a study on ratio analysis of balaji amine limitedr by noname

EXECUTIVE SUMMERY

ALLANA INSTITUTE OF MANAGEMENT SCIENCES, PUNE

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I had undertaken a project titled A STUDY ON RATIO ANALYSIS OF BALAJI AMINE LIMITED This project work consists of the analytical and different schemes of mutual funds which Reliance Money which provides to give the concept of what is the difference in their schemes.

The methodology that was adopted for framing the project was primary and secondary data. In my project, I have shown the different products and utility of it to the customer. This project highlights on the peculiarities of the product since they are traded in the market.

The project was studied with the help of brochure, magazine and internet. Even a dialogue was carried with the top executive so that it can help me to shape my project and get the exact idea where the position of product lies and its status.

Customers are the king. They were interviewed and their opinion was taken into consideration so that I can correlate my information with the theory part. Since customers were rigid they didnt reveal the exact information about the product .Even keeping in mind the duration of the project there were certain limitations for it. As people were not ready to spare some time and discuss the product or answer to the query raised by me. So, I have to drawn some of the conclusion on the basis of the brochures and material of the company being provided.


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INTRODUCTION TO THE STUDY


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1.1

Introduction to the Study :

Finance is the lifeblood of a business. Financial management is study about the process of procuring and judicious use of financial resources with a view of maximizing the value of the firm there by the value of the owners. The main objective of the study is to know the financial performance of the company. The study has been carried out with respect such as Balance Sheet and Profit and Loss Account for the financial year 2002 to 2006, which has been published in Annual Reports of the company. The ratios are calculated on the basis of data collected from the financial Statements. Ratio Analysis of the companys Balance Sheet and Income statement gives overall evaluation of the companys financial health. Such analysis is very useful for the investors, lenders, deposit holders, analyst, and government etc. Ratio analysis helps in performance assessment.

1.2 OBJECTIVES OF THE STUDY:1. To analyze financial statements of Balaji Amines Limited. 2. To know the financial position of the company. 3. To study the profitability of company. 4. To calculate liquidity of the company. 5. To know various sources of finance for BAL. 6. To know the financial growth of the company. 7. To know the future long term requirement of the funds for various activities of BAL.


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1.3

RESEARCH METHODOLOGY:

In this case, I have approached the customers of Reliance Money, discussion with the company guide and senior colleagues to gather the information related to my project work. During my project not only the primary data helped me but I have to take help of the secondary data. 1. For the analysis purpose annual reports are studied.

2. Secondary data for the theoretical purpose is referred from financial text books written by various authors. And as far as BALs data is concerned I have collected it through E- brochure of BAL, head of the various department such as finance, marketing, services etc.

3. For calculating the ratios I have referred BALs financial data such as balance sheets of every year.


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1.5

CHAPTER SCHEME:

The first chapter one consists of introduction of study, objective of the study, research methodology and scope and limitation of the study. The second chapter is profile of Balaji Amines Limited gives history, profile, mission, quality policy, quality objectives, departments, product manufactured and industry background of Balaji Amines Limited. The third chapter is theoretical background meaning of financial statement, financial analysis, definitions of ratio analysis, importance of ratio analysis, limitation of ratio analysis and types of financial ratio. The fourth chapter focuses on analysis and interpretation of data. The fifth chapter concludes with findings, conclusion and suggestions.


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COMPANY PROFILE


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2.1 BALAJI AMINES LIMITED PROFILE:Balaji Amines Ltd (BAL), an ISO certified company incorporated under the company Act, 1956 by a group of technology promoters with technical know how form Dr.P.S. Murty through M/S KOBI Engineering Consultancy (P) Ltd. & Associates. The plant with installed capacity of 900 TPA of Ethylamines & 3000 TPA of Methyl Amines located at Tamalwadi; Tuljapur Taluka, dis. Usmanabad; maharashrta with is registered office at Balaji Bhavan, 165/A, Railway Lines Solapur 413001 & its administration office at 4th floor; KPR house, near Anand Theatre, sardar patel road, secundrabad 500003. BAL, one of the leading manufacturer of Aliphatic amines in India, was set up in the year 1988 to cater to the growing requirement of value based chemicals. BAL Commenced manufacture of Methylamines in the year 1991 and subsequently added facilities for manufacture of Ethylamines and other derivatives of Methylamines. BAL has been consistently adding capacities and fine tuning process to provide a quality at a least cost to the customers. World over, amine technology is a closely guarded process with only few handful companies having access to such technology. BAL for the first time in India tested on an indigenously developed technology it further over a period of time. Today, BALs products are accepted in international markets and have gained the distinct support quality status, which makes it one of the few companies in India having the potential to match the stringent international quality standards. BAL has awarded the most prestigious status export house by the ministry of commerce, the govt. of India. BALs state-of-the-art manufacturing facility is located at Tamalwadi; village near the town of solapur. BAL is the first India with an indigenous technology; a sate-of-the-art plant has been set up for the manufacturer of various grades of CHOLINE CHLORIDE, near solapur. The facility is completely furnished with latest technology with modern equipments.


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BAL, the only companies, having integrated facilities from Ammonia, methanol to chorine chloride by using their own products like Trimethyl amine. It plays a very essential role in the Metabolism of growing livestock especially poultry bralers and parent birds. The last one decade of close working relationship with the pharmaceuticals sectors has provided BAL an in depth knowledge on the pharmaceuticals markets. BALs research in the recent past indicated that public perception to alternate medicines is increasing and the motto back to nature is gaining importance several leading pharmaceutical companies have already started adding natural medicines (derived from natural sources) and would add several more in the near future. Nutraceutical business at BAL is a focused entity created to identify disease syndrome and developed cure through time tested medicines derived out of medicines are widespread and have been tested and approved by regulatory authorities. Indian traditional medicines in particular the Ayruveda are quite popular in global markets and BAL nutraceutical facility is created exclusively to cater to this growing market of Ayruvedic route to cure diseases. A small beginning has been made with the small team of highly qualified scientists drawn from various research institutions to BAL nutraceutical facility.

2.2 MISSION: To innovate research and develop cosmoceuticals on custom manufacturing basis. To identify disease syndrome and provide a safer and non-toxic alternate medicine route based on the India traditional medicine system. To develop a comprehensive database covering the entire herbal medicine system. To undertake custom research for leading pharmaceuticals.


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2.3 BOARD OF DIRECTORS:NameShri.M.R. Krishnaiah Shri.A.Pratap Reddy Shri..N.Rajeshwar Reddy Shri.D.Rem Reddy Shri.G.Hemanth Reddy Shri.T.Naveena Chandra Shri.S.Vishnu Rao Shri.S.V.Pattabhiraman Shri.Umakant Barik

DesignationChairman M.D. Wholetime Directors Wholetime Directors Wholetime Directors Director Director Director C.S.

