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CHAPTER III
FINANCIAL PERFORMANCE OF PUBLIC SECTOR
ENTERPRISES –AN ANALYSIS
The present chapter contains three sections. Significance of financial ratios in
financial performance analysis are discussed in the first section , the theoretical base
of the selected financial ratios in the second section and the evaluation of financial
and operating performance are detailed in the third section.
Section 1: Significance of Financial Ratios in the Performance Analysis
For evaluating the financial performance, financial ratios are used. These
ratios help in evaluating whether the company is performing well or not. The pivotal
instruments for providing most of such economic information are the financial
statements prepared at regular intervals by the public enterprises.
It is worth quoting in this connection the observation made by Eaton
Marquis (1957)1 former president of AICPA (Association of the Institute of Certified
Public Accountants of America), who asserted that one thing which holds the
economy together under all the pressures and in the midst of this swift evolutionary
passage through time is our system of financial reporting. Without adequate
information about the results of business operations, no one could make intelligent
decisions, and our economy would fall apart.
Financial statements, as vehicles of communication, intend to convey
information about the workings of the unit over a period of time as well as its state
of affairs at a point of time. The Tuyeblood Committee (1973)2, in its report
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enunciating the objectives of financial statements, states that the function of external
accounting reports is to provide information for making of economic decisions by
parties who rely on such reports as a basic source of information. These financial
statements purport to communicate economic messages of the results of business
decisions and events which can be expressed in terms of quantifiable data in such a
way as to achieve the maximum understanding with the users and correspondence of
the message with economic reality.
Financial statements are multifunctional, catering to the needs of several
users, both from within and outside the economic unit, viz., managers, creditors,
investors, taxation authorities, regulatory bodies, trade unions and employees. These
varied users are concerned with the relevant information of their own areas of
interest in the firm for which they analyse and interpret these financial statements.
Some of the users are interested in the quality of operational performance whereas
others are concerned with adjudging the capability of the concern in meeting its debt
obligations. On the basis of the information gained from these financial statements,
these varied users reach the decisions pertaining to their own areas of interests.
Thus, shareholders decide about the shareholding of the concern on the basis of its
expected profitability, credit analysts including financial institutions, bankers and
other lending agencies, about the lending policy on the basis of the creditworthiness
of the concern; and the taxation authorities decide about the amount of tax to be
levied on the basis of the operating results.
Economic messages that the various users draw from these financial
statements get facilitated when the individual variables are transformed into
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financial ratios. This transformation allows direct comparison of economic units of
different sizes and provides a better picture of a firm’s financial position and the
interrelationships of the data. The denominator of financial ratios acts as size
deflator to remove the effects of scale from comparison (Geoffrey, 1980)3. The
usage of financial ratios is also justified by the fact that the selection of pertinent
material from a plethora of published information is more useful than wide and
indiscriminate reading. Financial ratios serve this purpose by reducing the size of
data disclosed in financial statements to precise information. Financial ratios, the
derivatives of financial statements, therefore, are widely applied to reach certain
judgments about the firm under study. They are expected to provide the economic
and objective justification for the decisions. In this connection Laurent (1979)4 has
opined that in principle the justification for employing financial ratio analysis to
investigate a company’s financial state is highly defensible.
The logical reason behind this type of analysis is the proposition that there
are certain normative relationships which exist between different financial
components of a company as displayed in the balance sheet and profit and loss
account. The extent to which a company does or does not conform to these norms
for the activities that it is engaged in is indicative of something favourable or
unfavourable, depending on the relationship being examined.
It is, thus, clear that financial ratios are used not only in analyzing the past
and present financial performance of an economic unit but also can be applied to
predict its future financial performance. The prediction of future events is of great
interest to the varied users of financial statements since it is a necessary pre-
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condition for decision making. The predictive capability of financial ratios has
assumed such an importance in the past few years that it is now used as a criterion
for judging the usefulness of financial statements (Beaver, 1974)5.
It is well established that the earlier the trouble is detected, the more easily
and economically it may be countered. Forewarning helps in forearming. Early
detection of state of affairs and the profitability enable the management to rectify it.
Advance information regarding the condition of an enterprise should be an important
factor in streamlining the allocation of resources by financial institutions, banks and
investors in general, to achieve efficiency.
Section 2: Theoretical Frame Work for Analysis
The ratios applied by the Bureau of Public Enterprises in Kerala for evaluation of
the financial and operating performance such as Debt Equity Ratio, Current Ratio ,
Receivables to Sales , Stock of Finished Goods to Sales , Stock of Raw Materials
to Consumption , Consumption to Sales , Net Profit to Sales and Return on
Investment ,Net worth, Capital Employed, Capital Invested and the Working capital
are taken for evaluation of the financial performances of selected Public Sector
Enterprises under study.
The net worth comprises of paid up capital plus reserves and surplus minus
preliminary expenses, accumulated loss, miscellaneous expenditure not written off
and intangible assets ( as given in balance sheet ) .Capital Employed means net fixed
assets including capital work in progress plus working capital. Capital Invested
means paid up capital plus long term borrowals and Working Capital means the
Current assets including loans and advances minus current liabilities and provision.
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Debt Equity Ratios
Long term debt-to equity ratio reveals the extent of support that the long term
debt holders are enjoying from the equity capital. It thereby provides guidelines as to
what magnitude they can take a shelter of the equity cover available with the
organisation. The basic reason attributable in this case is to avoid further risk
attached to equity capital and shareholders are unwilling to supply additional capital.
This is the ratio of long term borrowals to paid up capital . The computation is made
by using the following formula:
Debt to Equity Ratio = Long term Borrowals / Paid up Capital
An enhanced level of borrowed funds are compared to owner’s investment
which evidently results in higher service obligations in terms of interest payments
and consequently increases the possibility of the firm’s inability to meet its
obligations in time. It exhibits the relationship between loan funds and net worth. Its
main object is to increase the owners benefits ie, possibility to earn income from
such investment exceeds the interest payable to them. A high ratio of debt to equity
is appreciable in the case of capital intensive industries.
Liquidity Ratios
Liquidity ratios measure the ability of the firm to meet its current obligations.
A firm should ensure that it does not suffer from lack of liquidity and also that it
does not have excessive liquidity. The failure of a company to meet its obligations
due to lack of sufficient liquidity, will result in a poor creditworthiness, loss of
creditors’ confidence, or even in legal tangles resulting in the closure of the
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company. A very high degree of liquidity is also bad; e.g. idle assets earn nothing.
The most common ratio, which indicates the extent of liquidity, is current ratio.
Current Ratio
Current Ratio establishes the relationship between assets which are cash or
cash equivalents convertible within a period of one year (Current Assets) to
liabilities which are to be met within a period of one year (Current Liabilities).The
ratio of current assets including loans and advances to current liabilities including
provisions is current ratio.
