm. The components of this
ratio are share holders or proprietor funds and Total Assets.
Proprietary Funds
Proprietary Ratio =---------------------Total Assets
Table Showing the Proprietary Ratio
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year
Proprietary Funds
(Rs)
Total Assets
(Rs)
Ratio
2003-2004
681649615
1030807897
0.66
2004-2005
762273839
1001896632
0.76
2005-2006
766363722
1034740976
0.74
2006-2007
791351367
1120706908
0.71
2007-2008
831059862
1147456545
0.72
Graph: 9
96
Jocil limited
Interpretation of Proprietary Ratio:A High proprietary ratio indicative of strong financial position of
the business, the higher the ratio and the better it is. Proprietary ratio
0.6&0.7 times to the total assets indicate good leverage of borrowings.
As this ratio we can understand that owners contribution towards
total assets is more than 50%, so the outsider contribution is less than
50%.
97
Jocil limited
3. ACTIVITY RATIOS:1.Inventory Turnover Ratio:This ratio indicates the efficiency of the firm in producing and selling
its product. It is calculated by dividing the cost of goods sold by the
average inventory.
Cost of Goods Sold
Inventory turnover ratio = ---------------------------Average inventory
Table Showing the Inventory Turnover Ratio

Opening
Inventory
(Rs)
Closing
Inventory
(Rs)
Average
Inventory
(Rs)
year
Cost of Goods sold

(Rs)
2003-2004
626975086
156179205 188886937 172533071
3.63
2004-2005
57655039
188886937 131405030 160145984
3.60
2005-2006
611764248
131405030 105291435
118348233
5.17
2006-2007
671588518
105291435 133945023
119618229
5.61
2007-2008
916719897
133945023 138918033 136431528
6.72
98
Ratio
Jocil limited
Interpretation of Inventory Turnover Ratio:Inventory Turnover Ratio indicates how fast the stock is sold. A
high ratio is good from the view point of liquidity y and it is favorable to
the firm. A low ratio implies that the inventory does not sell and stays in
ware house for long time.
Inventory turnover ratio was decreased to3.63&3.60 in the years
2004&2005 .The ratio was increased to 5.17 and 6.72 in the years
2007&2008. The ratio is very less as it is around 4&5; It should be
minimum seven times.
99
Jocil limited
2. Debtors Turnover Ratio:The second major activity ratio is the receivables or debtors
turnover ratio. It shows how quickly receivables or debtors are converted
into cash. In other words the debtors turnover ratio is a test of the
liquidity of the debtors of a firm.
Sales
Debtors Turnover Ratio = --------------------Debtors
Table Showing the Debtors Turnover Ratio
100
Jocil limited
Year
Sales
(Rs)
Debtors
(Rs)
Ratio
2003-2004
831984907
113730833
7.32
2004-2005
772261376
136188751
5.67
2005-2006
730258572
151096317
4.83
2006-2007
845585494
152291708
5.55
2007-2008
1129196244
206245483
5.48
Graph: 11
101
Jocil limited
Interpretation of Debtors Turnover Ratio;A firm sells goods for cash and credit. Credit is used as marketing
tool by a number of companies. When the firm extends credits to its
customers, debtors are created in the firms accounts. Debtors are
convertible into cash over a short period. The liquidity position of the
firm depends on the quality of debtors to a greater extent.
Debtors Turnover indicates the number of times debtors turnover
each year. Generally the higher the value of Debtors turnover, the more
efficient is the management of credit .In the year2008 the ratio is 5.48 it
indicates 5 times debtors are turnover are turnover each year. Debtors
Turnover ratio should improve, it should 8 times in a year.
3.Average Collection period:The average number of days for which debtors remain outstanding
is called Average collection period in other words its debtors remains
102
Jocil limited
outstanding for 12 months. The average collection period measures the
quality of debtors since it indicates the speed of their collection.
It tells us how and what time the debtors are collected.
360
Average Collection Period = --------------------------Debtors Turnover Ratio
Table Showing the Average Collection Period
year
Days
Debtors Turnover
Ratio
Average Collection
period (days)
2003-2004
360
7.32
49
2004-2005
360
5.67
63
2005-2006
360
4.83
75
2006-2007
360
5.55
65
2007-2008
360
5.48
66
Graph: 12
103
Jocil limited
Interpretation of Average Collection Period:The average collection period measures the quality of debtors since
it indicates the speed of their collection. The shorter the average
collection period, the better the quality of debtors, since a short collection
period implies the prompt payments by debtors.
The collection period must be minimum 45 days. Average
collection period of Jocil is 66 days in the year 2008. It has to be
improved.
104
Jocil limited
4.Net Assets Turnover ratio:Assets are used to generate sales therefore a firm should manage its
assets efficiency to maximize sales. The relationship between sales and
assets is called assets turnover. Firms ability to produce a large volume
of sales for a given amount of net assets is the most important aspects of
its operating performance.
Sales
Net Assets Turnover Ratio= -----------Net Assets
Table Showing the Net Assets Turnover Ratio
year
Sales
(Rs)
Net Assets
(Rs)
Ratio
2003-2004
831984907
822102806
1.01
2004-2005
772261376
833334102
0.93
2005-2006
730258572
868214844
0.84
2006-2007
845585494
920213490
0.92
2007-2008
112,91,96,244
963233154
1.17
105
Jocil limited
Graph: 13
Interpretation of Net Assets Turnover Ratio:The Net Assets Turnover Ratio of Jocil was 1.01 in the year 2004.
It was decreased to 0.93&0.84 in the year 2005&2006. And in the year
2008 the ratio is 1.17, it implies the Jocil Company is producing Rs 1.17
of sales for one rupee of capital employed in Net Assets.
106
Jocil limited
5. Total Assets Turnover Ratio :Some analysis likes to compute the total assets turnover in addition
to or instead of the net assets turnover. This ratio shows the firms ability
in generating sales from all financial resources committed to total assets.
Sales
Total Assets Turnover Ratio = ----------Total Assets.
Table Showing the Total Assets Turnover Ratio
Year
Net Sales
(Rs)
Total Assets
(Rs)
Ratio
2003-2004
831984907
1030807897
0.81
2004-2005
772261376
1001896632
0.77
2005-2006
730258572
1034740976
0.71
2006-2007
845585494
1120706908
0.75
2007-2008
112,91,96,244
1516065278
0.75
107
Jocil limited
Graph: 14
Interpretation of Total Assets Turnover Ratio:The Total Assets Turnover Ratio is 0.75 in the year 2008 it implies
that Jocil Company generates a sale of Rs 0.75 for one rupee investment
in fixed and current assets.
108
Jocil limited
6.Working Capital Turnover Ratio:A firm may also like to relate net current assets or net working
capital to sales. Working capital turnover indicates for one rupee of sales
the company needs how many net current assets. This ratio indicates
whether or not working capital has been effectively utilized in market
sales.
Net Sales
Working Capital Turnover Ratio =
--------------------Working Capital
Table Showing the Working Capital Turnover Ratio
Year
Net Sales
(Rs)
Working Capital
(Rs)
Ratio
2003-2004
831984907
424261363
1.96
2004-2005
772261376
453765255
1.70
2005-2006
730258572
336253666
2.17
2006-2007
845585494
442019163
1.91
2007-2008
112,91,96,244
434387007
2.60
109
Jocil limited
Interpretation of Working Capital Turnover Ratio:Working Capital Ratio of Jocil was 1.96 in the year 2004. It was
decreased to 1.70 in 2005.And in the year 2006&2007 the ratio was
fluctuated. In the year 2008 the ratio is 2.60.
110
Jocil limited
7.Fixed Assets Turnover Ratio:The firm may wish to know its efficiency of utilizing fixed assets
and current assets separately. The use of depreciated value of fixed assets
in computing the fixed assets turnover may render comparison of firms
performance over period or with other firms.
Sales
Fixed Assets Turnover Ratio =--------------------Net Fixed Assets
Table Showing the Fixed Assets Turnover Ratio