2.4 QUALITY POLICY: We will satisfy our customers by supplying products as per requirements with timely delivery. We will maintain continual improvement in all spheres of our activities. We will achieve this by implementing effective methods to improve quality and by inculcating quality culture in our company.

2.5 QUALITY OBJECTIVES: To update the technologies and operating methods to maintain leadership in National / International market. To maintain leadership in market by manufacturing new hi-tech product. To motivate the employees and improve there skills by regular training programmes. To implement appropriate environment and safety measures.


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2.6 BALS VARIOUS DEPARTMENTS AND ITS FUNCTIONS: 2.6.1 PURCHASE DEPARTMENT:Purchase department deals with production planning and raw material required for production. Purchase department also works according to the forecasting done by marketing department.

Main functions of purchase department: Working according to production planning. Fulfilling the requirement. Providing guidance for purchase of material requirement. Concerning with payments for purchase.

Purchase categories: Raw material. Capital goods. Laboratory equipments. Mechanical instrumentation and Electric items. Miscellaneous material. The sources of purchase are, chemical weekly, existing customers, Internet searching new supplier, existing supplier etc.

2.6.2 MARKETING DEPARTMENT:Marketing department is responsible for establishing and maintaining the procedure for contract review and co-ordinates the activities. To understand the needs of the customers and communicate it to the concerned department. To carry out the contract reviews and get it approved the commercial director.


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To receive and record the customers complaints and communicate them to all concerned department. To organise the dispatch activities ass per dispatch schedule. Department is concerned or responsible for the overall communication with customers.

SERVICES: Credit pay facility depends upon customers requirements may be for the 90 days, 60 days, 30 days etc. Transportation expenses added in the bills to the same extend. 365 days continuous service. Exhibition for marketing. Benefits-sales tax due to industry situated in D+ area.

2.6.3 PRODUCTION DEPARTMENT:Production department is a responsible for handling the production activity, function of production department are explain as below, To executive planned range of production. To implement and follow the rules essential for a purpose of safety. To control the production activity. To implement safety equipollents as per need. To control the performance of department. To take correct actions on customers complaint, if any To maintain the interlink between production department and store department.


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2.6.4 QUALITY ASSURANCE DEPARTMENT: To perform inspection and testing of raw material intermediates in process materials and finished products in accordance with the quality plans and documented procedures. To maintain inspection and test records up to date. To ensure that calibration of inspection, measuring and testing equipments in Q.A.D. (Quality Assurance Department) is done as per the plan. To process the customer complaint to take necessary corrective actions. To report production department on the non-conformity in intermediate, in process and finished product.

2.6.5 STORES AND MATERIAL HANDLINGTo receive, store and issue spare parts and other material to the respective department. To maintain all purchase and store related records. Take care/full precautions for leak safety and spillage for raw material, finished products and storage tanks. Manages the loading and unloading operation of raw material and finished products. Carried out he calibration of weighing machine.

2.6.6 HUMAN RESOURCE DEPARTMENT To conduct and arrange training for employees as per training needs. To evaluate training programmes. To appraise the performance of employees. To provide safety requirement as per need. It responsible for all welfare activities


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2.6.7 MAINTAINANCE AND INSTRUMENT DEPARTMENT: To carry out breakdown maintenance and to put the equipment back in operation without affecting the product. To prepare preventive maintenance plan and to make appropriate changes whenever necessary. To prepare preventive maintenance plan and to maintain records for the same. To co-ordinate with purchase department for the material required for the same. Calibration and control of inspection, measuring and test equipments. Electric department activities are covered under instrument department.

2.6.8 EXPORT DEPARTMENT: Find out the potential customers through various sources. Contact and negotiate with selected customers. Preparation of various documents which are necessary for the export of product. Find out the various govt. schemes for getting the incentives.

2.6.9 FINANCE DEPARTMENT:This department keeps the record of the following things, Sales volume of production. Raw material cost. Combination after raw material. Total cost of production. Gross profit. Interest


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FUNCTIONS: To makes payments of vendors. To verify the outstanding due of customers and to send outstanding reminders through marketing department. To manage finance for the company as for the guidelines from the commercial director / executive director. To make monthly reports. To update of accounts.

To make cost analysis. IMPLEMENTATION OF ERP:

ERPEnterprise Resource Planning:All the functions carried out at BAL are integrated by the implementation of the ERP system. The implementation of the ERP system is been started from the financial year 2006. Enterprise resource planning is a software technology that helps to integrate all the functions of the organization. ERP system helps in avoiding the duplication of work.For example, if the customer places an order with the marketing department and as the marketing manager accepts the order, the information of the same is been passed on to the production dept.( at the factory). And the production dept. will accordingly prepare the production schedule. The information of the production schedule will be passed on to the purchase dept. and accordingly the latter will plan for the purchase of raw material. Any purchase of raw material made is noted by the finance dept. and accordingly the payments are released.The staff at BAL is undergoing training for the operation of the ERP system.However, the ERP system provides the information required but the ultimate decision is to be taken by the managers.ALLANA INSTITUTE OF MANAGEMENT SCIENCES, PUNE

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2.8 PRODUCT RANGE OF BAL:

ChemicalsMonomethylamine (Anhydraus) Tri Ethylamine

ChemicalsDimethylamine

ChemicalsTrimeth ylamine

ChemicalsDimethylamine

Mono ethylamine

Mono methylamine 40%

Mono methylamine 42% Trimethylamine 30%

Mono Mithylamin 45% Mno ethyl amine 70% Monomethylamine HCL Mono Ethylamine Hcl

dimethylamine 40% Mma + methanol 25% Diethylamine Acetamide Tri methylamine Hcl

Dimethylamine 50%

MMA + Methanol 30% Dimethylamine HCL Tri Ethylamine Hcl

Trimethylamine HCL Diethylamine Hcl Choline Chloride 65% & 75% solution

Choline Chloride power Diethyl Amino Ethyl.

Dimethyl Urea.

Mono methyl urea.

Dimethyl Amino Ethanol

Morpholine

Absolute Alcohol.

N- Methyl -2 Pyrrolidinone.

Triethyl Benzyl Ammonium Chloride.


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2.9 BAL CLIENT LIST: LIST OF CUSTOMERS: Domestic: Color Chem. Ltd. Thane Gharda Chemicals Max-Gb, Chandigarh Dr. Reddys Labs, Hyderabad. Avon Organics Ltd., Hyderabad. Cheminor Drugs, Hyderabad. Ttk Pharma, Hyderabad. Medicorp Technologies Hyderabad. Swarup Chemicals, Lucknow. Uithoga Chemicals, Cochin. Suven Pharma, Hyderabad. Oswal Chemicals, Hyderabad. Indian Dye Stuff Industries.