Current Ratio = Current Assets / Current Liabilities
It measures solvency of the company in the short term. The ideal is
considered as 2:1 but banks consider the minimum acceptable level as 1.33:1 . A
very high current ratio will have an adverse impact on the profitability of the
organisation. It may be due to piling up of inventory, inefficiency in collection of
debtors , high balance in cash and banks without proper investment . It is generally
symptomised by a mismatch of the current liabilities against current assets. If the
money receipts from debtors as well as cash sales and other income are insufficient
to meet the payments which should be made to creditors, there shall be a built up of
creditors balances.
Persisting with such a situation will result in the creditors waiting for longer
periods for recovery of their money. Pressure from creditors will increase, and
illiquidity will become a problem. Part of such crisis is created by the fact that under
the accrual system of accounting, units are made liable to pay advance tax, declare
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and pay dividends to shareholders within a specified period of time in cash. An
unrealistic increase in accounts receivables which are no better than partial truths
does not help. The current ratio endeavours to provide an idea about the cushion
available with the firm to meet its short term obligations. If an enterprise cannot
meet its current obligations when they become due, its continued existence becomes
doubtful, and that renders all other measures of performance irrelevant. Therefore,
liquidity crisis generally leads to solvency crisis. Current ratio, therefore, aids in the
prediction of future operational activity and assists both internal and external users
of financial information in the decision making process.
The ratio, however, is subject to serious theoretical and practical
shortcomings. The ratio is a static concept. What is of greater relevance is the
availability of resources to meet future cash outflows whenever they arise rather than
keeping a buffer as explained by the ratio. These flows depend on elements not
included in the ratio itself, such as sales, profits and changes in economic conditions.
Moreover, the ratio is easily amendable to manipulation. Despite the shortcomings
entailed in the current ratio, more precisely its static nature, its use in predicting
corporate failure has been indicated in the empirical works of Merwin (1942)16
wherein it was suggested that current ratios of the failed firms were in general less
than those of industry as a whole and, therefore, this ratios is expected to possess the
barometric capacity to forewarn imminent problems. A deteriorating ratio is an
indicator of problems in the offing and warrants an effective management over
inventory, accounts receivables, cash and accounts payables.
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Activity Ratios
Activity ratios are employed to evaluate the efficiency with which the firm
manages and utilizes its assets. These ratios are also called as turnover ratios
because they indicate the speed with which assets are being converted or turned over
into sales. Activity ratios thus involve a relationship between sales/production and
assets. A proper balance between sales and assets generally reflects that assets are
managed well. The prominent activity ratios to judge the effectiveness of assets
utilization are capacity utilisation, finished goods turnover, raw material turnover,
debt collection period, credit payment period, asset turnover and working capital
turnover.
a. Receivables to Sales (in months)
The ratio indicates the Account Receivables (Debtors plus Bills Receivables)
to Sales in terms of months. The formula used for computation is:
Receivables to Sales (in months) = Accounts Receivables/ Sales (x) 12
b. Stock of Finished Goods to Sales (in months)
The ratio indicates the stock of finished goods (excluding semi finished
goods) to Sales in terms of months and can be computed by :
Stock of Finished Goods to Sales = Closing stock of finished goods / Sales (x) 12
Change in stock to sales ratio can be either positive or a negative fraction.
Positive change in stock ratio reveals that production was more than the sales,
whereas a negative change indicates market demand exceeded current production
levels. This ratio, if read with capacity utilization ratio, gives more insights. A low
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capacity utilization ratio coupled with negative change in stock ratio points towards
urgent improvement in production levels to avoid stock out situations. Similarly, a
low capacity utilization ratio with a positive inventory build up highlights the need
of intensifying the marketing efforts to push up the sales further.
c. Stock of Raw Materials to Consumption
Material consumed can be found out as opening balance of raw material plus
purchases minus closing balance of raw material. The firms’ operational efficiency
lies in the number of times it will be able to convert the raw material inventory into
finished goods during the period under report. A firm’s operational margin is
realised only when value is added on the raw materials procured by it. This value
addition potential of the process undertaken by the concern contributes towards its
profitability to the extent of the number of times it can transform input into intended
saleable output. A higher ratio indicates the velocity of addition on account of
operating margin is high and the operation is a value generating one.
The ratio of stock of raw materials (excluding general stores and spares ) to
Consumption in terms of months is ascertained by :
Stock of Raw Material to Consumption
= Closing Stock of Raw materials / Raw materials Consumed (x) 12
d. Consumption to Sales
The ratio indicates the raw materials consumed to Sales expressed as a
percentage on Sales and is computed by using the following formula:
Consumption to Sales (%) = Raw material Consumed / Sales (x) 100
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e. Net Profit to Sales
A company should earn profits to survive and grow over a long period of
time. Profits are essential, but it would be wrong to assume that every action
initiated by management of a company should be aimed at maximizing profits,
irrespective of concerns for customers, employees, suppliers or social consequences.
Profitability ratios are calculated to measure the operating efficiency of the
company. Besides management of the company, creditors and owners are also
interested in the profitability of the firm. The profitability ratios discussed here are
return on investment and net profit to sales.
The net profit margin ratio is measured by dividing net profit after taxes
including non- operating incomes less non-operating expenses as appearing in the
profit and loss account by sales. Net profit is obtained when operating expenses,
interest and taxes are subtracted from the gross profit.
Net profit margin ratio establishes a relationship between manufacturing,
administering and selling the products. This ratio is the overall measure of the
firm’s ability to turn each rupee sales into net profit. If the net margin is inadequate,
the firm will fail to achieve satisfactory return on shareholders’ funds.
This ratio also indicates the firm’s capacity to withstand adverse economic
conditions. A firm with a high net margin ratio would be in an advantageous
position to survive in phases of falling selling prices, rising costs of production or
declining demand for the product. It would really be difficult for a low net margin
firm to withstand these adversities. Similarly, a firm with high net profit margin can
make better use of favourable conditions, such as rising selling prices, falling costs
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of production or increasing demand for the product. Such a firm will be able to
accelerate its profits at a faster rate than a firm with a low net profit margin.
