A

PROJECT REPORT
ON
“ANALYSIS AND INTERPRATION OF FIANNCIALSTATEMENT WITH THE HELP
OF RATIO ANALYSIS”

FOR

JIVAN MEDICAL

BY

__________
UNDER THE GUIDANCE

OF

__________

__________
IN PARTIAL FULFILLMENT OF

__________

ACKNOWLEDGEMENT

1
I consider it a privilege to express my appreciation and respect for all those, whose
supports and suggestion helped me to successfully complete my final year project while
working on this project it enriched me with information and knowledge about the analysis
and interpretation of financed statement with reference to jivan medical

First, I take this opportunity to express my profound gratitude and deep regards to my
project guide PROF__________ for his exemplary guidance, monitoring and constant
encouragement throughout the course of this project

Also I would like to express my sincere thanks to PROF __________ for supporting me in
the harder times of my project

And I’m giving my special thanks to MR JIVAN (owner of jivan medical) who had been
extremely cooperative and helpful to make my project a success

Lastly, I thank almighty allah, my beloved parents, and my supporting friends for their
constant encouragement and assistance

2
Declaration

I hereby that the project report titled, analysis and interpretation of financed statement
with reference to jivan medical the information submitted herein is true and original to
the best of my knowledge

I affirm that the project copy submitted to university of __________ is the original, and
has not been submitted elsewhere before.

__________

3
 INDEX

S.R NO CONTENT PAGE. NO

1 INTRODUCTION 2

2 INDUSTRY PROFILE 5

3 COMPANY PROFILE 13

4 OBJECTIVES AND SCOPE 16

5 DATA COLLECTION AND LIMITATIONS 18

6 DATA ANALYSIS AND INTERPRETATION 21

7 SUMMARY SHEET 55

8 FINDINGS 57

4
9 SUGGESTION AND CONCLUSION 59

10 REFERENCE 61

CHAPTER NO: 1

5
 INTRODUCTION

Introduction

Globally Indian pharmaceutical market is the third largest in terms of volume and
thirteenth largest in terms of value as per a report by equity master, India is the largest
provider of generics accounting for 20 per cent of global exports in terms of volume. Of
late, consolidation has become an important characteristic of the Indian pharmaceutical
market as the industry is highly fragmented.

India enjoys an important position in the global pharmaceuticals sector, the country also
has a large pool of scientists and engineers who have the potential to steer the industry
ahead to an even higher level and the pharma facilities and personal increased
substantially between the early 1950 and early 1980, but because of fast population
growth, the number of licensed medical practitioners per 10000 individuals had fallen by
the late 1980’s to three per 10000 from the 1981 level of four per 10000. The use of
state-of-the –art medical equipment, often imported from western countries. Was

6
primarily limited to urban centers in the early [Link] pharmaceutical industry
develops, produces, and markets drugs or pharmaceuticals for use as medications.[1]
Pharmaceutical companies may deal in generic or brand medications and medical devices.

It is an industry that has evolved tremendously over the years. The pharmaceutical
industry has a major contribution to Indian economy as it ranks 4 th in the world,
pertaining to the volume of sales and has an estimated worth of about US$ 6 billion.

The growth rate of the industry is about 13% per year hence has a promising futuristic
contribution to the economy.

It should also be noted that the pharmaceutical industry is one related to health care ,
hence it plays a major role in ensuring safety and efficacy while delivering quality,
affordable drugs to its consumers.
Therefore a proper survey to explore pharmaceutical industry , its achievements and
future opportunities is important.

7
Sector profile of pharmacy

● As per 'Pharma Vision 2020', the Government of India aims to make India a global

leader in end-to-end drug manufacturing.

● Manufacturing costs in India are approximately 35-40 per cent of those in the US

due to low installation and manufacturing costs.

● Pharmaceutical exports from India have grown at a CAGR of 21 per cent over the

last decade.

● Indian vaccines are exported to 150 countries.

● The projected human resource requirement in the Indian pharma sector is

estimated to be about 21,50,000 by 2020

8
 CHAPTER NO: 2

INDUSTRY PROFILE

9
Industry size

● Presently the market size of the pharmaceutical industry in India stands at US$ 20

billion. As on March 2014, Indian pharmaceutical manufacturing facilities

registered with the US Food and Drug Administration (FDA) stood at 523, highest
for any country outside the US.

● Indian pharmaceutical firms are eyeing acquisition opportunities in Japan's growing

generic market as the Japanese government aims to increase the penetration of

generic drugs to 60 per cent of the market by 2017 from 30 per cent in 2014, due to
ageing population and rising health costs.

● "Indian pharmaceutical industry is expected to touch USD 55 billion by 2020 as

against the current size of USD 18 billion but the exports may slow down to grow
at a CAGR of 7.98 per cent in value terms due to tightening of regulatory
mechanism in top exports markets of US, Russia and Africa," a joint report by
Assocham and TechSci Research reveals.

● India is the largest supplier of medicine to the US and pharmaceutical exports from

India rose from USD 3.44 billion in 2013 to USD 3.76 billion in 2014.

● "Pharmaceutical exports to the US are rising due to the increasing demand for high

quality generic drugs in the market. However, the growth rate for exports of
pharmaceutical products from India to the US is declining, due to increasing US
Food and Drug Administration (FDA) scrutiny on the quality of pharma products
coming from drug manufacturing plants located in India.

● "In order to boost the growth rate of exports to the US, Indian companies will need

to leverage their compliance to US FDA regulations," it added.

● The report further said the exchange rate issue in the country is affecting the

pharmaceuticals market in Russia.

