UNITED COLLEGE OF EDUCATION

AFFILIATED to Guru Gobind Singh Indraprastha University (New Delhi)

PLOT NO 50-B, KNOWLEDGE PARK III, DELHI –NCR,

GREATER NOIDA, GB NAGAR, U.P, INDIA, PIN-201310

PROJECT REPORT
ON

“FINANCIAL ANALYSIS OF PARAG DAIRY”

SUBMITTED FOR
Partial Fulfillment of the award of Degree of Bachelor of
Business Administration (BBA)

To
Guru Gobind Singh Indraprastha University (New Delhi)

Under the Guidance of: SUBMITTED BY:

Mr. Kuldip Kaul Mr. Anuj Singh
(HOD/BBA) UNIVERSITY ROLL NO.

50627101718

1
 DECLARATION
This is to certify that report entitled “FINANCIAL ANALYSIS OF PARAG DAIRY” which is submitted
by me in partial fulfilment of the requirement for the award of the degree BBA to GGSIPU university Dwarka,
Delhi comprises only my original work and due acknowledgement has been made in the text of all other
material used.

DATE: NAME OF STUDENT : Mr. Anuj Singh

APPROVED BY : NAME OF GUIDE: Mr. Kuldip Kaul

(HOD/BBA)

2
 CERTIFICATE

This is to certify that the report titled “FINANCIAL ANALYSIS OF PARAG DAIRY” is an authentic
record of summer internship work carried out by name: Mr. Anuj Singh (Roll no. 50627101718) under my
guidance & supervision, in the partial fulfillment of the requirements for the award of Bachelor of Business
Administration.

Prof. Kuldip Kaul

(HOD/BBA, Faculty Guide)

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 ACKNOWLEDGEMENT
I ANUJ SINGH would like to sincerely thank United College of Education, Greater Noida for providing me an
opportunity for this internship which has enhanced my knowledge on this area.

I take this opportunity to express my gratitude to the people who have been instrumental in the successful
completion of my report.

I would like to thank my faculty guide and also Hod Sir Mr. Kuldip kaul for their suggestions & ideas to
improve my work.

Above all . I would like to thank almighty God for his blessings and my family who have been a constant
source of support & inspiration

ANUJ SINGH
50627101718

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 INDEX

Sr. No. Particulars Page No.

INTRODUCTION

1.1 Introduction to the topic 6-8

1.2 Company profile

1. 9-13
1.3 Industry Profile
14-19

Research Methodology

2.1 Research Design 20-21

2. 2.2 Sources of data collection 22-23

2.3 Objectives of study 24-25

Analysis and Findings

3.1 Ratio analysis 26-35

3. 3.2 Data analysis 36-74

3.3 Summary of findings 75-76

Summary and conclusion

4.1 Conclusion 77-78

4. 4.2 Recommendation and suggestion 79-80

4.3Limitation 81-82

6. Bibliography 83-84

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INTRODUCTION TO TOPIC

6
 INTRODUCTION

As my project in Parag, I worked on the analysis of the financial position of the company. For this the main
tool, which is used, is Ratio Analysis. 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
profit and loss account.

“The science of financial analysis”. Says Navin Chandra Joshi “is assuming art increasingly important role
for appraising the real worth of a going concern”.

An analysis of several financial tools provides all-important basis for valuing securities and appraising
managerial programs. Financial analysis is a vital apparatus for the interpretation of financial statement.
Financial statements of a company include Trading and Profit and Loss account, profit and Loss
Appropriation and Balance sheet.

These statements may be fruitfully used if they (statements) are analyzed and interpreted to have an insight
into the strengths and weakness of the firm.

As my project I worked on the analysis of various ratios and after it give suggestion towards this ratio. I
worked on four types of ratio i.e. Liquidity ratio, leverage ratio, activity ratio, profitability ratio.

UTILITY OF FINANCIAL ANALYSIS

Financial analysis can be undertaken by management of the firm, or by parties outside the firm, viz. owners,
creditors, investors and others to form firm. In other word it can be said that financial statements are of much
interest to a number of different groups like:

1. OWNERS

Owners can evaluate the efficiency of the firm to know about how efficient business is going on and knowing
the liquidity and financial position of the firm.

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2. SHAREHOLDERS

Shareholders can evaluate the efficiency of the management and determine whether to buy, sell or hold the
shares.

3. CREDITORS

Creditors can find out the financial strength and capacity of a borrower, the value of a floating share on the
assets held as security and the value of unquoted shares.

4. MANAGEMENT

The top management can measure the success or otherwise of a company’s operations, determine the relative
efficiency of various departments, processes and products appraise the individual performance and evaluate
the system of internal control.

5. LABOUR UNION

The labor union assesses whether the company presently affords a wage increase.

6. ECONOMISTS

The economists analyze the financial statement with a view to studying the prevailing business and economic
condition.

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COMPANY PROFILE

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 COMPANY PROFILE

PARAG DAIRY

Ghaziabad Pradeshik co-operative dairy federation came into being on 23rd march 1938 via registration number
257. The capital invested was only Rs.100 and 220 liters of liquid milk. Today 2 lakh litres of milk is handled
in the co-operative production unit and its annual turnover has touched the Rs. 50 crore marks. It is established
in 1938. its registration is to be created in 23 march 1938. And that time the first dairy inspector was Mr. N. K.
Bhargava. First time company initial capital investment was Rs. [Link] spite of several setbacks and hurdles,
the co-operative has steadily progressed from strength. Operation flood II, which was implemented in Uttar
Pradesh, is the year 1983-84 provided the much –needed impetus to the co-operative. For the past few years
Ghaziabad Pradeshik co - operative dairy federation has maintained its lead in among the states co-operatives in
areas as diverse as distributions, handling, and revenue.

DAIRY FEDERATION

The history of co-operative dairy industry in U.P. dates back to 1918, when “Katra Co-operative Milk Society”
Allahabad was established. “ LMPU ” was established in 1938 as the first step towards organized dairy
development programme all over India . At the time of independence four milk supply schemes were operating
in Ghaziabad, Allahabad, and Varanasi and Kanpur cities. The Agra co-operative dairy came into existence in
the second five year plan while dairies at Bareilly, Gorakhpur and Mathura were adopted later on.

The apex institution of dairy co-operative was registered under the name of “PCDF” (Pradeshik co-operative
dairy federation) in the year 1962 during the fourth five year plan Aligarh and

Meerut was also proposed to be included in the scheme. The govt. of U.P. also entrusted PCDF with the
responsibility of implementing the operation flood I was to establish co-operative structure in some of the best
milk shee’s located in ten states in U.P. being of them.

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OPERATION FLOOD I, II AND III WERE STARTED IN U.P.

Operation flood i, ii and iii were started in UP with the following objectives-

 Removing the middlemen between the producers and consumers by the procurement of the milk directly
by the producer directly through village co-operative society.

