SUMMER TRAINING REPORT

ON

FINANCIAL ANALYSIS
AT

OMAX AUTO LIMITED

SUBMITTED IN PARTIAL FULFILLMENT FOR THE REQUIREMENT OF DEGREE IN

MASTER OF BUSINESS ADMINISTRATION

OF

MAHARSHI DAYANAND UNIVERSITY

ROHTAK

SESSION: 2024-2026

SUBMITTED TO: SUBMITTED BY:

SACHIN BALUNI

MBA

MBA DEPARTMENT [Link]. 4020450

[Link]. 2411081022

[Link] NO.

RAMANUJAN COLLEGE OF MANAGEMENT

AFFILIATED TO MD UNIVERSITY, ROHTAK

PALWAL, MITROL HARYANA - 121105

PREFACE
1
 Practical training is an important part of theoretical studies. Any professional
degree remains incomplete without practical exposure. The students are required to
develop deep into the intricacies of the human resource related activities.

It covers all that which remains uncovered in the classroom. It offers all that
which remains an invaluable treasure of experience. It offers an exposure to
practical of management of business organization.

As we know well that practical training plays an important role in future

building of an individual. One can easily overcome the fear from that life in which he
has to join as a member after sometime.

Just theoretically knowledge is not sufficient for the success of an individual to

one should have practical knowledge about theory of general life.

I have been given an opportunity to do practical training at Autoload solutions

LLP. I availed of this opportunity is a very satisfactory manner and I think it will be
much beneficial for me in future building.

Learning is like eating food. It is not how much one eats that matters, what
counts are how much you digest. Knowledge is potential power wisdom is real
power. Knowledge becomes poor only when it is acted upon.

The research and methodology includes the research procedure, research,

research design, sample design, data collection and finally limitations of study. The
methods used for conducting survey are by preparing a structured questionnaire
and then taking the views of respective respondents

S
ACHIN BALUNI

ROLL no: 4020450

2
 ACKNOWLEDGEMENT

A project report has never been the sale product of the person whose name
appears on the cover. There are always some people whose guidance proves to be
of immense help in giving its final shape. So, it is my first duty to express my
gratitude towards all of them.

Success in my endeavor calls for co-operation and the valuable for senior and
colleagues.. First, of all I would like to convey my heart full gratitude to Ms. Neetu
singhfor giving me permission to work on a project in this organization. I am also
thankful to Mrs. Rita Dagar who has provided me supervision and guidance
during my project work. I cherish to record my thanks to management of OMAX
AUTOSLIMITED.

Last but not the least; I am extremely thankful to god who is the ultimate
guide providing me with valuable insist, courage and determination at every
doorstep, if I don’t mention here that love, affection & co-operation which I received
from my family members. They too helped me a lot in completing this report.

Sachin Baluni

(Roll No. 4020450)

3
 TABLE OF CONTENT

S. No. PARTICULARS PAGE NO.

INTRODUCTION TO THE TOPIC

CH – 1

CH – 2 COMPANY PROFILE

CH – 3 LITERATURE REVIEW

RESEARCH METHODOLOGY

[Link] Of Study

[Link] Of Study

[Link] Of Study
CH – 4

[Link] Of Study

[Link] Of Study

CH – 5
DATA ANALYSIS AND INTREPRETATION

FINDINGS
CH – 6
 CONCLUSION
 SUGGESTIONS &RECOMMENDATION
CH – 7 ANNEXURES

 BIBLIOGRAPHY

4
 CHAPTER = 1
INTRODUCTION TO
THE TOPIC

INTRODUCTION:

5
 We know business is mainly concerned with the financial activities. In order to ascertain the
financial status of the business every enterprise prepares,certain statements, known as financial
statements. Financial statements are,mainly prepared for decision making purposes. But the information
as is provided in the financial statements is not adequately helpful in drawing a meaningful conclusion.
Thus, an effective analysis and interpretation offinancial statements is required.

Analysis means establishing a meaningful relationship between various items of the two financial
statements with each other in such a way that a conclusion is drawn. By financial statements we mean two
statements :
(i) Profit and loss Account or Income Statement
(ii) Balance Sheet or Position Statement

These are prepared at the end of a given period of time. They are the indicators of profitability and
financial soundness of the business concern. The term financial analysis is also known as analysis and
interpretation of financial statements. It refers to the establishing meaningful relationship between various
items of the two financial statements i.e. Income statement and position statement. It determines financial
strength and weaknesses of the firm.

Analysis of financial statements is an attempt to assess the efficiency and performance of an

enterprise. Thus, the analysis and interpretation of financial statements is very essential to measure the
efficiency, profitability, financial soundness and future prospects of the business units.

Meaning of Financial Analysis

The process of evaluating businesses, projects, budgets and other finance-related entities to
determine their suitability for investment. Typically, financial analysis is used to analyze whether an
entity is stable, solvent, liquid, or profitable enough to be invested in. When looking at a specific
company, the financial analyst will often focus on the income statement, balance sheet,

Definition of Financial Analysis:

In the words of Finney and Miller: “Financial analysis consists in separating facts according to some
definite plan, arranging them in groups according to certain circumstances and then presenting in a
convenient and easily read and understandable form.

Investopedia explains Financial Analysis

6
One of the most common ways of analyzing financial data is to calculate ratios from the data to
compare against those of other companies or against the company's own historical performance. For
example, return on assets is a common ratio used to determine how efficient a company is at using its
assets and as a measure of profitability. This ratio could be calculated for several similar companies and
compared as part of larger analysis.

Introduction & How Company Perform its Financial Analysis

Omax Autos Ltd., a part of Omax Group is into manufacture of sheet metal, tubular and
machined components and sprockets for two-wheelers and four at its two plants in
Dharuhera, Haryana. Hero Honda is major client of the company contributing 75% of its
turnover. The company has a marketing tie-up with Hero Honda, near which the Haryana
plant of the company is situated. Omax Autos other customers include Maruti, TVS Suzuki,
T I Diamond Chain and SRF.

In 1994-95, the company doubled the capacity of its electroplating plant and sprocket
division. It has started constructing its proposed third unit at Gurgaon. It has also
purchased new land in Gurgaon to put up its fourth unit to exclusively meet the
requirements of the upcoming new unit of Hero Honda Motors at Gurgaon.

Major Part of expansion of new Speedomax project has been completed. New automatic
computerized tri-nickle coating plant is ready for production. However, to meet the
enhanced demand of Hero Honda Motors Ltd and to achieve better economies of scale,
company has started putting one more new Automatic computerized tri-nickle coating plant
of same capacity of Speedomax & Commercial Production of plant commenced in July99.

The 4th plant at IMT,Manesar,has started its commercial production in April,2002 at an

estimated cost of Rs.18.00 crores. The company has got a major break through in getting
exports from M/s Piaggio of Italy and from M/s Santhana Brothers. It is also planning to
become global supplier for OEM buyers. It is also negotiating with MNCs in India for the
supply of components to their international [Link] Auto is in the process of
amalgamating Indital Tintoria Ltd with itself with effect from March 1, 2003. The
amalgamation scheme is pending approval of High Cour to Pujab & Haryana.
Vision, Mission & Core Values

Vision
 Highly customer oriented, humane and system run global organization with a concern for Society
Mission
 We are a dedicated, proactive, loyal & accountable group of people with a quest for excellence
through latest technology, people empowerment and brand equity to produce world class products
by adopting best business practices and ethics.

7
 Core Values

 Human Dignity
 Honesty
 Commitment
 Sincerity
OMAX AUTO LTD. NIFTY 50

8
 CHAPTER-2

COMPANY
PROFILE

9
OMAXAUTOSLIMITED

Omax Autos Limited was incorporated in 1983 with a vision to emerge as a

niche player in Auto Industry and has grown exponentially into truly diversified and
globalised corporate entity since then. In the last Twenty-Seven years of its
existence, the Omax Autos Group has created and executed projects that were a
part to touch every walk of life and human endeavor, while setting new benchmarks
in quality. Today the Group enjoys a Gross Turnover Rs. 974.95 crores, spanning its
horizon and providing fulfilled management. The group enjoys huge reserves of
goodwill that has led to some of the biggest names in the corporate world putting
their trust in us and constantly strives to provide products and services that
enhance the quality of life and work, and to address a gamut of human needs

OMAX Autos Ltd is in the business of manufacturing auto components. Omax

is one of the largest manufacturers of Sheet Metal parts, Machined Tubular,
Electroplated & painted components, Welding Facilities with integrated world-class
features in India.

With growing opportunities & enhanced experience base Omax Autos has
strengthen horizontally. In the last 27 years the company has widened its customer
base and products by entering into 4 wheeler industry, producing for central
railways and defense and producing home accessories apart from 2 wheeler
industry. Not only within the domestic market footsteps have also left their mark
globally through IKEA, TENNECO, PIAGGIO & TOYOTA.

