AN ANALYSIS & COMPARATIVE STUDY OF FINANCIAL STATEMENTS

CONTENTS
1. EXECUTIVE SUMMARY 2. OBJECTIVE AND SCOPE OF PROJECT 3. COMPANY PROFILE 4. THEORETICAL BACKGROUND 5. RESEARCH METHODOLOGY 6. RATIO ANALYSIS AND PRESENTATION 7. CONCLUSION 8. BIBLIOGRAPHY 9. ANNEXURE 1 10. ANNEXURE 2

EXECUTIVE SUMMARY
This project named An Analysis and Comparative Study of Financial Statements was carried out at ISS intergrated facility service and understand financial feasibility of the company in terms of liquidity, turnover, solvency, profitability etc. by using Ratio Analysis technique. I chose to do this project at Kalyani Steels The Ratio Analysis technique is the process of identifying the financial strength and weakness of the firm by properly establishing relationship between the items of the balance-sheet and the profit and loss account because the figures recorded in the financial statements are absolutely incapable of revealing the soundness or otherwise of a Company s financial position or performance. Thus the technique of Ratio Analysis has been used which is supposed to be powerful tool for financial statements. In Ratio Analysis technique a ratio is used as a benchmark for evaluating the financial position and the performance of the firm.

OBJECTIVES

1. To obtain a true insight into financial position of the company. 2. To make comparative study of financial statements of different years. 3. To draw the correct picture of the financial operations of the company in terms of liquidity, solvency, turnover, profitability etc. 4. To find out the reasons for unsatisfactory results

COMPANY PROFILE
ISS is one of the worlds largest facility services provider and 4th largest employer privately held, with market presence in Europe, Asia, U.S.A. and Australia. ISS has its operations in 53 countries with more than 525,000 employees and 125,000 business-tobusiness customer. Ranked 2nd at the IAOP Global 100. ISS - India headquartered in Mumbai and has Operations in more than 19 cities (Mumbai, Bangalore, New Delhi, Gurgaon, Hyderabad, Chennai, Kochi, Coimbatore, Pune, Lonavala, Nashik, Nagpur, Korba (Chattisgarh), Aurangabad, Indore, Baroda, Kolkata,etc). ISS provides the following Services; SERVICES: - Cleaning & Housekeeping Services Daily office cleaning Washroom servicesspecialized cleaning - Office Support Services Records Management Payroll Management Temporary Staffing - Catering Services Company restaurant Executive dining Coffee solutions - Property Services Building maintenance Landscaping HVAC Electrical PlumbingFire Protection system maintenanceBMS Pest Control - Integrated Facility Services On-site Management One point Contact Change ManagementSpace Management Third Party Suppliers IFS Software Consultancy - Security Services Access Control Security Solutions Mobile PatrolsAlarm Response Services Cash & Valuables Services Risk Consulting Guarding Services.

ABOUT ISS GROUP WORLDWIDE Founded in 1901 with more than 200,000 business-to-business customers worldwide, ISS is one of the world's largest commercial providers of Facility Services. The company has operations in 53 countries in Europe, Asia, North America, South America and Australia and employs more than 550,000 people.

In 2008 the ISS Group's annual revenues exceeded DKK 69 billion. ISS's head office is located in Copenhagen, Denmark.

ABOUT ISS in INDIA Operating as ISS Integrated Facility Services, since 2005. Since then has grown inorganically by acquiring close to twelve companies in India. The recent acquisitions being Godrej Hi Care the second largest Pest Management Company In India and SDB Cisco the second largest security Company in India. With these acquisitions the total employee count in India is 45000+
The ISS code of conduct articulates group-wide standards in the areas of: y y y y y y Personal conduct of employees Anti-corruption and bribery Compliance with competition laws Business partner relations Workplace standards Corporate responsibility

Personal Conduct of Employees y y y Employees must comply with the law ISS expects its employees to live by the corporate values: honesty, quality, entrepreneurship and responsibility Where no legislation or rules govern personal conduct, each employee must exercise sound judgement and due careWhenever in doubt, employees should raise their questions with a superior or another responsible staff member Customers, colleagues and other business partners must be treated with respect and fairness Harassment, including sexual harassment, is unacceptable at ISS ISS demands that employees perform their work without the influence of alcohol or drugs

y y y

Anti-Corruption and Bribery

y y y y

ISS is against any form of corruption and bribery and committed to combating such practices ISS competes for business on fair terms and solely on the merits of its services Regardless of local practice, any personal payments, kick-backs or bribes between ISS and customers, suppliers or public servants are strictly prohibited It is unacceptable to receive gifts or other gratuities from business partners unless customary in the environment and of a modest value