An analyst will be able to interpret the firm’s profitability more meaningfully
if one evaluates both the ratios - gross margin and net margin - jointly. For example,
if the gross profit margin has increased over years, but the net profit margin has
either remained constant or declined, or has not increased as fast as the gross margin,
this implies that the operating expenses relative to sales have been increasing. The
increasing expenses should be identified and controlled. Gross profit margin may
decline due to fall in sales price or increase in the cost of production. As a
consequence, net profit margin will decline unless operating expenses decrease
significantly. The crux of the argument is that both the ratios should be jointly
analysed and each item of expense should be thoroughly investigated to find out the
causes of decline in any or both the ratios. The ratio of net profit before tax and
dividend to sales expressed as a percentage on Sales:
Net Profit to Sales (%) = Net Profit Before Tax and Dividend / Sales (x) 100
f. Return on Investment
Return on Investment (ROI) measures the return generated by net fixed
assets plus current assets minus current liabilities excluding bank loans. The ratio of
return on investment is calculated as:
Return on Investment
=Net Profit before Tax and Dividend / Capital Employed (x) 100
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Since taxes are not controllable by management and since firm’s
opportunities for availing tax incentives differ, it is prudent to use net profit before
tax as a measure of profit. In order to survive in the long run a firm should generate
a ROI at least equal to its overall weighted average cost of capital. Any return over
and above ROI on capital employed creates an Economic Value Addition (EVA) on
the shareholder equity.
Section 3: Analysis of Financial Performance of selected Public Sector
Enterprises
For the purpose of evaluation of financial performance, 18 PSUs are selected
from various sector categories of industries in Kerala. They are: 1.Kerala Financial
Corporation ; 2.Kerala Tourism Development Corporation; 3. The Kerala Ceramics
Limited; 4. The Kerala Minerals and Metals Limited ; 5. Travancore Titanium
Products Limited; 6. Transformers and Electrical Kerala Limited ; 7. Kerala State
Electronics Development Corporation Limited; 8. Kerala Agro Machinery
Corporation Limited; 9. Kerala Automobiles Limited; 10.Kerala Agro Industries
Corporation Limited ; 11. Travancore Sugars and Chemicals Limited; 12. Sitaram
Textiles Limited; 13.Handicrafts Development Corporation Limited; 14.Kerala State
Bamboo Corporation Limited; 15.Kerala State Civil Supplies Corporation Limited;
16.Kerala State Artisans Development Corporation Limited; 17. Kerala State
Palmyrah Development and Worker’s Welfare Corporation Limited; and 18. Kerala
Shipping Inland Navigation Corporation Limited .Let us now evaluate the financial
performance one by one:
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1. KERALA FINANCIAL CORPORATION
Kerala Financial Corporation,(KFC) was incorporated in 1953 under the
State Financial Corporations Act , 1951. The forerunner of this corporation was the
Travancore - Cochin Financial Corporation established in 1953 under the SFC Act,
1951 . This was later renamed as Kerala Financial Corporation consequent to the
reorganisation of states in 1956. KFC has its headquarters at Trivandrum with
regional offices at Trivandrum, Kottayam, Palakkad and Kozhikode and district
offices in all the 14 district headquarters of the Kerala state. The KFC is the pioneer
in industrial financing in the Kerala state. Since its inception in 1953, as a
development banker, the contribution of the corporation in the industrialisation of
the state has been significant.
a. Net Worth
The net worth of KFC is analysed for knowing the trend in owners
contribution .The net worth was Rs. 3900 crores during 1990-91 which increased to
Rs. 6014 crores during 1995-96. Again this increased up to Rs. 13,189 crores in
1999-2000. It was Rs. 11332 crores in 2000-2001 which increased to Rs. 11156
crores in 2004-05 and an unprecedented growth of Rs. 26995 crores is seen in 2009-
2010. The overall position of net worth for a period of 20 years study from 1990-91
to 2009-2010 shows a fluctuating trend of increase.(Table 3.1)
b. Capital Employed
The capital employed of KFC is analysed for knowing the trend in net fixed
assets including the capital work in progress plus the working capital . The capital
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employed was Rs 1526 crores during 1990-91which increased to Rs. 2950crores
during 1994-95. Again this increased up to Rs 6187 crores in 1999-2000. It was Rs
8074 crores in 2000-2001 which decreased to Rs 2942 crores in 2004-05 and an
unprecedented growth of Rs 84952 crores is seen in 2009-2010. The overall position
of capital employed for a period of 20 years under study from 1990-91 to 2009-2010
shows a fluctuating trend of increase with exception of the year 1996-97 (Table 3.1).
c. Capital Invested
The Capital Invested by KFC is analyzed for knowing the trends in paid up
capital plus long term borrowings . The capital invested was Rs 2633 crores during
1990-91 which increased to Rs 35864 crores during 1994-95. Again this increased
up to Rs 76891 crores in 1999-2000. It was Rs 86177 crores in 2000-2001 which
decreased to Rs 71671 crores in 2004-05 and an increase to Rs 78562 crores is seen
in 2009-2010. The overall position of capital employed for a period of 20 years
study from 1990-91 to 2009-2010 shows a fluctuating trend of increase (Table3.1).
d. Working Capital
The Working Capital of KFC is analyzed for knowing the trend in current
assets over current liabilities for meeting its short term obligations. The working
capital invested was Rs 1529 crores during 1990-91 which increased to Rs 2875
crores during 1994-95. Again this increased up to Rs 5612 crores in 1999-2000. It
was Rs 7637crores in 2000-2001 which decreased to Rs 2599crores in 2004-05 and
an abnormal increase to Rs 84706 crores is seen in 2009-2010. The overall position
of working capital for a period of 20 years study from 1990-91 to 2009-2010 shows
a fluctuating trend of increase (Table3.1).
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Table 3.1 Net worth, Capital Employed , Capital Invested and Working
Capital of KFC ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5
1990-1991 3900.14 1525.54 2632.57 1528.80
1991-1992 4001.17 1660.97 28008.35 1612.55
1992-1993 4618.89 2220.07 30821.88 2170.39
1993-1994 4871.16 2263.25 33139.44 2201.76
1994-1995 6013.8 2949.7 35864.32 2874.56
1995-1996 7282.28 2162.57 39741.57 1849.66
1996-1997 8643 546 49607 2495
1997-1998 10357 1240 61344 648
1998-1999 11645 3815 72212 3148
1999-2000 13189 6187 76891 5612
2000-2001 11332 8074 86177 7637
2001-2002 9789 9573 92376 9145
2002-2003 9635 9019 88443 8615
2003-2004 11186 3649 81502 3276
2004-2005 11156 2942 71671 2599
2005-2006 11533 7697 67211 7383
2006-2007 7220 2877 58353 2578
2007-2008 8183 51206 59118 50920
2008-2009 24353 75545 71766 75288
2009-2010 26995 84952 78562 84706
Source: Compiled from the Review of Public Enterprises , Various issues, Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of KFC from 1990-91 to 2009-
2010 with the trend line and regression equation is shown in fig. 3(i)
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Fig. 3(i) Net worth, Capital Employed, Capital Invested and Working capital of KFC
Source: Table 3.1
The trend line (linear trend of first degree) of the Net worth from1990-91 to
2009-2010 is Y = 730.17x + 2628.4. The slope is 730.1x and intercept is 2628.4.
The R² is 0.4913 which shows that the equation is most suitable for prediction.
There is an increase in the net worth of KFC during the liberalization period.