Though the Company has moved towards new frontiers in the last 27
successful years, yet it nourishes old relationships with undying passion and

10
perseverance. With 10 plants as facilities, a strong infrastructure base and
enlightened human resource the organization has reached the zenith of success

Through continuous and aggressive strategy building and disciplined

execution of the same it has been possible to attain high level of growth and
experience. The key features of the strategy are –

 To make major improvements towards customer's satisfaction.

 To develop a competitive edge - to optimize its cost and move up in
value chain.
 To progress through a strong base laid on in depth research and development

The Company has also made significantly major changes

namely –

The Manesar Unit got Registered for in-house R&D activity with DSIR, Govt. of India,
New Delhi.

Exploring projects in Hydro, Solar & Wind as Renewable Source of Energy and
have:-

a) Successfully installed & commissioned 100 kWp Capacity Solar Roof Top
Photovoltaic System at Manesar and Dharuhera plants for Captive use.

Ordered 2 Gas Based Generator sets of 1364 kWe & have signed agreement with
GAIL for supplying 20000 SCM of Gas Per Day to units located at Manesar &
Dharuhera plants, which will result in considerable cost saving.

Commenced commercial production of chassis of commercial vehicles for Tata

Motors Limited at Lucknow plant.

Set up dedicated facilities at Gurgaon plant to manufacture parts and components

for Indian Railways.

Set up plant at Bawal to manufacture Home Furnishing products.

11
CORPORATE INFORMATION

CHAIRMAN EMERITUS:-

Dr. Brijmohan Lall Munjal

BOARD OF DIRECTORS:-

 Mr. Suresh Mathur Chairman

 Dr. Ramesh C. Vaish Director
 Dr. T.N. Kapoor Director
 Mr. SalilBhandari Director
 Mr. Verinder Kumar Director
 Mr. AtulRaheja Director
 Mr. LalitBhasin Director
 Mr. K.C. Chawla Whole Time Director
 Mr. Jatender Kumar Mehta Managing Director
 Mr. Ravinder Mehta Managing Director

AUDIT COMMITTEE:-

 Mr. SalilBhandari Chairman

 Dr. T.N. Kapoor Member
 Mr. AtulRaheja Member
 Mr. Jatender Kumar Member
 Dr. R.C. Vaish Member
12
AUDITORS:-

o M/s A. Kumar Gupta& Co.,

o Chartered Accountants, Ludhiana

INTERNAL AUDITORS:-

o M/s KRA & Associates

o M/s SinghiChugh& Kumar
o M/s Doogar& Associates

SECRETARIAL AUDITORS:-

o M/s Chandrasekaran Associates,

o Company Secretaries
o
SENIOR MANAGEMENT EXECUTIVES:-

o Mr. N.P. Singh ED (Human Resource)

o Mr. [Link] ED (Commercial)
o Mr. Sharad Jain Chief Financial Officer
o Mr. KishorKarnataki CEO (Commercial Vehicle)
o Mr. Manoj Mishra President (Passenger Car)
BANKERS:-

o Canara Bank
o State Bank of India
o Citi Bank
o United Bank of India
o Royal Bank of Scotland N.V. (India)
o HDFC Bank Limited
o Deutsche Bank
o ICICI Bank Limited

13
MILESTONES

1983 The year marked the beginning of the name "Omax Autos Limited".

1985 The first unit started in Dharuhera as an ancillary supplier to Hero Honda

For Sheet Metal and Tubular Welded components.

1986 Omax Autos Limited went public with more than 7500 shareholders.

1988 Established its second unit Automax in Gurgaon.

1989 Diversified its customer base by roping in Carrier Aircon Ltd. in Air

Conditioning Components.

1997 Bagged ISO 9002 certificate from TUV of Germany.

1999 Established its third unit- Speedomax in Sidhrawali.

Tied up with Honda- Siel Cars India Ltd. and New Holland Tractors Ltd. For

supply of Body and Axle parts.

2000 Set up the ultra modern Paint Shop with latest technology from ABB India

Ltd.

2001 A new phase of Kaizen activity- Various Training & HR activities started in

All plants.

2002 Established its Fourth Plant at IMT Manesar with a capital outlay of Rs.

200 million equipped with modern Tool Room, R&D Centre with state of

The art machinery began production.

2003 Established its Fifth Plant- Sprocket division in Dharuhera. Bagged

ISO/TS- 16949, ISO 14001 & OHSAS- 18001 Certification from UL India

14
 For all plants.

2004 Established its Sixth Plant at Bangalore having machining & sheet metal

Manufacturing facilities.

Established its Seventh Plant- Indital at Dharuhera. Started Exports to

North America and Europe with clients such as Delphi, Tenneco,

Cummins, Piaggio etc.

2005 Established its Eighth Plant at Binola, Gurgaon for catering export clients.

2006 SAP rolled out in all Eight plants across India.

2007 Automax, Gurgaon-Sohna Road Plant merged with Binola Plant.

2008 Established its latest Plant at Lucknow to manufacture chassis for

commercial vehicles for Tata Motors.

Established new Corporate Office in Gurgaon.

2009 Tied up with IKEA for supply of Metal Houseware Products.

Reached the remarkable heights of 26 years of manufacturing and

rendering quality products & services to customers.

2010 Commercial production started at Lucknow plant.

Set up plant at Bawal to manufacture Home Furnishing products.

Installed 100 kWp Solar PV System at Dharuhera & Manesar plant for

Captive use.

ORGANISATION’S VISION:-

15
 “Highly customer oriented, humane
and system run global organization with a concern for society“

ORGANISATION’S MISSION:-

“To be a dedicated, proactive, loyal & accountable group of people with a quest for
excellence through latest technology, people empowerment and brand equity to
produce world class products by adopting best business practices and ethics.”

IMS (INTEGERATED MANGEMENT SYSTEM) POLICY:-

“In line with organizations Vision & Mission, to remain committed for total
satisfaction of the customers, associates and society at large, through excellence in
quality, value for money, on time deliveries and continual improvement. While
achieving this, to remain committed to comply with legal and other requirements
relating to Environment, Health & Safety, for prevention of polluion, ill-health &
injury.

CORE VALUES:-

 Human Dignity
 Honesty
 Commitment
 Sincerity

ASPIRATIONS:-

 To build a world class Company through reliability and be a great place to

work.
 Company’s vision is to make the Company the best in class in whatever they
do, globally.
 The products and services they offer should be comparable to the best in the
world,
 Company’s business process and systems should set benchmark for others.
 To earn the respect of the competitors and be loved by our stakeholders.

16
  The Company should be the most preferred company to work for, for any
employee.
 He should feel like a owner, be able to live his dream, fulfill all his professional
goals and enjoy while doing so.

OMAX STRENGHT IT’S EMPLOYEES

HR MISSION:-

“To promote and sustain the culture of developing world class leaders for value
addition in every sphere of original activities while fulfilling employees’ professional
and personalsatisfaction.”

OMAX INFRASTRUCTURE

10Manufacturing Plants situated across India, which forms the backbone of the
structure called "OMAX AUTOS LIMITED".

10Facilities including Stamping Facility; CNC Pipe Bending Facility;Welding

Facility;Sprocket Facility; Machining Facility; Piston Rod Manufacturing Facility; Tri
Nickel Chrome Plating Facility; Tool Room Facility; Induction Hardening Facility and
Tube Manufacturing facility.

35Main Products that form the vital & significant component and accessories for
two wheeler, four wheeler, commercial vehicles and home furnishing.

52Customers / Clients that include OEMs & Tier I Manufacturers, providedwith

timely and quality product delivery.

R&D Centre:-

To facilitate research & development of new products, designs and equipments as

well as to improve the existing products by technical upgradation and cost
minimization.