Compliance with Competition Laws y y y y Compliance with all applicable competition rules and regulations lies at the heart of ISS business practice ISS does not arrange with competitors to fix prices, allocate services, sales quotas or divide markets ISS does not engage in bid rigging or exchange information on tenders with competitors ISS does not discuss competitive issues (such as pricing, discounts, bonuses, sales terms etc.) with competitors

Business Partner Relations y y y y y ISS will inform its suppliers and customers through appropriate channels about the ISS Code of Conduct and ask them to take the principles into account in all relevant circumstances The ISS service delivery will meet agreed standards for quality, health and safety at customer sites Customer privacy is respected and applicable data protected Complaints are addressed effectively, and they are considered a valuable contribution to constantly ensuring high levels of service ISS evaluates its procurement of products and services against the following criteria: Quality, Efficiency, Environment and Employees (Q3E)

Workplace Standards y y y y y y y y ISS ensures proper working conditions for its employees, including appropriate health and safety standards ISS tolerates no form of discrimination against employees; all employees are entitled to fair and equal treatment ISS respects the freedom of association and the right to collective bargaining; all employees have the right to join and form trade unions ISS uses no forced or compulsory labour In accordance with international conventions, ISS avoids employing children ISS offers adequate wages, that - as a minimum - comply with local agreements and regulations ISS supports the introduction and upholding of minimum wages Employees are offered training opportunities relevant to the function they performISS respects employee privacy and protects applicable data accordingly

Corporate Responsibility y y y y y y ISS respects the United Nations Declaration of Human Rights ISS operates according to principles of good corporate governance ISS is committed to continuously reducing adverse environmental effects of its operations ISS is a member of the United Nations Global Compact and complies with the ten principles of the compact ISS acts as a good corporate citizen in all societies where it operates The social, environmental and ethical commitments of ISS must be reflected in all dealings with customers, employees, suppliers and other stakeholders

y y

y y

In 2005, ISS announced the new strategy, Route 101. Route 101 is a destination plan that describes ISS in terms of service offerings, organisation, geography, etc. The destination described in Route 101 is a Facility Services company with revenue of DKK 101 billion. ISS will continue to work towards this goal following the vision: Lead Facility Services globally. To further operationalise this vision, ISS in the spring of 2007 introduced the ISS Strategy Plan 2007-2009. ISS strategy plan 2007-2009 The ISS Strategy Plan 2007-2009 is not a new direction for the Group. The strategy of transforming ISS into the leading global Facility Services company remains the same. The ISS Strategy Plan 2007-2009 further details the initiatives needed to fulfil the vision. - Facility Services ISS continues the process of transforming itself into a Facility Services company. In response to customer demand, ISS has established operations in security services through acquisitions in several geographies. To further strengthen its strategic focus on developing these services, Security, including access control and guarding services, has been added as a fifth pillar in ISSs IFS house as illustrated above. This means that ISS wants to offer a wide range of services supported by the five pillars of the IFS House: > Cleaning > Office Support > Property Services