The trend line (linear trend of first degree) of the Capital Employed from
1990-91 to 2009-2010 is Y = 2799.2x+ 15386. The slope is 2799.2x and intercept is
15386. The R² is 0.4458 which shows that the equation is most suitable for
prediction. There is an increase in the capital employed of KFC during the
liberalization period.
The trend line (linear trend of first degree) of the Capital Invested from 1990-
91 to 2009-2010 is Y = 2667.1x + 32457. The slope is 2667.1x and intercept is
32457. The R² is 0.4671 which shows that the equation is most suitable for
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prediction. There is an increase in the capital invested of KFC during the
liberalization period.
The trend line (linear trend of first degree) of the Working Capital from
1990-91 to 2009-2010 is Y = 2788.1x + 15585. The slope is 2788.1x and intercept
is 15585. The R² is 0.4427 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of KFC during the
liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
This ratio indicates the long term borrowing to paid up capital .The debt
equity ratio of KFC during 1990-91 was 7.25 : 1 which declined to 5.40 : 1 in 1994-
95 . It further declined to 4.93:1 in 1995-96 which increased to 5.28:1 in the next
year and remained almost stagnant up to 2000-2001 (5.75:1) . It again increased to
5.86:1 in 2001-02 and declined to 3.56: 1 in 2004-05 and further declined to 2.85:1
in 2009-2010. It clearly indicates that the long term borrowings to paid up capital is
declining from1990-91 to 2009-10. It shows their reduced dependence on borrowed
funds during the period under study. This is a good sign as a high ratio debt to equity
is not advisable as it is a financing concern (Table 3.2).
ii. Current Ratio
The current ratio of KFC during 1990-91 was 3.78 : 1 which increased to
5.50:1 in 1994-95 .It was 2.73 :1 in 1995-96 and in the subsequent years sharply
declined and then increased to 4.33 :1 in 1999-2000. There was a fluctuating trend
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and declined to 2.04 :1 in 2004-05. An abnormal increase is seen in 2008-09 (62.56
:1 ) and 2009-10 (29.26 : 1 ). The overall trend shows a fluctuating one with decline
in certain years and an abnormal increase in certain other years. To conclude, these
ratios are not favourable, being high. It clearly indicates that the liquidity
management of KFC is not sound and systematic (Table 3.2).
iii. Return on Investment
This is the return on the capital employed by the KFC. The return on
investment shows an increasing trend from 1990-91 (4.61per cent) to 1999-2000
with a normal increase but with exceptional increase in 1996-97 and 1997-98
periods. From 2000-01 (-30.2 per cent) onwards there was a steep decline in all other
years except during 2003-04 (4.96 per cent), 2006-07 (43.55 per cent) and in 2009-
10 (5.46 per cent ).It is clear indication from the ratios that the return on investment
of KFC during the whole period of 20 years of study from 1990-91 to 2009-10 in
not a promising one(Table 3.2).
iv. Net Profit to Sales
This is the ratio of net profit before tax and dividend to total sale of the KFC.
The net profit to sales is in an increasing trend from 1990-91 (3.22per cent) to 2001-
02, but from 2002 -03 onwards there was a decline in all other years with exception
of 2003-04 (1.54 per cent) and 2009-10 (50.43 per cent ) . This makes it clear that
the profit to sales of KFC during the whole period of 20 years of study from 1990-
91 to 2009-10 in not a promising one and the profit earned is only meager(Table
3.2).
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Table 3.2
Financial and Operating Ratios of KFC
Year Debt-equity ratio Current ratio Return on
investment (%) Net profit to sales
(%)
1 2 3 4 5 1990-1991 7.25 : 1 3.78 :1 4.61 3.22 1991-1992 7.36:1 3.89:1 5.41 3.42 1992-1993 7.00:1 4.20:1 6.36 4.15 1993-1994 6.20:1 5.06:1 6.25 3.62 1994-1995 5.40:1 5.50:1 6.45 2.75 1995-1996 4.93:1 2.73:1 45.25 4.62 1996-1997 5.28:1 1.00:1 266.3 5.58 1997-1998 5.67:1 1.36:1 92.58 7.26 1998-1999 5.88:1 2.35:1 30.09 11.46 1999-2000 5.52:1 4.33:1 11.62 6.74 2000-2001 5.75:1 4.48:1 -30.2 20.59 2001-2002 5.86:1 5.14:1 -30.12 20.59 2002-2003 5.10:1 4.81:1 -6.99 -5.5 2003-2004 4.26:1 2.37:1 4.96 1.54 2004-2005 3.56:1 2.04:1 -8.46 -2.84 2005-2006 3.23:1 2.57:1 -2.52 -2.46 2006-2007 2.67:1 1.54:1 43.55 -3.78 2007-2008 2.72:1 14.75:1 -2.01 -12.41 2008-2009 2.52:1 62.56:1 -10.28 -76.21 2009-2010 2.85:1 29.26:1 5.46 50.43
Source: Compiled from the Review of Public Enterprises , Various issues, Bureau of Public Enterprises , Government of Kerala .
It is seen that direct correlation exists between net worth to capital employed,
capital invested and to some extent working capital and no correlation exist between
other items ( Table 3.3 )
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Table 3.3 Correlation
Item No. Item Correlation 1 Net worth 1
2 Capital Employed 0.951
3 Capital Invested 0.936
4 Working capital 0.088
5 Debt to Equity Ratio -0.907
6 Current Ratio -0.166
7 Return on Investment -0.573 Source: Computed from Table 3.1 and Table3.2
2. KERALA TOURISM DEVELOPMENT CORPORATION
Kerala Tourism Development Corporation (KTDC) Limited is under the
Tourism Department, one of the administrative departments of Government of
Kerala which was incorporated on December, 1965. KTDC is a commercial agency
which is actively participating in building up basic infrastructure needed for the
development of tourism in the State. KTDC is running hotels and wayside amenity
centres throughout Kerala. It promotes and conducts tours all over the State and
maintains a high-tech reservation system.
a. Net Worth
The net worth of KTDC was Rs. 132.89 crores during 1990-91 which
increased to Rs 680.03 crores during 1995-96. Again this increased up to Rs. 5801.7
crores in 1999-2000. It was Rs. 6008.4 crores in 2000-2001 which increased to
Rs.6919.1 crores in 2004-05 and a further growth of Rs. 6788.2 crores in 2009-2010.
The overall trend of net worth for a period of 20 years study from 1990-91 to 2009-
2010 shows an increase with exception of 2007-08 ( Table 3.4).