17
FINANCIAL HIGLIGHTS AND GRAPHS OF OMAXE AUTOS

FINANCIAL PERFORMANCE:-

March March March

Year ended March 2012 March 2014
2013 2015 2016

Gross Sales 71,069 84,840 88,103 98,095 97,495

Net Sales 58,610 69,944 73,044 83,435 87,558

Export Sales 2,656 3,076 3,408 5,266 8,500

Gross Profit
5,730 7,710 7,367 7,991 7,789
(PBITD)

Net Profit (PAT) 2,003 2,366 1,584 543 1,430

Net Worth 11,371 13,333 14,567 14,561 16,139

Capital Employed 19,590 20,262 24,578 30,962 30,687

Fixed Assets (Net

22,639 26,804 31,769 33,390 35,422
block)

KEY INDICATORS:-

March March20 March20 March March

Year ended
2012 13 14 2015 2016

Gross Profit Margin

9.78 11.02 10.09 9.62 8.90
(%)

Net Profit Margin

3.42 3.38 2.17 0.65 1.63
(%)

18
Export Sales/Net
4.53 4.40 4.67 6.25 9.71
Sales (%)

Debt/Equity 0.74 0.52 0.69 1.13 0.90

Earning Per Share

8.84 12.17 7.53 3.17 6.64
(Rs)

Dividend Per Share

2.00 2.25 1.50 1.00 1.50
(Rs)

Book Value/Share
52.70 62.34 68.11 68.08 75.46
(Rs)

DISTRIBUTION OF SHARE HOLDINGS AS ON MARCH 31, 2012:-

Nominal Value Total face

Number of %total %total face
of shares value
holders holders Value
(In Rupees) (In
Rupees)
1-5000 11,890 80.16 1,72,26,300 8.05

5001-10000 1,746 11.77 1,26,58,520 5.92

10001-20000 672 4.53 97,59,100 4.56

20001-30000 189 1.27 49,33,880 2.31

19
30001-40000 76 0.51 7,07,550 1.7

40001-50000 71 0.48 32,58,810 1.52

50001-100000 97 0.65 67,09,620 3.14

15,66,28,35
100001&above 94 0.63 73.23
0

21,38,82,1
Total 14835 100.00 100.00
30

SHARE HOLDINGS PATTERN AS ON MARCH 31, 2010:-

[Link] Category No. of Shares % of

. shareholding

1
Promoters 'Holding

Indian Promoters 72,68,350 33.98

Bodies Corporate 38,94,504 18.21

2
Non Promoters' Holding

Mutual Funds and UTI 0 0.00

Banks, FIs, Insurance Companies 0 0.00

20
 Foreign Institutional Investors 88,939 041

Private Corporate Bodies 36,07,399 16.87

Indian Public 63,35,149 29.62

NRIs/OCBs 1,93,872 0.91

TOTAL 21388213 100.00

CUSTOMERS OF OMAX AUTOS LTD

INDIAN CUSTOMERS (OEMS):-

 Hero Honda Motors Ltd.

 MarutiUdyog Ltd. (Suzuki J.V.)
 Honda Motorcycle & Scooters India Pvt.
 TVS Motors Ltd.
 Suzuki Motorcycle Ltd.
 New Holland Tractors (India) Ltd
 Yamaha Motors India Pvt. Ltd.
 Hero Motors Ltd.
 International Tractor Ltd

INDIAN CUSTOMERS (TIER 1):-

 Bharat Seats Ltd.

 Carraroindia Ltd.
 CaparoMaruti
 DeiphiAutomotives
 Denso India Ltd.
 Gabrial India Ltd.
21
  Honeywell
 IKEA
 India-Nippon Electricals Ltd.
 Mitsuba Sical India Ltd.
 Sundram Clayton Ltd.
 Tata Motors Limited
 Toyota (India)

EUROPEAN CUSTOMERS:-

 Delphi-Spain
 Delphi-Poland
 Honeywell
 Piaggio
 Tenneco Automotive-Belgium
 Supersprox-Czech

NORTH AMERICAN CUSTOMERS:-

 Delphi Automotive Inc. USA

 Tenneco Automotive (Mexico)

BUSINESS AREAS / PRODUCTS MANUFACTURED BY OMAX AUTOS

LIMITED

AUTOMOTIVE:-

22
TWO WHEELER:-

 Tubular Welded Component

 Sprocket
 Welded Component in all
 Sheet Metal Component in all
PASSENGER CARS:-

 Neck fuel filters

 Steering column shafts
 Frame assemblies
 Transmission shafts
 Back plates for brake shoes
 Piston rods for damper assembly
 Door beams
SEGMENT WISE SHARE IN 2009-2010 (AS PER DOMESTIC SALE)

ENGINEERING:-

23
Company has entered into Joint Venture Agreement with COC (China Oghiara
Corporation) tooling and stampings, Taiwan for world class tool room.

PRODUCT MANUFACTURED:-

Assemblies & Sub assemblies of stamped/Welded components including surface

treatment, Sub Assemblies of Machine Components & SprocketsTools & dies.

3D-TOOL MODEL BY UG-NX4

Bright bars made out of mild steel.

RAILWAY SUPPLIES:-
24
OMAX is registered supplier to railway.

Various products are under development for supplies to various locations of India.

METAL HOME FURNISHINGS:-

 Carbon Steel
 Stainless Steel

CORPORATE OFFICE:-

 Plot No. B-26, Institutional Area,

32, Gurgaon – 122001

OMAX AUTOS LIMITED:-

Registered Office & Dharuhera Plant Address:

69 [Link], Delhi Jaipur Highway,

Dharuhera, Rewari (Haryana)- 122106

25
UTOMAX PLANT:-

Automax (A unit of Omax Autos Limited)

Delhi- Jaipur Highway, Village & P.O Binola

Gurgaon (Haryana)- 122001

CHAPTER - 3

26
  REVIEW OF
LITERATURE

REVIEW OF LITERATURE

 Financial Analysis
We know business is mainly concerned with the financial activities. In order to ascertain the financial
status of the business every enterprise prepares, certain statements, known as financial statements.
Financial statements are mainly prepared for decision making purposes. But the information as is
provided in the financial statements is not adequately helpful in drawing
a meaningful conclusion. Thus, an effective analysis and interpretation offinancial statements is required

27
Analysis means establishing a meaningful relationship between various items of the two financial
statements with each other in such a way that a conclusion is drawn. By financial statements we mean two
statements :
(i) Profit and loss Account or Income Statement
(ii) Balance Sheet or Position Statement
These are prepared at the end of a given period of time. They are the indicators of profitability and
financial soundness of the business concern. The term financial analysis is also known as analysis and
interpretation of financial statements. It refers to the establishing meaningful relationship between various
items of the two financial statements i.e. Income statement
and position statement. It determines financial strength and weaknesses of the firm.
Analysis of financial statements is an attempt to assess the efficiency and performance of an enterprise.
Thus, the analysis and interpretation of financial statements is very essential to measure the efficiency,
profitability, financial soundness and future prospects of the business units.

 Definition of Financial Analysis:

In the words of Finney and Miller:
“Financial analysis consists in separating facts according to some definite plan, arranging them in groups
according to certain circumstances and then presenting in a convenient and easily read and
understandable form.”

Investopedia explains Financial Anaylsis:

“One of the most common ways of analyzing financial data is to calculate ratios from the data to
compare against those of other companies or against the company's own historical performance. For
example, return on assets is a common ratio used to determine how efficient a company is at using its
assets and as a measure of profitability. This ratio could be calculated for several similar companies and
compared as part of a larger analysis.”
Meaning of Financial Analysis

The process of evaluating businesses, projects, budgets and other finance-related entities to
determine their suitability for investment. Typically, financial analysis is used to analyze whether an
entity is stable, solvent, liquid, or profitable enough to be invested in. When looking at a specific
company, the financial analyst will often focus on the income statement, balance sheet, and cash flow
statement. In addition, one key area of financial analysis involves extrapolating the company's past

28
performance into an estimate of the company's future performance.

Objectives of Financial Statement Analysis

The major objective of financial statement anaylsis are as follows

1. Assessment of Past Performance:

Past performance is a good indicator of future performance. Investors or creditors are interested in the
trend of past sales, cost of good sold, operating expenses, net income, cash flows and return on
investment.

2. . Assessment of current position:

Financial statement analysis shows the current position of the firm in terms of the types of assets owned
by a business firm and the different liabilities due against the enterprise.
3. Prediction of profitability and growth prospects:

Financial statement analysis helps in assessing and predicting the earning prospects and growth rates in
earning which are used by investors while comparing investment alternatives and other users in judging
earning potential of business enterprise

.4. Prediction of bankruptcy and failure:

Financial statement analysis is an important tool in assessing and predicting bankruptcy and probability of
business failure

5. Assessment of the operational efficiency:

Financial statement analysis helps to assess the operational efficiency of the management of a company.
The actual performance of the firm which are revealed in the financial statements can be compared with
some standards set earlier and the deviation of any between standards and actual performance can be used
as the indicator of efficiency of the managemen

Financial analysis serves the following purposes :

_ Measuring the profitability

The main objective of a business is to earn a satisfactory return on the

funds invested in it. Financial analysis helps in ascertaining whether
29
adequate profits are being earned on the capital invested in the business
or not. It also helps in knowing the capacity to pay the interest and
dividend.

_ Indicating the trend of Achievements

Financial statements of the previous years can be compared and the
trend regarding various expenses, purchases, sales, gross profits and net
profit etc. can be ascertained. Value of assets and liabilities can be
compared and the future prospects of the business can be envisaged.

_ Assessing the growth potential of the business

The trend and other analysis of the business provides sufficient information indicating the growth
potential of the business.

_ Comparative position in relation to other firms

The purpose of financial statements analysis is to help the management to make a comparative study of
the profitability of various firmsengaged in similar businesses. Such comparison also helps the
management to study the position of their firm in respect of sales, expenses, profitability and utilising
capital, etc
._ Assess overall financial strength
The purpose of financial analysis is to assess the financial strength of the business. Analysis also helps in
taking decisions, whether funds required for the purchase of new machines and equipments are provided
from internal sources of the business or not if yes, how much? And also
to assess how much funds have been received from external sources.