y y

> Catering > Security Service solutions are offered to the customer as single services, multi services or Integrated Facility Services (IFS). In a single service outsourcing the customer buys one service solution from ISS, e.g. outsourcing of cleaning or property services. The customer thereby enjoys the benefits of outsourcing to ISS and can capitalise on service know-how and best practices, labour management and handling of all HR issues, procurement benefits, reduced financial administration of the outsourced service area, increased operational fiexibility, etc. In a multi service outsourcing the customer achieves the same benefits as single service outsourcing only for each outsourced service area as well as benefits of service integration where possible. In an Integrated Facility Services solution ISS takes over all or most of the service functions at the customers premises, provided the services are within the pillars of the IFS house. The customer thereby receives the full potential of single service outsourcing and benefits from an ISS on-site management solution that exploits the synergy potential, and as a result provides the customer with an integrated and cost effective solution. Through the acquisitions of broadranged service companies in Germany, Switzerland and the United Kingdom, ISS is able to provide management of Facility Services. The acquired capabilities have provided an approach to clients where ISS is able to offer management of services, delivered either through subcontracting or through own service provisions depending on the preference of the client. An IFS implementation team was established in 2006 with the primary focus of accelerating the IFS implementation in selected countries. The team consists of four experienced specialists with an overlying mission of providing operational support in winning, bidding, transitioning and operating the first IFS contract within a country. The prioritised countries in 2006 were Spain, Belgium and Switzerland. In 2007, the prioritised countries are Germany, the Netherlands and Australia. - Single service excellence The foundation for being the leading Facility Services company is a continuous focus on delivering service excellence in every service area. Going forward, ISS will continue to focus heavily on developing single service excellence and spreading it throughout the organisation. - Operational efficiency ISS will seek to maintain and enhance operational efficiency by retaining its focus on three well-established and prioritised operational objectives for its local managers: (i) cash flow; (ii) operating margin; and (iii) profitable organic growth. In addition, ISS will focus on reducing the financial leverage on a multiple basis. Cash cow ISSs first objective is to continue to maintain a relatively high rate of cash conversion primarily by operating in a manner that optimises working capital. Through this approach, ISS expects to continue to generate a positive free cash flow.

Operating margin ISSs second objective is to maintain or improve its operating margin, which increased from 5.1% in 2000 to 5.8% in 2006. ISS will seek to generate operational efficiencies by increasing its local market positions and operational densities, as well as through the implementation of company-wide best practices. Profitable organic growth ISSs third objective is to continue to leverage its international market position and service offering in order to increase its local market positions and drive organic growth. To do this, ISS established a Sales Excellence Centre in 2006 to create sales systems and to promote benchmarking and the sharing of best practices between countries. ISS continues to work with a wide range of initiatives to: (i) attract new customers; (ii) increase customer retention rates, including through the establishment of dedicated key account teams; and (iii) cross-sell related services, such as pest control and washroom services, to existing customers. Additionally, ISS has established a market presence and operating platforms in selected high-growth economies, particularly in Latin America and Asia. Reduce financial leverage Following the acquisition of ISS A/S by FS Funding A/S, ISS is determined also to seek to reduce, on a multiple basis, the financial leverage of the FS Funding Group, which increased as a result of the acquisition. This is expected to be achieved primarily through growth in ISSs operating profit through a continued focus on cash flow, operating margin, organic growth and acquisitions. However, as a result of this growth strategy, ISS expects to incur additional debt in the future. The extent and timing of the FS Funding Groups deleveraging on a multiple basis will, however, depend upon, among other things, ISSs cash flow generation and the scale and timing of payments related to its future acquisition activities, which may temporarily increase its leverage on a multiple basis in terms of net debt to pro forma adjusted EBITDA. - Growth A wide range of initiatives will underpin organic growth spanning from further investment in the growth economies of the world via an enhanced sales force and training to new customer retention initiatives. ISS expects to continue to make acquisitions to facilitate its strategy of increasing local scale and broadening its local service offerings. Since the beginning of 2000, ISS has acquired and integrated more than 500 businesses, more than 450 of which were acquisitions of relatively small businesses with annual revenues of less than DKK 100 million (EUR 13.4 million). The two largest acquisitions to date have been Abilis in France in 1999 and Tempo in Australia in 2006 which on the date of the respective acquisitions had estimated annual revenue of approximately DKK 5.2 billion and approximately DKK 2.9 billion. Apart from Tempo, the two largest acquisitions in 2006 were Edelweiss in Switzerland (estimated annual revenue of DKK 0.7 billion) and DEBEOS in Germany (estimated annual revenue of DKK 0.5 billion). ISS expects to continue focusing primarily on smaller acquisitions, which it believes will reduce the risks relating to individual acquisitions and enable it to leverage the experience of local

