© 2021 JETIR April 2021, Volume 8, Issue 4 [Link].

org (ISSN-2349-5162)

AN ANALYSIS OF FINANCIAL
PERFORMANCE APPLYING RATIO
ANALYSIS OF DRISH SHOES PVT LTD
1. [Link], UG Student, Department of Commerce with Professional Accounting, Sri
Ramakrishna college of Arts and Science, Coimbatore-641 006, Tamilnadu, India. Email:
m.rithickshankar99@[Link]
2. [Link] Infant, Assistant Professor, Department of commerce with Professional Accounting, Sri
Ramakrishna College of Arts and Science, Coimbatore-641006, Tamilnadu, India.
Email:vinihenry92@[Link]

ABSTRACT:
The analysis paper of AN ANALYSIS OF FINANCIAL PERFORMANCE APPLYING RATIO
ANALYSIS OF “DRISH SHOES PRIVATE LIMITED” is enabled to study and evaluate the company’s
financial performance and its position in shoe industry by applying ratio analysis. The company's financial
performance has been thoroughly examined during the years from 2015-2019. The company’s data
gathered from the secondary sources. The study includes analysing the profit and loss account and balance
sheet for the five years periods. It intimates the company's financial position during the year which is useful
for correct decision making. It assists to change the company into very right direction towards profit. This
paper gives the guiding principle about the Liquidity Ratios, Solvency Ratios , Coverage Ratios,
Activity Ratios and Profitability Ratios analysis of Drish shoes Pvt Ltd, Village- Rajpurateh Nalagarh,
District-Solan, Himachal Pradesh.

KEYWORDS:
Accounting Ratios, Financial position , Financial Performance and Drish Shoes Private Limited

INTRODUCTION:
Analysis of Ratio is one of the methodology and powerful tool of financial analysis where it is used as a
yardstick for evaluating the financial conditions and performance of a company. It is used as a device to
examine in detail and elucidate the financial health of a company. Ratio analysis of financial statements
assists the management in right decision making and proper control. Ratio analysis is the universally
accepted tool for evaluation of efficiency and profitability of the business, financial condition. Hence, the
ratio analysis is beneficial from the following objects:

 Short- term planning and long- term planning

 Measurement of financial presentation and assessment of financial performance
 Analyse based on the financial trends
 Conclusion making for operations and investments
 Financial problems must be analysed.
 Providing the valuable appreciation into company’s picture or financial position

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OBJECTIVES:
Objectives of the study are given below

 To do better financial analysis of the company

 To determine liquidity of the company
 To decide operational efficiency of the company
 To determine profitability of the company

STATEMENT OF PROBLEM:
The principal aim of a business pledge is to create profits. Profit earning is taken into account most vital for
the continuity of the business enterprises. A business needs profits not just for its existence however
conjointly for growth and diversification. The investors want a adequate returns on their investment in
addition to workers and creditors. A business company can execute its responsibility to various segments of
the society only through earning of good profit. Financial performance is prepared to review the state
of investment in a business and result achieved throughout a specific period of financial performance.
The evaluations are also of great significance to the financial lenders.

REVIEW OF LITERATURE:
 Jothi, K. & Geethalakshmi, A. (2016) This analyse tries to examine the profitability & financial
position of selected companies of Indian automobile industry using statistical tools such as ratio
analysis, mean standard deviation and correlation.
 Maheswari, V. (2015) Tried to analyse the financial strength of the Hero Honda motors limited
have recognised three factors, i.e. Solvency position Liquidity position and profitability position
based on the study of period of nine years using ratio analysis.
 Krishnaveni , M. & Vidya, R (2015) Writer has picked 87 companies out of 242 companies in
capital line database to debate the standard current ratio of automobile industry is harmonised with
tractor and four sectors such as engine parts, lamps, gears and ancillaries with norms of standard.
 Idhayajothi, R et al (2014) the main idea behind this study is to analyse the financial performance
of Ashoka Leyland ltd. at Chennai. The outcome shows that financial performance is healthy and
also suggested to improve financial performance by reducing the various expenditures.
 Dhole Madhavi (2013) Investing the influence of price movement of share on selected company
execution. It guides due investors think about various factors before selecting the better portfolio.
Emotional factors do play a role in price movement only in short term but in long run annual
performance is sole factor responsible for price movement.