 To increase the production of milk from milking animals by providing inputs to the producers.

 To arrange the supply of liquid milk in the major cities of U.P. for carrying out the whole programme
successfully and for proper planning, implementation, follow-up, maintenance etc. an effective
organization structure has been charted out .

MARKETING DIVISION

The marketing division of P.C.D.F. has been divided into two parts-

1- Liquid milk marketing.

2- Milk product marketing.
The division is important because the marketing strategies of both are entirely different, both sub divisions are
discussed brief.

LIQUID MILK MARKETING

At present the liquid milk having brand name as “PARAG” is being marketed through local units / milk in
major cities of U.P. & Delhi under direction of P.C.D.F. Ltd. – LKO, KNP, DLH, VRN, MRT, are the main
central points for maximum milk demand.

MILK PRODUCT MARKETING

The product marketing division is handling the marketing the Product of Butter, Ghee, Mattha, Milk Cake, Ice-
cream, Dahi etc.

The above products reach the ultimate consumer through one of the following distribution channels.

a) Stockiest Sale.
b) Concessionaries Sale.
c) Clearing & Forwarding Agents.

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Stockiest sale is three – stockiest > Retailer > Consumer each of the intermediaries operates on the bass of
margin base of the % of investment.

In concessionaries sale only one intermediary is involved viz .

Manufacturer > Stockiest > Retailer > Consumers

Through this channel the product of highly perishable nature find their way out.

Except U.P. & Delhi in other states PARAG products are distributed through

“Clearing overheads by eliminating the necessity for P.C.D.F. owned warehouses and offices in three states” .

OBJECTIVES

PCDF’S front-end objective was to see that there was enough milk for everyone in town.

Marketing is simply the PCDF’S tool to achieve their ultimate objective and delivering the pure Parag milk to
every home.

PURPOSE

PCDF’S aims to build a system to ensure that individual farmer got a fair price for the milk he sold.

MISSION
PCDF’S mission is to become the strongest marketing organization by 2015. PCDF’S came into existence in
23rd march 1938, with the simple intension of ensuring a fair return to the producers. Which was implemented
in UP is the year 1983-1984 provided the much needed impetus to co-operation. The mission was to develop a
product mix that would not only promote sustained growth but also help member union to develop adequate
production and processing facilities. It also aimed to offer quality products at fair price, and to do so by
achieving economies of scale and costs. And this mission gave birth to brands like parag and mother dairy.

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VISION

 To bring maximum revenue villages of the state under cooperative fold.

 To procure maximum marketable surplus milk produced in the state through village dairy cooperatives.
 To make dairy cooperatives self sustainable.
 To create adequate marketing infrastructure for providing quality milk and milk products to urban
consumers.

Parag Product

Parag and its products are leader in the present name PARAG Parag’s products are different type of liquid milk
pouches like Butter, Ghee Paneer etc. The detailed description of the product of L.M.U. is discussed below:
1. Butter
2. Paneer
3. Milk cake
4. Ghee
5. Ice – cream
6. Skimmed milk powder
7. Flavored milk
8. Mattha
9. Sweet curd
10. Cream
11. Pera
12. Milk
Full cream milk – 500 ml

Toned milk – 500ml

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MILK INDUSTRY
PROFILE

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 INDUSTRY PROFILE

Dairy farming is a class of agriculture, or an animal husbandry, enterprise, for long-term production of milk, usually
from dairy cows but also from goats and sheep, which may be either processed on-site or transported to a dairy
factory for processing and eventual retail sale.

Demonstration of a new Soviet milker device. East Germany 1952

The first milking machines were an extension of the traditional milking pail. The early milker device fit on top
of a regular milk pail and sat on the floor under the cow. Following each cow being milked, the bucket would
be dumped into a holding tank. This developed into the Surge hanging milker. Prior to milking a cow, a large
wide leather strap called a surcingle was put around the cow, across the cow's lower back. The milker device
and collection tank hung underneath the cow from the strap. This innovation allowed the cow to move around
naturally during the milking process rather than having to stand perfectly still over a bucket on the floor.

With the availability of electric power and suction milking machines, the production levels that were possible in
stanchion barns increased but the scale of the operations continued to be limited by the labor intensive nature of
the milking process. Attaching and removing milking machines involved repeated heavy lifting of the
machinery and its contents several times per cow and the pouring of the milk into milk cans. As a result, it was
rare to find single-farmer operations of more than 50 head of cattle.

History of milk preservation methods

Cool temperature has been the main method by which milk freshness has been extended. When wind mills and
well pumps were invented, one of its first uses on the farm besides providing water for animals was for cooling
milk, to extend the storage life before being transported to the town market.

The naturally cold underground water would be continuously pumped into a tub or other containers of milk set
in the tub to cool after milking. This method of milk cooling was extremely popular before the arrival of
electricity and refrigeration.

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Refrigeration

When refrigeration first arrived (the 19th century) the equipment was initially used to cool cans of milk, which
were filled by hand milking. These cans were placed into a cooled water bath to remove heat and keep them
cool until they were able to be transported to a collection facility. As more automated methods were developed
for harvesting milk, hand milking was replaced and, as a result, the milk can was replaced by a bulk milk
cooler. 'Ice banks' were the first type of bulk milk cooler. This was a double wall vessel with evaporator coils
and water located between the walls at the bottom and sides of the tank. A small refrigeration compressor was
used to remove heat from the evaporator coils. Ice eventually builds up around the coils, until it reaches a
thickness of about three inches surrounding each pipe, and the cooling system shuts off. When the milking
operation starts, only the milk agitator and the water circulation pump, which flows water across the ice and the
steel walls of the tank, are needed to reduce the incoming milk to a temperature below 5 degrees.

This cooling method worked well for smaller dairies, however was fairly inefficient and was unable to meet the
increasingly higher cooling demand of larger milking parlors. In the mid-1950s direct expansion refrigeration
was first applied directly to the bulk milk cooler. This type of cooling utilizes an evaporator built directly into
the inner wall of the storage tank to remove heat from the milk. Direct expansion is able to cool milk at a much
faster rate than early ice bank type coolers and is still the primary method for bulk tank cooling today on small
to medium sized operations.

Another device which has contributed significantly to milk quality is the plate heat exchanger (PHE). This
device utilizes a number of specially designed stainless steel plates with small spaces between them. Milk is
passed between every other set of plates with water being passed between the balance of the plates to remove
heat from the milk. This method of cooling can remove large amounts of heat from the milk in a very short
time, thus drastically slowing bacteria growth and thereby improving milk quality. Ground water is the most
common source of cooling medium for this device. Dairy cows consume approximately 3 gallons of water for
every gallon of milk production and prefer to drink slightly warm water as opposed to cold ground water. For
this reason, PHE's can result in drastically improved milk quality, reduced operating costs for the dairymen by
reducing the refrigeration load on his bulk milk cooler, and increased milk production by supplying the cows
with a source of fresh warm water.