management teams throughout its countries of operation. ISS cannot provide any assurance, however, that it will not pursue larger acquisitions in the future. It is important to emphasize that acquisition driven revenue growth will vary widely from year to year, among other things depending on opportunities, organisational capability, financial resources, etc. and thus acquisition speed could deviate significantly from the range mentioned above. - Geography ISS intends to increasingly focus on the BRIC-countries (Brazil, Russia, India and China) as well as other growth markets, particularly located in Eastern Europe, Latin America and Asia. In 2006, ISS established country operations in Mexico and the Philippines and in January 2007, ISS set up operations in Taiwan. Furthermore, the presence in Turkey was significantly expanded in 2006 through an acquisition. ISS is currently analysing the US market in preparation for a possible US entry. - Organisation As a foundation for the strategy plan, ISS is transforming its organisation to allow it to focus on accelerating the service development. Head office resources focusing specifically on China and India have been appointed. Organisational resources have also been added for Eastern Europe, Russia, Australia and Latin America in order to support the development of these geographies. Training and education is key to the strategy plan. ISS will invest even more in these areas in order to continue to accelerate its transformation towards Integrated Facility Services. - Branding As a part of the transformation to a global Facility Services company, ISS will invest further in strengthening the ISS brand across the world. - Systems and methodologies ISS will invest further in systems and methodologies. A Corporate Solution, i.e. a standardised IT-business solution, has been further developed and implemented in a number of countries. Shared initiatives in a number of areas such as planning tools, facility service management systems, etc. have been developed and will be implemented going forward. - Acquisitions ISS considers acquisitions an integral part of the business model. Acquisitions are the Groups primary means of investing in the business, to develop and refine the business concept and to continuously improve its competitive strength in an unconsolidated industry structure. The acquisition process is aimed at creating value for shareholders. The acquisition process is anchored with local management teams enabling them to take advantage of and leverage the local presence. The local management team screens the market for potential targets and builds a pipeline of qualified opportunities. The management teams stay involved throughout the acquisition process from the very beginning of target

identification to the final step of the integration in order to make sure that responsibility and focus on the execution is maintained. ISSs mergers and acquisitions department manages the acquisition process, primarily with respect to valuation of the acquisition and negotiation of the material acquisition agreements, to the extent that its centralised resources add value. This centralised department is responsible for quality assurance with respect to all acquisitions and is a driving force with respect to centralised pipeline management in the country organisations. The centralised pipeline management ensures that each subsidiary continues to explore acquisition opportunities which would contribute to the achievement of ISSs objectives. ISSs mergers and acquisitions department is more heavily involved in all larger acquisitions, and all acquisitions are approved by the Executive Group Management of ISS A/S. In addition, the approval of the Board of Directors is required for large or strategic acquisitions. The most important element of Group involvement is in the assessment of country readiness for acquisitions as well as strategic screening and valuation of acquisitions. On a discounted cash flow basis a total value of the target is estimated by assigning value to six independent components.

y y

1.Stand alone value of the target 2.Value of expected contract losses 3.Value of expected margin improvements 4.Value of expected financial synergies 5.Value of expected cost synergies 6.Value of expected future organic growth

The Group operates with three key valuation indicators. First, Return on Investment (ROI) and price multiples are assessed and measured up against appropriate benchmarks varied according to size, industry segment, geography, etc. Second, the time structure of the MVA and the EVA break-even horizon is assessed. In addition to the mentioned valuation parameters a range of other criteria are employed on a discretionary basis.

ACHIEVEMENT:
y ISS India operation is ISO 9001:2000 certified and have over 47000 employees. A Service to meet all your Business Needs & a complete End to End Solution ISS is into Five major businesses globally Facility Services, Property Services, Catering Services, Security Services and Support Services. International Association of Outsourcing professionals (IAOP) ranked ISS 6th in 2010 for its demonstrated competencies

THEORITICAL BACKGROUND

MEANING OF RATIO: -

A ratio is a simple arithmetical expression of the relationship of one number to another. According to Accountants Handbook by Wixon Kell and Bedford, a ratio is an expression of the quantitative relationship between two numbers . In short it can be defined as the indicated quotient of two mathematical expressions. The ratios can be expressed in 1) Percentages 2) fraction and 3) Proportion of numbers. MEANING OF RATIO ANALYSIS: -

Ratio Analysis is a technique of analysis and interpretation of financial statements. it is defined as the systematic use of ratios to interpret the financial statements so that the strengths and weaknesses of a firm as well as its historical performances and current

financial condition can be determined. There are a number of ratios which can be calculated from the information given in the financial statements, but the analysts has to select the appropriate date and calculate only a few appropriate ratios from the same keeping in mind the objectives of analysis.

The following four steps involved in the ratio analysis: 1. Selection of relevant data from financial statements depending upon financial analysis. 2. Calculation of appropriate ratios. 3. Comparison of the calculated ratios of the same firm in the past or the ratios developed from projected financial statements to the ratios of some other firms or the comparison with ratios of the industry to which firm belonged. 4. Interpretation of ratios.