International: Chemosurgery Corporation, USA. Espirx Technologies, USA. National Biochemical corp., USA. Whyte Chemical, UK. Beximco Group, Pakistan. Globe Drugs Ltd., Bangladesh. Drugs International Ltd., Bangladesh. Euronitro S. L. Spain. Sung IC Chemical co. Ltd., Korea. Oman Chemicals & Pharmacy, Oman


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THEORETICAL FRAMEWORK


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Theoretical Framework 7.1 Introduction:

Finance is mostly described as the Science of money and involves the process of conversion of accumulated funds to productive use. The overall objective of the financial management could be achieved with procurement of funds in time at low cost and their effective utilization must generate an income higher than the cost of procuring them otherwise there is no point in running the business. The basis for financial analysis, planning and decision-making is financial information. A business firm prepares its final accounts viz, Balance sheet & profit & loss Account, which provides useful financial information for the purpose of decisionmaking. Financial information is needed to predict, compare and evaluate the firms earnings ability. Thus, the financial statements provide a summarized view of the financial position and operations of affirm. The analysis of financial statements is, thus an important aid to financial analysis. For the purpose of the obtaining the material & relevant information necessary for ascertaining the financial strengths & weaknesses of an enterprise, it is necessary to analyze the data depicted in the financial statement. The analysis of financial statement is a process of evaluating the relationship between component part of financial statements to obtain a better understanding of the firms position and under consideration from the total information contained in the financial statements.


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7.2

Meaning of financial statement: A financial statement is a systematically and logically arranged financial

data. In short, financial statement i.e. 1. Balance sheet. 2. Profit and Loss Account. Balance sheet contains information about the resources and obligation of a business entity and its owners interest in business at a particular point of time. It reveals financial position of a firm on particular date. The Profit and Loss Account reflects earning capacity and potential of the firm. The income statement is scoreboard of firms performance during a particular period of time.

3.2 Meaning of Financial Analysis:The financial statement like Balance Sheet and profit And Loss account are prepared to exhibit the firms financial position. But, the information provided in financial statement is not an end in itself, as no meaningful conclusions can be drawn from these statements alone. But, if the on formation provided in two statements is used simultaneously, this gives abundant information. The financial analysis is used to diagnose the strength and weakness of the firm. The doctor examines his patient by recording his illness and prescribing medicine for it. In the same way, financial analyses the information contained in balance sheet and statement. Financial analyst finds out matters of concern and prescribes i.e. describes how it can be overcome.

3.4 RATIO ANALSIS:ALLANA INSTITUTE OF MANAGEMENT SCIENCES, PUNE

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Introduction: Ratio analysis is the universally used technique for analysis of financial statements. Ratio analysis is a very powerful analytical tool useful for measuring performance of an organization. A ratio is a statistical yardstick that provides a measure of relationship between the variables or figures. Ratio analysis is a widely used too of financial analysis. It is defined as the systematic use ratio to interpret the financial statements so that the strengths and weaknesses if a firm as well as its historical performance and current financial condition can be determined. The term ratio refers to the numerical or quantitative relationship between two items/variables. The ratio analysis helps the management to analyze the past performance of the firm and to make further projections. Ratio analysis allows interested parties like shareholders, investors, creditors, Government and analysis to make an evaluation certain aspects of a firms performance.

3.5 Definitions of Ratio Analysis: 1) A Ratio is defined as: The indicated quotient of the mathematical expression and the relationship between two or more things. In financial analysis, a ratio is used as an index of yardstick for evaluating position and performance of a firm.

2) A Ratio is defined, as: Ratio analysiss a process of analysis of the ratios in such a manner, so that management can take actions on of Standard performances.


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Importance of Ratio Analysis: The importance of the ratio analysis lines in the fact that it presents facts on a comparative basis and enables the drawing of inferences regarding the performance of a firm. Ratio analysis is relevant in assessing the performance of a firm in respect of the following

1. Liquidity Position:With the help of the ratio analysis conclusions can be drawn regarding the liquidity position of affirm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. The liquidity ratios are particularly in credit analysis banks and other suppliers of short-loans.

2. Long- term solvency: Ratio analysis is equally useful for assessing the long-term solvency is measured by the leverage capital structure and profitability ratio, which focus on earning power and operating efficiency. Ratio analysis reveals the strength and weakness of a firm in this respect.

3. Operating Efficiency:Ratio analysis throws light on the degree of efficiency in the management and utilized of assets. Various activity ratios measure this kind of operational efficiency. The solvency of a firm depends upon the sales revenues generated by the use of its assets total as well as its components.

4. Over all Profitability: The management constantly concerned about the overall profitability of the enterprise that is they are concern about the ability of firm to meet its short term as well as long-term obligations to its creditors to ensure a reasonable return to its owner and secure optimum utilization of the asset of the firm.


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5) Inter firm Comparison: Ratio analysis is one of the popular technique uses to compare ratio of firm with the industrial average. A single figure related to some standards an inter firm comparison. Would demonstrate the relative position vis--vis competitors. If any variance is found the firm can identify the probable results and in that light, it takes remedial measures.

6) Trend Analysis:Ratio analysis enables a firm to take the time dimension in to account that is it reveals whether the financial position of affirm is made possible by the use of trend analysis. The firms movement may be favorable.

3.8 Types of Ratios:The various group of purpose are as follows. Short Term Solvency Ratios. Long Term Solvency Ratios. Profitability Ratios. Turnover Ratios. Expenses Ratios.

[A] Short term solvency Ratios / Liquidity Ratios:Liquidity ratios measures short-term liquidity of firm. Management can employ these ratios to ascertain how efficiently they are managing working capital. The

Liquidity Ratios measures the ability of a firm to meet its short-term obligations and reflect the short-term financial solvency of a firm. 1. Current Ratio. 2. Quick Ratio or Acid Test Ratio.


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1. Current Ratio :Current ratio is defined as the ratio of current assets to current liabilities current liability. Current ratio means those assents convertible or expected to be

converted into cash within a year. Current liabilities are those liabilities, which are to be paid of within the same period. Current assets include cash in hand and at bank, marketable securities, debtors, prepaid expenses etc. Current liabilities include outstand or accrued expenses, Sundry creditors, Bills payable, Provisions for taxation etc. Thus, current ratio is an index of firms financial stability. The logic

behind current ratio is that cash need not be available to meet all current liabilities on particular date. But there should be good prospects for an adequate inflow of cash indicated by the amount of individual component current assets. A high current ratio is an assurance that the firm will have adequate funds to pay current liability. Current Ratios = Current Assets / Current Liability

2. Quick Ratio / Acid Test :Quick ratio is the ratio of quick assets to current liability. Quick assets are those, which can be converted into cash without diminution in their value. Which assets include cash, bank and sundry debtors ? Quick Ratio is more rigorous test of liquidity than current ratio since; it eliminate. Inventories and prepaid expenses as a part of current assets. A high quick ratio compared to current ratio indicates under stocking. While a low quick ratio may indicate overstocking. A quick ratio of 1:1 is assumed as standard in theory. But this may very seasons to seasons and also from Business to Business. Quick Ratio = Quick Assets / Quick liability