10
● "For example, Dr. Reddy's pharma revenues in Russia dropped 9 per cent in dollar

terms despite a rise of 30 per cent in Rubbles. Hence, stabilisation of the currency
is of utmost importance in generating revenues through exports," according to the
report.

11
Growth trends

Steep growth expected in pharmaceutical expenditure

•Over 2012–20, total healthcare spending is expected to rise at a CAGR of 20 per cent to
US$ 280 billion from US$ 65 billion

•Industry revenues are expected to expand at a CAGR of 12.1 per cent during 2012-20
and reach US$ 45 billion

•Pharmaceutical sales, as a percentage of total healthcare spending, are expected to

increase to 27 per cent by 2016 from 18.9 per cent in 2008nbsp;

12
Major players and their market shares

India has a total of 24,000 pharmaceutical companies, of which around 250 fall under the
organized category. These 250 organized units control nearly 70 per cent of the market.
About 8,000 small scale units together form the core of the pharmaceutical industry in
India, including 5 Central Public Sector Units. About 75% of the top 20 pharma companies
are Indian owned.

Some of the major Indian private companies and their market shares are:

Market Cap
Company Name
(Rs. cr)
Sun Pharma 196,364.98
Lupin 70,237.58
DrReddys Labs 54,089.45
Cipla 42,446.81
Aurobindo Pharm 42,184.88
Cadila Health 34,935.22
GlaxoSmithKline 28,778.70
Divis Labs 26,124.76
Glenmark 22,623.44
Torrent Pharma 22,214.71
Piramal Enter 16,523.78
Alkem Lab 16,440.19
Ajanta Pharma 11,800.97
Alembic Pharma 11,528.69
Wockhardt 10,322.64
Abbott India 9,801.56
Sanofi India 9,589.26
Biocon 9,183.00

13
Strides Shasun 9,173.60
Natco Pharma 8,182.71
Dr Lal PathLab 7,603.32
Pfizer 7,448.65
Sun Pharma Adv 7,242.50
Ipca Labs 7,022.98
Jubilant Life 6,444.51
Sequent Scienti 3,911.84
FDC 3,237.45
Shilpa 3,186.24
AstraZeneca 2,905.88
Dishman Pharma 2,771.54
Indoco Remedies 2,524.00
Suven Life Sci 2,517.65
Granules India 2,497.77
JB Chemicals 2,107.78
Novartis India 2,076.65
Marksans Pharma 2,030.20
Unichem Labs 1,931.33
Caplin Labs 1,508.73
Aarti Drugs 1,160.24
Morepen Lab 1,122.32
Merck 1,064.85
Hikal 1,062.03
Alembic 969.33
Anuh Pharma 877.38
Nectar Life 865.65
Claris Life 745.40
SMS Pharma 728.01
TTK Healthcare 714.47
Vivimed Labs 666.95
Amrutanjan Heal 606.83

14
Panacea Biotec 583.11
Neuland Lab 535.22
RPG Life 385.29
Hester Bio 378.22
Astec Life 371.01
Nutraplus India 362.46
Orchid Pharma 360.31
Mangalam Drugs 356.72
Gufic Bio 329.51
Themis Medicare 285.85
Lincoln Pharma 239.77
Kopran 219.27
Jenburkt Pharma 200.25
PiramalPhytoca 181.72

15
Government support and policies

The Indian Government is very proactive for boosting growth and investment in Indian
pharmaceutical sector. It allows 100 per cent FDI under the automatic route in the drugs
and pharmaceuticals sector.

The DIPP data suggests that the drugs and pharmaceuticals sector has attracted an
impressive level of FDI worth US$ 1,882.76 million during April 2000 to March 2011.
Industrial licenses are not required in India for most of the drugs and pharmaceutical
products. Manufacturers are free to produce any drug duly approved by the Drug Control
Authority.

This patent regime has led to the investment from many pharmaceutical multinationals in
India. Now they are looking at India not only for its traditional strengths in contract
manufacturing but also as a highly attractive location for research and development
(R&D), particularly in the conduct of clinical trials and other services. Indian and foreign
companies are continuing with patented drug launches in India and between 2005 and
2010, the Indian Patent Office has granted 3,488 product patents, as per a KPMG report.

Indian Government’s Initiatives

● The Department of Pharmaceuticals has prepared a "Pharma Vision 2020"

document for making India one of the leading destinations for end-to-end drug
discovery and innovation. Through this, the government provides support by way

16
 of world class infrastructure, internationally competitive scientific manpower for
pharma R&D and venture fund for research in the public and private domain.

● The Government is also embarking on a major multi-billion dollar initiative with 50

per cent public funding through a public-private partnership (PPP) model to

harness India’s innovation capability. The vision is to catapult India into one of the
top five pharmaceutical innovation hubs by 2020, targeting to achieve a global
niche with one out of every five to ten drugs discovered worldwide by 2020
originating from India.

● The Government has also been taking various policy initiatives for the

pharmaceutical sector. These include tax-breaks to the pharmaceutical sector and

weighted tax deduction at 150% for the R&D expenditure incurred. Steps have
also been taken to streamline procedures covering development of new drug
molecules, clinical research etc. Indian Government has launched two schemes—
New Millennium Indian Technology Leadership Initiative and the Drugs and
Pharmaceuticals Research Programmed—specially targeted at drugs and
pharmaceutical research.

● The Central Drug Standard Control Organization (CDSCO), which falls under the

purview of the Ministry of Health and Family Welfare, is the primary pharma
regulatory body in India. The Drug Controller General of India (DCGI) presides over
the CDSCO at both the central and state levels.