RESEARCH METHODOLOGY:
RESEARCH: Research is the systematic investigation into and study of materials and sources so as to
establish facts and reach conclusions.

Methodology: Methodology is a set of methods and principles used to perform in a particular area of study
or activity.

In preparing of this analyse, the data is collected from the sources of the following:
 Primary Data:
Not applicable for this analyse..
 Secondary Data:
The source of data is collected from the Ministry of Corporate Affairs- India website.
o Balance Sheet of Drish Shoes Pvt Ltd.
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o Profit and Loss account of five years for period from 2015 to 2019

SAMPLING DESIGN:
 Sampling Unit: Financial statements
 Sampling Size : Preceding five years financial statements

STUDY PERIOD: This analyse covers for the periods of five years data from 2014-15, 2015-16,
2016-17, 2017-18, 2018-19 mean an accounting year of the company comprising of 365 working days.

TOOLS USED:
 Accounting Ratios.

LIMITATIONS:
The following are the restrictions of the analysis

 The study is limited to solely five years of data.

 The study is purely based on data which is collected from Ministry of Corporate Affairs’ website.
 There is not any set industry standard for comparison and hence interpretation is made on general
standards.
 The ratio is calculated from the past financial statements and these aren’t yardstick for future.

DATA ANALYSIS AND INTERPRETATION:

LIQUIDITY RATIO

CURRENT ASSETS
CURRENT RATIO = -----------------------------
CURRENT LIABILITIES

YEAR CURRENT ASSET CURRENT LIABILITIES CURRENT RATIO

2014-15 1,85,01,81,410 1,21,70,18,300 1.52:1

2015-16 99,19,63,022 1,03,46,16,564 0.959:1

2016-17 91,23,98,520 99,46,83,879 0.917:1
2017-18 97,92,11,514 1,11,76,52,946 0.876:1
2018-19 99,59,88,594 1,12,52,91,918 0.885:1

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CURRENT RATIO

1.5

0.5

0
2014-15 2015-16 2016-17 2017-18 2018-19
CURRENT RATIO 1.52 0.959 0.917 0.876 0.885

INTERPRETATION:
The standard norm for current ratio 2:1. During the year 2014-15 is 1.52 and further
years 2016 -17, 2017-18 and 2018-19 gradually decreases. The current ratio is not
standard norms in any of the five years. Hence, the Current Ration is not adequate.

QUICK ASSETS
QUICK RATIO = -----------------------------
CURRENT LIABILITIES

CURRENT
YEAR QUICK ASSET QUICK RATIO
LIABILITIES
2014-15 1,34,58,68,578 1,21,70,18,300 1.106:1
2015-16 53,40,76,259 1,03,46,16,564 0.516:1
2016-17 39,92,43,296 99,46,83,879 0.401:1
2017-18 33,09,64,140 1,11,76,52,946 0.296:1
2018-19 30,47,98,512 1,12,52,91,918 0.271:1

INTERPRETATION:
The standard norm for Quick ratio 1:1. During the year 2014-15 is 1.106 and further years 2016 -17, 2017-
18 and 2018-19 gradually decreases. The Quick ratio is standard norms in the year 2014-15 is just above
the standard norms but after that during year 2015-16 50% reduced and further years gradually decreases .
Hence, the Quick Ration is not adequate.