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B) Long term Solvency Ratio or Leverage Ratio:Solvency ratio are those ratio calculated to determine the firms ability to meet its long term obligations. The long term obligations include the claims of debentures holders and other financial institutions which have offered long term and medium term loans to the firm. The solvency position of a firm can be determined with the help of following ratio: 1. Debt Equity Ratio :2. Shareholder Equity Ratio :3. Interest Coverage Ratio 4. Fixed Assets to long term fund 5. Capital Gearing Ratio

1) Debt Equity Ratio :Debts equity ratio is those calculated to know the extent of outsider fund and shareholder funds used in acquiring the assets for a firm in other words, it is calculated to measure the relative claim of outsiders and share holder against the assets of a firm. It is also called as external internal equity ratio or debt to net worth ratio. Debt or outsider fund : An outsider fund refers to long term liabilities. Some writer are of the opinion that preference share should be considered as outsiders funds for the reason that dividend payable on these shares is fixed and the amount of these shares may be redeemed after expiry a stipulated period. Similarly, there is a

controversy regarding current liabilities also. Some writers are of the opinion that current liabilities should be considered as outsiders funds for the reason that they represent the firm obligations to outsiders. However we are of the opinion that debt equity ratio may be calculated excluding current liabilities because they are repayable with in a very short period and these liabilities widely fluctuate during a year. Shareholder funds: Equity share capital + preference share capital + all accumulated profits (i.e. both revenue and capital reserves) less accumulated losses.


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A low debt equity ratio indicates that the interests of outsiders are safe and guarded and a firm need not worry about their payment. On the other hand, a high debt equity ratio indicates that the claims of outsiders are more than the shareholders, their interests are not safe and they (outsider) have to bear the probable future losses. Debt Equity Ratio = Long Term / Equity Capital.

2) Shareholder Equity Ratio :The Shareholders Equity Ratio is the ratio of Shareholders Equity & Total Capital employed. employed. This is an important ratio for determining the long term It is calculated by dividing the Shareholders Equity & Total Capital

solvency of a company. In general the higher the share of owned capital, proprietors in the total capital of the company, the less is the like hood of insolvency in future, given normally efficient management. The general principle is that more stable the earnings of the business, lower will be the equity ratio which would be considered acceptable and safe. Shareholder equity ratio= Shareholder Equity/Total Capital Employed

3) Interest Coverage Ratio :It is also known as time interest-earned ratio. This ratio measures the debt servicing capacity of a firm in so far as fixed interest on long-term loan is concerned. It is determined by dividing the operating profits or earnings before interest and taxes (EBIT) by the fixed interest charges on loans. Thus, Interest coverage = EBIT / Interest


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It should be noted that this ratio uses the concept of net profits before taxed because interest is tax-deductible so that tax is calculated after paying interest on long term loan. This ratio, as the name suggests, indicates the extent to which a fall in EBIT is tolerable in that the ability of the firm to service its interest payments would not be adversely affected. For instance, an interest coverage of 10 times would imply that even if the firms EBIT were to decline to one-tenth of the present level, the operating profits available for servicing the interest on loan would still be equivalent to the claims of the lenders. On the other hand, coverage of five times would indicate that a fall in

operating earnings only to up to one-fifth level can be tolerated. From the point of view of the lenders, the larger the coverage, the greater is the ability of the firm to handle fixed-charges liabilities and the more assured is the payment of interest to them. However, too high a ratio may imply unused debt capacity. In contrast, a low ratio is a danger signal that the firm is using excessive debt and does not have the ability to offer assured payment of interest to the lenders.

4) Fixed Assets to long term fund :It reflects the security of fixed obligation. It indicates, to some extent, whether or not additional creditor funds may be obtained by using the same security. Fixed Assets to long term fund = Fixed Assets/ Long Term Fund

5) Capital Gearing Ratio :Capital Gearing indicates the relationship between equity Shareholders funds and fixed interest bearing debentures / loans. If the fixed interest bearing debentures exceeds equity shareholders funds, it is called Highly geared it is called Low geared capital and if both are equal, it is called Evenly geared capital. Capital Gearing Ratio = Equity shareholder funds / long term + unsecured loans.


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C) Profitability Ratios:The purpose of study and analysis of profitability ratio to help assessing the adequacy of profits earned by the company and also to discover whether profitability is increasing of declining. The profitability of the firm is the net result of a large number of policies and decisions. The profitability ratios show the combined effects of liquidity, asset management and debt management on operating results. Profitability ratios are measured with reference to sales, capital employed, total assets employed, shareholders funds etc. 1. Returns on Capital Employed or Return on Investment. 2. Cash Profit Ratio. 3. Return on Shareholders Fund Ratio. 4. Gross Profit Ratio. 5. Net Profit Ratio.

1. Returns on Capital Employed or Return on Investment :A return on Capital Employed is determined by divining Net Profit by Capital Employed. ROI = EAT + Interest / Total Capital Employed *100 The strategic aim of a business enterprise is to earn a return on capital. If in any particular case, the return in long run is not satisfactory, then the deficiency should be corrected or the activity is abandoned for a more favorable one.

2. Cash Profit Ratio :Cash Profit Ratio is computed using cash flow business operation as the numerator. This vale is determined by adding non-cash expenses, such as depreciation and amortization to net profits available to equity owners. The ratio indicates the cash generating ability (per equity share) of the firm. Like EPS, cash EPS should be used with caution. It is beset with all the limitation associated with EPS measure. Cash Profit Ratio = Net profits + Deprecation / Net sales*100ALLANA INSTITUTE OF MANAGEMENT SCIENCES, PUNE

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3. Return on Shareholders Fund Ratio :According to this ratio, profitability is measured by dividing the net profits after taxes (but before preference dividend) by the average total shareholders equity. The term shareholders equity includes (i) preference share capital; (ii) ordinary shareholders equity consisting of (a) equity share capital, (b) share premium, and (c) reserves and surplus less accumulated losses. The ordinary shareholders equity is also referred to as net worth. Thus,

Return on total shareholders equity = Net profit / shareholders equity*100 The ratio reveals how profitably the owners funds have been utilized by the firm. A comparison of this ratio with that of similar firms as also with the industry average will throw light on the relative performance and strength of the firm.

4. Gross Profit Ratio :The ratio measures the gross profit margin on the total net sales made by the company. The gross profit represents the excess of sales proceeds during the period under observation over their cost, before taking into account administration, selling and distribution and financing charges. The ratio measures the efficiency of the companys operations and this can also be compared with the previous years results to as certain the efficiency partners with respect to the precious year.

Gross Profit Ratio = GP / Sales *100


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5. Net Profit Ratio :The net profit ratio measures the relationship between net profit and Income from Sales in percentage.