● The Government also plans to set up a Pharmacopeia Commission to support

Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy (AYUSH)

through guidelines laid down in the review of the Eleventh Plan.

17
 CHAPTER NO: 3

COMPANY PROFILE

18
Company and product profile

M/S JIVAN MEDICAL & GENERAL STORES

S NO 130, H NO. 424, NR SMATIVAN SCHOOL,

WAKAD, PUNE:-411057

Jivan medical stores are a small firm which is set up on 3 marches 2012 with a capital of
1000000 lac and they are purchasing from different and famous pharma industries of the
world.

The first motive of this firms always to understand the needs of the customers, and they
meticulously work to the need of the customers

The following are some of the product available in the stores is as

▪ Antidepressant

▪ Analgesics

▪ Anti-allergic

▪ Antibiotic

▪ Painkillers

▪ Antifungal

▪ Anti-inflammatory

▪ Antacid

19
 ▪ Anti-fever tab

And some of the distributors are

● ABBOTT INDIA LTD

● ALEMBIC CHEMICALS LTD(ALL DIVISION)

● ASTRA IDL LTD

● AGLOWMED LTD

● BIOCHEM LABORATORIES LTD

● BHARAT SERUMS& VACCINES P. LTD

● BAYER ZYDUS LTD

● CADILA PHARMA (ALL DIVISION)

● CHIRON PANECIA LTD

● CIPLA LTD

● DABUR ( CONSUMER )

● ELAN PHARMA

● ETHORE (JOHNSON & JOHNSON LGC )

● ERIS FIFE SCIENCES

● FOURTS INDIA LTD

● GERMAN REMEDIES LTD

20
21
 CHAPTER NO: 4

OBJECTIVE AND SCOPE

Objective

▪ To study the present financial system at jivan medical

▪ To determine the profitability liquidity ratio

▪ To analysis the capital structure of the firm with the help of leverage ratio

22
 ▪ To offer appropriate suggestion for the better performance of the organization

▪ To analyse the exact financial position of the firm.

Scope

The main scope of carrying out this project is an effort to study financial analysis of
M/s Jivan the study that I concluded is financial analysis of
M/s Jivan is to analysis of secondary data only all the information used for analysis
of financial analysis of the firm has been collected from firms balance sheet.

23
 CHAPTER NO: 5

DATA COLLECTION & LIMITATIONS

Data Collection

24
The focus of this chapter is on the methodology used for the collection of data for research.
Data are the basic inputs to any decision making process in a business. Data can be
classified into primary data and secondary data.

Primary Data
Primary data can be collected through the experiments or through survey, if the researcher
performs an examination in the truth in his hypothesis. However the researcher can adopt
one or more of the following ways to collect data.

● By Observation.

● Through personal interview.

● Through telephonic interview.

● By mailing of questionnaires.

● Through schedules.

Secondary Data
The secondary data are collected from sources which have already been created for the first
time use and future use. The secondary data can be obtained from internal sources and
external sources. The internal sources for marketing applications are sales records,
marketing activity; cost information, customer feedback etc. The external sources are
government publications, foreign government publications, journals, publications of trade
associations, books, magazines, newspapers, annual reports, research reports in universities
etc.
Data for this Project is collected through Secondary Sources
Secondary data for three years is collected from the profit and loss statements and Balance
sheet of the company.
Reference Book: - Theory relating to the subject matter and various concepts taken up
from financial reference books.

25
Limitations

▪ There is inefficient financial data in the balance sheet which was provided

▪ The firm may have some good and some bad ratio, making it difficult to tell if it’s a

good or weak company

▪ Limited time frame carry out financial analysis for the medical shop

▪ Account ratio calculated based on ratio analysis will be correct only if the

accounting data on which they are based are correct.

▪ It is only an analysis of past financial data

26
 CHAPTER NO: 6
DATA ANALYSIS & INTERPRETATION

27
Ratio Analysis

Introduction
According to J. Batty “the term accounting ratio is used to describe significant
relationships which exist between figures shown in a balance sheet, in a profit and loss
account, in a budgetary control system or in any other part of the accounting
organization”. The accounting ratio indicates quantitative relationship which is used for
analysis and decision making. It provides basis for inter- firm comparison. The ratios will
be effective only when they are compared with ratios of base period or with standards or
with the industry ratios. The financial statements, income statements, and Balance sheet
report what has actually happened to earnings during a specified period and present a
summary of financial position of the company at a given point of time. The statements of
retained earnings reconcile income earned during the year and any dividends distributed
with the change in retained earnings between the start and end of the financial year
under study. Ratio analysis is a very powerful analytical tool useful for measuring
performance of an organization. Ratio normally pinpoints a business’ strengths and
weakness in two ways:

The ratio analysis is made fewer than six broad categories as

⮚ Liquidity Ratios

⮚ Leverage Ratios

⮚ Asset management Ratios

⮚ Profitability Ratios

⮚ Operating Ratios

⮚ Market based Ratios

28
Current Ratio

This ratio measures the solvency of the company in the short- term. Current assets are
those assets which can be converted into cash within a year. Current liabilities and
provision are those liabilities that are payable within a year

A current ratio of 2:1 indicates a highly solvent position. A current ratio of 1:33:1 is
considered by banks as the minimum acceptable level for providing working capital
finance.

The ratio indicate the ability of the firm to repay back it’s liabilities are short- term period
(within one year). Ideal ratio is 2 if it is higher than two sound(good) liquidity ratio,
between 1 to 2 is satisfaction but needs improvement. If it is too low it is bankruptcy

Current assets
Current ratio = -----------------
Current liabilities

Quick Ratio/Acid Test Ratio

Quick ratio is used as a measure of the company’s ability to meet its current obligations.
Since bank overdraft is secured by the inventories, the other current assets must be
sufficient to meet other current liabilities.