_ Assess solvency of the firm

The different tools of an analysis tell us whether the firm has sufficient funds to meet its short term and
long term liabilities or not.
PARTIES INTERESTED
Analysis of financial statements has become very significant due to widespread interest of various parties
in the financial results of a business unit. The various parties interested in the analysis of financial
statements
are :
30
(i) Investors :Shareholders or proprietors of the business are interested in the wellbeing of the
business. They like to know the earning capacity of the business and its prospects of future growth.
(ii) Management :The management is interested in the financial position and performance of the
enterprise as a whole and of its various divisions. It helps them in preparing budgets and assessing the
performance of various departmental heads.

(iii) Trade unions :They are interested in financial statements for negotiating the wages or salaries or
bonus agreement with the management.
(iv) Lenders :Lenders to the business like debenture holders, suppliers of loans and lease are
interested to know short term as well as long term solvency position of the entity.
(v) Suppliers and trade creditors :The suppliers and other creditors are interested to know about
the solvency of the business i.e. the abilityof the company to meet the debts as and when they fall due.
vi) Tax authorities :Tax authorities are interested in financial statementsfor determining the tax
liability.

(vii) Researchers :They are interested in financial statements in undertaking research work in
business affairs and practices.
(viii) Employees :They are interested to know the growth of profit. As a result of which they can
demand better remuneration and congenial working environment.
(ix) Government and their agencies :Government and their agencies need financial information
to regulate the activities of the enterprises/ industries and determine taxation policy. They suggest
measures to formulate policies and and regulations.
(x) Stock exchange :The stock exchange members take interest in financial statements for the
purpose of analysis because they provide useful financial information about companies.

Thus, we find that different parties have interest in financial statements for
different reasons. Thus, we find that different parties have interest in financial statements for different
reasons.

TECHNIQUES AND TOOLS OF FINANCIAL STATEMENT

ANALYSIS
Financial statements give complete information about assets, liabilities, equity, reserves, expenses and
profit and loss of an enterprise. They are notreadily understandable to interested parties like creditors,
shareholders,investors etc. Thus, various techniques are employed for analysing and nterpreting the
financial statements. Techniques of analysis of financial
31
statements are mainly classified into three categories :
(i) Cross-sectional analysis
It is also known as inter firm comparison. This analysis helps inanalysing financial characteristics of an
enterprise with financialcharacteristics of another similar enterprise in that accounting [Link]
example, if company A has earned 15% profit on capital invested.
This does not say whether it is adequate or not. If we analyse further and find that a similar company has
earned 16% during the same period, then only we can make a conclusion that company B is better. Thus,
it turns into a meaningful analysis.
(ii) Time series analysis
It is also called as intra-firm comparison. According to this method, the relationship between different
items of financial statement is established, comparisons are made and results obtained. The basis
ofcomparison may be :
– Comparison of the financial statements of different years of thesame business unit.
– Comparison of financial statement of a particular year of differentbusiness units.
(iii) Cross-sectional cum time series analysis
This analysis is intended to compare the financial characteristics of two or more enterprises for a defined
accounting period. It is possible to extend such a comparison over the year. This approach is most
effective inanalysing of financial statements. The analysis and interpretation of financial statements is
used to determine the financial positon. A number of tools or methods or devices are used to study the
relationship between financial statements. However, the following are the important tools which are
commonly used for analyzing and interpreting financial statements :
_ Comparative financial statements
_ Common size statements
_ Trend analysis
_ Ratio analysis
_ Funds flow analysis
_ Cash flow analysis
_ Comparative financial statements
In brief, comparative study of financial statements is the comparison of the financial statements of the
business with the previous year’s financial statements. It enables identification of weakpoints and
applying corrective measures. Practically, two financial statements (balance sheet and income statement)
are prepared in comparative form for analysis purposes.
1. Comparative Balance Sheet

32
The comparative balance sheet shows the different assets and liabilities of the firm on different dates to
make comparison of balances from one date to another. The comparative balance sheet has two columns
for the data of original balance sheets. A third column is used to show change
(increase/decrease) in figures. The fourth column may be added for giving percentages of increase or
decrease.
While interpreting comparative Balancesheet the interpreter is expected to study the following aspects :
(i) Current financial position and
Liquidity position
(ii) Long-term financial position
(iii) Profitability of the concern
(i) For studying current financial position or liquidity position of a concern one should examine the
working capital in both the years. Working capital is the excess of current assets over current liabilities.
(ii) For studying the long-term financial position of the concern, one should examine the changes in fixed
assets, long-term liabilities and capital.
(iii) The next aspect to be studied in a comparative balance sheet is the profitability of the concern. The
study of increase or decrease in profit will help the interpreter to observe whether the profitability has
improved or not After studying various assets and liabilities, an opinion should be formed about the
financial position of the concern.

Comparative Income statement

The income statement provides the results of the operations of a business. This statement traditionally is
known as trading and profit and loss A/c. Important components of income statement are net sales, cost of
goods sold, selling expenses, office expenses etc. The figures of the above components are matched with
their corresponding figures of previous years individually and changes are noted. The comparative
income statement gives an idea of the progress of a business over a period of time. The changes in money
value and percentage can be determined to analyse the profitability of the business. Like comparative
balance sheet, income statement also has four columns. The first two columns are shown figures of
various items for two years. Third and fourth columns are used to show increase or decrease in figures in
absolute amount and percentages respectively.
The analysis and interpretation of income statement will involve the following :

– The increase or decrease in sales should be compared with the increase or decrease in cost of goods
sold.
– To study the operating profits

33
– The increase or decrease in net profit is calculated that will give an idea about the overall profitability of
the concern.
COMMON SIZE STATEMENTS AND TREND ANALYSIS
The common size statements (Balance Sheet and Income Statement) are shown in analytical percentages.
The figures of these statements are shown as percentages of total assets, total liabilities and total sales
respectively. Take the example of Balance Sheet. The total assets are taken as 100 and different assets are
expressed as a percentage of the total. Similarly, various
liabilities are taken as a part of total liabilities
Common size balance sheet
A statement where balance sheet items are expressed in the ratio of each asset to total assets and the ratio
of each liability is expressed in the ratioof total liabilities is called common size balance sheet.
Thus the common size statement may be prepared in the following way.
– The total assets or liabilities are taken as 100
– The individual assets are expressed as a percentage of total assets i.e.
100 and different liabilities are calculated in relation to total liabilities For example, if total assets are
Rs10 lakhs and value of inventory is Rs 100,000, then inventory will be 10% of total assets= (10000
*100)/100000 
Common size income statement
The items in income statement can be shown as percentages of sales to showthe relations of each item to
sales.
Trend percentage analysis (TPA)
The trend analysis is a technique of studying several financial statements over a series of years. In this
analysis the trend percentages are calculated for each item by taking the figure of that item for the base
year taken as 100. Generally the first year is taken as a base year. The analyst is able to see the trend of
figures, whether moving upward or downward In brief, the procedure for calculating trends is as :
– One year is taken as a base year which is generally is the first year or last year.
– Trend percentages are calculated in relation to base year.
The financial statement analysis is important for different reasons:
 HoldingOfShar
Shareholders are the owners of the company. Time and again, they may have to take decisions
whether they have to continue with the holdings of the company's share or sell them out. The
financial statement analysis is important as it provides meaningful information to the shareholders
in taking such decisions.

34
  DecisionsAndPlans
The management of the company is responsible for taking decisions and formulating plans and
policies for the future. They, therefore, always need to evaluate its performance and effectiveness
of their action to realise the company's goal in the past. For that purpose, financial statement
analysis is important to the company's management.

 ExtensionOfCredit
The creditors are the providers of loan capital to the [Link] they may have to
take decisions as to whether they have to extend their loans to the company and demand for higher
interest rates. The financial statement analysis provides important information to them for their purpose
 InvestmentDecision
The prospective investors are those who have surplus capital to invest in some profitable
opportunities. Therefore, they often have to decide whether to invest their capital in the company's share.
The financial statement analysis is important to them because they can obtain useful information for their
investment decision making purpose.

CONCEPTUALISATION

Tools and Techniques of Financial Statement Analysis:

Following are the most important tools and techniques of financial statement analysis:

1. Horizontal and Vertical Analysis

2. Ratios Analysis

1. Horizontal and Vertical Analysis:

Horizontal Analysis or Trend Analysis:

Comparison of two or more year's financial data is known as horizontal analysis, or trend
analysis. Horizontal analysis is facilitated by showing changes between years in both dollar and
percentage form.

Trend Percentage:

35
Horizontal analysis of financial statements can also be carried out by computing trend
percentages. Trend percentage states several years' financial data in terms of a base year. The base year
equals 100%, with all other years stated in some percentage of this base.