Net Profit Ratio = Net Profit / Sales *100 The ratio of net profit to income from sales expresses the cost price effectiveness of the operation. A high net profit ratio would ensure adequate return on investment. A low net profit ratio has the opposite implications.

D) Turnover Ratio:The efficiency or activity ratio are those ratio calculated to measure the operational efficiency of a business concern. The operational efficiency a firm is judged based on its profits earning capacity and the optimum utilization of its available resources in accordance with financial policies related to its operation. These ratio are also called as Turnover Ratio, Performance Ratio or Current Assets Movement Ratio because they measure the speed with which the assets are converted into sales. All the ratios coming under this category are calculated with reference to sales or cost of sales and expressed in number of times say, 6 times, etc. A number of turnover ratios can be calculated, such as,

1) Inventory Turnover Ratio (In Times). 2) Debtors Turnover Ratio - Average Collection Period. 3) Fixed Assets Turnover Ratio.


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1) Inventory Turnover Ratio (In Times) :The inventory turnover, or stock turnover, measures how fast the inventory is moving through the firm and generating sales. The inventory turnover reflects the efficiency of inventory management. The higher the ratio, the more efficient the

management of inventory turnover may be caused by a low level of inventory which may result in frequent stock outs and loss of sales and customer goodwill. Notice that as inventories tend to change over that year, we use the average of the inventories at the beginning and end of the year. In general, average may be used when a flow figure is related to a stock figure.

Inventory Turnover Ratio = Cost of goods sold / Average total stock.

2) Debtors Turnover Ratio and Average Collection Period :A firm may sell goods on cash as well as on credit. When the goods are sold on credit, the parties to whom the goods have been sold, are called as debtors or bookdebts in accounting terminology. There must be proper credit collection policy to ensure proper collection of debts with out which there is every possibility of outstanding debt becoming bad. Therefore, Debtors turnover ratio is calculated to measure the efficiency of credit promotion policy and credit collection policy. Debtors turnover ratio indicates the speed with which the debtors are turnover during a year. It is expressed in number of times the debtors are turned over. Higher Debtors Turnover Ratio indicates more efficient collection of debts and signifies the more liquidity of debts and lowers Debtors Turnover Ratio, more in efficient collection of debts and signifies the less liquidity of debts. Debtors turnover = Total credit sales/Average sundry debtors.


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The quality of debtors can be evaluated by ascertaining average collection period also. This is calculated to know how many days credit is outstanding. Average

collection period serves as check on collection of Outstanding balances from customers. A high average collection period indicates inefficient collection of debts and it affects liquidity position of a firm, whereas a low average collection period indicates better quality of debts and sound liquidity position of a firm.

Average collection period = total days in a year / Debtors turnover Ratio

3) Fixed Assets Turnover Ratio :This ratio is calculated to measure the adequacy or otherwise of investment in fixed assets. This ratio is very significant for the manufacturing concerns. High ratio indicates efficiency in work performance where as low ratio means inadequate investment in fixed assets.

Fixed Assets Turnover Ratio = Sales / Fixed Assets.

E) Expenses Ratios:Another profitability ratio related to sales is the Expenses Ratio. It is computed by dividing expenses by sales. The term expenses includes 1) cost of goods sold, 2) administrative expenses, 3) selling and distribution expenses, 4) financial expenses but excludes taxes, dividends and extraordinary losses due to theft of goods, good destroyed by fire and so on. There are different variants of expense ratios. That is listed below:


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1) Cost of goods sold ratio:The cost of goods sold ratio shows what percentage share of sales is consumed by cost of goods and, conversely, what proportion is available for meeting expenses such as selling general distribution expenses as well as financial expenses consisting of taxes, interest and dividend, and so on. The expenses ratio is, therefore, very important for analyzing the profitability of a firm. It should be compared over a period of time with the industry average as well as firms of similar type. As a working proposition, a low ratio is favorable, while a high is unfavorable. Cost of goods sold Ratio = Cost of goods sold / Net sales *100

2) Operating expenses ratio:The ratio is test of the operational efficiency with which the business is being carried. It indicates the managerial ability to control the operating expenses. Operating expenses Ratio indicate company ability to general profits out of its available resources with control of management therefore low operation ratio is better.

Operating expenses Ratio = Administrative expenses + Selling Expenses / Net sales *100.


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DATA ANALYSIS & INTERPRETATION


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Data Analysis & Interpretation: 4.1 Short Term Solvency Ratio:4.1.1 Table Showing Calculation of Current Ratio:

Particulars Year 2001 02 2002 03 2003 04 2004 05 2005 06 2006-07

Current Assets 146116456 192953491 334001813 456684943 598448934 789443212

Current Liabilities 57435921 50407566 114117247 175293028 202178786 390145621

Ratio 2.54 3.83 2.92 2.61 2.95 2.03

Source :- Balance Sheet of Balaji Amines Limited.

Current Ratio = Current assets / Current liabilitiesThe Current ratio is the composition of current asset. It measures firms short term solvency i.e. its ability to meet short term obligations. The higher is the current ratio, the larger is the amount of rupees available per rupee of current obligations and the greater is the safety of funds of short term creditors. The general norm in India is 1.33 internationally it is 2. From the above table it clears that the company is maintaining higher current ratio i.e. in 2002 03 it was 3.83, , 2.54, 2.92, 2.61& 2.95in 2001-02, 2003-04, 2004-05, 200506 & 2006-07 respectively.


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4.1.2 Table Showing Calculation of Quick Ratio:


Quick Assets 109476090 143134022 237727372 2199808020 372953590 383456741

Quick Liabilities 57435921 50407566 114117247 175293028 202178786 210548120

Ratio 1.91 2.83 2.08 1.71 1.84 1.63

Source: - Balance Sheet of Balaji Amines Limited.

Quick Ratio = Current assets Inventory / current liabilitiesThe Quick ratio is the ratio of quick assets and quick liabilities. It is calculated by dividing the quick assets by the quick liabilities. Quick Ratio is a more penetrating test of liquidity than the current ratio. If quick ratio is greater than it simply sound liquidity position of company. The standard for quick Ratio is 1:1. From the above table it is observed that the company is marinating a consultant 2001 02 Acid test ratio it had been 1.91, 2.83, 2.08, 1.71, & 1.84 in the last five years i.e. 2001-02, 2002-03, 2003-04, 2004-05, 2005-06 & 2006-07 respectively.