A quick ratio is 1:1 indicates highly solvent position. This ratio serves as a supplement to
the current ration in analyzing liquidity

This ratio is real test of liquidity ideal ratio is 1 if it is higher the 1 it is Sound. If it is lower
the 1 the it is unsound

Quick assets
Quick ratio =
Liquid liabilities

29
Stock Turnover Ratio
This ratio indicates the number of time for which the stock of the business have being
turnover that is have being utilize for manufacturing activity.

Higher the ratio higher is the efficiency of manufacturing activity with the given amount
of stock. The ratio is supported by average holding period. Which is equal to average
holding ratio.

Cost of goods sold or net

Stock turnover ratio = sales
Average inventory

Debtors Turnover Ratio

Debtors turnover, which measures whether the amount of resources tied up in debtors is
reasonable and whether the company has been efficient in converting debtors into cash.

Higher the ratio, the better the position

Total sales
Debtors turnover ratio =
Closing Debtors

30
Debtor’s collection period
Average debtors collection period measure how long it take to collect amount from
debtors.

The actual collection period can be compared with the stated credit terms of the
company. If it is longer than those terms, then this indicates inefficiency in collecting
debts

The formula of Debtors collection period is

Average Debtors
× 365
In days =
Credit sales

Average Debtors
× 52
In weeks =
Credit sales

Average Debtors
× 12
In months =
Credit sales

Average collection period

Average collection period is computed by dividing the number of working days for a given
period (usually an accounting year) by receivables turnover ratio. It is expressed in days
and is an indication of the quality of receivables.

31
 360 days
Average collection period =
Debtor’s turnover ratio

Creditors Turnover Ratio

It is a ratio of net credit purchases to average trade creditors. Creditors turnover ratio is
also know as payables turnover ratio.

It is on the pattern of debtors turnover ratio. It indicates the speed with which the
payments are made to the trade creditors. It establishes relationship between net credit
annual purchases and average accounts payables. Accounts payables include trade
creditors and bills payables.

Total purchase
Creditors turnover ratio =
Closing creditors

Average payment period

The average payment period (APP) is defined as the number of days a company takes to
pay off credit purchases. It is calculated as accounts payable / (total annual purchases /
360). As the average payment period increases, cash should increase as well, but working
capital remains the same. Most companies try to decrease the average payment period to
keep their larger suppliers happy and possibly take advantage of trade discounts.

360 days
Average payment period =
Creditor’s turnover ratio

32
Working Capital Turnover Ratio
Working capital means excess of current assets over current liabilities. Working capital is
closely related to sales. Working capital turnover ratio indicates the number of times the
working capital is converted into sales. The higher the ratio, the lower is the investment in
working capital and greater are the profits.

Cost of goods sold

Working capital turnover ratio =
Net
Costworking
of goods capital
sold

Fixed Assets Turnover Ratio

The above ratio indicates the efficiency fixed assets or total assets invested on the
business. Higher the ratio, higher is the sales generation with the same amount of fixed
asset or total Assets.

Cost of goods sold

Fixed Assets turnover ratio=
Fixed Assets

Gross Profit Ratio

This ratio is also known as “Gross Margin ratio “or “Trading Margin ratio”. It shows the
relationship between the gross profits to net sales and is generally expressed in
percentage. In other words, it expresses the gross margin as a percentage of sales. Higher
the ratio higher will be profitability

Gross Profit
× 100
33
 Gross Profit Ratio =
Net sales

Net Profit Ratio

This ratio is also known as “the net profit to sales ratio” net profit margin” and net profit
are final profit at the business. This ratio indicates financial profitability out of sales after
all operating and non-operating expenses higher the ratio better is the profitability

Net profit
Net profit ratio = × 100
Net sales

Operating Ratio
A ratio that shows the efficiency of a company's management by comparing operating
expense to net sales.

Cost of goods sold + operating expenses

Operating ratio = × 100
Net sales

Operating Profit Ratio

34
operating profit ratio is a variation of net profit ratio. It measures the relationship
between operating profits and sales. Higher the operating profit ratio better is the
operational profitability of the business and managerial efficiency.

Operating profit
× 100
operating profit ratio =
Net sales

Material Consumed Ratio

it is the ratio that shows for sales figure. the material consume can be found. By adding
purchase in to opening stock and deducting the closing stock

Material consumed
× 100
material consumed ratio =
Net sales

Rent Expenses Ratio

The expenses of offer rent is the total percentage of rent used for administration, offices,
management an expenses ratio of 1% per annual means that each year 1% of sales have
been paid for the rent

Rent expenses
Rent expenses ratio = × 100
Net sales

35
Return on Proprietors Equity/Funds
The return on proprietors fund ratio has been used by investors as a measure of the profit
for the period which is available to the owner’s stake on the business

The return on equity shareholders is therefore a measure of profitability

Net profit
Return on proprietors fund = × 100
Proprietor’s funds

Return on Capital Employed (ROCE)

This ratio is also called as return on investment (ROI).this ratio indicates the return on the
total long term funds invested in the business. Such return must be higher Then cost of
capital return on capital employed taken has measure evaluating capital budgeting
decision higher the ratio higher the profitability. If the return on Capital is less than the
cost of capital. Investment in the business is not justified.

Operating profit
× 100
Return on capital employed =
Capital employed

Return on Assets
The profitability of the firm is measured by establishing relation of net profit with the
total assets of the organization. This ratio indicates the efficiency of utilization of assets in
generating revenue.