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b. Capital Employed
The capital employed of KTDC was Rs 690 crores during 1990-91 which
increased to Rs 1093.1 crores during 1994-95. Again this increased up to Rs
5240.7crores in 1999-2000. It was Rs 5477.1 crores in 2000-2001 which increased to
Rs 5932.6 in 2004-05.It was Rs 5122.2 crores in 2009-2010. The overall position of
Capital employed for a period of 20 years study from 1990-91 to 2009-2010 shows
a fluctuating trend of increase with exception of the year 1996-97 (Table 3.4).
c. Capital Invested
The capital invested by KTDC was Rs1530.72 crores during 1990-91 which
increased to Rs 1794.46 crores during 1994-95. Again this increased upto Rs
4540.336 crores in 1999-2000. It was Rs 5240.45 crores in 2000-2001 which
increased to Rs 7094.4 crores in 2004-05 and an increase of Rs 8324.3 crores in
2009-2010. The overall trend of capital invested during the liberalization period
under study shows a fluctuating trend but on the whole it is found increasing( Table
3.4).
d. Working Capital
The working capital invested by KTDC was Rs 150.55 crores during 1990-
91 which increased to Rs 279.31 crores during 1994-95. Again this increased up to
Rs 2408.9 crores in 1999-2000. It was Rs 2582.5 crores in 2000-2001 which
decreased to Rs 462.2 crores in 2004-05 and an abnormal fall to Rs -512.9 crores is
seen in 2009-2010 . The trend during the initial phase of liberalization was an
96
increasing one but after 2005-06 the position is a declining one or even it goes to
negative growth (Table 3.4).
Table 3.4
The Net worth, Capital Employed , Capital Invested and Working
Capital of KTDC
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 132.89 690.25 1530.72 150.55 1991-1992 133.97 700.35 1527.85 157.45 1992-1993 181.52 854.47 1584.42 237.67 1993-1994 323.52 981.39 1639.34 289.59 1994-1995 680.03 1093.11 1794.46 279.31 1995-1996 1205.28 1667.81 2143.29 436.39 1996-1997 2366.63 2765.52 2899.85 1553.75 1997-1998 3676.46 3598.94 3323.44 2048.25 1998-1999 4537.73 4384.79 3709.33 2233.78 1999-2000 5801.7 5240.68 4540.36 2408.9 2000-2001 6008.36 5477.05 5240.45 2582.46 2001-2002 6042.3 5531.84 5448.8 756.1 2002-2003 6380.68 5551.31 5580.89 740.55 2003-2004 7159.61 6152.02 6802.46 763.31 2004-2005 6919.1 5932.55 7094.35 462.22 2005-2006 6965.54 5654.99 6771.35 598.18 2006-2007 7139 3907.5 6454.36 -182.34 2007-2008 5894.84 3987.53 7261.96 71.28 2008-2009 6615.52 4628.7 7857.45 482.98 2009-2010 6788.19 5122.17 8324.25 -512.93
Source: Compiled from the Review of Public Enterprises , Various issues, Bureau of Public Enterprises , Government of Kerala .
97
The graphical representation of the trends in the growth of Net worth,
Capital Employed, Capital Invested and Working capital of KTDC from 1990-91 to
2009-10 is shown in fig. 3(ii)
Fig. 3(ii)
Net worth, Capital Employed, Capital Invested and Working capital of KTDC
Source : Table 3.4
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y = 439.85x-375.74. The slope is 439.85x and intercept is 375.74 .
The R² is 0.8263 which shows that the equation is most suitable for prediction.
Hence it is inferred that there is increase in the net worth of KTDC during the
liberalization period.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 271.98x +840.37. The slope is 271.98x and intercept
is 840.37. The R² is 0.6004 which shows that the equation is most suitable for
prediction. It is inferred that there is an increase in the capital employed of KTDC
during the liberalization period.
98
The trend line of the Capital Invested during 1990-91 to 2009-2010 is
Y=397.19x + 405.93. The slope is 397.19x and intercept is 405.93. The R² is 0.9672
which shows that the equation is most suitable for prediction. There is an increase in
the capital invested of KTDC during the liberalization period.
The trend line of the Working Capital during 1990-91 to 2009-2010 is
Y=21.271x +1001.2. The slope is-21.271x and the intercept is 1001.2. The R² is
0.494 which shows that the equation is most suitable for prediction. There is a
decline in the working capital during the liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of KTDC during 1990-91 was 0.94: 1 which declined
to 0.81: 1 in 1994-95 . It increased to 0.96:1 in 1995-96 which declined to 0.31: 1 in
1999-2000 and increased to 0.34:1 in 2000-01.It was 0.46:1 in 2004-05 which
declined to 0.39:1 in 2005-06 and further declined to 0.16: 1 in 2009-2010. It
clearly indicates that the long term borrowings to paid up capital is declining from
1990-91 to 2009-10 period. It means that they are not dependent too much on
borrowings but stick on to paid up capital as the base (Table 3.5) .
ii. Current Ratio
It is seen from Table 3.5 that the current ratio of KTDC during 1990-91 was
2.01 : 1 which decreased to 1.81 :1 in 1994-95 .It was 2.22 :1 in 1995-96 and in the
subsequent years sharply declined. It was 3.40 : 1 in 1999-2000 and declined to
1.79:1 in 2004-05. It increased to 2.66:1 in 2005-06 and declined to 0.16 :1 in 2009-
99
10 . The overall trend shows a trend of high fluctuation in all the years under study.
In the initial years the current ratio was favourable but declined sharply during 2006-
07 to 2009-10. Hence it is concluded that these ratios are not promising ones because
in most of the years the ratios are higher or lower than the ideal one (Table 3.5).
iii. Return on Investment
The return on investment of KTDC is negative in most of the years. It was
-2.81per cent in 1990-91 but a positive trend is seen in 1994-95 with 9.29 per cent.
This positive trend lasted up to 1999-2000 with 2.66 per cent but a negative trend
from 2001-02 (-3.21) to 2005-06 (-1.07 per cent). From 2006-07 (1.2 per cent ) on
wards a positive trend is seen up to 2009-10 (0.54 per cent) periods .It is a clear
indication from the ratios that the return on investment of KTDC during the whole
period of 20 years of study from 1990-91 to 2009-10 is varying and is not in an
acceptable level ( Table 3.5).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of KTDC in 1990-
91 was -2.22 per cent but the trend is reversed during 1994-95 with a profit of 5.34
per cent. The profit declined to 3.2 per cent in 1999-2000. The loss position
continued from 2001-02 (-5.63 per cent) to -1.23 per cent in 2005-06 but the trend
reversed and some profit was earned from 2006-07 (0.83 per cent) to 2009-10 (0.41
per cent). This makes it clear that the profit to sales of KTDC during the whole
period of 20 years of study from 1990-91 to 2009-10 is not at all appreciable and
rewarding (Table 3.5).