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4.2 Long Term Solvency Ratio Or Leverage ratio:4.2.1 Table Showing Calculation of Debt Equity Ratio:


Long Term Debt 77830877 246650830 346129636 414192179 535410656 634078212

Equity Capital 121008689 153782340 211825985 248145288 321737708 335247127

Ratio 0.64 1.6 1.63 1.67 1.63 1.89


Debt Equity Ratio = Long term debt / Equity CapitalThe Debt Equity Ratio is the ratio of long term Debt and Equity Capital. It is calculated by dividing the long term debt to Equity capital. A low debt equity ratio indicates that the interests of outsiders are safe and guarded and a firm need not worry about their payment on the other hand a high debt equity ratio indicates that the claims of outsiders are more that the shareholders, their interest are not safe & they have to bear the probable future losses. From the above table it is observed that the company maintained long term debt to equity capital ratio i.e. 2001-02 is 0.64, 1.6, 1.63, 1.67 & 1.66 in the year 2002-03, 200304, 2004-05,2005-06 & 2006-07 respectively


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4.2.2 Table Showing Calculation of Shareholders Equity Ratio: Particulars Year 2001 02 2002 03 2003 04 2004 05 2005 06 2006--07 121008689 153782340 211825985 248145288 321737708 331872807 Shareholders Equity Total Capital Employed 269455413 400433170 557955621 662337467 857148364 876214787 0.45 0.38 0.38 0.37 0.38 0.37 Ratio


Shareholders Equity Ratio = Shareholders Equity / Total Capital Employed.The Shareholders Equity Ratio is the ratio of shareholders Equity & Total capital employed. It is calculated by dividing the shareholders Equity by total capital employed. This is an important ratio for determining the long term solvency of company. In general the higher the share of owned capital, proprietors in the total capital of the company the less is the likelihood of insolvency in future, given normally efficient management. The general principal is that more stable the earnings of the business, lower will be the equity ratio which would be considered acceptable and safe. The shareholders Equity Ratio of Balaji Amines Limited in the year 200203 is 0.38,in 2003-04 is 0.38, in 2004-05 is 0.37, in 2005-06 is 0.38 & in 2001-02 is 0.45


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4.2.3 Table Showing Calculation of Interest Coverage Ratio: Particulars Year 2001 02 2002 03 2003 04 2004 05 2005 06 2006--07 57217467 63114936 103590408 72857604 120793000 102540078 20872357 16772028 23713870 27622131 44185889 32954287 2.74 3.77 4.36 2.64 2.73 3.11 EBIT Interest Ratio


Interest Coverage Ratio = EBIT/ Interest.Profit before interest and tax is used in the numerator of this ratio because the ability of a firm to pay interest is not affected by tax payment, as interest on debt funds is a tax deductible expenses. A high interest coverage ratio means that the firm can easily meet its interest burden even if profit before interest taxes suffers a embarrassment when profit before interest taxes decline. This ratio is widely used by tenders to assess a firms debt capacity. Further, it is a major determinant of bond rating. The interest coverage Ratio of Balaji Amines Limited was higher in 200304 that is 4.36, & it had been constant for 2001-02, 2004-05, 2005-06 i.e. 2.74, 2.61 and 2.73, in 2002-03 it had increased slightly to 3.77


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4.2.4 Table Showing Calculation of Fixed Assets to Long Term Fund:

Particulars Year 2001 02 2002 03 2003 04 2004 05 2005 06 2006--07

Fixed Assets 18077878 313133432 409742041 465704627 548916465 582457814

Long Term Fund 198839566 246650830 346129636 414192179 535410656 565845249

Ratio 0.91 1.27 1.18 1.12 1.03 1.02


Fixed Assets to Long Term Fund = Fixed Assets/ Long Term Fund.This ratio is calculated by dividing fixed assets to long term funds. It reflects, in some measure, the security of fixed obligation. It indicates, to some extent, whether or not additional creditor funds may be obtained by using the same security. The fixed Assets to long term fund of company were . 0.91, 1.27, 1.18, 1.12 & 1.03 in the year 2001-02, 2002-03, 2003-04, 2004-05,2005-06 & 2006-07 respectively.


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4.2.5 Table Showing Calculation of Capital Gearing Ratio:


Equity Capital 121008689 153782340 211825985 248145288 321737708 364582414

Long Term Loan 77830877 246650830 346129636 414192179 535410656 465874512

Ratio 1.55*--0.62 0.61 0.60 0.60 0.78


Capital Gearing Ratio = Equity Capital/ Long Term Loan.Capital Gearing indicates the relationship between equity shareholder funds and fixed interest bearing debentures / loans. If the fixed interest bearing debentures

exceeds equity shareholders funds. It is called Highly geared capital and if equity share holder funds exceed the interest bearing debenture it is called Low geared capital and if both are equal it is called Every geared capital. The capital gearing ratio of Balaji Amines Limited i.e. 1.55, 0.62, 0.61, 0.60 & 0.60 in the year i.e. 2001-02, 2002-03, 2003-04, 2004-05,2005-06 & 2006-07 respectively.


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4.3 Profitability Ratio: Return of Capital Employed:Particulars Year2001 02 2002 03 2003 04 2004 05 2005 06 2006-07 28814644 79886964 126917388 100479735 164978889 142598745

EBIT + Interest

Total Capital Employed121008689 400433170 557955621 662337467 857148364 754897241

Ratio23.81 19.95 22.75 15.17 19.25 18.88


Return of Capital Employed = EBIT + Interest/ Total Capital Employed *100.Here the profits are related to the total capital employed. It can be determined by, dividing net profit to capital employed. The capital employed basis provides a test of profitability related to the sources of long term funds. This ratio indicates that how efficiently the long term funds of owners and creditors are being used. Return on investment ratio for Balaji Amines Limited were23.81 times for2001-02 is 19.95 times for 2002-03 is 22.75 times for 2003-04 is 15.17 times for 2004-05 & 19.25 times for 2006-07. This ratio increased because of increase in profitability of company & decreased in total capital employed.


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4.3.2 Table Showing Calculation of Cash Profit Ratio:

Particulars Year2001 02 2002 03 2003 04 2004 05 2005 06 200607

Cash Flow After Tax49958399 56275928 8971303 74009860 122680762 118542101

Net Sales411530864 451068149 709059940 877268727 1286139790 1085429474

Ratio12.14 12.48 12.65 8.44 9.54 10.92


Cash Profit Ratio = Net Profit + Depreciation / Net Sales *100.Cash profit ratio is computed using cash flow business operations as the numerator. This value is determined by adding non-cash expenses, such as

depreciation and amortization to net profits available to equity owners. The ratio indicates the cash generating ability of the firm. Cash generating ability depends upon both profitability and non cash expensed like depreciation. The cash profit of company i.e. 12, 12 , 12, 8 & 9 in the year 2001-02, 2002-03, 2003-04, 2004-05,2005-06 & 2006-07 respectively.


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4.3.3 Table Showing Calculation of Return On Equity Ratio:

Particulars Year2001 02 2002 - 03 2003 - 04 2004 05 2005 - 06 2006-7

Earnings After Tax37942287 41168079 67416720 46442523 90696920 81254654

Net worth121008689 153782340 211825985 248145288 321737708 204812401

Ratio0.31 0.27 0.32 0.19 0.28 0.39


Return on Equity Ratio = EAT/ Net WorthThis ratio is calculated by dividing net profit after tax to shareholder equity. The ratio reveals how profitably the owners funds have been utilized by the firm. The ratio of company were 0.31, 0.27, 0.32, 0.19 & 0.28 in the year i.e. 2001-02, 2002-03, 2003-04, 2004-05,2005-06 & 2006-07 respectively.