Net profit
× 100
36
 Return on Assets =
Total assets

Solvency Ratio
Solvency ratios show a company's ability to make payments and pay off its long-term
obligations to creditors, bondholders, and banks. Better solvency ratios indicate a more
creditworthy and financially sound company in the long-term

Outside liability
Solvency Ratio =
Total Assets

Proprietary Ratio
This ratio is also called ‘Equity ratio’ or owners fund ratio’ or Net worth ratio’ or
shareholders equity ratio’. This ratio points out relationship between the shareholders’
funds and total tangible assets a high ratio shows that there is safety for creditors of all
types.

Proprietary funds
Proprietary ratio =
Total asset / Total resources

Fixed Assets to Proprietary Fund Ratio

This ratio is also known as fixed assets to net worth. It establishes the relationship
between fixed assets and shareholders’ funds. The main object of calculating this ratio is
to ascertain the percentage of owners funds invested in fixed assets. If the ratio is high, it
implies that much of shareholders’ funds are tied up in fixed capital and there is a risk of
shortage of circulating capital.
37
 Fixed Assets
Fixed assets to proprietary fund ratio =
Capital funds

Current Assets to Proprietary Funds

This ratio points out the relationship between current assets and shareholders’ funds. The
object of calculating this ratio is to calculate the percentage of shareholders’ funds
invested in current assets. If this ratio is high, it indicates that the financial position of the
company is good. If this ratio is low, it implies that the financial position of the company is
weak.
Current Assets

Current assets to proprietary fund ratio =

Proprietary funds

Fixed Assets to Current Assets Ratio

This ratio establishes relationship between fixed assets to current assets. A decrease in
this ratio means that trading is slack or mechanization has been used. An increase in the
ratio means a heavy investment on debtors and stocks that fixed assets are more
intensively used. If current assets increase with the corresponding increase in profit, it will
show that the business is expending.

Fixed assets
Fixed assets to current assets ratio =
Current asset

38
M/S JIVAN MEDICAL& GENRAL STORES
S NO 130, H NO. 424, NR SMATIYAN SCHOOL,
WAKAD, PUNE: - 411057.

TENTATIVE TRADING, PROFIT & LOSS ACCOUNT FOR THE YEAR ENDED 31ST MARCH 2014

PARTICULARS AMOUNT PARTICULARS AMOUNT

TO OPENING STOCK 0.00 BY SALES 1009226.00

TO PURCHASES 1052028.00 BY CLOSING STOCK 371120.00

TO EXPENSES OF 5230.00
PURCHASE

TO GROSS PROFIT 323088.00

1380346.00 1380346.00

TO ELECTRICTY CHARGES 8592.00 BY GROSS PROFIT 323088.00

TO TELEPHONE EXPENSES 4212.00 BY OTHER INCOME 120000.00

TO TRAVELLING EXPENSES 14580.00

TO BANK CHARGES& 687.37

INTEREST

TO RENT PAID 84000.00

TO PROFESSIONAL FEES 2500.00

TO DEPRECIATION 23626.50

TOTAL RS:- 443088.00 TOTAL RS:- 443088.00

CAPITAL ACCOUNT

PARTICULARS AMOUNT PARTICULAR AMOUNT

TO DRAWINGS A/C 72000.00 BY BALANCE B/F 380000.00

TO L/C 28400.00

TO BALANCE C/F 722688.00 BY NET PROFIT 443088

TOTAL RS:- 823088.00 TOTALS RS:- 823088.00

39
M/S JIVAN MEDICAL & GENERAL STORES
S NO 130, H NO. 424, NR SMATIYAN SCHOOL,
WAKAD, PUNE: - 411057.

TENTATIVE BALANCE SHEET AS ON 31ST MARCH 2014

____________ __________ ___________ ____________ ____________ ____________

LIABILITIES AMOUNT AMOUNT ASSETS AMOUNT AMOUNT

___________ ____________ ___________ ____________ ____________ ____________

CAPITAL A/C FIXED ASSETS

----------------- -----------------------

FURNITURE A/C 78960.00

MR RAVINDRA KARALE 722688.00 LESS: DEP. @10% 7896.00
---------------- 71064.00

VEHICLE A/C 52370.00

LESS: DEP. @15% 7855.50
--------------- 44514.50

FRIDGE 24700.00
PROVISIONS LESS: DEP. @15% 3705.00
----------------- -- ------------ 20995.00
PROFESSIONAL FEES 2500.00
COMPUTER 27800.00

LESS: DEP. @15% 4170.00

--- ----------- 23630.00

CURRENT LIABILITIES CURRENT ASSETS

SUNDRY CREDITORS 171766 SUNDRY DEBTORS 150000

OUTSTANDING EXPENSES 28945 CLOSING STOCK 371120.00
PROVISION OF TAXATION 4610 CASH AND BANK BALANCE
--------------------------------------
CASH IN HAND 20974.30
CASH AT BANK 22890.20

--------------------------- --------------------- -------------------------------- -------------------------------- ------------ -----------------

TOTAL RS :- 725188.00 TOTAL RS :- 725188.00

1) Current ratio

40
 Current asset Debtors + stock + cash + bank 564984
= 2.75:1
Current liability Creditors + outstanding + provision of tax 205321

Note:- Accepted ratio is 2:1

This ratio indicates the ability of the firm to repay back and the current ratio of the firm is
2.75:1 and ideal current ratio is 2:1 it indicates highly solvent position of the firm

2) Quick ratio

Quick assets 193864

= 0.94:1
Liquid liability 205321

Note:- Accepted ratio is 1:1

The liquid ratio of the firm is 0.94 an ideal liquid is 1:1 it represent that the firm is bite the
normal standard it needs to be improved and this ratio is real lest of liquidity