100
v. Receivables to Sales
This ratio reveals the trends in accounts receivable to sales and it was 0.58 in
1990-91 which increased to 0.91 in 1994-95. It increased to 0.95 in 1995-96 which
declined to 0.43 in 1999-2000 and again declined to 0.21 in 2004-05 which shows a
good result .It increased to 0.51 in 2005-06 which again increased to 0.54 in 2009-
10. A fluctuating trend is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis (Table 3.5).
vi. Stock of Raw materials to Consumption
This ratio reveals the trends in stock of raw materials to consumption which
was 0.91 in 1990-91 and increased to 1.65 in 1994-95. It increased to 1.72 in 1995-
96 which again increased to 1.81 in 1999-2000 and declined to 0.72 in 2004-05 . In
2005-06 the ratio was 0.52 which again declined to 0.46 in 2009-10. A fluctuating
trend is noticed during 1990-91 to 2009-10 the whole 20 year period under analysis.
The lower the months in the raw material stock to consumption of KTDC is really an
appreciable one (Table 3.5).
vii. Consumption to Sales
It represents the ratio of raw materials consumed to sales expressed as
percentage. It was 40.2 per cent in 1990-91 which remained almost similar in
1994-95 (40.21 per cent ). It increased to 42.52 per cent in 1999-2000. It declined to
38.43 per cent in 2000-21 which again declined to 36.14 per cent in 2004-2005.
From 2005-06 onwards there was a decline from 35.13 per cent to 29.28 per cent in
2009-10. A fluctuating trend is noticed during the whole 20 year period under
101
analysis. The lower the consumption of material gives an indication that the
production is not up to the desired level which affect the sales (Table 3.5).
Table 3.5
Financial and Operating ratios of KTDC
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit to sales
(%)
1 2 3 4 5 6 7 8 1990-1991 0.94 :1 2.01 : 1 -2.81 0.58 0.91 40.2 -2.22 1991-1992 0.98:1 2.05:1 -2.91 0.65 0.95 43.4 -2.84 1992-1993 0.96:1 2.10:1 6.15 0.78 1.44 41.57 5.93 1993-1994 0.93:1 2.15:1 8.86 0.89 1.82 40.6 8.2 1994-1995 0.81:1 1.81:1 9.29 0.91 1.65 40.21 5.34 1995-1996 0.96:1 2.22:1 11.26 0.95 1.72 40.10 6.58 1996-1997 0.75:1 14.62:1 10.9 0.96 1.78 41.00 8.48 1997-1998 0.42:1 7.31:1 9.73 0.85 1.79 41.50 9.52 1998-1999 0.30:1 3.93:1 15 0.61 1.80 41.60 15.02 1999-2000 .31:1 3.40:1 2.66 0.43 1.81 42.52 3.2 2000-2001 .34:1 5.13:1 0.78 0.61 1.82 38.43 1.26 2001-2002 .39:1 2.33:1 -3.21 0.42 0.92 36.33 -5.63 2002-2003 .43:1 2.4:1 -2.96 0.51 0.91 32.10 -4.9 2003-2004 .40:1 2.35:1 -3.5 0.20 0.85 30.58 -5.96 2004-2005 .46:1 1.79:1 -1.98 0.21 0.72 36.14 -2.89 2005-2006 .39:1 2.66:1 -1.07 0.51 0.52 35.13 -1.23 2006-2007 .33:1 1.85:1 1.2 0.41 0.49 30.17 0.83 2007-2008 0.22:1 1.03:1 1.66 0.52 0.62 29.84 1.12 2008-2009 0.11:1 1.25:1 1.19 0.53 0.51 28.93 0.86 2009-2010 0.16:1 1.75:1 0.53 0.54 0.46 29.28 0.41
Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues It is seen that direct correlation exist between net worth to capital employed ,
capital invested and negative correlation exist between other items (Table 3.6)
102
Table 3.6
Correlation
Sl. No. Item Correlation
1 Net worth 1 2 Capital Employed 0.951 3 Capital Invested 0.936 4 Working capital 0.088 5 Debt to Equity Ratio -0.907 6 Current Ratio -0.166 7 Return on Investment (%) -0.573 8 Receivable to sales ( in Months) -0.873 9 Stock of raw materials to consumption ( in months ) -0.870 10 Consumption to Sales (%) -0.987 11 Net Profit to sales ( %) -0.512
Source: Computed from Table 3.4 and Table3.5
3. THE KERALA CERAMICS LIMITED
Kerala Ceramics Limited (KCL) was promoted jointly by Government of
Kerala and Kerala State Electronics Development Corporation (KSEDC) with the
name “Dielectro Magnetics Ltd.” in 1974 for manufacture of 25 million pieces of
Ceramic Capacitors per annum. Technical knowhow used by the company was
developed by National Physical Laboratories. The company became a subsidiary of
Kerala State Electronics Development Corporation Ltd (KELTRON) in the year
1977 and was rechristened as “Keltron Electro Ceramics Ltd.”, in January 1985.
The capacity was enhanced to 90 million ceramic capacitors per annum.
103
a. Net Worth
The net worth of Kerala Ceramics Limited is analysed and is seen negative in
all the 20 years from 1990-91 to 2009-10. It means that during the entire period
under analysis the net worth is negative (Table 3.7).
b. Capital Employed
The capital employed of Kerala Ceramics Limited was Rs 108.5 crores
during 1990-91 which declined to Rs 14.52 crores during 1994-95. From 1995-96
capital employed shows a negative growth. The trend of 20 years from 1990-91 to
2009-2010 is a declining one .It means that during the entire period under analysis
the capital employed is seen negative ( Table 3.7).
c. Capital Invested
The capital invested by Kerala Ceramics Limited was Rs 1321.2 crores
during 1990-91 which increased to Rs 1478.7 crores during 1994-95. Again this
increased to Rs 1556.4 crores in 1995-96 which increased to Rs 1736.7 crores in
1999-2000. It was Rs 1745.7 crores in 2000-2001 which increased to Rs 1760.9
crores in 2004-05 and a further increase to Rs 2090.5 crores in 2009-2010 .The
capital invested for the entire period of 20 years under study from 1990-91 to
2009-2010 shows an increasing trend (Table 3.7).
d. Working Capital
The working Capital of Kerala Ceramics Limited is analyzed and is seen it
was negative in all the years under study from 1990-91 to 2009-2010 ( Table 3.7).