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QUICK RATIO

1.2
1
0.8
0.6
0.4
0.2
0
2014-15 2015-16 2016-17 2017-18 2018-19
QUICK RATIO 0.75 0.946 1.001 0 0

CASH + BANK+ MARKETABLE SECURITIES

CASH RATIO = ------------------------------------------------------
CURRENT LIABILITIES

YEAR CASH+MARKETABLE SECURITES CURRENT LIABILITIES CASH RATIO

2014-15 17,81,17,506 1,21,70,18,300 0.146:1
2015-16 7,17,91,929 1,03,46,16,564 0.069:1
2016-17 64,83,514 99,46,83,879 0.007:1
2017-18 33,14,732 1,11,76,52,946 0.003:1
2018-19 42,66,207 1,12,52,91,918 0.004:1

CASH RATIO
1
0.5 0 0 0 0 0
0
2014-15 2015-16 2016-17 2017-18 2018-19
CASH RATIO 0 0 0 0 0

INTERPRETATION:

In all the above years i.e. from 2014-15 to 2018-19 the quick ratio is zero. The standard norm for Absolute
Quick ratio 1:2. The company has totally failed in keeping sufficient cash and bank balances and
marketable securities.

SOLVENCY RATIO

SHARE HOLDERS EQUITY

EQUITY RATIO = ----------------------------------
NET ASSETS

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YEAR SHAREHOLDERS EQUITY NET ASSETS EQUITY RATIO

2014-15 9,06,28,000 87,46,31,743 0.104:1

2015-16 9,06,28,000 27,38,83,699 0.331:1
2016-17 9,06,28,000 29,23,01,299 0.31:1
2017-18 9,06,28,000 42,40,53,694 0.214:1
2018-19 9,06,28,000 46,50,59,446 0.195:1

EQUITY RATIO
0.331
0.35 0.31
0.3
0.25 0.214
0.195
0.2
0.15 0.104
0.1
0.05
0
2014-15 2015-16 2016-17 2017-18 2018-19
EQUITY RATIO 0.104 0.331 0.31 0.214 0.195

INTERPRETATION:

In all the above year i.e. from 2014-15 to 2018-19 the Equity ratio is below 50%. During the year 2015-
16, the equity is 0.331. This means that creditors rather than investors are currently funding more assets.
0.331 percentages of the company’s assets are owned by creditors and not by shareholders. This is not a
healthy ratio.

TOTAL DEBT
DEBT RATIO = ------------------------
NET ASSETS

YEAR TOTAL DEBT NET ASSET DEBT RATIO

2014-15 1,37,65,67,989 87,46,31,743 1.574:1
2015-16 1,29,54,99,306 27,38,83,699 4.73:1
2016-17 1,26,77,41,875 29,23,01,299 4.337:1
2017-18 1,34,17,37,879 42,40,53,694 3.164:1
2018-19 1,27,70,09,940 46,50,59,446 2.746:1

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DEBT RATIO

6
4
2
0
2014-15 2015-16 2016-17 2017-18 2018-19
DEBT RATIO 1.574 4.73 4.337 3.164 2.746

INTERPRETATION:

In all the above years, the Debt ratio is above 100%. During the year 2015-16 and 2016-17, the debt is
more than 400%. Again 2017-18 and 2018-19 is reduced and finally above 200% during the year 2018-19.
Even though, debt ratio is towards lowering, the risk is at high. The financial health is at risk level.

TOTAL DEBT
DEBT TO EQUITY RATIO = -------------------------------------------
TOTAL SHARE HOLDERS EQUITY

YEAR TOTAL DEBT SHAREHOLDER EQUITY DEBT TO EQUITY RATIO

2014-15 1,37,65,67,989 9,06,28,000 15.189:1
2015-16 1,29,54,99,306 9,06,28,000 14.295:1
2016-17 1,26,77,41,875 9,06,28,000 13.988:1
2017-18 1,34,17,37,879 9,06,28,000 14.805:1
2018-19 1,27,70,09,940 9,06,28,000 14.091:1

DEBT TO EQUITY RATIO

15.5 15.189
14.805
15
14.295
14.5 13.988 14.091
14
13.5
13
2014-15 2015-16 2016-17 2017-18 2018-19
DEBT TO EQUITY RATIO 15.189 14.295 13.988 14.805 14.091

INTERPRETATION:

Debt to equity ratio has dramatically risen from 13 to 15. This indicates that the company’s truculent
growth programme being funded by debt. But, in Covid-19 like shut down situation, the company is very
risk for borrowing cost and may lead to bankruptcy.