Plate heat exchangers have also evolved as a result of the increase of dairy farm herd sizes in the United States.
As a dairyman increases the size of his herd, he must also increase the capacity of his milking parlor in order to
harvest the additional milk. This increase in parlor sizes has resulted in tremendous increases in milk
throughput and cooling demand. Today's larger farms produce milk at a rate which direct expansion
refrigeration systems on bulk milk coolers cannot cool in a timely manner. PHE's are typically utilized in this

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instance to rapidly cool the milk to the desired temperature (or close to it) before it reaches the bulk milk tank.
Typically, ground water is still utilized to provide some initial cooling to bring the milk to between 55 and 70
°F (21 °C). A second (and sometimes third) section of the PHE is added to remove the remaining heat with a
mixture of chilled pure water and propylene glycol These chiller systems can be made to incorporate large
evaporator surface areas and high chilled water flow rates to cool high flow rates of milk.

Milking operation

Milking machines are held in place automatically by a vacuum system that draws the ambient air pressure down
from 15 to 21 pounds per square inch (100 to 140 kPa) of vacuum. The vacuum is also used to lift milk
vertically through small diameter hoses, into the receiving can. A milk lift pump draws the milk from the
receiving can through large diameter stainless steel piping, through the plate cooler, then into a refrigerated
bulk tank.

The extracted milk passes through a strainer and plate heat exchangers before entering the tank, where it can be
stored safely for a few days at approximately 42 °F (6 °C). At pre-arranged times, a milk truck arrives and
pumps the milk from the tank for transport to a dairy factory where it will be pasteurized and processed into
many products.

MARKET

There is a great deal of variation in the pattern of dairy production worldwide. Many countries which are large
producers consume most of this internally, while others (in particular New Zealand), and export a large
percentage of their production. Internal consumption is often in the form of liquid milk, while the bulk of
international trade is in processed dairy products such as milk powder.

Worldwide, the largest producer is India, the largest exporter is New Zealand the largest importer is Japan.

World production

Rank Country Production in Million Tonnes

1  India 114.4

2  United States 79.3

3  Pakistan 35.2 (needs validation)

4  China 32.5

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5  Germany 28.5

6  Russia 28.5

7  Brazil 26.2

8  France 24.2

9  New Zealand 17.3

10  United Kingdom 13.9

11  Ukraine 12.2

12  Poland 12

13  Netherlands 11.5

14  Italy 11.0

15  Turkey 10.6

16  Mexico 10.2

17  Australia 9.6

18  Egypt 8.7

19  Argentina 8.5

20  Canada 8.1

There are certain industries which started various dairy farms which are described as

Below-

 Amul and Gujarat Cooperative Milk Marketing Federation Ltd.

 Andhra Pradesh Dairy Development Co-operative Federation Limited:
 Aravind Foods 
 Dynamix Dairy Industries Ltd
 Haryana Dairy Development Cooperative Federation Ltd
 Heritage Foods (India) Ltd
 [Link]

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 Indian Dairy Association (IDA)
 Kream Kountry - From the house of Kwality.
 Mahaan Group - Dairy and FMCG products.
 The National Dairy Development Board
 The Orissa State Cooperative Milk Producer's Federation Limited (OMFED)
 Vidya Dairy
 VRS Foods
 Mother Dairy

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RESEARCH METHODOLOGY

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 RESEARCH METHODOLOGY

RESEARCH DESIGN

A specific frame work used for data collection of scientifically conducted project is known research design.
There are three types of research design.

A. Exploratory
B. Descriptive
C. Causative

EXPLORATORY RESEARCH

Exploratory research is done to know why & how certain phenomenon occurs, how consumer evaluates quality,
tangible features, and replacement policy warranty.

DESCRIPTIVE RESEARCH

Descriptive research is carried out to describe market characteristics.

Example: To understand the consumer buyer behavior.

CAUSATIVE

Causative research is done to establish cause and affect relationship.

Example: The influence of income and life style on purchase decision.

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 SOURCES OF DATA
Usually, the information needed to solve the problem cannot be found in internal of published external records.
The research is depends on primary data. Which are collected scientifically for the study?

In this research report I am using secondary data of the company and analyze various ratios by using various
formulas. I am not using primary data.

Data

There are two types of data-

Primary Data

Primary data refers to data collected directly from the market place like customer, traders & suppliers. They are
often reliable data sources & help in overcoming limitations of secondary data.

Primary data is again mainly of two types –

- Census
- Sample
Census

Refers to collecting of data from the entire population. The most common from of census is the Indian population
census or compilation of voters list in an area. It takes along time & hence is not suitable for market researcher.
Sample

Refers to collecting of data from a particular segment and that segment to be taking the survey.

SECONDARY DATA

Secondary data means data that are already available i.e., they refer the data, which have already been collected
and analyzed by someone else. When the researcher utilizes secondary data, then he has to look into various
sources from where he can obtain them, IN this case he is certainly not confronted with the problems that are
usually associated with the collection of original data. Secondary data may either be published data or
unpublished data. Usually published data are available in:

1 Various publications of the central, state and local governments;

2 Various publications of foreign government or of international bodies and their subsidiary
22
 organization;
3 Technical and trade journals:
4 Books, magazines and newspapers;

Reports and publications of various associations connected with business and industry, banks, stock, exchanges
etc.;

Reports prepared by research scholars, universities, economists etc. In different fields, and Public records and
statistics, historical documents, and other sources of published information.

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OBJECTIVES

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 OBJECTIVES

 To study the financial position for the Parag, Partapur, Meerut.

 To assess the significance of the financial ratios. By selecting a few parameters such as liquidity,
turnover and profitability.

 To make the ratio as simple as for the every part of the aspect and find out those facts which are
directly used.

 Give suggestion towards the company factors to increase the efficiency’s.

 To study towards the company profitability.

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RATIO ANALYSIS

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 RATIO ANALYSIS

An analysis of the financial statements with the help of ratio may be termed as “Ratio Analysis”. It involves
the process of computing, determine and presenting the relationship of items of financial statements and
comparison and interpretation of these ratios and uses them for future projections.

MEANING OF RATIO:

A ratio is a mathematical relationship between two related items expressed in quantitative firm. This
quantitative relationship may be expressed in either of the following ways:

a) In proportion: In this form the amounts if two items are being expressed in a common
denomination.
b) In rate or times or co-efficient: when ratio is expressed in this
c) Form, it is called as turn over and is written in times.
d) In percentage: a special type of rate, which expressed the relation in hundredth.

UTILITY OF RATIO ANALYSIS

Some general utility of ratio analysis is given below:

a) Trends in cost, sales, profit and other facts are related by the past ratios and the future events can
be forecasted on the basis of such trends.
b) Ideal ratios may be constructed and the relation found between strategic ratios may be used for
achieving ‘desired coordination’.
c) Ratios may be used as instrument of management control particularly in the areas of sales and
costs.
d) Ratios are also facilitating the function of communication.
e) Ratios also may be used as a measure of efficiency.
f) It helps to make profitable investments.