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4.3.4 Table Showing Calculation of Gross Profit Ratio:


Gross Profit78089824 79886964 126917388 100479735 164978889 145647821

Sales411530864 451068149 709059940 877268727 1286139790 1076217814

Ratio18.97 17.71 17.89 11.45 12.83 13.53


Gross Profit Ratio = Profit + before tax/ sales *100Gross Profit Ratio is the result of the relationship between prices, sales volume and costs. This ratio shows the margin left after meeting manufacturing costs. It measures the efficiency of production as well as pricing when everything is normal the Gross profit margin should remain unchanged irrespective of level of production & sales. The gross profit ratio for the company i.e. 18.97 , 17.71 , 17.89 , 11.45 & 12.83 in the year i.e. 2001-02, 2002-03, 2003-04, 2004-05,2005-06 & 2006-07 respectively.


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4.3.5 Table Showing Calculation of Net Profit Ratio:


Net Profit37942287 41168079 67416720 46442523 90696920 76584210

Net Sales411530864 451068149 709059940 877268727 1286139790 1025468741

Ratio9.22 9.13 9.51 5.29 7.05 7.46


Net Profit Ratio = Net Profit / Net sales *100This ratio established relationship between net profit sales and is generally expressed as a percentage. It indicates operational efficiency or inefficiency of an enterprise. High net profit is the index of better operational efficiency. The net profit ratio of Balaji Amines Limited is 9.22, 9.13 , 9.51 , 5.29 & 7.05 in the years i.e. 2001-02, 2002-03, 2003-04, 2004-05,2005-06 & 2006-07 respectively.


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4.4 Turnover Ratio / Activity Ratio:4.4.1 Table Showing Calculation of Inventory Turnover Ratio:

Particulars Year2001 02 2002 - 03 2003 - 04 2004 05 2005 - 06 2006--07

Cost of goods sold354313397 387953213 3605856422 80502221 1165346790 325478101

Average total stock45511020 43229918 73046955 126575682 191186134 44245145

Ratio7.78 times 8.97 times 8.29 times 6.36 times 6.09 times 7.35 times


Inventory Turnover Ratio = cost of goods sold/ Average total stockThis ratio measures how fast the inventory is moving through the firm and generating sales. management. It indicates company is able to purchase the raw material able to process and then sale the finished goods quickly. In general a high inventory turnover ratio is better than a low ratio. The Balaji Amines limited inventory turnover ratio were 7.78 times, 8.97, 8.29, 6.36 & 6.09 times in the year i.e. 2001-02, 2002-03, 2003-04, 2004-05, 2005-06 & 200607 respectively. The inventory turnover reflects the efficiency of inventory


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4.4.2

Table Showing Calculation of Debts Turnover Ratio:


Total credit sales411530864 451068149 709059940 877268728 1286139790 1158721015

Arrange sundry Debtors70935184 88601181 133131047 195599489 256189380 245164521

Ratio5.80 times 5.09 times 5.32 times 4.48 times 5.02 times 4.72 times


Debts Turnover Ratio = Total credit sales / Arrange sundry DebtorsThe Debtors Turnover Ratio is a test of the liquidity of the debtors of a company Debtors turnover ratio indicates the speed with which the debtors are turned over during a year. It also measures the liquidity of accounts receivable and the effectiveness of credit policy of the company. It indicates company ability to sale the products in the markets, Higher ratio of debtors turnover is better. A turnover ratio of the company i.e. 5.80, 5.09, 5.32, 4.48 & 5.02 times in the year i.e. 2001-02, 2002-03, 2003-04, 2004-05, 2005-06 & 2006-07 respectively.


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Average Collection period:Table Showing Calculation of Average Collection period:


Total Clays in years365 365 365 365 365 365

Debtors Turnover Ratio5.80 5.09 5.32 4.48 5.02 4.9

Ratio65 71 68 81 72 74


Average Collection period = Total days in years / Debtors Turnover RatioThis ratio indicates the extent to which the debts have been collected in times. The ratio is very helpful to the lender because it explains to them whether their borrowers collected period implies prompt payment by debtors. It reduces the chances of bad debts. The overall performance is quite satisfactory. In the year 2001-02, 2002-03, 2003-04, 2004-05, 2005-06,2006-07 is 62, 71, 68, 81,72 & 74 days.


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4.4.3

Table Showing Calculation of Fixed Assets Turnover Ratio:


Sales411530864 451068149 709059940 877268727 1286139790 1372546894

Fixed Assets180774878 313133432 409742041 465704627 548916465 578452165

Ratio2.28 1.44 1.73 1.88 2.34 2.37


Fixed Assets Turnover Ratio = Sales /Fixed AssetsIt measures the efficiency of a firm in managing the more efficient management and utilization of fixed assets while low turnover ratio are indicatives of under utilization of available resources and presence of idle capacity. This ratio indicates the extent to which the entrustment in fixed assets contributes towards sales. Fixed Assets turnover ratio of Balaji Amines Ltd for 2001-02, 2002-03, 2003-04, 2004-05,2005-06 & 2006-07 is 2.28, 1.44, 1.73, 1.88 & 2.34 respectively. Higher ratio indicates efficiency in work performance. This indicates there is proper utilization of available resources and presence of idle capacity.


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4.5

Comparative Analysis:

Table Shows the comparative analysis of Balaji Amines Ltd. with industry average:

Ratios LiquidityCurrent Ratio

FormulaCurrent assets / Current liabilities

BAL2.95

Industry Average1.26

Acid Test Ratio Current asset inventory/ Turnover Inventory Turnover Fixed Turnover Current Liabilities Cost of goods sold/ Avg inventory Assets Sales / Fixed Assets

1.84

0.69

6.09

6.43

2.34

1.26

Source: - Financial Management by Prasanna Chandra Balance Sheet of Balaji Amines Limited.

Researcher have discussed a long list of financial ratios, for judging whether the ratio are high or low one has to make a comparative analysis such as a cross section analysis or time series analysis.

Comparison with the Industry:The table (4.5) shows the ratio of the company along with industry average. Comparing the ratios of researcher found that 1. The Company has a favorable liquidity position, the liquidity ratios of company are higher than the industry average. 2. Turnover ratios of company are higher than the industry average.


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OBSERVATION AND FINDINGS


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OBSERVATION AND FINDINGS:The following observations are drawn up from calculation and interpretation of Ratios:-

A) SHORT TERM SOLVENCY RATIOS:1) Current Ratio:Regarding the liquidity point of view, the current ratio of company is more than industry standard ratio. This indicates satisfied short term financial position. Short term liquidity position of company is satisfactory.