3) Stock turnover ratio

Cost of goods sold or net sales 1009226

= 2.71 times
Average inventory 371120

This stock turnover ratio is quite low, it means that the firm is not efficiently managing it
is inventory or stock

4) Debtors turnover ratio

41
 Total sales 1009226
= 6.73 times
Closing debtors 150000

The debtor’s turnover ratio indicates that the firm is efficiently managing it is debtors

5) Debtor’s collection period

Average debtors 150000

× 365 × 365 = 54.24 days
In days =
Credit sales 1009226

Average debtors 150000

In weeks = × 52 × 52 = 7.72 weeks
Credit sales 1009226

Average debtors 150000

× 12 × 12 = 1.78 months
In months =
Credit sales 1009226

Higher the ratio better the position the actual collection should compared with the credit
terms of the firm in analyzing the efficiency of credit control

6) Average collection period

360 days 360 days = 54 days

Debtor’s turnover ratio 6.72

The average collection period is quite more which means that we get money from our
debtor’s within 54 days

42
 Total purchase
1052028
7)Creditors turnover ratio = = 6.12 times
Closing debtors 171766

This ratio represents that substantial amount is payable towards credit purchase. It is to
be checked whether the firm is exceeding the credit period allowed to the company. If it
is 0 it will damage the relationship with the suppliers and the cost of taking credit

360 days 360

8) Average payment period = = 59 days
Creditor’s turnover ratio 6.12

It means that we are making payment to our creditors in 59 days

Cost of goods sold

9) Working capital turnover ratio =
Net working capital
Cost of goods sold= sales – gross profit

1009226 – 323088 = 686138

Net working capital = current assets – current liability

686138
564984 – 205321= 359663 = 1.90:1
359663

The working capital turnover ratio is slightly low which means that firm is not using
working capital efficiently

Cost of goods sold 686138

= 4.28:1
10) Fixed assets turnover ratio =
Fixed assets 160203
43
This ratio indicates that the costs of goods sold are 4.28:1 times of the fixed assets, higher
the ratio, higher is the sales

Gross profit 323088

11) Gross profit ratio = × 100 × 100 = 32.01 %
Net sales 1009226

The above ratio indicates direct operating profitability that is factory related profitability
at the firm and the gross profitability of this firm is 32 % which means that firm is making
ample profit, higher the ratio higher will be profitability

Net profit 304890

× 100 × 100 = 30.21 %
12) Net profit ratio =
Net sales 1009226

This ratio indicates the firm’s capacity obviously higher the ratio better is the profitability
and the firm’s profitability is good enough

Cost of goods sold + operating ratio

13) Operating ratio = × 100
Net sales

686138 + 112071
× 100 = 79.09 %
1009226
This ratio indicates that 79.09 % of sales have been consumed by operating cost and only
20.9 % (100-79.09) is left over

Operating profit 211017

44 × 100 × 100 = 20.91 %
14) Operating profit ratio =
Net sales 1009226

The operating profit ratio of the firm is very low the firm needs to improve operating
profitability

Material consumed
15) Material consumed ratio = × 100
Net sales
Material consumed = opening stock + purchase – closing stock

1052028 – 371120 = 680908

680908 × 100 = 67.5 %

1009226

It indicates that out of total sales 67.5 % have been consumed by material

Rent expenses
16) Rent expenses ratio = × 100
Net sales

84000
× 100 = 8.32 %
1009226

It indicates that out of total sales 8.32 % have been paid for rent

Operating profit 211017

17) Return on capital employed = × 100 × 100 = 40.59 %
Capital employed
Operating profit 519867
211017

45
The ratio indicates the return on the total long term funds invested in the firm there the
firm get 40.59 % return on their capital employed and such return must be higher than
cost of cost of capital employed taken has measure evaluation capital, budgeting decision
higher the ratio higher the profitability

Net profit 304890 × 100 = 58.93 %

18) Return on proprietor’s equity = × 100
517367
Proprietor’s fund

Even the return on proprietor’s fund gives good percentage which indicates good
financial position of the firm

Net profit 304890

19) Return on assets = ×100 × 100 = 42.04 %
Total assets 725188

The return on assets of the firm show a tremendous percentage which much needed and
indicates the efficiency of utilization of assets in generating revenue

205321
Outside liability
20) Solvency ratio = = 0.28:1
Total assets 725188

Generally lower the ratio of total liability to total assets more satisfactory or stable is the
long term solvency position of the firm

Proprietary fund 517367

21) Proprietary ratio = = 0.71 %
Total asset or total resource 725188

Note :- here the shareholder fund are to be considered as capital (proprietary fund)

46
It represent the relationship of proprietary fund to total assets, higher the ratio of the
share in the total capital of the firm, better is the long term solvency position

Fixed assets 160203

22) Fixed assets to proprietor’s fund ratio = = 0.30 times
Capital funds 517367
Here the ratio is blow 1 which means that owner funds are more than total fixed assets

Current assets 564984

23) Current assets to proprietary funds = = 1.09 times
Proprietor fund 517367

This ratio indicates the extent to which proprietors funds are invested in current assets.
But here they have invested more amounts in current assets then proprietors fund

Fixed asset 160203

24)Fixed asset to current assets = = 0. 28
Current asset 564984

The fixed assets are only 0.28 times of current assets

47
M/S JIVAN MEDICAL& GENRAL STORES
S NO 130, H NO. 424, NR SMATIYAN SCHOOL,
WAKAD, PUNE: - 411057.

TENTATIVE TRADING, PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31 ST MARCH 2015