STAGES FOR RATIO ANALYSIS

The following procedure is generally followed, while analyzing the financial statements through ratio
analysis:
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STEP I: Selection of the relevant data from the financial statements depending upon the objective of
the analysis.

STEP II: Calculation of appropriate ratios from the above data.

STEP III: Comparison of the calculated ratio with the ratios of the same from in the past, or the ratios
developed from projected financial statements or the Ratio’s of some other, firm or the comparison
with the ratio of the industry to which the firm belongs.

STEP IV: Interpretation of ratios.

a) Balance sheet ratio: i.e., ratios calculated on the basis of tile figures of the balance sheet only.
b) Profit and loss account ratios: i.e., ratios calculated on the basis of the figures of profit and loss
account only.
c) Combined ratio: i.e., ratios based on figure of profit and loss account as well as balance sheet.
d) Projected ratios, i.e., ratios developed using the projected, or Performa, financial statements of the
same firm.

TYPES OF RATIOS

Ratio can be classified for the purpose of exposition into four broad groups:

 Liquidity ratio
 Leverage ratio
 Activity ratio
 Profitability ratio

LIQUIDITY RATIOS

Liquidity ratio’s measures the short –term solvency or the short –term financial soundness of the
business. It is extremely essential for a firm to be able to meet its obligations they become due.

Liquidity Ratio’s measure the ratio ability of the firm to meet his current obligation, this ratio is also
an effective source to ascertain whether the working capital has been effectively utilizes.

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 The ratios calculated for Parag who indicates the extent of liquidity are:

 CURRENT RATIO
 QUICK RATIO
 CASH RATIO
 NET WORKING CAPITAL RATIO

CURRENT RATIO
Current ratio may be defined as the relationship between current assets and
Current liabilities.
The ratio indicates the short-term financial soundness of the company. It judge whether the current assets
are sufficient to meet the current obligation out of the current assets.
It is calculated by dividing the total of current assets by the total of current liabilities.
Current assets are those assets, which are converted into cash with in one year, and current liabilities are those
liabilities, which are to be paid within a year.

OBJECTIVE AND SIGNIFICANCE

This ratio is an indicator of the firm’s ability to promptly meet its short-term liability. It is used to assets the
short-term financial position.

QUICK RATIO
Quick ratio establishes a relationship between quick assets or liquid assets and current liabilities.
An asset is liquid if it can be converted into cash immediately or reasonably soon without a loss of value.
Cash is considered most liquid assets.

OBJECTIVE AND SIGNIFICANCE

This ratio is also an indicator of short term solvency of the firm .It is used to test the short-term liquidity of
the firm in its correct form.
This is calculated as by dividing of liquid assets by current liabilities.

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CASH RATIO

Since cash is the most liquid assets be examined cash ratio and its equivalent to current liabilities.

Trade investment or marketable securities are equivalent of cash; therefore, they may be included in
the computation of cash ratio.

NET WORKING CAPITAL RATIO

The difference between current assets and liabilities is called Net Working Capital Ratio.

Net Working Capital used as a measure of a firm’s liquidity. It is considered as that’ between two
firm’s the one having the larger Net Working Capital has the greater ability to meet its current
obligation.

LEVERAGE RATIOS

A firm should have a short-term as well as long –term financial position. To judge the long –term financial
leverage or capital structure. In other word, it can be said that this financial ratio’s through light on the long-
term solvency of a firm as reflected in its ability to assure the long-term creditors with regard to:
(a) Periodic payment of interest during the period of the loan.
(b) Repayment of principal on maturity.
As a general rule; there should be an appropriate mix of debt and owner’s equity in financing the firm’s
assets, the manner in which assets are financed has the number of implications.
Those calculated for these studies are:
 DEBT – EQUITY RATIO
 TOTAL DEBT RATIO
 INTEREST COVERAGE RATIO
 FIXED ASSETS RATIO
 DEBT TO TOTAL FUNDS
 RESERVE TO CAPITAL RATIO
 CAPITAL GEARING RATIO
 PROPRIETORY RATIO

Parag is one of the units of the Gangol Sahakari Dugdh Utpadak Sangh limited.

30
So it is hard to calculate the Leverage Ratio as a separately because its shares are jointly issued and in-
group the debts are taken.

So calculation is separately not possible because separate data’s are not available.

ACTIVITY RATIOS
Turnover means “sales”, so turnover ratio is related to sales. It is an accepted fact that sales have direct
relationship with the performance of the business. Higher sales mean better performance which really means
of the business. Fund is invested in various assets in business to make sales and to earn profit .the efficiency
with which assets are managed directly effects the volume of sales.
The better the management of assets, the larger is the amount of sales and profits.
This ratio indicates the speed with which assets are converted or turned over into sales.
Those calculations for this study are:
 TOTAL CAPITAL TURNOVER RATIO
 WORKING CAPITAL TURNOVER RATIO
 FIXED ASSETS TURNOVER RATIO
 DEBTOR’S TURNOVER RATIO
 CREDITOR’S TURNOVER RATIO

CAPITAL TURNOVER RATIO

Turnover here indicates the speed or rate with which capital employed is rotated in the process of
doing business. Efficient rotation of capital would to higher profitability.

OBJECTIVE AND SIGNIFICANCE

Capital turnover ratio establishes the relationship between sales and capital employed.

The objective of working out this ratio is to determine how efficiently the capital employed is being
used and this in turn shows the promises of profitability and efficiency of management.

WORKING CAPITAL TURNOVER RATIO

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Working capital of a concern is directly related to sales ‘the current assets like debtors, bill receivable,
and cash, stock etc. change with the increase or decrease of sales. The working Capital is taken as:

Working capital = Current Assets – Current Liabilities

FIXED ASSETS TURNOVER RATIO

Fixed assets are used in the business for producing goods to be sold.

The effective utilization of fixed assets will result in increased production and reduced cost.

OBJECTIVE AND SIGNIFICANCE

Fixed assets turnover ratio indicates how efficiently or other wise the fixed assets are used.

DEBTOR’S TURNOVER RATIO

This ratio establishes the relationship between net credit sales and averages of debtor’s of the year.

OBJECTIVE AND SIGNIFICANCE

This ratio indicates the efficiency with which debts are collected .It will be in the interest of business,
if the ratio is higher which will indicate the debts are collected quickly.

CREDITOR’S TURNOVER RATIO

Creditor’s turnover ratio indicates the velocity with which the payment for credit purchase is made to
creditors.

OBJECTIVE AND SIGNIFICANCE

Creditor’s turnover ratio is the debt payment enjoyed with indicates whether the firm is enjoying
actually the credit premised by suppliers.