TOTAL DEBT
DEBT TO TOTAL ASSET RATIO = ------------------------
TOTAL ASSETS
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YEAR TOTAL DEBT TOTAL ASSETS DEBT TO TOAL ASSET RATIO

2014-15 1,37,65,67,989 2,25,11,99,732 0.611:1
2015-16 1,29,54,99,306 1,56,93,83,005 0.825:1
2016-17 1,26,77,41,875 1,56,00,43,174 0.813:1
2017-18 1,34,17,37,879 1,76,57,91,573 0.76:1
2018-19 1,27,70,09,940 1,74,20,69,386 0.733:1

DEBT TO TOAL ASSET RATIO

1
0.8
0.6
0.4
0.2
0
2014-15 2015-16 2016-17 2017-18 2018-19
DEBT TO TOAL ASSET RATIO 0.611 0.825 0.813 0.76 0.733

INTERPRETATION:

Debt to total asset ratio is less than one for all five years. Hence, the company is at less risk towards debt to
total assets point of view.

COVERAGE RATIO

EARNINGS AVAILABLE FOR DEBT SERVICE

DEBT SERVICE COVERAGE RATIO = -----------------------------------------------------------
TOTAL INTEREST EXPENSES

EARNINGS AVAILABLE TOTAL INTEREST DSCR( DEBT SERVICE

YEAR COVERAGE RATIO)
FOR DEBT SERVICE EXPENSES
2014-15 7,22,89,398 7,15,98,052 1.01:1
2015-16 2,59,83,574 5,43,57,702 0.478:1
2016-17 2,44,06,483 5,86,81,959 0.416:1
2017-18 -3,88,79,609 7,13,57,861 -0.545:1
2018-19 3,89,78,582 8,40,54,824 0.464:1

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DSCR( DEBT SERVICE

COVERAGE RATIO)

1.5 1.01
1 0.478 0.416 0.464
0.5
0
-0.5
-0.545
-1
2014-15 2015-16 2016-17 2017-18 2018-19
DSCR( DEBT SERVICE
1.01 0.478 0.416 -0.545 0.464
COVERAGE RATIO)

INTERPRETATION:

During the year 2014-15, the ratio is 1 and after that it is reduced 50%. But during the year 2017-18
drastically ratio reduced to -0.545 and after that in the year 2018-19 increased to 0.464. This shows the
company ability to current debt obligation is 46%.
This may be due to more debts for company truculent growth strategy but have to watch further years
growth of ratio and should achieve the required ratio criteria.

EBIT (EARNINGS BEFORE INTEREST & TAXES)

INTEREST COVERAGE RATIO = ------------------------------------------------------------------
TOTAL INTEREST EXPENSES

YEAR EBIT INTEREST INTEREST COVERAGE RATIO

2014-15 10,43,23,662 7,15,98,052 1.457:1
2015-16 4,52,51,732 5,43,57,702 0.832:1
2016-17 3,35,82,132 5,86,81,959 0.572:1
2017-18 -4,24,97,401 7,13,57,861 -0.596:1
2018-19 3,62,69,949 8,40,54,824 0.432:1

INTEREST COVERAGE RATIO

1.457
1.5
0.832
1 0.572
0.432
0.5
0
-0.5
-0.596
-1
2014-15 2015-16 2016-17 2017-18 2018-19
INTEREST COVERAGE RATIO 1.457 0.832 0.572 -0.596 0.432

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INTERPRETATION:

During the year 2014-15, the ratio is 1.5 but after that gradually decreased and particularly in the year
2017-18 goes to negative. Hence, interest coverage ratio is not satisfactory.