PARTICULARS AMOUNT PARTICULARS AMOUNT

TO OPENING STOCK 392570.00 BY SALES 2724290.00

TO PURCHASES 2137756.00 BY CLOSING STOCK 412360.00

TO EXPENSES OF 13274.00
PURCHASE

TO GROSS PROFIT 593050.00

3136650 3136650

TO ELECTRICTY CHARGES 12043.00 BY GROSS PROFIT 593050.00

TO TELEPHONE EXPENSES 6401.00

TO TRAVELLING EXPENSES 20509.00

TO BANK CHARGES& 1310.57

INTEREST

TO RENT PAID 108000

TO PROFESSIONAL FEES 2500.00

TO DEPRECIATION 17761.05

TOTAL RS:- 593050.00 TOTAL RS:- 593050.00

CAPITL ACCOUNT

PARTICULARS AMOUNT PARTICULAR AMOUNT

TO DRAWINGS A/C 72000.00 BY BALANCE B/F 1138762.00

TO L/C 28400.00

TO BALANCE C/F 1631412.00 BY NET PROFIT 593050

TOTAL RS:- 1731812.00 TOTALS RS:- 1731812

48
M/S JIVAN MEDICAL & GENERAL STORES

S NO 130, H NO. 424, NR SMATIYAN SCHOOL,

WAKAD, PUNE: - 411057.

TENTATIVE BALANCE SHEET AS ON 31ST MARCH 2015

______________ ________________ ______________ _________________ _____________ ____________

LIABILITIES AMOUNT AMOUNT ASSETS AMOUNT AMOUNT

______________ ________________ ______________ _________________ _____________ ____________

CAPITAL A/C FIXED ASSETS

----------------- -----------------------

FURNITURE A/C 63957.60

MR RAVINDRA KARALE 1319231 LESS: DEP. @10% 6395.76
---------------- 57561.84

VEHICLE A/C 37837.33

LESS: DEP. @15% 5675.60
----------------- 32161.73

FRIDGE 17845.75
PROVISIONS LESS: DEP. @15% 3012.83
----------------- ------------------ 15168.89
PROFESSIONAL FEES 2500.00

COMPUTER 20085.50
LESS: DEP. @15% 3012.83
---------------- 17072.68

CURRENT LIABILITIES CURRENT ASSETS

ADVANCE TO RELATIVES 725000
SUNDRY CREDITORS 252751 SUNDRY DEBTORS 300000
OUTSTANDING EXPENSES 51540 CLOSING STOCK 412360.00
PROVISION OF TAXATION 7890 CASH AND BANK BALANCE
--------------------------------------
CASH IN HAND 33302.52
CASH AT BANK 41284.35

--------------------------- --------------------- -------------------------------- -------------------------------- ------------ -----------------

TOTAL RS :- 1633912.00 TOTAL RS :- 1633912.00

49
 Current asset
1) Current ratio: =
Current liability

Debtors +stock + cash in hand + bank

Creditors + outstanding + provision

300000 + 412360 +33302 +41284

252751 +51540 + 7890

786946
= 2.52:1
312181

Interpretation

The current ratio of the firm is 2.52:1 and ideal current ratio is 2:1 it indicates highly
solvent position of the firm.

Quick assets
2) Quick ratio =
Liquid liability

Note: quick assets all current assets – stock

374586
= 1.19
312181

The liquid ratio of the firm is 1.19 an ideal liquid is 1:1 it represents the highly solvent

Position of the firm

50
 Cost of goods sold or net sales
3) Stock turnover ratio =
Average inventors

Opening stock + closing stock

Average stock =
2

392570 + 412360
= 402465
2

Cost of goods sold = sales – gross profit

2131240
2724290 – 593050 = 2131240 = 5.29 times
402465
Stock turnover ratio of the firm is 5.29 times which means that firm is efficiency managing
it is inventors

Total sales
4) Debtors turnover ratio =
Closing debtors

2724290
= 9.08 times
300000

51
The high debtor’s turnover ratio indicates the efficiency of the firm converting debtors in
to cash quickly

5) Debtors collection period

Average debtors
× 365
1) In days =
Credit sales

300000
× 365 = 40.19 days
2724290

Average debtors
× 52
2) In weeks =
Credits sales

300000
× 52 = 5.72 weeks
2724290

Average debtors
× 12
3) In months =
Credits sales

300000
× 12 = 1.32 months
2724290

Higher the ratio better the position the actual collection should be compared with the
credit terms of the firm in analyzing the efficiency of credit control.

52
 360 days
6) Average collection period =
Debtor’s turnover ratio

360 days
= 40 days
9.08

The average collection period is quite more which means that we get money from our
debtors within 39.6 days

Credit purchase, total

7) Creditors turnover ratio =
Closing, average creditors

2137756
= 8.45 times
252751

This ratio represent that substantial amount is payable towards credit purchase, it is to be
checked whether the firm is exceeding the credit period allowed to the firm

360 days
8) Average payment period =
Creditor’s turnover ratio

360 days
= 43 days

8.45

53
It means that we are making payment to creditors in 43 days

54
9) Working capital turnover ratio =

Sales Cost of goods sold

Or
Working capital Net working capital

Cost of goods sold = sales – gross profit

Net working capital = current asset – current liability

2131240
= 4.48 times
474765

The cost of goods sold of the firm is 4.48 times of the net working capital which leads to
smooth running of cash in to business

10) fixed assets turnover ratio

Sales Cost of goods sold

Or
Fixed assets Fixed assets

2724290
= 22.33 times
121962

The ratio appear to be satisfactory and the firm is assumed to be using its fixed assets
properly in achieving target product and turnover, higher the ratio , higher is the sales