PROFITABILITY RATIOS

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It is fact that sufficient profit must be earned to sustain the operations of the business to be able to obtain
funds from investor’s for expansion and growth and to contribute towards the social overheads for the
welfare of the society.
Profit is the difference between revenue and expenses over a period of times.
Therefore the profit ability ratios are calculated to measure the operating efficiency of the company.
Generally, the major types of profitability ratios are:
 Profitability in relation to sales
 Profitability in relation to investment
A company should be able to produce adequate profit on each rupee of sales .The profitability of the
company should also be evaluated in term of firm’s investment in assets and in term of capital contribution
to creditor’s and owners.
Those calculations for this study are:
 GROSS PROFIT RATIO
 NET PROFIT RATIO
 EXPENSE RATIO:
1. SELING AND DISTRIBUTION EXPENSES RATIO
2. OFFICE EXPENES RATIO
3. RATIO OF MATERIAL CONSUMED
4. RATIO OF DIRECT LABOUR
5. RATIO OF FACTORY EXPENSES
 OPERATING EXPENES RATIO
 RETURN ON INVESTMENT RATIO

GROSS PROFIT RATIO

Gross profit equal the difference between net sales revenue and the cost of goods sold.

This ratio indicates the average speed between the cost of goods sold and the sales revenue.

It is calculated by dividing gross profit by sales.

OBJECTIVE AND SIGNIFICANCE

Gross profit ratio is a reliable guide to the adequacy of selling prices and efficiency of stock control.

33
NET PROFIT RATIO

A commonly used measure is return on sales after termed net profit margin.

This ratio establishes a relationship between net profit and sales and indicates management
efficiency in manufacturing, administrating, and selling the product.

If the net margin is inadequate firm will fail to achieve the satisfactory return on owner’s equity.

OBJECTIVE AND SIGNIFICANCE

Net profit ratio helps in determining the efficiency of the business.

Objective of working net profit ratio is to determine whether operating cost is with in the desired
parameters or not.

EXPENSES RATIOS

Expense ratios are calculated to ascertain the relationship that exists between operating expenses and
volume of sales.

It indicates the portion of sales, which is consumed by the various operating expenses.

OBJECTIVE AND SIGNIFICANCE

These ratios are valuable in comparing various firms in the same industry of operating data from year
to year for the same firm.

OPERATING EXPENSES RATIO

This ratio measures the extent of cost incurred for making the sales. This ratio matches cost of goods
sold plus other operating expenses on the one hand with net sales other hand.

OBJECTIVE AND SIGNIFICANCE

34
Operating profit is the test of the operational efficiency of the business. It shows the percentages of
sales that are absorbed by the cost of sales and operating expenses.

RETURN ON INVESTMENT

The term investment may refer to total assets or net assets. The funds employed in the net assets are
known as capital employed.

The conventional approach of calculating return on investment (ROI) is to divide profit after tax by
investment.

35
DATA ANALYSIS

36
 DATA ANALYSIS

LIQUIDITY RATIO

1. CURRENT RATIO
This ratio is calculated as follow:

CURRENT RATIO = CURRENT ASSETS

CURRENT LIABILITIES
Where,

Year 2014 2015 2016 2017

-15 - 16 - 17 - 18
(lacs) (lacs) (lacs) (lacs)
A)Current assets:
 Inventories 348.86 275.38 297.10 286.50
 Sundry Debtor’s 397.44 362.49 369.20 388.65
 Cash in hand and
Bank 129.19 98.62 156.47 180.20
 Accrued Interest 0.44 0.54 0.46 0.45
 Loans & Advances 65.39 59.09 65.76 64.35
________ ________ ________ _______
Total (A) 941.32 796.12 888.99 920.15
________ ________ ________ _______

B) Current Liabilities:
 Sundry Creditor’s 227.03 249.60 311.88 296.40
 Other Liabilities 52.88 26.56 31.10 28.56

 Pro. for Leave

Encashment 73.33 84.26 93.44 88.45
________ ________ _______ _____
Total (B) 353.24 360.42 436.42 413.41
________ ________ ______ _____
Then the Ratio is: 2.66 2.21 2.03 2.22

Remarks
A relatively high current ratio is an indication that the firm is liquid and has the ability to pay its current
obligation in time as when they become due, vise versa. As a convention the minimum two to one ratio e.g.
2:1 is referred as a banks rule of thumb.

37
GRAPH

3 2.66

2.5 2.21 2.22

2.03
2

1.5

0.5

0
20014-15 2015-16 2016-17 2017-18

Inference

The above diagram shows that in the year 2014-15 is 2.66, in year 2015-16 is 2.21, in year 2016-17 is
2.03 and in year 2017-18 is 2.22.

38
2. QUICK RATIO

This ratio is calculated as follow:

QUICK RATIO = CURRENT ASSETS – INVENTORIES

CURRENT LIABILITIES

Where,
Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

A) Current assets:
 Inventories 348.86 275.38 297.10 286.50
 Sundry Debtor’s 397.44 362.49 369.20 388.65
 Cash in hand and
Bank 129.19 98.62 156.47 180.20
 Accrued Interest 0.44 0.54 0.46 0.45
 Loans & Advances 65.39 59.09 65.76 64.35
______ _______ _______ _______
Total (A) 941.32 796.12 888.99 920.15
______ _______ _______ _______

B) Current Liabilities:
 Sundry Creditor’s 227.03 249.60 311.88 296.40
 Other Liabilities 52.88 26.56 31.10 28.56
Pro. for Leave
Encashment 73.33 84.26 93.44 88.45
_______ _______ ______ ______
Total (B) 353.24 360.42 436.42 413.41
_______ _______ ______ ______
Then ratio is: 1.68 1.44 1.36 1.53

39
Remarks

Usually high quick ratio is an indication that the firm is liquid and has the ability to meet its current
liabilities in time .As a rule of thumb or as a convention quick ratio of one to one i.e., 1: 1 is
considered satisfactory.

GRAPH

1.68
1.8 1.53
1.6 1.44
1.36
1.4
1.2
1
0.8
0.6
0.4
0.2
0
2014-15 2015-16 2016-17 2017-18

Inference

The above data shows the quick ratio of the company in year 2014-15, 2015-16 , 2016-17 and 2017-
18 is 1.68, 1.44 ,1.36 and 1.53 respectfully. The ratios show the company enjoys the high liquidity
position; it is good however too much liquidity may affect the profitability of the company.