SALES
TOTAL ASSET TURNOVER RATIO = ----------------------------
TOTAL ASSETS
YEAR SALES TOTAL ASSETS TOTAL ASSET TURNOVER RATIO
2014-15 3,10,26,07,522 2,25,11,99,732 1.378:1
2015-16 2,40,69,72,959 1,56,93,83,005 1.534:1
2016-17 2,34,88,56,219 1,56,00,43,174 1.506:1
2017-18 2,31,96,69,989 1,76,57,91,573 1.314:1
2018-19 2,24,29,05,644 1,74,20,69,386 1.287:1

TOTAL ASSET TURNOVER RATIO

1.534 1.506
1.6
1.5 1.378
1.4 1.314 1.287
1.3
1.2
1.1
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
TOTAL ASSET TURNOVER RATIO 1.378 1.534 1.506 1.314 1.287

INTERPRETATION:
If the asset turnover ratio is higher, then the company is capable and efficient. Since, higher ratios imply
that the company is generating lot of revenue per rupee of assets.
During all the years, the turnover ratio is above 1. Even though, it is satisfactory after year 2016-17
gradually decreasing and should not be below one.

SALES
FIXED ASSETS TURNOVER RATIO = ----------------------------
FIXED ASSETS
FIXED ASSETS
YEAR SALES FIXED ASSETS TURNOVER RATIO
2014-15 3,10,26,07,522 40,10,18,322 7.737:1
2015-16 2,40,69,72,959 57,74,19,983 4.168:1
2016-17 2,34,88,56,219 64,76,44,654 3.627:1
2017-18 2,31,96,69,989 78,65,80,059 2.949:1
2018-19 2,24,29,05,644 74,60,80,792 3.006:1

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FIXED ASSETS TURNOVER RATIO

7.737
8
6 4.168 3.627 3.006
2.949
4
2
0
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
FIXED ASSETS TURNOVER RATIO 7.737 4.168 3.627 2.949 3.006

INTERPRETATION:

Generally, the norms of an asset turnover ratio of 2.5 or more could be expressed as good. However, it is
more probably to target for an asset turnover ratio which is between 0.25 and 0.5.
During the year 2014-15, ratio is 7.737 it is very good and after that gradually reduced and in 2018-19 the
ratio is 3.006. It is satisfactory.
SALES
WORKING CAPITAL TURNOVER RATIO = ----------------------------
WORKING CAPITAL

WORKING CAPITAL WORKING CAPITAL

YEAR SALES (CA-CL) TURNOVER RATIO
2014-15 3,10,26,07,522 63,31,63,110 4.9:1
2015-16 2,40,69,72,959 -4,26,53,542 -56.431:1
2016-17 2,34,88,56,219 -8,22,85,359 -28.545:1
2017-18 2,31,96,69,989 -13,84,41,432 -16.756:1
2018-19 2,24,29,05,644 -12,93,03,324 -17.346:1

WORKING CAPITAL TURNOVER RATIO

4.9
10
0
-10
-20 -16.756 -17.346
-30 -28.545
-40
-50
-60 -56.431
2014-15 2015-16 2016-17 2017-18 2018-19
WORKING CAPITAL TURNOVER
4.9 -56.431 -28.545 -16.756 -17.346
RATIO

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INTERPRETATION:

In the year 2014-15, the working capital turnover ratio is 4.9 which is positive and high which reflected the
company effectiveness of working capital management and sales done for this period. But further years go
highly negative. Negative means that the company has not sufficient short term funds for fulfilling the
sales done for that period. This will cause a shortage of funds and a business to run out of money. This is
alarming to the business. This is not satisfactory.