INTERPRETATION OF RATIOS: The interpretation of ratios is an important factor. Though calculation of ratios is also important but it is only a clerical task whereas interpretation needs skill, intelligence and foresightedness. The impacts of factors such as price level changes, change in accounting policies, window dressing etc should be kept in mind when attempting to interpret ratios. The interpretation of ratios can be made in following ways: 1. Intra firm comparison: - Here the ratios of one organization may be compared with the ratios of the same organization for the various years either the previous years or the future years. 2. Inter firm comparison: - The ratios of one organization may be compared with the ratios of the other organization in the same industry and such comparison will be meaningful as the various organization, in the same industry may be facing similar kinds of financial problems. 3. The ratios of an organization may be compared with some standards, which may be supposed to be the thumb-rule for the evaluation of the performance.

CLASIFICATION OF RATIOS: The ratios may be classified under various ways, which may use various criterions to do the same. However for the convenience purpose, the ratios are classified under following groups. 1. Liquidity group 2. Turnover group 3. Profitability group 4. Solvency group and 5. Miscellaneous group

LIQUIDITY GROUP:

The ratios computed under this group indicate the short-term position of the organization and also indicate the efficiency with which the working capital is being used. Commercial banks and short-term creditors may be basically interested in the ratios falling under this group. Two most important ratios may be calculated under this group. 1) Current Assets: It is calculate as, Current Assets/Current Liabilities

Current ratio indicates the backing available to current liabilities in the form of current assets. In other words, higher current ratio indicates that there are sufficient assets available with the organization, which can be converted in the form of cash. A current ratio of 2:1 is supposed to be standard and ideal . 2) Liquid Ratio or Acid Test Ratio: -

It is calculated as, Liquid Assets/Liquid Liabilities Here liquid assets include all assets except inventory and p/p exps and liquid liabilities except overdraft or cash credit or o/s exps. Liquid ratio indicates the backing available to liquid liabilities in the form of liquid assets. The term liquid assets indicate the assets, which can be converted in the form of cash without any reduction in the value. Almost immediately whereas the term

liquid liabilities which are required to be paid almost immediately. In other words, a higher liquid ratio indicates that there are sufficient assets available with the organization, which can be converted in the form of cash almost immediately to pay off those liabilities, which are to be paid off almost immediately. As such higher the liquid ratio better will be the situation. A liquid ratio of 1:1 is supposed to be standard and ideal.

TURNOVER GROUP: Ratios computed under this group indicate the efficiency of the organization to use the various kinds of assets by converting them in the form of sales. Under this group the following classification of ratios are made.

1) Fixed Assets Turnover Ratio: It is calculated as, Net Sales/Fixed Assets

A high fixed assets turnover ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in fixed assets. It indicates that the fixed assets are turned over in the form of sales more number of times.

2) Current Assets Turnover Ratio: It is calculated as, Net Sales/Current Assets

A high current assets turnover ratio indicates the capability of the organization to achieve maximum sales with the maximum investment in current assets. It indicates that the current assets are turned over in the form of sales more number of times.

3) Working Capital Turnover Ratio: It is calculated as, Net Sales/Working Capital

A high working capital turnover ratio indicates the capability of the organization to achieve maximum sales with the minimum investment in the working capital. It indicates that working capital is turned over in the form of sales more number of times.

4) Inventory or Stock Turnover Ratio: It is calculated as, Cost of Goods Sold/Avg. Inventory

A high inventory turnover ratio indicates that maximum sales turnover is achieved with the minimum investment in inventory. As such as a general rule, high inventory turnover ratio is desirable.

5) Debtors Turnover Ratio: It is calculated as, Net Credit Sales/Closing Sundry Debtor

This ratio indicates the speed at which the sundry debtors are converted in the form of cash. However the intention is not correctly achieved by making the calculation in this way. As such this ratio is normally supported by the calculation period, which is calculated as below.

a) Calculation of Daily Sales: It is calculated as, Net Credit Sales/No of Working Days

b) Calculation of Collection Period: It is calculated as, Closing Sundry Debtors/Daily Sales The average collection period as computed above should be compared with the normal credit period extended to the customers. If the average collection period is more than the normal credit period allowed to the customers, it may indicate over investment in debtors which may be the result of over extension of credit period, liberalization of credit term, ineffective collection procedure and so on.