40
 3. CASH RATIO

This ratio is calculated as follow:

CASH + MARKETABLE SECURITIES

CASH RATIO =

CURRENT LIABILITIES

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

A) Cash 129.19 98.62 156.47

180.20

Add. Marketable
Securities ---------- --------- --------- ---------
_________ ______ _______ ______

129.19 98.62 156.47 180.20

_________ ______ _______ ______

B) CURRENT LIABILITIES

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

Current liabilities 353.24 360.42 436.42 413.41

_______ _______ ______ ______

Then ratio is: 0.36 0.27 0.36 0.43

41
 Remarks:

The acceptable norms for this ratio are 50% or 0.5: 1 or 1:2

GRAPH

2014-15 2015-16 2016-17 2017-18

Inference

In the above data it shows that the cash ratio of company is in 2014-15,2015-16,2016-17 and 2017-18 is
0.36,0.27,0.36 and 0.43 respectfully .It is below the standard and it is not good for company.

42
4. NET WORKING CAPITAL RATIO

This ratio is calculated as follow:

NET WORKING CAPITAL= NET WORKING CAPITAL

NET ASSETS
Net Working Capital:

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

Current assets 941.32 796.12 888.99 920.15

Less: current

Liabilities 353.24 360.42 436.42 413.41

588.08 435.70 452.57 506.74

NET ASSETS:

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

FIXED ASSETS

(LESS DEPRECATION) 114.25 115.53 113.03 118.25

ADD: NET CURRENT

ASSETS 941.32 796.12 888.99 920.15

1055.57 911.65 1002.02 1038.4

Then the ratio is: 0.55 0.47 0.45 0.48

43
 Remarks:

Higher the ratio higher the liquidity.

GRAPH

0.6 0.55

0.47 0.48
0.5 0.45

0.4

0.3

0.2

0.1

0
2014-15 2015-16 2016-17 2017-18

Inference

In the above data it shows that the Working capital ratio of company is in 2014-15, 2015-16, 2016-17 and
2017-18 is 0.80, 0.79 , 0.80 and 0.81 respectfully. Ratio shows the liquidity position of the company is good
in fourth year.

44
 LIQUIDITY RATIO’S

YEAR 2014-15 2015-16 2016-17 2017-18

2.66 2.21 2.03 2.22

CURRENT RATIO

1.68 1.44 1.36 1.53

QUICK RATIO

CASH RATIO 0.36 0.27 0.36 0.43

0.55 0.47 0.45 0.48

WORKING
CAPITAL

RATIO

COMMENT

In the above calculation of liquidity ratio, the entire ratios are good but above the standard ratio
limit of the liquidity except the cash ratio.

In the current ratio of the company in year the 2015, 2016, 2017, 2018 the ratio is 2.66, 2.21, 2.03 and
2.22 respectively.

These ratios of liquidity indicate the over capitalization of current assets.

In quick ratio, the ratios shows the company enjoy the high liquidity position, it is good however too
much liquidity is not beneficial for the company future and the quick ratios is also more than the
standard ratio.

The cash ratio of the company, the ratios is well after three years.

45
Working capital ratio shows the liquidity position of the company is good in fourth year.

So overall liquidity position of the company is satisfactory performance and the Current ratio and
Quick ratio shows over the standard ratio.

46
 ACTIVITY RATIO

1. CAPITAL TURNOVER RATIO

. It is calculated as Capital Turnover Ratio.

CAPITAL TURNOVER RATIO = NET SALES

CAPITAL EMPLOYED

CAPITAL EMPLOYED:

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

NET FIXED ASSETS 114.25 115.53 113.03 118.25

Add. WORKING

CAPITAL 588.08 435.70 452.57 506.74

TOTAL 702.33 551.23 565.60 624.99

WORKING CAPITAL:

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

CURRENT ASSETS 941.32 796.12 888.99 920.15

Less. CURRENT

LIABILITIES 353.24 360.42 436.42 413.41

47
 TOTAL 588.08 435.70 452.57 506.74

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

SALES 1914.66 2142.51 2699.31 2800.85

Then ratio is: 2.72 3.89 4.77 4.48

Remarks

Higher the ratio the better it is. However too high a ratio may indicate over trading resulting in
paucity of funds?

GRAPH

4.77
5 4.48
4.5 3.89
4
3.5
2.72
3
2.5
2
1.5
1
0.5
0
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Gross Profit ratio of company is in 2014-15, 2015-16, 2016-17 and 2017-
18 is 2.73, 3.89 ,4.77 and 4.48 times respectfully .It shows that the performance of business is better and all
the available resources are well utilized.

2. WORKING CAPITAL TURNOVER RATIO

48
 This ratio can be calculated as under:

WORKING CAPITAL TURNOVER = SALES

WORKING CAPITAL

Where,

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

Sales 1914.66 2142.51 2699.31 2800.85

Working Capital:

Current assets 941.32 796.12 888.99 920.15

Less: Current

Liabilities 353.24 360.42 436.42 413.41

Total 588.08 435.70 452.57 506.74

Then ratio is: 3.26 4.92 5.96 5.53

Remarks:

A higher the ratio indicates efficient utilization of working capital.

49
GRAPH:

5.96
6 5.53
4.92
5

4 3.26
3

0
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the working capital turnover of company is in 2014-15, 2015-16,
2016-17 and 2017-18 is 3.26, 4.92, 5.96 and 5.53 respectfully .It shows the better utilization of the
working capital incurred in the operation.

50
2. FIXED ASSETS TURNOVER RATIO

The following formula is used for measurement of the ratio:

FIXED ASSETS TURNOVER = NET SALES

FIXED ASSETS

Where,

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

Sales 1914.66 2142.51 2699.31 2800.85

Net FIXED ASSETS: 114.25 115.53 113.03 118.25

Then the ratio is: 16.76 18.55 23.88 23.69

Remarks:

Higher the ratio is it better of the business. An increasing trend shows that financial Assets are
utilized efficiently to achieve higher sales.

51
 GRAPH:

23.88 23.69
25

18.55
20 16.76

15

10

0
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Fixed Assets turnover of company is in 2014-15, 2015-16, 2016-17 and
2017-18 is 16.76, 18.55, 23.88 and 23.69 times respectfully .It shows the better utilization of the Fixed Assets,
which incurred in the operation.

52
3. DEBTOR’S TURNOVER RATIO

This ratio is calculated as by the following formula:

DEBTOR’S TURNOVER RATIO = TOTAL SALES

ACCOUNT RECEIVABLE

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

TOTAL SALES 1914.66 2142.51 2699.31 2800.85

TOTAL DEBTOR 397.44 362.49 369.20 388.65

Then the ratio is 4.82 5.91 7.31 7.21

Remarks:

Higher the ratio indicates economy and efficiency in the collection of amount due. It shows that
collection performance of PARAG is improving year by year. Credit period has been reduced to 3
months to 2 months in 2006.

53
 GRAPH:

8 7.31 7.21
7 5.91
6 4.82
5
4
3
2
1
0
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Debtors Turnover of company from 2015 to 2018 is 4.82, 5.91, 7.31
and 7.21 times respectfully. It shows that the collection policy of the company is too liberal.