Year
Net Sales
(Rs)
Net Fixed Assets

(Rs)
2003-2004
831984907
395747897
2004-2005
772261376
3774355347
2.05
2005-2006
730258572
529624998
1.38
2006-2007
845585494
475858147
1.78
2007-2008
112,91,96,244
522589967
2.16
Ratio
2.10
111
Jocil limited
Graph: 16
Interpretation of Fixed Assets Turnover Ratio:Fixed Assets Ratio indicates the extent to which the investment to
fixed assets contributes towards sales. A high fixed assets ratio indicates
firms utilization of fixed assets is satisfactory.
Fixed Assets Ratio of Jocil was 2.10 in the year 2004.It was
decreased from 2.05 to 1.38 in the years 2006&2007. And it increased to
2.16 in the year 2008.
112
Jocil limited
8. Current Assets Turnover Ratio:The firm may wish to know its efficiency of utilizing current assets
in the organization.
Sales
Current Assets Turnover Ratio = ---------------Current Assets
Table Showing the Current Assets Turnover Ratio
Year
Net Sales
(Rs)
Current Assets
(Rs)
Ratio
2003-2004
831984907
63,50,60,000
1.31
2004-2005
772261376
62,44,61,285
1.24
2005-2006
730258572
50,51,15,978
1.45
2006-2007
845585494
64,48,48,761
1.31
2007-2008
112,91,96,244
62,48,66,578
1.81
113
Jocil limited
Interpretation of Current Assets Turnover Ratio