Vertical Analysis:

Vertical analysis is the procedure of preparing and presenting common size [Link] size
statement is one that shows the items appearing on it in percentage form as well as in dollar form. Each
item is stated as a percentage of some total of which that item is a part. Key financial changes and trends
can be highlighted by the use of common size statements.

2. Ratios Analysis:

The ratios analysis is the most powerful tool of financial statement analysis. Ratios simply means one
number expressed in terms of another. A ratio is a statistical yardstick by means of which relationship
between two or various figures can be compared or measured. Ratios can be found out by dividing one
number by another number. Ratios show how one number is related to another.

Profitability Ratios:

Profitability ratios measure the results of business operations or overall performance and effectiveness
of the firm. Some of the most popular profitability ratios are as under:

 Gross profit ratio

 Net profit ratio
 Operating ratio
 Expense ratio
 Return on shareholders’ investment or net worth
 Return on equity capital
 Return on capital employed (ROCE) Ratio
 Dividend yield ratio
 Dividend payout ratio
 Earnings Per Share (EPS) Ratio
 Price earnings ratio

36
Liquidity Ratios:

Liquidity ratios measure the short term solvency of financial position of a firm. These ratios are
calculated to comment upon the short term paying capacity of a concern or the firm's ability to meet its
current obligations. Following are the most important liquidity ratios.

 Current ratio
 Liquid / Acid test / Quick ratio

Activity Ratios:

Activity ratios are calculated to measure the efficiency with which the resources of a firm have been
employed. These ratios are also called turnover ratios because they indicate the speed with which assets
are being turned over into sales. Following are the most important activity ratios:

 Inventory / Stock turnover ratio

 Debtors / Receivables turnover ratio
 Average collection period
 Creditors / Payable turnover ratio
 Working capital turnover ratio
 Fixed assets turnover ratio
 Over and under trading

Long Term Solvency or Leverage Ratios:

Long term solvency or leverage ratios convey a firm's ability to meet the interest costs and payment
schedules of its long term obligations. Following are some of the most important long term solvency or
leverage ratios.

 Debt-to-equity ratio
 Proprietary or Equity ratio
 Ratio of fixed assets to shareholders funds
 Ratio of current assets to shareholders funds
 Interest coverage ratio
 Capital gearing ratio
 Over and under capitalization

37
Limitations of Financial Statement Analysis:

Although financial statement analysis is highly useful tool, it has two limitations. These two limitations
involve the comparability of financial data between companies and the need to look beyond ratios.

Advantages of Financial Statement Analysis:

There are various advantages of financial statements analysis:

 The major benefit is that the investors get enough idea to decide about the investments of
their funds in the specific company.
 Secondly, regulatory authorities like International Accounting Standards Board can ensure
whether the company is following accounting standards or not.
 Thirdly, financial statements analysis can help the government agencies to analyze the
taxation due to the company. Moreover, company can analyze its own performance over
the period of time through financial statements analysis.

OPERATING CYCYE CONCEPT

The duration or time required to complete the sequence of events right from the purchase of raw materials
for cash to the realization of sales in cash is called operating cycle or working capital cycle. The operating
cycle consists of three phases:
In phase 1, cash gets converted into inventory. This would include purchase of raw materials, conversion
of raw materials into work-in-progress, finished goods and terminate in the transfer of goods to stock at
the end of the manufacturing process. In the case of trading organization, this phase would be shorter as
there would be no manufacturing activity and cash will be converted into inventory directly. The phase
will, of course, be totally absent in case of service organizations.
In phase 2 of the cycle, the inventory is converted into receivables as credit sales are made to customers.
Firms which do not sell on credit will obviously not have phase 2 of the operating cycle.
The last phase, phase 3, represents the stage when receivables are collected. This phase completes the
operating cycle. Thus, the firm has moved from cash to inventory, to receivables and to cash again.

38
Besides fixed working capital, a business may need additional working capital to meet the growing
demands of busy seasons at stated intervals. If the demand for the products of the business goes up at any
time it needs additional funds to pay for more materials, labour and other expenses and to meet the
requirement of cash balance to be maintained in the changed situation. This additional working capital
needed to feed the operating cycle in busy business periods is known as variable or temporary working
capital. It is called variable or temporary because the business does not need it always but it is required
according to the need of the situation.
Generally the importance of variable working capital is more acute in business concern having seasonal
market demands. Variable or temporary workingcapitalmay be further sub- divided into (a) seasonal
working capital and (b) special working capital.
The additional working capital required by a concern to carry out its operating activities in busy seasons
of high market demands is known as seasonal working capital. Businesses which mostly have seasonal
demands of their products like ice- cream, cold drinks, wool and likely products manufacturing concern
may need huge amount of seasonal working capital. In other business concerns too the market may rise to
the peak in some particular time period. So in all types ofbusiness a portion of working capital may be
preserved for meeting seasonal needs. On the other hand, the portion of working capital that is needed by
a concern to meet the extraordinary requirements of special situations is known as special working
capital. This is called special working capital because it is needed in special situations and not in normal

circumstances

Diagrammatic representation of the concept of working capital

39
GENERAL NATURE OF BUSINESS:
The working capital requirements of an enterprise are basically related to the conduct of the business.
According to the nature of business they have to maintain a sufficient amount of cash, inventories and
book debts. The industrial concerns require fairly large amounts of working capital though it varies from
industry to industry depending on their assets structure.

PRODUCTION CYCLE:
Another factor which has a bearing on the quantum of working capital is the production cycle. The term
“production or manufacturing cycle” refers to the time involved in the manufacture of goods. It covers the
time-span between the procurement of raw materials and the completion of the manufacturing process
leading to the production of finished goods. To sustain such activities the need of working capital is
obvious.

BUSINESS CYCLE:
The working capital requirements are also determined by the nature of the business cycle. The variations
in business conditions may be in two directions: (i) upward phase when boom conditions prevail, and (ii)
downward phase when economic activity is marked by a decline. During the upswing of the business
activity the need of working capital is more as opposed to the downward phase of the business.

PRODUCTION POLICY:
The requirement of working capital also depends on the production policy of the firm. In manufacturing
concerns having mostly seasonal demand for the product the production policy is a significant
determinant of working capital.

CHANGES IN PRICE LEVEL:

General increase in price level increases working capital need of a firm because the firm has to pay more
for maintaining the previous level on working capital.

GROWTH AND EXPANTION:

As a company grows, it is logical to expect that a larger amount of working capital will be required. The
critical fact is however, is that the need for increased working capital funds does not follow the growth in
business activities but precedes it.

40
AVAILABILITY OF RAW MATERIALS:
In case raw materials are easily available on soft terms the firm does not require maintaining a huge
inventory of raw materials. Such a firm does not require blocking up huge amount of working capital for
this purpose. On the contrary if raw materials are scarce and its supply is irregular and seasonal in nature
the firm needs to store a reasonable quantity of raw materials in hand. The working capital need of such a
firm is significantly high.

DIVIDEND POLICY:
The payment of dividend consumes cash resources and, thereby, affects working capital to that extent.
Conversely, if the firm does not pay dividend but retains the profits, working capital will increase.

DEPRECIATION POLICY:
Depreciation policy also exerts an influence on the quantum of working capital. Depreciation charges do
not involve any cash outflow. The effect of depreciation policy on working capital is, therefore indirect.
At NCL depreciation is provided on straight line method at the rates specified in schedule- XIV to the
companies act, 1956. However where the historical cost of the depreciable asset undergoes a change, the
depreciation on the revised amortized depreciable amount is provided prospectively over the residual
useful life of the asset based on the rates specified in schedule- XIV to the companies act, 1956.
Depreciation on assets installed/ disposed off during the year is provided with respect to the month of
addition/ disposal thereof.

CURRENT ASSETS:
The list of current assets comprises inventories (including raw materials, work-in-progress and finished
goods and spares), sundry debtors including receivables, readily realizable securities and tax reserve
certificates, short-term investments, accrued incomes, prepaid expenses (not in the nature of deferred
charge), cash at bank, and cash in hand.
In NCL current assets are:
 Inventories (stores & spares, raw materials, semi-finished products)
 Sundry debtors
 Cash & bank balances
 Interest receivable/accrued
 Loans & advances etc.

41
CURRENT LIABILITIES:
The list of liabilities includes trade creditors, accounts payable, outstanding or accrued expenses, bank
overdraft, outstanding liabilities, short-term loans and borrowings and certain obligations including
different provisions, i.e., provision for taxation, proposed dividend etc.
In NCL current liabilities are:
 Sundry creditors
 Advances from customers
 Security deposit

Other liabilities etc.

FACTORS TO BE CONSIDERED WHILE ESTIMATING WORKING CAPITAL

REQUIREMENT

 Total costs incurred on materials, wages and overheads.