104
Table 3.7
Net worth, Capital Employed , Capital Invested and Working Capital of Kerala Ceramics Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 -272.34 108.52 1321.21 -15.82 1991-1992 -284.63 116.65 1433.31 -17.98 1992-1993 -257.01 77.62 1429.16 -38.73 1993-1994 -241.63 55.03 1453.69 -43.55 1994-1995 -307.24 14.52 1478.79 -74.06 1995-1996 -604.18 -238.49 1556.42 -317.07 1996-1997 -745.72 -374.72 1561.73 -444.74 1997-1998 -660.11 -282.27 1718.57 -343.71 1998-1999 -738.16 -351.14 1727.75 -403.82 1999-2000 -810.32 -414.32 1736.73 -457.58 2000-2001 -888.18 -483.25 1745.66 -510.79 2001-2002 -972.89 -570.21 1743.41 -584.62 2002-2003 -1041.39 -635.59 1746.53 -667.73 2003-2004 -1182.28 -756.4 1766.61 -781.1 2004-2005 -1269.74 -849.55 1760.92 -866.81 2005-2006 -1341.67 -868.48 1813.92 -881.69 2006-2007 -1359.68 -693.26 1907.1 -701.07 2007-2008 -1319.65 -614.37 1945.96 -617.5 2008-2009 -1300.92 -542.34 1999.26 -554.18 2009-2010 -1294.79 -445 2090.47 -456.36 Source: Compiled from the Review of Public Enterprises , Various issues, Bureau
of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth,
Capital Employed, Capital Invested and Working capital of Kerala Ceramics
Limited from 1990-91 to 2009-2010 with the trend line and regression equation is
shown in fig. 3(iii)
105
Fig. 3(iii) Net worth, Capital Employed, Capital Invested and Working capital of Kerala
Ceramics Limited
Source : Table 3.7
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y = -67.888x–131.8. The slope is -67.888xand intercept is 131.8. The
R² is 0.9373 which shows that the equation is most suitable for prediction. There is
a decrease in the net worth of Kerala Ceramics Limited during the liberalization
period.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y =-46.77x + 103.73. The slope is 46.77xand intercept is
103.73. The R² is 0.7021 which shows that the equation is most suitable for
prediction. There is a decrease in the capital employed of Kerala Ceramics Limited
during the liberalization period.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 33.865x + 1341.3. The slope is33.865x and intercept
106
is 1341.3. The R² is 0.9307 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested of Kerala Ceramics Limited
during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = -39.937x – 19.602.The slope is -39.937x and intercept
is 19.602. The R² is 0.6566 which shows that the equation is most suitable for
prediction. There is decrease in the Working Capital of Kerala Ceramics Limited
during the period under study.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Kerala Ceramics Limited during 1990-91 was
2.31:1 which declined to 0.43: 1 in 1994-95. It increased to 0.46:1 in 1995-96 which
declined to 0.43 : 1 in 1999-2000 and increased to 0.45:1 in 2004-05 and a marginal
increase in 2005-06 with 0.49:1 and it again increased to 0.72:1 in 2009-10 . It
clearly indicates that the long term borrowings to paid up capital is declining year
after year which shows that the borrowings are lesser and they depend on equity
capital (Table 3.8) .
ii. Current Ratio
The current ratio of Kerala Ceramics Limited during 1990-91 was 0.89 : 1
which declined to 0.75:1 in 1994-95. It was 0.41:1 in 1995-96 and in the subsequent
years there was a decline up to 1998-99. Then it increased to 3.31: 1 in 1999-2000
and then declined to 0.13:1 in 2004-05. It was 0.14: 1 in 2005-06 which goes to
negative in 2009-10 (-1.38:1). The overall trend shows a trend of high fluctuation in
107
all the years but ideal ratio is seen only in 1999-2000. To conclude these ratios are
not promising because in most of the years the ratios are less than the ideal one
(Table3.8).
iii. Return on Investment
The return on the capital employed by the Kerala Ceramics Limited is
analysed and is seen negative in all the years under study from 1990-91 to 2009-10
and not a promising one (Table 3.8).
iv. Net Profit to Sales
The ratio of net profit to sales in 1990-91 was -6.12 per cent but the trend
reversed during 1992-93 with a profit of 10.59 per cent and during 1993-94 with
2.89 per cent. The profit declined to -21.05 per cent in 1994-95 and this loss position
continues up to 1997-98 ( -11.13 per cent ) . Next two years 1998-99 and 1999-2000
there was profit of 24.75 per cent and 22.53 per cent respectively. In 2000-01 the
loss is 10.5 per cent which increased to 26.01 per cent. The loss position declined in
2009-10 (0.92 per cent).The profit to sales of Kerala Ceramics Limited during the
period from 1990-91 to 2009-10 in not a promising one ( Table 3.8).
v. Receivables to Sales
The ratio of receivable to sales was 1.28 in 1990-91 which declined to 0.58
in 1994-95. It was 0.58 in 1995-96 which increased to 3.91 in 1999-2000 and again
declined to 0.34 in 2000-01. It was 1.07 in 2004-05 but declined to 0.72 in 2009-10.
A fluctuating trend is noticed during 1990-91 to 2009-10 the whole 20 year period
under analysis (Table 3.8).
108
vi. Stock of Finished Goods to Sales
This ratio reveals the trends in stock of finished goods to sales and was 4.85
in 1990-91 which decreased to 4.27 in 1994-95. It declined to3.14 in 1995-96 which
again declined to 2.7 in1999-2000 and declined to 2.34 in 2000-01 . In 2004-05 the
ratio was 1.25 which increased to 3.69 in 2009-10 .A fluctuating trend is noticed
during 1990-91 to 2009-10 the whole 20 year period under analysis.(Table 3.8).
vii. Stock of Raw materials to Consumption
This ratio reveals the trends in stock of raw materials to raw material
consumption and it was 2.86 in 1990-91 which declined to 1.54 in 1994-95. It was
1.65 in 1995-96 which again declined to 1.22 in 1999-2000 and further declined to
0.72 in 2004-05, but with a slight increase in 2009-10. A fluctuating trend of
increase is noticed in all the 20 years from 1990-91 to 2009-10 which means
sufficient stock of raw materials is there for production operations and is appreciable
one ( Table 3.8).
viii. Consumption to Sales
It represents the ratio of raw materials consumed to sales expressed as
percentage and it was 21.19 per cent in 1990-91 with considerable variation during
the period under study. It was 16.26 per cent in 1994-95 and declined to 6.73 per
cent in 1999-2000, but increased to 20.7 per cent in 2004-05. It was 20.2 per cent in
2005-06 which declined to 18.67 per cent in 2009-10. This fluctuating trend with
marginal increase or decrease during the period under study gives an indication that
the production is not up to the desired level ( Table 3.8).