The Current Assets turnover ratio indicates how much sales
generated when one rupee investment in total current assets. The higher
the current assets turnover ratio the more efficient the management and
utilization of assets.
The Current Assets Turnover Ratio is 1.81; it implies the Jocil
limited a sale of Rs 1.81 for one rupee investment in current assets.
114
Jocil limited
D .PROFITABILITY RATIOS:1. Gross Profit Ratio:The first profitability ratio in relation to sales is the gross profit
margin ratio, it reflects the efficiency with which management produces
each unit of product .This ratio indicates the average spread between the
cost of goods sold and the sales revenue. It indicates how much profit is
earned on your products.
Gross Profit
Gross Profit Ratio = -----------------Sales
Table Showing the Gross Profit Ratio

Year
Gross Profit
(Rs)
Net Sales
(Rs)
Ratio
2003-2004
205009821
831984907
0.25
2004-2005
195706337
772261376
0.25
2005-2006
118494324
730258572
0.16
2006-2007
173996976
845585494
0.20
2007-2008
212476347
112,91,96,244
0.19
115
Jocil limited
Graph: 18
Interpretation of Gross Profit Ratio:There is no standard norm for Gross Profit Ratio; it may vary from
business to business. A high ratio of gross profit to sales is a sign of good
management as it implies that the cost of production of the firm is
relatively low.
A relatively low gross profit margin is definitely a danger signal. A
firm should have reasonable gross profit to ensure adequate coverage of
operating expenses of the firm and sufficient returns to the owners of the
business, which is reflected to the net profit margin.
The Gross Profit Ratio of Jocil Company is satisfactory.
116
Jocil limited
02. Net Profit(PAT) Ratio:Net Profit is obtained when operating expenses, interest and taxes
are subtracted from the gross profit. The Net Profit Margin is measured
by dividing profit after tax / sales.
Net profit Ratio =
Profit after Tax

----------------------Sales
Table Showing the Net profit Ratio
Year
Net Profit
(Rs)
Net Sales
(Rs)
Ratio
2003-2004
97251100
831984907
0.12
2004-2005
111004418
772261376
0.14
2005-2006
29406711
730258572
0.04
2006-2007
55631609
845585494
0.07
2007-2008
86948601
112,91,96,244
0.08
117
Jocil limited
Graph: 19
Interpretation of Net Profit Ratio:A Higher net profit margin would ensure adequate return to the
shareholders as well as enable the firm to ensure to withstand adverse
economic conditions when selling price is declined, cost of production is
rising and demand for the product is rising. A low net profit margin
indicates a high rate of return on investment if it has higher inventory
turnover.
In the year 2004 the net profit is 0.12 and it was increased to 0.14 in
the year 2005. It was decreased to 0.04&0.07 in the year2007&2007.In
2008 the ratio of Net profit is 0.08.
118
Jocil limited
3.Return on Equity (ROE):Net Worth is the total of Share Capital and Reserves & Surplus.
Return on equity is calculated to know the profitability of owners
investment.
Profit after Taxes
Return on Equity = -------------------Net Worth
Table Showing the Return on Equity Ratio