6) Capital Turnover Ratio: It is calculated as, Sales/Capital Employed

This ratio indicates the efficiency of the organization with which the capital employed is being utilized. A high capital turnover ratio indicates the capability of the

organization to achieve maximum sales with minimum amount of capital employed. As such higher the capital turnover better will be the situation.

SOLVENCY GROUP Ratios computed under this group indicate the long-term financial prospects of the company. The shareholders debenture holders and other lenders of long-term finance/ term loan may be basically under this group. Following ratios may be computed under this group.

1) Debt-equity Ratio: It is calculated as, External Liabilities/.Shareholders Fund

Debt-equity ratio indicates the state of shareholders or owners in the organization vis--vis that of the creditors. It indicates the cushion available to the creditors on liquidation of the organization. A high debt-equity ratio may indicate that financial status of the creditors is more than that of the owners. A very high debt-equity ratio may make the proportion of investment in the organization a risky one. On the other hand a very low debt equity rate may mean that the borrowing capacity of the organization is being underutilized.

2) Proprietary Ratio: It is calculated as, Total Assets/Owners Fund

This ratio indicates the extent to which the owner s funds are sunk in different kinds of assets. If the owner s fund exceeds fixed assets, it indicates that a part owners fund invested in the current assets also and if owners fund are less than fixed assets it indicates that the creditors finance a part of fixed assets either by long term or short term.

3) Capital Employed Ratio: It is calculated as, Fixed Assets *100/Capital Employed

This ratio indicates the extent to which the long-term funds are sunk in fixed assets.

4) Interest Coverage Ratio: It is calculated as, PBIT/Interest Charges

This ratio indicates protection available to the lenders of long-term capital in the form of funds available to pay the interest charges i.e. profits. Normally a high ratio will desirable but too high a ratio may indicate underutilization of the borrowing capacity of the organization whereas too low a ratio may indicate excessive long-term borrowings or inefficient operation.

PROFITABILITY GROUP

1) Gross Profit Ratio: It is calculated as, Gross Profit *100/Net Sales

The gross profit ratio indicates the relation between production cost and sales and efficiency with which the goods are produced or purchased. A high gross profit ratio may indicate that the organization is able to produce or purchase at a relatively lower cost.

2) Net Profit Ratio: It is calculated as, Net Profit after Taxes *100/Net Sales

The net profit ratio indicates that portion of sales available to the owners after the consideration of all types of expenses and costs either operating or nonoperating or normal or abnormal. A high net profit ratio indicates higher profitability of the business.

3) Operating Ratio: It is calculated as, Mfg COGS + operating exps*100/Net Sales

This ratio indicates the percentage of net sales, which is absorbed by the operating cost. A high operating ratio indicates that only a small margin of sales is available to meet the expenses in the form of interest, dividend and operating exps. As such low operating ratio will always be desirable.

OVERALL PROFITABILITY GROUP 1) Return on Assets: It is calculated as, Net Profit *100/Assets

Return on assets measures the profitability of the investment in a firm. As such higher return on assets will always be preferred. However Return on assets does not indicate the profitability of various sources of funds, which finance total assets.

2) Return on Capital Employed: It is calculated as, Net Profit after taxes+Int on Long Term Loans*100/Capital Employed

Return on capital employed measure4s the profitability of the capital employed in the business. A high return on capital employed indicates a better and profitable use of long-term funds of owners and creditors. As such a high return on capital employed is preferred.

3) Return on Shareholders Funds: It is calculated as, Net Profit after Taxes*100/Total Shareholders Funds This ratio indicates the profitability of a firm in relation to the fund supplied by the shareholders

MISCELLANEOUS GROUP 1) Capital Gearing Ratio: It is calculated as, Fixed income-bearing securities/Equity Capital

A high capital-gearing ratio indicates that in the capital structure, fixed income bearing securities are more in comparison to the equity capital in that case the Company is said

to be highly geared. On the other hand, if fixed income-bearing securities are less as compared to equity capital the company is said to be lowly geared.

2) Earning Per Share: It is calculated as, Net Profit after tax and dividend/Number of equity shares o/s

It is widely used ratio to measure the profit available to the equity shareholders on a per share basis. As such increasing Earning Per Share may indicate the increasing trend of current profits per equity share.