SALES
INVENTORY TURNOVER RATIO = -----------------------------------
AVERAGE INVENTORY

AVERAGE INVENTORY
YEAR SALES INVENTORY TURNOVER RATIO
2014-15 3,10,26,07,522 51,99,56,794 5.967:1
2015-16 2,40,69,72,959 48,10,99,798 5.003:1
2016-17 2,34,88,56,219 48,55,20,994 4.838:1
2017-18 2,31,96,69,989 58,07,01,299 3.995:1
2018-19 2,24,29,05,644 66,97,18,728 3.349:1

INVENTORY TURNOVER RATIO

5.967
6.000 5.003 4.838
5.000 3.995
4.000 3.349

3.000
2.000
1.000
-
2014- 2015- 2016- 2017- 2018-
15 16 17 18 19
INVENTORY TURNOVER RATIO 5.967 5.003 4.838 3.995 3.349

INTERPRETATION:

A fine inventory turnover ratio is between 5 and 10 for most of the companies, which tells us that you trade
and restock your inventory every one to two months.

During the year 2014-15 and 2015-16, the ratio is about 6 and 5 and is good and satisfactory. But in the
further years, it is gradually decreasing and year 2018-19, it shows 3.349 which are low of general norms.
This implies that weak sales and possible excess inventory and also known as overstocking. It could imply
a problem with the goods being offered for sale or be a result of very low marketing.

PROFITABILITY RATIO

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NET PROFIT
NET PROFIT RATIO = -----------------------
SALES
YEAR NET PROFIT SALES NET PROFIT RATIO
2014-15 7,22,89,398 3,10,26,07,522 0.023:1
2015-16 2,59,83,574 2,40,69,72,959 0.011:1
2016-17 2,44,06,483 2,34,88,56,219 0.01:1
2017-18 -3,88,79,609 2,31,96,69,989 -0.017:1
2018-19 3,89,78,582 2,24,29,05,644 0.017:1

NET PROFIT RATIO

0.023
0.025
0.02 0.017

0.015 0.011 0.01

0.01
0.005
0
-0.005
-0.01
-0.015
-0.02 -0.017
2014-15 2015-16 2016-17 2017-18 2018-19
NET PROFIT RATIO 0.023 0.011 0.01 -0.017 0.017

INTERPRETATION:

During all the years, the ratio shows 0.02 to 0.01 which is 1% to 2% which is very low.
This low ratio indicates that the company uses an ineffective cost structure and /or poor pricing strategies.
This also shows inefficient management. It also indicates high costs (expenses) and weak pricing
strategies.

EBIT
OPERATING PROFIT RATIO = -----------------------
SALES
OPERATING PROFIT
YEAR EBIT SALES RATIO
2014-15 10,43,23,662 3,10,26,07,522 0.034:1
2015-16 4,52,51,732 2,40,69,72,959 0.019:1
2016-17 3,35,82,132 2,34,88,56,219 0.014:1
2017-18 -4,24,97,401 2,31,96,69,989 -0.018:1
2018-19 3,62,69,949 2,24,29,05,644 0.016:1

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OPERATING PROFIT RATIO

0.4 0.34

0.3
0.2
0.1 0.019 0.014 0.016
0
-0.018
-0.1
2014-15 2015-16 2016-17 2017-18 2018-19
OPERATING PROFIT RATIO 0.34 0.019 0.014 -0.018 0.016

INTERPRETATION:

The operating profit is gradually reduced from 3.4% to 1% which is not satisfactory. During the year
2017-18, the ratio is negative, which is an indication of company’s inability to control costs. However, this
may be the common of sector-wide or macro-economic struggling out of hand of company’s management.