Year
Net Profit
(Rs)
Net Worth
(Rs)
Ratio
2003-2004
97251100
681649615
0.14
2004-2005
111004418
762273839
0.15
2005-2006
29406711
766363722
0.03
2006-2007
55631609
791351367
0.07
2007-2008
86948601
831059862
0.10
119
Jocil limited
Graph: 20
Interpretation of Return on Equity:Return on Equity indicates how well the firm has the resources of
owners. The earnings of a satisfactory return is the most desirable
objective of a business.
The return on Equity of Jocil was 0.14 in the year 2004.It was
increased to 0.15in the following year. later the ratio as 0.03&0.07 in the
years 2006&07 and in the year 2008 the ratio is 0.10.
120
Jocil limited
Findings:
1. The current ratio of the Jocil over the period of study is in the
increasing stage. It shows positive sign of liquidity position. The
Current ratio of the company is very much satisfactory; It is around
the ideal ratio (2:1) and the company is able to meet its short term
obligations.
2. The quick ratio of Jocil is more than the ideal ratio (1:1) over the
period of study. By this we can understand the short-term financial
position of the company is sound.
3. The cash ratio of the Jocil is fluctuating .The acceptable norm for
the cash ratio is50% or1:2. The cash position of Jocil is decreased
from 0.55to 0.33 in the year 2006-07 to 207-08 . It is in better
stage.
4. The Debt ratio of Jocil is 0.03 in the year 2007-08;It means that
lenders have financed 3% of net assets. It obviously implies that
owners have providing remaining finances.
5. The Debt Equity ratio of the Jocil is decreased compared to
previous year. In the year 2007-08 the ratio is 0.03 .A Debt Equity
ratio indicates the margin of safety to the creditors. A Debt Equity
ratio of 1:2 is considered ideal. Therefore there is a high margin of
safety.
6. The proprietary Ratio of the Jocil is increased year by year. The
ratio 0.6 & 0.7 times to the total assets indicate good leverage of
121
Jocil limited
borrowings. As this ratio we can understand that owners
contribution towards total assets is more than 50%, so the outsider
contribution is less than 50%.
7. Inventory Turnover ratio of Jocil for the last five years is
increasing. But it is around 4&5: It is not satisfactory because it
should be at least six times.
8. Debtors turnover ratio of Jocil is fluctuating year by year.
Generally the higher the value of Debtors turnover the more
efficient is the management of debtors. But the Debtors turnover
ratio is decreased compared to the previous years. It should also
improve, the collection policy is all satisfactory, it should be
minimum 8times or 45 days.
9. Working capital Turnover ratio of Jocil is decreased compared to
previous year. The ratio revealing that turnover condition is to
improve; it is also not as much satisfied.
10.Fixed Assets Ratio indicates the extent to which the investments to
fixed assets contribute towards sale. A high fixed assets ratio
indicates firms utilization capacity of assets. Fixed Assets ratio of
Jocil in the year 2007-078 is 0.54. The ratio is decreased compared
to the previous years. Hence Jocil should try to improve ratio by
proper utilization of assets.
122
Jocil limited
11.The Gross profit ratio of the Jocil is decreased compared to the
previous years. Jocil has to further increase the gross profit ratio by
decreasing the manufacturing expenses.
12.Net profit ratio of the Jocil is fluctuating. Net Profit ratio is
decreased compared to the previous years. A higher net profit
margin would ensure adequate return to the shareholders and a low
net profit margin indicates a high rate of return on investment if it
has high inventory turnover.
13.Return on Equity is also considered as satisfactory ratios for the
company.
123
Jocil limited
Suggestions:
1. The companys cash balance position has not been steady. It is
fluctuating. So the company should maintain a proper balance and
it leads to negative effect towards net working capital.
2. Net Working Capital ratio is decreasing compared to previous
years. It has to improve by maintaining proper cash balance.
3. Stock Turnover Ratio is very less as it is around 4&5;l it should be
minimum six times and so the sales promotion activity should be
taken up.
4. There must be better coordination among purchase, production
marketing and financial divisions. This will help in achieving
satisfactory efficiency in inventory management.
5. Jocil should improve the Debtors turnover ratio by reviewing the
debt collection process.
124
Jocil limited
BIBLIOGRAPHY
1.
Financial Management
I.M. Pandey
2.
Prasanna Chandra
3.
Khan and Jain
4.
Facts for You
EFY Enterprises Pvt. Ltd.,
5.
Fundamentals of
James C. Van Home
Chemical Weekly
Sevak Publications
6.
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Jocil limited

Mahatma Gandhi college

User Industry of Oleo Chemicals

Fatty Acid Industry:

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Present Status of Industry:

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A Brief note on Fatty Acid Industry in AP.

source Tamilnadu State, even though produces major quantities of rice,

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Types of Fatty Acids:1) Saturated:

2) Unsaturated: Oleic Acid

Raw materials that constitute fatty acids include the following:

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Stearic Acid Industry:

industry in India are Godrej, Jocil, VVF. The average consumption by

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Personal wash market in India is very high. Everyone is using toilet

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The total turnover of toilet soap industry is Rs 4500 crores.

Segmentation of the Toilet Soap Market:Price Range

Rs.12+ (for 75gms)

Market share of premium,popular,sub-popular

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Reasons for growth rate of sub-popular soaps:

A brief profile of the various players in the personal

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Mahatma Gandhi college

Mahatma Gandhi college

Mahatma Gandhi college

Market Share in percent

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LOCATION OF THE COMPANY:

No.694/37A/TMO/94 dated 3-3-1994 before going into further

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Expansion of the Plant:

The company received letter of intent from department of industrial

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ORGANISATIONAL STRUCTURE OWNERSHIP AND

President & Secretary

State Bank of India

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REGISTERED OFFICE & FACTORY:

Small Scale Unit

Nature of the Unit

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Vice President to Secretary

Asst. Sales Supervisor

Functions of Jocil Limited:

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Mahatma Gandhi college

VARIOUS GRADES OF STEARIC ACIDS

Used in drugs, pharmaceuticals,

cosmetics, chemicals & plastics

PVC Stabilizers and Chemicals

PVC Stabilizers and Chemicals

Mahatma Gandhi college

Mahatma Gandhi college

Mahatma Gandhi college

Main Plant Suppliers:

Mahatma Gandhi college