54
4. CREDITOR’S TURNOVER RATIO

This ratio of Parag is calculated as follows:

CREDITOR’S TURNOVER RATIO = TOTAL PURCHASE

ACCOUNT PAYABLE

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

TOTAL PURCHASES 634.31 797.74 1140.73 1750.32

TOTAL PAYABLE 227.03 249.60 311.88 296.40

Then the ratio is: 2.79 3.20 3.66 5.91

Remarks:

Higher creditor’s turnover ratio indicates that company ii increasing trend prompt in paying its
creditor which enhance its creditworthiness but it also signify that company is taking full
advantages of credit facilities provide by creditor’s period is beneficial for the company.

55
 GRAPH:

5.91
6

5
3.66
4 3.2
2.79
3

0
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Gross Profit ratio of company from2015 to 2018 is 2.79, 3.20, 3.60 and
5.91 respectfully. It shows good sign, which is in increasing trend, which shows that the company enjoys good
credit in market.

56
 ACTIVITY RATIO

YEAR 2014-2015 2015-2016 2016-2017 2017-2018

TOTALCAPITAL 2.61 3.89 4.77 4.48

TURNOVER

WORKING CAPITAL 3.26 4.92 5.96 5.53

TURNOVER

FIXED ASSETS 16.76 18.55 23.88 23.69

TURNOVER

DEBTORS TURNOVER 4.18 5.22 6.39 7.21

CREDITORS 2 .79 3.20 3.66 5.91

TURNOVER

COMMENT:

In the above calculation of turnover ratio of the company, the ratio of these shows that the
performance of business is better and all the available resources are well utilized.

The total capital turnover ratio shows good sign of increasing trend. Which indicate the efficient used
of the employed capital in sales.

The working capital ratio, it shows the better utilization of the working capital incurred in the
operation.

57
The above fixed assets turnover ratio shows a slightly decrease than company does not well utilized.

The debtor’s turnover ratio shows of increases trend year by year that means the company provide its
credit payment period to its customers, which indicate the liberal debt collection policy of the
company.

The calculated creditor’s turnover ratio indicates the company enjoys good credit payment period from
its creditor’s.

So, overall the turnover ratio of the company is good except the debtor’s turnover ratio, which shows
the liberal collection policy, and more credit collection period given to its customers, which is not
beneficial of company growth.

58
 PROFITABILITY RATIO

1. GROSS PROFIT RATIO

GROSS PROFIT RATIO = GROSS PROFIT x 100

NET SALES

OR

Sales – cost of goods sold x 100

Net sales

Where,

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

GROSS PROFIT: 770.00 825.41 1957.38 2141.53

NET SALES: 1914.66 2142.51 2699.31 2800.85

Then the ratio is: 40% 39% 72% 76%

Remarks:

Higher the ratio better is the result.

59
GRAPH:

76%
80% 72%
70%
60%
50% 40% 39%
40%
30%
20%
10%
0%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Gross Profit ratio of company from 2015 to 2018 is 40%, 39%,
72% and 76% respectfully. It shows good sign, which is 76%. This indicates the efficiency in stock
control and an adequacy of the selling price.

60
2. NET PROFIT RATIO

This ratio of Parag is calculated from the following formula:

NET PROFIT

NET PROFIT RATIO = x 100

NET SALES

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

Net profit: 49.99 71.68 130.88 168.05

Net sales 1914.66 2142.51 2699.31 2800.85

Then the ratio is: 3% 3% 5% 6%

Remarks:

Higher the ratio is better is the profitable.

61
 GRAPH:

6%
6%
5%
5%

4%
3% 3%
3%

2%

1%

0%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Gross Profit ratio of company from 2015 to 2018 is 3%, 3%, 5% and 6%
respectfully .It is the increasing in trend the operation expenses, is in desired parameters.

62
 a. EXPENSES RATIO

The expense ratios are calculated as by the following formulas:

a) RAW-MATERIAL USED =
MATERIAL COST x 100

NET SALES

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

RAW- MATERIAL 673.10 812.20 1113.95 1469.25

NET SALES 1914.66 2142.51 2699.31 2800.85

Then the ratio is 35% 38% 41% 52%

63
GRAPH:

60% 52%
50% 41%
38%
40% 35%

30%

20%

10%

0%
2014-15 2015-16 2016-17 2017-18

64
 b. RATIO OF DIRECT LABOUR =

DIRECT LABOUR COST x 100

NET SALES

YEAR 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

DIRECT LABOUR 66.78 70.82 140.74 154.88

NET SALES 1914.66 2142.51 2699.31 2800.85

Then the ratio is 3% 3% 5% 6%

GRAPH:

6%
6%
5%
5%

4%
3% 3%
3%

2%

1%

0%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Gross Profit ratio of company from 2015 to 2018 is 3%, 3%, 5%
and 6% respectfully .It is the increasing in trend, which is not good for the company future.

65
 c. RATIO OF FACTORY EXPENSES =

FACTORY EXPENSES x 100

NET SALES

Where,

YEAR 2009-10 2010-11 2011-12 2012-13

(lacs) (lacs) (lacs) (lacs)

FACTORY EXP. 169.49 183.59 246.74 298.52

NET SALES 1914.66 2142.51 2699.31 2800.85

Then the ratio is: 9% 9% 9% 11%

GRAPH:

11%
12%
9% 9% 9%
10%

8%

6%

4%

2%

0%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Gross Profit ratio of company from 2015 to 2018 is 9%, 9%, 9% and 11%
respectfully .It is the constant in all the year, it shows that all the factory expenses is in the control and there is
no additional factory expenses bear in any of the year by the company irrespective of their change in
production.
66
d. RATIO OF OFFICE EXPENSES =

OFFICE EXPENSES x 100

NET SALES

Where,

YEAR 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

OFFICE EXPENSES 142.43 120.70 135.68 189.65

NET SALES 1914.66 2142.51 2699.31 2800.85

Then the ratio is: 7% 6% 5% 7%

GRAPH:

7% 7%
7% 6%
6% 5%
5%
4%
3%
2%
1%
0%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the administration expenses ratio of company is from 2015 to 2018 is
7%, 6%, 5% and 7% respectfully .It is the decreasing in trend, which is beneficial for the company,
and ratio indicates in under controlled.

67
e. SELLING AND DISTRIBUTION EXPENSES RATIO =

SELLING AND DISTRIBUTION

EXPENSES

X 100

NET SALES

YEAR 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

Selling & Dist.

Expenses 265.93 296.26 348.31 365.45

NET SALES 1914.66 2142.51 2699.31 2800.85

Then the ratio is: 14% 14% 13% 13%

GRAPH:

14% 14%
14%

13% 13%
13%

12%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the selling and distribution expenses of company from 2015to2018 is
14%, 14%, 13% and 13% respectfully .It shows the decreasing in trend, ratio indicates in under
controlled.
68
 4. OPERATING EXPENSES RATIO

This ratio of Parag as calculated as follows:

OPERATING EXPENSES RATIO =

COST OF GOODS SOLD + OTHER

OPERATING EXPENSES x 100

NET SALES

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

COST OF GOODS

SOLD : 1144.65 1317.10 741.93 659.32

Add. OPERATING

EXPENSES 690.75 757.13 869.09 981.52

TOTAL: 1835.40 2074.23 1611.02 1640.84

Then the ratio is: 96% 97% 60% 59%

Remarks:

Lower the ratio of the net operating expenses is beneficial for the company.