PROFIT
RETURN ON INVESTMENT RATIO = -----------------------
INVESTMENT

ROI RETURN ON
YEAR PROFIT INVESTMENT INVESTMENT
2014-15 7,22,89,398 22,49,21,212 0.321:1
2015-16 2,59,83,574 21,53,50,967 0.121:1
2016-17 2,44,06,483 21,31,36,709 0.115:1
2017-18 -3,88,79,609 4,06,28,027 -0.957:1
2018-19 3,89,78,582 4,06,28,027 0.959:1

ROI RETURN ON INVESTMENT

0.959
1
0.8
0.6 0.321
0.4 0.121 0.115
0.2
0
-0.2
-0.4
-0.6
-0.8
-1 -0.957
2014-15 2015-16 2016-17 2017-18 2018-19
ROI RETURN ON INVESTMENT 0.321 0.121 0.115 -0.957 0.959

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INTERPRETATION:

During the year 2014-15, the return is 32% which is good and after that reduced to 12 % to 11%. In the
year 2017-18 this is negative. This refers to a loss, either on an investment or on invested projects. But in
the year 2018-19 the return is 95% which is very high and satisfactory.

FINDINGS:
From the above analysis, it clearly tells us that

The liquidity of the company is in decreasing position and not satisfactory. The Operation efficiency
is also not the anticipated standard. The profitability is poor.

Liquidity Ratios:
The current ratio is beneath the ratio’s standards of 2:1 in all five years and not at the satisfactory
level. The quick ratio is found too low in all the years. The cash ratio is lower than the standard ratio
of 1:1
Solvency Ratios:

Debt to assets turnover ratio at the lowest level as it indicates not the well-organized use of funds.
Debt-equity ratio is not favourable and indicates risk. Interest coverage ratio is in decline and
negative also come which isn’t absolutely satisfactory.
Activity Ratios:

Inventory turnover ratio is initially good but further low of general norms which means weak sales.
Total Asset turnover ratio is even though satisfactory but shows gradual decrease and should not be
below standard norms. Fixed assets to turnover ratio is initially very good and gradually reducing
however in satisfactory level.

Profitability Ratios:

Net profit ratio is extremely low which indicates incapable of management. Operating profit ratio
isn’t satisfactory and also negative shows inability to control costs. Return on investment ratio is
very satisfactory however in the year 2017-18 negative refers loss.

SUGGESTIONS:
 The company could decrease its inventory turnover on basis of the order for sales and market
potential. The company may diminish the variable expenses of raw material consumed, power and
fuel, employee expenses, administration, and selling & distribution expenses. It will lead to more
operating profit. So as to raise the profitability of the company. It is recommended to manage the
cost of goods sold and operating expenses The management would try to accept cost
diminishing techniques in their company to get rid of this crucial situation.
 The company could ceaselessly maintain its proper planning and control techniques in order
to regulate and optimize the use of cash balance. The company may be maintained in the current
assets properly so that it will lead to a stronger position of working capital. The company may
lessen the creditor’s position by repaying the loans in short-period and may in healthier position in
the forthcoming.
 The company would attempt to suit the amount of working with the sales trends. If there is a deficit
of working capital, they would attempt to build on an adequate amount of working capital. If there
is an exorbitant working capital, it would be invested either in marketable securities or would be
accustomed to repay borrowings.
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© 2021 JETIR April 2021, Volume 8, Issue 4 [Link] (ISSN-2349-5162)

 The management should try to utilise their production capacity absolutely so as to diminish
factory overheads and to utilise their fixed assets properly. To vitalise the financial ability, long-
term funds have to be used to finance vital current assets and a part of temporary current assets. It is
better if the company can reduce the oversized short-term loans and an advance eliminates the risk
of arranging finance regularly.

CONCLUSION:
Financial performance is a basic instrument which provides all information regarding the financial
position and operational efficiency of the company. The current ratio, quick ratio, net profit may
increase in this respect. It is concluded that the overall financial performance was not satisfactory as per
analysis. The company has to take appropriate steps to control the cost, raise the volume of sales, profit in
the forthcoming years. So, proper planning should be made. The company ought to try and use properly
their operating assets and should try to minimize their non-operating expenses.

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