2) Quick Ratio:It is a measure of the extent to which liquid resources are immediately available to meet current obligations. Generally, a quick ratio of 1:1 considered to represent a satisfactory current financial condition. The companies quick ratio above standard i.e. 1.91, 2.83, 2.03, 1.71 & 1.84 in the year 2001-02, 2002-03, 2003-04, 200405,2005-06 & 2006-07 respectively. which indicates a satisfactory current financial position of the company.

B) LONG TERM SOLVENCY RATIOS:1) Debt Equity Ratio:Debt Equity Ratio is decreased from 1.67 to 1.63 due to decreased in long term debts by company.

2) Shareholders Equity Ratio:Shareholders Equity Ratio indicates shareholders equity to total capital employed and this ratio is decreased from 0.45 to 0.38. This ratio decreased due to increase in total capital employed and decreased in shareholders equity.


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3) Interest Coverage Ratio:Interest coverage ratio is shown by the ability of organization coverage of interest in times. This ratio is increased from 2.74 to 3.77 due to increase in profitability of the company and simultaneously decrease in interest.

4) Fixed Assets to Long Term Fund:Fixed Assets to Long Term Fund is 0.91 in year 2001-02 and 1.03 is for 2005-06. This ratio increased in 2006-07 than 2001-02.

5) Capital Gearing Ratio:Capital Gearing Ratio is the ratio of total long term funds plus unsecured loan by shareholders equity this ratio increased because of decrease in long term loans and increase in equity capital. The capital gearing ratio of the factory indicates that the factorys capital is highly geared.

C) PROFITABILITY RATIOS:1) Return on Investment Ratio:Return on investment measures overall effectiveness of Management in generation profits with its available assets. Return on investment ratio is decreased from 2001-02 to 2006-07 i.e. 23.81% to 19.25%.

2) Cash Profit Ratio :This ratio indicates the cash generating ability of the company. Cash profit ratio is decreased by 12.14% to 9.54%. This ratio decreased it is a bad sign.

3) Return on Shareholder Fund Ratio:The Return on Shareholder Fund Ratio of Balaji Amines Ltd. has decreased immensely from 2001-02 to 2006-07 It has reduced from 0.31 to 0.28 It indicates decreasing trend because of increase reserve and surplus.


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4) Gross Profit Ratio:The Gross Profit of company is decreased. A low gross may reflect unfavorable purchasing. This fluctuation is very less and acceptable.

5) Net Profit Ratio :The Net Profit Ratio has decreased immensely from 2001-02 to 2006-07, viz 9.22 % to 7.05% It implies drastic increases in administrative expenses.

D) TURNOVER RATIO:1) Inventory Turnover Ratio:Inventory Turnover Ratio is reduced from year 2001-02 to 2006-07 i.e. 7.78 to 6.09 times respectively. This fluctuation is very less and acceptable.

2) Debt Turnover Ratio:It is observer that, while calculating debtors turnover ratio, the company was having stringent credit policy. Turnover ratio of year 2001-02 i.e. 5.80 to 5.02 in the year 2006-07 signifies that debtors get converted into cash.

3) Fixed Assets Turnover Ratio:The company Fixed Assets Turnover Ratio is high in year 2006-07 as compared to year 2001-02 i.e. 2.28 to 2.34 respectively. performance. High ratio indicates efficiency in work


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LIMITATION OF THE STUDY


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1) LIMITATION OF THE STUDY:The study is confined to Balaji Amines Limited and it is based on the information provided by the various departments of the company. The ratios are generally calculated from the past financial statements and thus it is difficult to interpret the future. Ratio analysis gives numerical expressions resulting from quantitative analysis of financial problems. But it does not give expression from qualitative analysis. Due to time constraints more data could not be gathered and analyzed. The inflationary situations or changing price levels are not considered while interpreting ratios.

2)LIMITATION OF RATIO ANALYSIS: 1. Impact of Inflation: Major limitation of the ratio analysis, as a tool of financial of financial analysis is associated with price level changes. Assets acquired at different periods are, in effect, shown at different prices in the balance sheet, as they are not adjusted for changes in the price level. As a result, ratio analysis will not yield strictly comparable and therefore, dependable result.

2. Difficulty in Comparison: One serious limitation of ratio analyses arises out of the difficulty associated with their comparison to interferences. Such comparisons are vitiated by different procedures adopted by various firms. The difference may relate to the following aspects:Ratio by them means nothing. They must always be compared with. A norm or a target The ratios achieved in other comparable companies.


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3. Product Line diversification: Detailed ratios for different divisions, products and market segments etc. may be set off by substantial profits in another product line. But the position for the rest of the year may be entirely different.

4. Lack of / standards:Even though some norms can be set for ratios, is no uniformity as to what an ideal ratio is. Generally it is said that Current Ratio should be 2:1. But if a firm supplies mainly to Government Departments where debt collection period is high, a current ratio of 4:a or 5:1, may also be considered normal.

5. High or Low:A number by itself cannot be high or low. Hence, a ratio by itself cannot become good or bad. The line of difference between good ratio and bad ratio is very thin.


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SUGGESTIONS


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SUGGESTIONS:1. Companies current Ratio has above standard. The standard ratio is good for short term liquidity. Company should try to maintain this ratio at optimum level. 2. The long term solvencies are satisfactory level of the company. 3. Profitability ratio shows the generation of profits of the company. The company profit is increasing year by year which is good sign of development. 4. Turnover ratios of the company are satisfactory level in both the years and company should try to maintain this ratio at optimum level. 5. Quick ratio of 1:1 is considered satisfactory. BALs quick ratio is 1.84:1. it indicates sound liquidity position of the company, so company should try to maintain this level continuously. 6. after 2002 the Debt equity ratio is slightly increasing year by year, so company should try to decline this ratio which helpful for the company to protect the future losses. 7. BALs shareholders Equity ratio has reduced from 0.45 to 0.38, according to general principle lower will be the equity ratio which would considered acceptable and safe. 8. after 2004 the companys interest coverage ratio has declining near about 50% so company should try to increase this ratio for reducing their interest burden. 9. fixed assets to long term funds and capital gearing ratio are satisfactory level of the company. 10. the gross profit of the company is decreased due to unfavorable purchasing. In future company should be careful about purchasing activities.


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CONCLUSION


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CONCLUSION:


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BIBLIOGRAPHY


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BIBLIOGRAPHY:

Books referred:Financial Management : M.Y. Khan & P.K. Jain.

Financial Management

:

P.V. Kulkarni & B.G. Satyaprasad.

Financial Management

:

Prasanna Chandra.

Research Methodology

:

C.R. Kothari.

Annual Reports of Balaji Amines Limited:

Website: www.balajiamines.com.


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a study on ratio analysis of balaji amine limitedr by noname

Documents

financial analysis

financial management

financial performance

financial position

financial year

bals financial data

financial growth

types of financial ratio