69
 GRAPH:

96% 97%
100%
90%
80%
70% 60% 59%
60%
50%
40%
30%
20%
10%
0%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the operating expenses ratio of company from 2015 to 2018 is 96%, 97%,
60% and 59% respectfully. It is the decreased in trend that shows less expenses is incurred in the operation
which is in uncontrolled manner and it is not good for the company future if it is continuously decreased like
this.

70
5. RETURN ON INVESTMENT RATIO

It is calculated as under:

Return on Investment = EBIT x 100

__________________
Capital Employed

Where,

Year 2014-15 2015-16 2016-17 2017-18

(lacs) (lacs) (lacs) (lacs)

EBIT 45.25 68.74 127.86 154.89

CAPITAL EMPLOYED

FIXED ASSETS 114.25 115.53 113.03 118.25

Add. WORKING

CAPITAL 588.08 435.70 452.57 506.74

TOTAL 702.33 551.23 565.60 624.99

Then, the ratio is: 6% 12% 23% 25%

Remarks:

Higher the ratio better is the results.

71
 GRAPH:

25%
25% 23%

20%

15% 12%

10%
6%

5%

0%
2014-15 2015-16 2016-17 2017-18

Inferences:

In the above graph it shows that the Return on investment of company from 2015 to 2018 is 6%, 12%, 23%
and 25% respectfully .It is the increasing in trend that shows better performance of the company.

72
 PROFITABILITY RATIOS

YEAR 2014-15 2015-16 2016-17 2017-18

(%)
(%) (%) (%)

GROSS PROFIT RATIO 40 39 72 76

NET PROFIT RATIO 3 3 5 6

MATERIAL COST 35 38 41 52

LABOUR COST 3 3 5 6

FACTORY EXPENSES 9 9 9 11

ADMINISTRATION 7 6 5 7

EXPENSES

SELLING & 14 14 13 13

DISTRIBUTION

EXPENSES

OPERATING EXPENSES 96 97 60 59

RETURN ON 6 12 23 25

INVESTMENT

COMMENT

In the above-calculated ratio of the profitability ratio of the company, the entire ratio shows a good
sign of except the increases in the expense ratio.

73
The gross profit ratio indicates the good sign but not satisfactory in the year 2015, 2016, 2017, the
ratio is 40%, 39%, 72%, respectively. But in year 2018 it shows good sign which is 76%. Which
indicates the efficiency in stock control and an adequence of the selling price?

The Net Profit ratio shows good and increasing trend sign, which indicate the operation expenses, is in
desired parameters.

The factory expenses ratio, administration ratio, indicates slightly increasing.

Material and labour cost shows slightly increase, it is due to increase in sale and high cost of raw
material. The operating ratio of this year indicates slightly decrease. Return on investment ratio is
good and satisfactory in year 2012-13 the ratio is 25%. Which indicate the better performance of the
company. So, over all profitability position of the company is good except the increasing
percentage in expenses ratio.

74
FINDINGS

75
 FINDINGS

 Current ratio is increasing day by day above its standard ratio.

 Company can improve its cash position after three years.
 The company is following more credit period payment period which is not beneficial to the company.
 The maximization debtor’s turnover ratio is not good sign for financial health of the company.
 Profitability ratio indicates good sign.
 There can be decreasing the operating expenses ratio and increasing in factory expenses ratio.
 Return on investment ratio is satisfactory.
 The overall performance of the company is good and they enjoy a good position of profitability.
 Company sale is increasing in day-by-day, which shows company annual report.
 Coordination of company’s people and management is very good.
 Working capital cycle of company is very good after three years in my study work.
 Company turnover is increasing in day by day.

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CONCLUSION

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 CONCLUSION

As my project I saw that proper coordination of the employees. Company sale is increasing in day by day than
company net profit should be also increasing. Company should be use proper utilization of resources and
minimum wastages. Company should believe in cash sale only.

The Turnover Ratio give good sign of the success but in the debtor’s turnover ratio shows that company
provided more credit period of payment to its customer, which is not beneficial for it.

Company should provide a fair return to the shareholders. Company should be plan to the expansion of his
business. Company should discuss every policy to his employees.

Company should be only some concentration of advertisement. Company’s efficiency should be improved in
day by day.

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RECOMMENDATION &
SUGGESTION

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 RECOMMENDATION & SUGGESTION

Although PARAG, PARTAPUR, MEERUT has satisfied the ratios. The following are the suggestion
being made out by me as observed during study of the performance through ratio analysis:

 Company should increase its sales of all the production units with increase in the sales of the
company that can be able to increase its financial position by adopting various promotion policy.
 Company should decrease the operating expenses to increase its operating profit to introduce new
products in the market and reduce cost.
 Maximize the utilization of fixed assets and working capital by minimum wastages of resources.
 All other management, personal and administrative suggestion to be incorporated and should
employee’s participation in management.
 To follow the strict credit collection policy so that profit should be earn more.
 Reduce the current assets and quick assets ratio by improving working capital ratio.
 Presently Cash ratio performance is poor by improving to reduce credit which is given to the
customer.
 Return on investment is in satisfactory position and they try to maintain it in future by its market
share.
 Companies should be proper utilize its available resources by using and maintain in working idle
resources.

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LIMITATION

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 LIMITATIONS OF THE PROJECT

 The study is limited to four years only i.e. 2006-07 to 2009-10

 Time is short for deep research.
 Separate records of the all units are not available.
 No comparison made with other firm’s ratio while during the study period and making conclusion
time.
 Study is limited with the one unit of Parag.
 The data is used in the project have been taken from annual report only. Hence, grouping and sub
grouping and annualisation of data may slightly affect the results.
 Annual report for 2008-09 to 2009-10 was not available to the company for its own policy.

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BIBLIOGRAPHY

83
 BIBLIOGRAPHY

 M.Y. khan & P.K. jain financial management

(Tata McGraw- Hill Publishing Company Limited, New Delhi)
 LK narang & SP jain financial management
(Kalyani publishers, New Delhi), 2000.
 C.R. kothari, research methodology
 Analysis of financial statements, T.S. grewal
 Accountancy, P.C. tulsian sixth revised edition (ratna sagar)
 Financial management, Prassnna Chandra

 Financial management,I.M Pandey

 Financial management, S.N Maheshwari

 Marketing Research (G..[Link])

 Marketing Research (Boyd)

Web sites:
www. [Link]
www. [Link]

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