 The length of time for which raw materials remain in stores before they are issued to production.
 The length of the production cycle or work-in-progress, i.e., the time taken for conversion of raw
materials into finished goods.
 The length of the Sales Cycle during which finished goods are to be kept waiting for sales.
 The amount of cash required to pay day-to-day expenses of the business.
 The amount of cash required for advance payments if any.
 The average period of credit to be allowed by suppliers.

IMPORTANCE OF WORKING CAPITAL RATIOS

 Ratio analysis can be used by financial executives to check upon the efficiency with which
working capital is being used in the enterprise. The following are the important ratios to measure
the efficiency of the working capital. The following, easily calculated, ratios are important
measures of working capital utilization.

RATIOS Formulae Result Interpretation

Current Ratio Total Current Assets/Total =X times It is the relationship between the amount of current assets
Current Liabilities and the amount of current liabilities. It measures the short-
term liquidity position of the firm.

42
Acid-Test Ratio Total Current Assets- =X times Similar to the Current Ratio but takes account of the fact
Inventories/ that it may take time to convert inventory into cash.

Total Current Liabilities

Working Capital Sales/Working Capital =X times A Higher Working Capital Ratio means lower investment in
Turnover Ratio working capital and better profitability.

Stock Turnover Ratio(in Sales/Inventory =X days On average, you turn over the value of your entire stock
days) every x days. You may need to break this down into product
groups for effective stock management.

Current Assets Turnover Sales/Current Assets =X times It reflects the efficiency in generating sales by Current
Ratio assets.

CHAPTER – 4

 RESEARCH METHODOLOGY
43
RESEARCH METHODOLOGY
Research methodology is a way to systematically solve the research problem.
Scientifically .In it, we study the various steps that are generally adapted by a
researcher in studying his research problem along with logic behind them.

MEANING OF RESEARCH
Research comprises defining and redefining problems, formulating hypothesis or
suggesting solutions, collecting, organizing and evaluating data making deductions
and reaching conclusions and at last carefully testing conclusions to determine
whether they fit the formulated hypothesis.

OBJECTIVES OF THE STUDY

BROAD OBJECTIVES:

 To find out the efficiency of financial analysis in omax

44
  To have a practical experience of the functioning of the Finance Department of omax.

 To study how of financial analysis practices plays an important role in supporting other activities
of omax

SPECIFIC OBJECTIVES:

 To gain familiarity with the various components of financial analysis in omax.

 To judge the success of the management in carrying on the daily transactions of the company.

 To gain an in-depth knowledge of the tricks of managing the daily financial activities of omax

 To find out the difference between the theoretical and practical aspect of financial analysis To
study and come out with any solution for improvement of working capital management at Omax
AutoLimited.

HYPOTHESIS OF THE STUDY

The Financial Analysis has become an essential tool of the management for controlling costs and
maximizing profits.

 This requires a careful working out plans in advance for all divisions of the company, their
implementation and investigating the cause of variances between anticipated and actual results.
The financial analysis and its administration are one of the principal means of meeting its end.

To have the proper control over him variance budget involves:-

1. Establishment of effective control.

2. Continuous comparison of actual with planned task for the achievement of target.

RELEVANCE OF THE STUDY

The study is done on the topic of financial analysis in the company.

This topic includes:

 The planning and control of revenue and expenditure. It helps in deciding whether or not to
commit.

 Resources to a particular long-term as well as short term, projects whose benefits to be realized
during the year or more than one year.

45
It is of utmost important to avoid less revenue and more expenditure during the year in the company. This
decision though taken by the individual concern is of national importance because it determines
employment, economic growth and economic activities. Overall Budgeting plays an important role in
identifying and managing the fund and expenses in the organization. That is why the topic chose for the
study is very relevant.

SIGNIFICANCE OF THE STUDY

Financial information is theHEART OF BUSINESS MANAGEMENT. Study of project needed for the
systematized effort to gain new knowledge. It is systemizing study consisting of a problem using the
hypothesis for the collection of the facts, data, analysis and conclusion.

 To know about the financial analysis of omax and the managerialworking towards the
[Link] is very useful and helpful in the performance of the company.

 To know about the turnover of the company. It will Continue or discontinueits main operation or
part of its business;
 Make or purchase certain materials in the manufacture of its product;
 Acquire or rent/lease certain machineries and equipment in the production of its goods;
 Issue stocks or negotiate for a bank loan to increase its working capital;
 Make decisions regarding investing or lending capital;
 Other decisions that allow management to make an informed selection on various alternatives in
the conduct of its business.
 The Financial Analysis function performs in-depth analysis of the institution’s financial and
operating results independently of the business units and prepares managementreports for Senior
Management and the Board. This function is generally found as a separate unit only in larger
institutions

LIMITATION OF THE STUDY

 Time is the real factor, which affects the study i.e. the time duration of eight
weeks for the project work, is very short span of time to conduct effective
study.
 Some departments are remaining untouched to this exercise. Hence it does
not bring complete picture of organization’s competence level.
 Scarcity of needful printed documents on the topic.

46
  All the employees and officers were found very busy in their working hours.
 Many a times my guide and others executives were not available in their
seats because they were busy in their allied work so as a researcher I have to
visit many a times to meet them and discuss on my topic.
 The questionnaire being objective type could not have provided much
opportunity for employees to give much ideas and suggestions.

RESEARCH DESIGN

A research design is a framework or blueprint for conducting the research project. It gives
details, of the procedures necessary for obtaining the information needed to structure or
solve research problem. A research design involves following components:

1. To define the information needed.

2. To design the exploratory, descriptive and casual phases of the research.
3. To specify the measurement and scaling procedures.
4. To appropriate form of data collection.
5. To specify the sampling process and sample size.

RESEARCH DESIGN WHICH IS USED IN THIS RESEARCH

1. DESCRIPTIVE RESEARCH:
Descriptive research studies are concerned with describing the characteristics of a particular
individual or group. For e.g. Studies concerned with specific prediction with narration of facts and
characteristics concerning individual group or situation are example of descriptive research also
comes under descriptive research

2. DIAGNOSTIC RESEARCH:
Diagnostic research determines the frequency with which something occurs or it’s associated or
not is an e.g. of diagnostic research design. Descriptive as well as diagnostic studies share
common requirements are grouped together.

METHODOLOGY

47
The data which I have collected for making this project is combination of both primary and secondary
data.

PRIMARY DATA:
This data had been collected through meetings and interviews with various managers and employees of
the finance department located in the administrative building of NCL. At the same time I had visited
various departments for collection of data. The departments that had been visited are as follows:-
 Main Cash Department
 Billing and Operation Department
 Budget Department
 Pay Section
 Excise Department.
 Welfare & Miscellaneous Bill Section
 Sales Department
 Project Management Department

SECONDARY DATA:
Apart from the primary data certain secondary data were required for this project. Following are the
sources of secondary data:-
 Annual Reports
 Cost & Budget Reports
 Creditors Reports
 Debtors Reports
 Inventory Reports
 Cash Report
 Materials Report
 Production Reports
 Sales Reports

EXECUTIVE SUMMARY

LPG or Liberalization, Privatization and Globalization as it is referred in short today have changed
the scenario of corporate world and management of enterprises in our country. It has now become
more important to not just manage an organization but to achieve corporate excellence
simultaneously as the future belongs to learning and performing organizations.

48
As every business concern irrespective of its size, nature, and age needs funds to carry out business
operations such as purchase of raw materials, payment of wages and other day-to-day expenses,
working capital becomes an important and integral part of business. Working capital is the life
blood and nerve centre of a business because no business can run successfully without an adequate
amount of it. Therefore, to manage working capital in any sector is a challenging job. The project
report titled “A Comparative Study on FINANCIAL ANALYSIS with special reference to Omax
Auto Limited” deals with this matter and is based on the in-house industrial training at Omax
Singrauli, pertaining to the requirement for the BBA from “DAV CENETENARY COLLEGE,
FARIDABAD.” Unless organization learn to manage its working capital, success, will be elusive.
Thus, the effectiveness of an organization depends on the strength of its working capital
management as it is core to the whole system., in recent years has become more crucial for
achieving rapid economic growth of our country.

The project contain the basic postulates of working capital, procedures for the analysis of working
capital, ratios being used to define the working capital and the impact of shortcomings in the

management of it . All this had been done to get a clear view of the techniques of FINANCIAL
ANALYSIS in Omax

Focus of the study problem

Aim of this work is to evaluate financial data of Omax in order to recommend managerial actions in
respect with financial management. Another principal interest is investor point of view. The evaluation
mostly relies on ratio analysis. From managerial point of view needs for diversification of product
portfolio and handling ambiguity of company production capabilities were identified. As financial
performance is improving there is opportunity for higher debt financing of the company.
Financial statement analysis of firms presents you an intuition on how
the corporation is conducting its program. For stockholders who are interested in finding out whether the
management is properly utilizing the corporation’s resources to create shareholder wealth, a financial
analysis of a corporation will be able to help investors come to proper decision. As such, financial
analysis of a corporation has several items, including capital budgeting and capital structure decisions
when the analysis of financial statements is done for the management of the firm. The performance of
competitors within the industry, and the viability of business’s future can be evaluated through financial
statement analysis.