55
 Gross profit
11) Gross profit ratio × 100

Net sales

593050
× 100 = 21.8 %
2724290

The gross profitability of the firm is 21.8 % which means that firm is making ample profit

12) Net profit ratio

Net profit
× 100
Net sales

424525
× 100 = 15.6 %
2724290

This ratio indicates financial profitability out of sales after all operation and non-
operation expenses higher the ratio better is the profitability

13) Operating ratio

Cost of goods sold + operating expenses
× 100
Net sales

Cost of goods sold = sales – gross profit

Operating expenses = electricity charges + telephone expenses + travelling expenses +

bank charges and interest + rent paid
2131240 + 148263
× 100 = 83.7 %
2724290 56
The above ratio indicates direct operating profitability that is factory related profitability
at the firm higher the ratio higher will be profitability, the ratio indicates that 83.7 % of
sales have been consume by operating cost and only 16.3 % is left over

Operating profit
14) Operating profit ratio ×100
Net sales

Operating profit = sales – operating cost

2724290 – 2279503 = 444787

444787
× 100 = 16.32 %
2724290

Note : operating profit = 100- 83.7 % = 16.3 %

The operating profit ratio of the firm is very much low as compare to last years. the firm
needs to improve operating profitability

15) Material consumed ratio

Material consumed
× 100
Material consumed ratio =
Net sales

Material consumed = opening stock + purchase – closing stock

392570 + 2137756 – 412360

2530326 – 412360 = 2117966

2117966
57
 × 100 = 77.7 %
2724290

In above ratio it indicates that out of the total sales 77.7 % have been consumed by
material

16) Rent expenses ratio

Rent expenses 108000

× 100 × 100 = 3.96 %
Net sales 2724290

It indicates that out of total sales 3.96 % have been paid for rent

17) Return on capital employed

Operating profit 444787

× 100 × 100 = 33.65 %
1321731
Capital employed

Have the firm get 33.65 % return on their capital employed

18) Return on proprietor’s fund

Net profit 424525

× 100 × 100 = 32.18 %
Proprietor’s fund 1319231

Even the return on proprietor’s fund gives good percentage which indicates good
financial position of the firm

19) Return on Assets

424525
Net profit
× 100 × 100 = 53.94 %
Total assets 786946

58
The return on assets of the firm shows a tremendous percentage which much needed and
indicates the efficiency of utilization of assets in generating revenue

20) Solvency ratio

Outside liability 1312181
= 0.80:1
Total assets 1633912
Generally lower the ratio of total liability to total asset. More satisfactory or stable is the
long term solvency position of the firm

21) Proprietary ratio

Proprietary fund 1319231

= 0.81:1
Total asset or total resource 1633912

Note:- there the shareholder’s fund are to be considered as capital ( proprietary fund)

The high proprietary ratio indicates the strong financial position of the business

22) Fixed assets to proprietor’s fund ratio

Fixed assets
121962
= 0.09 times
Proprietor’s fund 1319231

Here the ratio is blow 1 which means that owner funds are more than total fixed assets

23) Current assets to proprietor’s fund

Current assets
786946
= 0.6
Proprietor’s fund 1319231

24) Fixed assets to current assets

Fixed assets 121962

= 0.15 times
Current assets 786946

59
In this ratio the fixed assets are only 0.15 times of current assets

60
 CHAPTER NO: 7
SUMMARY SHEET

61
Summary Sheet

Particulars Year Year

2014 - 03 2015 - 3
Liquidity Ratio
A. Current ratio 2.75: 1 2.52: 1
B. Quick Ratio 0.94:1 1.19 : 1
Turnover Ratio
A. stock 2.71 5.3
Turnover Ratio
B.) Debtors 6.72 9.08
Turnover Ratio
C. Creditors 6.12 8.45
Turnover Ratio
D)Fixed Assets 4.28 22.33
Turnover Ratio
E. Working Capital 1.90 4.48
Turnover Ratio
Profitability Ratios
A. Net Profit Ratio 30.21% 15.6%
B. Gross Profit 32.01% 21.8%
Ratio
[Link] on capital 40.78% 33.65%
employed
D. Return on assets 42.04 53.94%

62
CHAPTER NO: 8
FINDINGS

63
Findings

▪ The liquidity of the firm it is fluctuating has current ratio in the year 2014-03 is

2.75:1 and in the year 2015-03 it is 2.52:1 and liquid ratio in the year 2014 – 03 is
0.94:1 and in the year 2015 – 03 it is 1.19: so the current ratio is decreasing and
liquid ratio is increasing

▪ The stock turnover ratio is increase which means inventory turning in to receivable

through sales quickly

▪ Debtors collection period is decreasing it means firm is managing it’s debtors very

efficiently

▪ Creditors payment period is increasing which is good for organization

▪ Fixed assets turnover ratio shows up word trend indicating organization fixed assets

are more than working capital

▪ Profitability are decreasing becoming very major

64
 CHAPTER NO: 9
SUGGESTION & CONCLUSITION

65
Suggestions and conclusions

▪ Organization overall profitability percentage is decreasing it is very less so they

should look to increase at a considerable rate

▪ The liquidity position needs to be worked on

▪ Current ratio is decreasing it needs to be increase though it is above standard

▪ They should take efforts to increasing overall performance if they want to make

more profit

66
CHAPTER NO: 10

REFERENCE

67
Reference

Books:

1) prasana Chandra- financial management

2) m.y. khan- financial management

3) [Link]- financial management

4) [Link]/lessons/ratio analysis

68