3) Dividend Payout Ratio: It is calculated as, Dividend Per Share *100/Earning Per Share

It measures the relationship between the earnings belonging to the equity shareholders and the amount finally paid to them by way of dividend. It indicates the policy of management to pay cash dividend.

ADVANTAGES OF RATIOS 1. Ratios simplify the comprehension of financial statements. They tell the whole story as a heap of financial data is condensed in them. They indicate the changes in the financial condition of the business. 2. They act as an index of the efficiency of enterprise. As such they serve as an instrument of management control. It is an instrument for diagnosis of the financial health of an enterprise. The efficiency of the various individual units similarly situated can be judged through inter-firm comparisons. 3. The ratio analysis can be if invaluable aid to management in the discharge of its basic functions of forecasting, planning, co-ordination, communication and control. A study of the trend of strategic ratio may help the management in this respect. Past ratios indicate trends in cost, sales, profit and other relevant facts. 4. The ratio analysis provides data for inter-firm comparison or intra-firm comparison. Comparison cannot be made with absolute figures. Net profit of one firm cannot be compared with the net profit of the other firm. But the percentages of net profits can be compared to evaluate the performance.

Similarly performance and efficiency of different departments in the same firm can be compared with the help of ratios. 5. Investment decisions can at times be based on the conditions revealed by certain ratios. 6. They make it possible to estimate the other figure when one figure is known. 29 LIMITITIONS OF RATIO ANALYSIS Though ratio analysis technique has got number of advantages, it attracts equal number of disadvantages too. Some of important advantages are as follows: 1) The ratios of the other organization May not be readily available. 2) Different accounting policies may be followed by the constituent organization in the industry. 3) The constituent organization in the same industry may vary from each other in terms of age, location, extent of automation, quality of management and so on 4) The technique of ratio analysis may prove to be inadequate in some situation if there is difference of opinions regarding the interpretation of certain items while computing certain ratios. 5) As the ratios are computed on the basis of financial statements, the basic limitation, which is applicable to the financial statements, is equally applicable in case of the technique of ratio analysis also. Thus the ratio analysis points out the financial condition of business whether it is very strong, good, questionable or poor and enables the management to take necessary steps.

RESEARCH METHODOLOGY

DATA COLLECTION a) Primary Data: Primary data related to the project was collected from the discussion and interaction with the senior employees and executives in the organization from Accounts and Finance department. b) Secondary Data: Secondary data was collected from the documents, which were in printed forms like annual reports, pamphlets, reference books based on Financial Management and through websites.

METHODOLOGY FOR ANALYSIS The methodology opted for carrying out project was by way of collection of data from the company s annual reports for the past three years i.e. from 2003-2004 to 2005-2006, for the calculation of ratios. The theory related to ratios was gathered from various financial management books, which served the purpose of calculation and analysis of ratios. Further based on the above statements ratios related to liquidity, turnover, solvency, profitability and over profitability groups and miscellaneous groups have been calculated and interpreted in an intra firm comparison method. Similarly the ratios have been presented in graphical format to have clear understanding of it during three financial years and changes in it.

RATIO ANALYSIS

LIQUIDITY GROUP 1) Current Ratio: 2) Acid Test Ratio: -

TURNOVER GROUP 1) Fixed Assets Turnover Group 2) Working Capital Turnover Ratio: 3) Current Asset Turnover Ratio 4) Capital Turnover Ratio: 5) Inventory Turnover Ratio: -

SOLVENCY GROUP

1) Debt-Equity Ratio: 2) Proprietary Ratio: 3) Capital Employed Ratio:-

PROFITABILITY RATIOS 1) Gross Profit Ratio: 2) Net Profit Ratio: -

3) OVER PROFITABILITY GROUP 1) Return on Assets: 2) Return on Capital Employed: 3) Return on Shareholders Fund: MISCELLANEOUS GROUP 1) Capital Gearing Ratio: -

NOTES FORMING PART OF THE PROJECT REPORT

1. Debtors for sale of assets has not been considered which has been duly mentioned in the schedules. 2. While considering long term loans for capital gearing ratio interest accrued on loans has not been considered. 3. While considering net sales, returns from sales has been deducted from gross sales. 4. Gross profit is calculated by deducting manufacturing expenses from Net Sales.