49
Viability of a project can be found out through a financial statement analysis which can be performed by
financial analysts employed by the firm. Projects that would bring in the maximum amount of revenues
over the course of time over similar projects are recommended by financial analysts to the management.
Expected returns from projects are provided by financial analysts to the management. Analysts employed
by the business can also give the management suggestions on whether to issue new stocks or borrow
money to fund new projects. Financial analysts will recommend whether a new project should be
undertaken or invest the money somewhere else, essentially performing capital budgeting decisions.
Financial Institutions will carry out a financial statement analysis of a business to see how strong its
fundamentals are, and then use their findings to either make good investments for themselves, or pass on
ther findings to their clients. Large investment corporations have their own in house financial analysts
who advice to their employers on what stocks might be a good buy, these recommendations are usually
private and only available within the company.

50
 . CHAPTER-5

DATA ANALYSISAND
INTREPRETATION

CALCULATION & INTERPRETATION OF RATIOS

1) CURRENT RATIO:
Current ratio = Current Assets
Current Liabilities
Calculation :

Year 2010 2009

Current 4000 38000
assets 0
Current 2300 21000
liabilities 0
Ratio 1.73. 1.80.9
9

51
 CHART:
40000
20000
0
2010
ts
ti es
s se ili 2009
a b
ent lia
rr nt
cu rre
cu

Interpretation:
In 2009 current ratio was 1.75 which is decreased to 1.69 in the year 2010. As compared
to last year Current Assets has increased because of increase in Inventories, Cash and
Bank balance and other Current Assets but Current Ratio has decreased because of
excess advance received from debtor , decrease in Cost of Removal of over burden, and
increase in current liability .

2) QUICK / ACID TEST/ LIQUID RATIO :

Quick Ratio = Quick/ liquid Assets

Current liabilities

Calculation :

Year 2010 2009

Quick 3406.48 1458.94
assets
Current 23696.97 21686.07
liabilities
Quick ratio 0.14:1 0.07:1

CHART:

52
 25000
20000
15000
10000
5000
2010
0
2009
s es
s et ti
as bili
ck lia
ui nt
Q re
r
Cu

Interpretation:
In 2009 quick ratio was 0.07 which has increased to 0.14 in 2010. Quick assets has
increased by 133% and Current liabilities has increased only by 9% Due to which quick
ratio has increased by 100%. The management has taken a great effort in maintaining high
quick assets as compared to last year.

3) STOCK TURN OVER OR INVENTORY TURN OVER RATIO:

Inventory turn over ratio = Cost of good sold

Average inventory
Cost of goods sold = Opening Stock+ Purchase + Direct
Expenses - Closing Stock

Average inventory = Opening stock + Closing stock

2
Calculation :

Year 2010 2009

COGS 51000.72 454738.36
Avg. 5094.255 4004.18
inventory
Ratio 10 Times 113.16
times

CHART:
53
 70000
60000
50000
40000
2010
30000
20000 2009
10000
0
COGS Avg. inventory

Interpretation: In 2009 inventory turn over ratio was 10.16 times which is reduced to
9.08 times. Reduction of Inventory turn over ratio in 2010 may be due to increase in cost
of goods sold with increase in sales as compared to last year or due to non availability of
opening balance of inventory in the year 2009.

4) DEBTOR TURN OVER RATIO:

Debtor turnover ratio = Net credit sales

Average debtors
Average debtors = Opening Debtor + closing Debtor
2

Calculation :

N Year 2010 2009

OTE Sales 155235.59 143719.15
S: Debtor Nil 289.19
Ratio Nil 496.9Times
Debtor in the year 2010 is -594.18 because of excess advance received from customer
therefore debtor is considered nil.

Chart:

54
 160000
140000
120000
100000
80000 2010
60000 2009
40000
20000
0
Sales Debtor

Interpretation:Debtorturn over ratio in the year 2009 is extremely high i.e 564 times .
The ratio is too high because the entire sale done by the project is according to the
agreement with customer. The debtor shown on the closing day of financial year is not
received by the customer because customer has time to pay his liability in near future. So
the project is not worried about the Bad debts.

5) GROSS PROFIT RATIO:

Gross profit ratio = Gross profit * 100

Net Sales

Gross Profit = Sales- Cost of goods sold

Calculation :

Year 2010 2009

Gross profit 88087.87 77980.79
Net sales 130035.59 120009.15
Ratio 58 % 59 %
160000
140000
120000
100000
80000 2010
60000 2009
40000
20000
0
Gross profit Net sales

55
 Interpretation:

In the year 2009 gross profit ratio was 59 % which is decreased to 58% in the year 2010.
The project gross profit has increased with increase in sales as compared to last year. The
project gross profit ratio has decreased by 1% due to increase in direct expenses. The
company has sound position to meet its non-operating expenses and also enough capable
to pay taxes and royalty to the government.

6) OPERATING RATIO:

Operating ratio = Operating Cost*100

Net Sales
Calculation :

YEAR 2010 2009

Operating Cost 60000 51000.54
Net Sales 100000.59 100019.15
Ratio 59.99% 50.99%

Interpretation:

In the year 2009 operating ratio was 45.05% which is reduced to 44.18% in the year 2010.
Reduction in operating ratio will contribute more to net profit . Reduction in operating
ratio may be possible due to reduction in cost per tones.

7) NET PROFIT RATIO:

Net profit ratio = Net profit after tax *100

Net sales

Calculation :

Year 2010 2009

Net profit 82105.48 67010.72

56
 Net sales 135235.59 123719.15
Ratio 60.71% 54.16%

 Chart

160000
140000
120000
100000
80000 2010
60000 2009
40000
20000
0
Net profit Net sales

Interpretation:

The net profit of the company has been increased by 6.55% as compared to last year. In
2009 project net profit was 54.16% which increased to 60.71% in 2010. Net profit of the
project has been increased due to increase in sales/ production, reduction in cost per
tonnes, and better control on operating expenses. The net profit of the project reveals
sound business of the project and strong financial position.

8) WORKING CAPITAL TURNOVER RATIO:

Meaning:

Working Capital Turnover Ratio = Cost of Sales

Net working capital

Calculation :

YEAR 2010 2009

COGS* 50047.72 40738.36
WORKING CAP. 10238.6 11339.93
RATIO 4.88 Times 3.59imes

*COGS :- Cost of Goods Sold

 Charts:

57
 70000
60000
50000
40000
2010
30000
2009
20000
10000
0
COGS WORKING CAP

Interpretation: In the year 2009 ratio was 3.11 times which is increased to 3.52
times in the year 2010. As compared to last year working capital has been utilized very
efficitently. In 2010, the reciprocal of this ratio( 1/3.52=0.284) shows that for sales of
RS 1 company requires 28 paisa as working capital. This ratio is very helpful to
forecast the working capital requirement on the basis of sales.

9) CREDITOR TURNOVER RATIO:

Creditors turnover ratio = Net Credit Purchases

Average creditors
Average creditors = opening creditors + closing creditors
2

Calculation :

YEAR 2010 2009

CREDIT 38301.77 39152.12
PURCHASE
AVG. 22691.52 21686.07
CREDITORS
RATIO 1.69 times 1.81times

Credit purchase include consumption of stores and spares, social overhead, ower &
fuel, repairs& contractual expenses.

 Chart:

58
80000
40000
0
2009
2010

Interpretation :A high creditors turnover ratio indicates that creditors not paid in
time while a low ratio gives an idea that the business is not taking full advantages of
credit period allowed by the creditors. Since creditors turnover ratio has decreased from
1.81 times to 1.69 times which represents that creditors are paid in time. It’s a good
sign for the company.

59
CHAPTER-
6
CONCLUSION
AND

SUGGESTION

60
  Conclusion

After analyzing the ratios of Omax autos and its competitors, the main thing to be noted is that
the company has improved its performance very well as compared to its previous
years ratios

But on the other side, the analysis shows that with the continuous improvement in performance of
Omax autos, Omax autos is still in backward position if compared it with Mahindra &
Mahindra and VST Tillers.

But we can also say that because of its continuous improvement Omax autos is also giving them a
tougher competition and will definitely acquire a better position in the future.

 In 2009 current ratio was 1.75 which is decreased to 1.69 in the year 2010. As compared
to last year Current Assets has increased because of increase in Inventories, Cash and
Bank balance and other Current Assets but Current Ratio has decreased because of
excess advance received from debtor , decrease in Cost of Removal of over burden, and
increase in current liability .
 A high creditors turnover ratio indicates that creditors not paid in time while a low ratio
gives an idea that the business is not taking full advantages of credit period allowed by
the creditors. Since creditors turnover ratio has decreased from 1.81 times to 1.69 times
which represents that creditors are paid in time. It’s a good sign for the company.
 In the year 2009 operating ratio was 45.05% which is reduced to 44.18% in the year
2010. Reduction in operating ratio will contribute more to net profit . Reduction in
operating ratio may be possible due to reduction in cost per tones

SHORTCOMINGS AND CONCLUSION

 The profitability of the project is getting affected due to the holding of cash as idle which is
increasing year after year.

 The company follows a good credit policy of debtors but a risk of bad debts is always present in
high debtors.

 The company has an excellent short-term liquidity position and it should look forward to improve
it in the future.

61
  Uneven trend in holding period of raw materials is a problem in Omax and this is affecting the
liquidity of the company.

 . The Financial Analysis ratio in Omax is low and measures should be adopted to increase it in
[Link] management of the project had been successful in timely recovery of accrued interest
from the concerned parties.

 The holding period of finished and semi-finished product in company has increased over the four
years though the turnover has gone up. Having such kind of situation of situation further can
cause a major impact on the liquidity of the company.

 Time is the real factor, which affects the study i.e. the time duration of eight
weeks for the project work, is very short span of time to conduct effective
study.
 Some departments are remaining untouched to this exercise. Hence it does
not bring complete picture of organization’s competence level.
 Scarcity of needful printed documents on the topic.
 All the employees and officers were found very busy in their working hours.
 Many a times my guide and others executives were not available in their
seats because they were busy in their allied work so as a researcher I have to
visit many a times to meet them and discuss on my topic.
 The questionnaire being objective type could not have provided much
opportunity for employees to give much ideas and suggestions.

MAJOR OBSERVATIONS AND RECOMMENDATION

Market share: The Company’s main motive should be to increase their market share.
Manyinvestors before investing see the market share in the market. So if the
company wants to increasethe value they have to increase the market share. This
can be achieved by creating a competitive edgeover its competitors. The company
has to increase its sales by various means like maintaining goodrelationships with
the customers, allowing good credit facility and also by reducing cost so as
toprovide a competitive price in the market. Proper marketing strategies can also
help the company inhaving good sales.

62
Investments:The Company has invested in various fields which is good as it has diverse its
risk butthere are some loop holes in the investment too. The company should also
invest in there isfreereturn also. The company didn’t invest in either of the risk free
return. The company should invest inthe government securities and debentures so

that the company should be risk free up to somepercentage .

Payment policies: Payment policies followed by Omax autosshould be reviewed time to time and
stepsshould be taken for prompt payments so that the good vendor database can be
maintained.

Collection period:Omax autos has a low debtor turnover ratio and a very high collection period of
90days which implies excessive blockage of funds as debt which might result in
stagnation of thebusiness. Attempts to reduce down the debtors turnover ratio to
30 days should be made whichwould ensure better availability of funds for business
operations.

Proper training: The personnel must be given training for proper use of equipments and
materialsso as to avoid damages which will result in saving the repair and
maintenance cost.

FINDINGS OF THE STUDY

 The company uses the other methods of analysis like comparative balance sheet,
income and expenditure account, cashflow statement etc.

 Proper procedures are followed in systematic manner in order to operate upon financial
budgets, analysis.

 The market position of the company is also very sound.

 The facilities provided to the employees are appreciable.

 The working environment is also up to date and makes the employees fulfill their
duties responsible.

 The financial position of the company is sound.

 The company‘s project financial department runs the project smoothly.

63
 To make working capital management various ratio analysis is used and their
interpretation is made.

CHAPTER-7
BIBLIOGRAPHY

64
World Wide Web

 [Link]

 [Link]

 [Link]

 [Link]

 [Link]

 [Link]

 [Link]

 [Link]/share/company

 [Link]/sbicap/[Link]

 [Link]

Publications:

 Erich A. Helfert ”TECHNIQUES OF FINANCIAL ANALYSIS (2005)” JAICO Publishing

House
 Rao S.B “FINANCIAL MANAGEMENT (2003)” Vikas Publication Pvt Ltd (VPPL), NEW
DELHI
 Srivastave R.M”ESSENTIAL OF BUSINESS FINANCE (2001)”Himalaya Publishing House

65
Articles and Journals:

 Economic times
 Miller, Merton H and Daniel Orr, (1966).”A Model Of Demand For Money” by Quarterly
journal Of Economics, P-80
 Times of India

APPENDICES

Omaxe

Standalone Balance Sheet in Rs. Cr.

Mar 16 Mar 15 Mar 14 Mar 13 Mar 12

12 mths 12 mths 12 mths 12 mths 12 mths

EQUITIES AND LIABILITIES

SHAREHOLDER'S FUNDS

Equity Share Capital 182.90 182.90 173.57 173.57 173.57

Preference Share Capital 250.00 250.00 0.00 0.00 0.00

Total Share Capital 432.90 432.90 173.57 173.57 173.57

Reserves and Surplus 1,478.71 1,450.05 1,405.21 1,331.91 1,266.67

Total Reserves and Surplus 1,478.71 1,450.05 1,405.21 1,331.91 1,266.67

Total Shareholders Funds 1,911.61 1,882.95 1,578.78 1,505.48 1,440.24

NONCURRENT LIABILITIES

Long Term Borrowings 420.09 326.03 476.11 475.90 573.19

Other Long Term Liabilities 152.57 129.53 73.80 59.69 81.57

Long Term Provisions 11.01 11.55 9.35 7.08 6.43

66
Total NonCurrent Liabilities 583.67 467.10 559.25 542.68 661.18

CURRENT LIABILITIES

Short Term Borrowings 224.77 327.02 236.15 193.45 146.55

Trade Payables 420.39 385.01 372.74 372.18 361.94

Other Current Liabilities 1,808.32 1,751.84 1,544.77 1,503.52 1,592.51

Short Term Provisions 11.57 11.98 17.94 0.33 0.18

Total Current Liabilities 2,465.04 2,475.84 2,171.60 2,069.48 2,101.17

Total Capital And Liabilities 4,960.33 4,825.89 4,309.63 4,117.64 4,202.58

ASSETS

NONCURRENT ASSETS

Tangible Assets 27.60 36.27 35.11 29.73 26.95

Intangible Assets 1.83 2.28 1.93 2.08 0.68

Capital WorkInProgress 0.02 0.13 0.00 0.00 1.45

Intangible Assets Under

Development 0.15 0.09 0.41 0.00 0.21

Fixed Assets 29.60 38.77 37.45 31.80 29.28

NonCurrent Investments 270.75 383.45 370.07 270.46 265.36

Deferred Tax Assets [Net] 11.17 7.70 5.80 4.06 7.69

Long Term Loans And

Advances 196.66 209.98 269.50 245.14 241.60

Other NonCurrent Assets 20.48 17.09 21.54 19.46 23.00

Total NonCurrent Assets 528.66 656.99 704.35 570.91 566.92

CURRENT ASSETS

Current Investments 0.00 0.10 0.00 0.05 0.05

Inventories 2,410.85 1,907.74 1,819.70 1,813.76 1,869.82

Trade Receivables 549.44 756.32 446.67 553.14 570.38

67
Cash And Cash Equivalents 194.12 200.99 197.63 138.07 111.36

Short Term Loans And

Advances 945.45 945.94 727.57 664.66 619.09

OtherCurrentAssets 331.80 357.81 413.71 377.05 464.97

4,431.6
Total Current Assets 6 4,168.91 3,605.27 3,546.73 3,635.66

4,960.3
Total Assets 3 4,825.89 4,309.63 4,117.64 4,202.58

OTHER ADDITIONAL
INFORMATION

CONTINGENT LIABILITIES,
COMMITMENTS

Contingent Liabilities 447.32 404.25 441.54 666.72 649.57

CIF VALUE OF IMPORTS

Raw Materials 1.59 7.77 20.15 5.24 0.00

EXPENDITURE IN FOREIGN
EXCHANGE

Expenditure In Foreign
Currency 0.44 0.47 0.31 0.37 1.17

REMITTANCES IN FOREIGN
CURRENCIES FOR

DIVIDENDS

Dividend Remittance In
Foreign

Currency

EARNINGS IN FOREIGN
EXCHANGE

68
FOB Value Of Goods

Other Earnings 0.55 1.39 0.20 0.67 4.43

BONUS DETAILS

Bonus Equity Share Capital 151.16 151.16 141.82 141.82 141.82

NONCURRENT INVESTMENTS

NonCurrent Investments
Quoted Market

4.83

Value

NonCurrent Investments
Unquoted

260.75 383.45 369.97 270.36 265.36

Book Value

CURRENT INVESTMENTS

Current Investments Quoted

Market

0.10 0.05 0.05

Value

Current Investments
Unquoted Book

Value

69