109
Table 3.8 Financial and Operating ratios of Kerala Ceramics Limited
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to
sales (in months)
Stock of finished goods to sales ( in months)
Stock of raw materials to consumption (in months)
Consumption to
sales (%)
Net profit to sales
(%)
1 2 3 4 5 6 7 8 9
1990-1991 2.31 :1 0.89:1 -24.05 1.28 4.85 2.86 21.19 -6.12
1991-1992 3.39:1 0.94:1 -26.04 1.39 5.95 3.76 23.17 -7.18
1992-1993 0.38:1 0.89:1 72.95 0.86 4.16 3.62 19.91 10.59
1993-1994 0.41:1 0.89:1 27.95 0.43 6.07 2.56 16.11 2.89
1994-1995 0.43:1 0.75:1 -656.82 0.58 4.27 1.54 16.26 -21.05
1995-1996 0.46:1 0.41:1 -45.65 0.58 3.14 1.65 13.44 -29.78
1996-1997 0.47:1 0.20:1 -28.65 0.32 1.33 1.05 16.08 -27.4
1997-1998 0.41:1 0.22:1 -18.25 0.25 1.28 1.98 12.03 -11.13
1998-1999 0.42:1 0.34:1 -32.15 0.32 3.19 0.89 13.31 24.75
1999-2000 0. 43:1 3.31:1 28.91 3.91 2.7 1.22 6.73 22.53
2000-2001 0.44:1 0.27:1 0.18 0.34 2.34 1.85 13.1 -10.51
2001-2002 0.43:1 0.24:1 -36.3 0.64 1.95 1.43 11.56 -11.43
2002-2003 0.44:1 0.19:1 0.16 0.44 1.97 0.63 19.96 -10.28
2003-2004 0.45:1 .14:1 -18 0.96 1.06 0.75 21.52 -11.74
2004-2005 0.45:1 .13:1 -12 1.07 1.25 0.72 20.7 -26.01
2005-2006 0.49:1 .14:1 -0.50 1.73 3.02 2.26 14.2 -24.57
2006-2007 0.57:1 .13:1 -0.10 0.42 0.43 0.74 19.09 -1.86
2007-2008 0.60:1 .15:1 -6.52 0.24 0.74 0.31 18.65 3.75
2008-2009 0.64:1 0.27:1 -3.45 0.42 1.78 0.23 25.59 1.88
2009-2010 0.72:1 0.37:1 -1.38 0.72 3.69 0.76 18.67 0.92 Source: Compiled from the Review of Public Enterprises , Various issues, Bureau of Public Enterprises , Government of Kerala .
It is seen that there is direct correlation exist between net worth to working
capital , stock of finished goods to sales and stock of raw materials to consumption
and a negative correlation exists between other items (Table 3.9)
110
Table 3.9
Correlation
Sl. No. Item Correlation
1 Net worth 1
2 Capital Employed 0.933
3 Capital Invested -0.910
4 Working capital 0.918
5 Debt to Equity Ratio 0.269
6 Current Ratio 0.319
7 Return on Investment (%) -0.274
8 Receivable to sales ( in Months) 0.006
9 Stock of finished goods to sales( in months ) 0.730
10 Stock of raw materials to consumption 0.738
11 Consumption to Sales (%) -0.243
12 Net Profit to sales ( %) 0.082
Source: Computed from Table 3.7 and Table3.8
4. THE KERALA MINERALS AND METALS LIMITED
Kerala Minerals and Metals Limited (KMML) was incorporated in 1972 to
take over M/s FXP Minerals, Chavara. The entire equity capital is held by
Government of Kerala. The Company set up a Titanium Dioxide Pigment
manufacturing unit in Chavara, with a capacity of 22000 Tonnes Per Annum (TPA)
at an estimated cost of Rs. 6500 lakh. Industrial Development Bank of India (IDBI),
Industrial Finance Corporation of India (IFCI), Life Insurance Corporation of India
(LIC), State Bank of India (SBI) and State Bank of Travancore (SBT) jointly
111
sanctioned term loans for commencing the project. The Company has two
distinguishable sets of plants viz., Titanium Pigmentation Plant and Mineral
Separation Plant to support the processing of mineral sand and other need based
sections.
a. Net Worth
The net worth of KMML was Rs -6535.8 crores during 1990-91 which
further increased to Rs -1391.44 crores during 1994-95. During 1995-96 onwards
the position of net worth changed into positive which amounted to Rs 4813.37 crores
and increased to Rs 18571.7 crores in 1999-2000. It increased to Rs. 26254.27
crores in 2000-01 and to Rs 41913.59 crores in 2004-05. There was an increase to
Rs. 42776.2 crores in 2005-06 and again it increased to Rs 48267.49 crores in 2009-
10. Thus during the initial years under study there was negative net worth but shows
an increasing trend during the entire period under liberalization (Table 3.10).
b. Capital Employed
The capital employed of KMML was Rs340.3crores during 1990-91 which
increased to Rs 4915.4 crores during 1994-95. During 1995-96 capital employed was
Rs 5029.97 crores which increased to Rs 18571.6 crores in 1999-2000. It was Rs
26254.7 crores in 2000-1 which again increased to Rs 42212.14 crores in 2004-05.It
was Rs 43074.93 crores in 2005-06 which increased to Rs49434.3 crores in 2009-10.
It means that the capital employed is found favourable during the liberalization
period (Table 3.10).
112
c. Capital Invested
The capital invested by KMML was Rs 17095.5 crores during 1990-91
which declined to Rs 9400.22 crores during 1994-95. During 1995-96 it was Rs
3309.97 crores which again declined to Rs 3093.27 crores in 1999-2000. In 2000-01
it was Rs 3093.3 crores which increased to Rs 3391.92 crores in 2004-05. It was Rs
3392.1 crores in 2005-06 which increased to Rs 4277.74 crores in 2009-10. It shows
that during the entire period under analysis the capital invested is found
unfavourable (Table 3.10).
d. Working Capital
The working Capital of KMML was Rs 3756.2 crores during 1990-91 which
declined to Rs 3041.5 crores during 1994-95. It was Rs 3187.47 crores in 1995-96
which increased to Rs 16694.31 in 1999-00. It was Rs 23567.25 crores in 2000-01
which increased to 32606.29 crores in 2004-05. It was Rs 27753.85 crores in 2005-
06 which declined to 18969.04 crores in 2009-2010.The overall position of working
capital during the period under review shows an increasing trend(Table 3.10).
113
Table 3.10
Net worth, Capital Employed, Capital Invested and Working Capital of KMML (Rs in Crores )
Year Net worth Capital Employed
Capital Invested Working Capital
1 2 3 4 5 1990-1991 -6535.82 340.3 17095.52 3756.2 1991-1992 -6726.95 376.4 17196.72 3886.32 1992-1993 -7604.13 7703.98 18404.48 5154.42 1993-1994 -5607.39 4884.78 13585.54 2844.94 1994-1995 -1391.44 4915.41 9400.22 3041.53 1995-1996 4813.37 5029.97 3309.97 3187.47 1996-1997 4833.51 4964.08 3233.94 3221.51 1997-1998 6079.14 7649.98 4664.21 5997.81 1998-1999 11376.74 11476.64 3193.27 9655.37 1999-2000 18571.7 18571.6 3093.27 16694.31 2000-2001 26254.17 26254.07 3093.27 23567.25 2001-2002 32680.79 32680.69 3093.27 29526.89 2002-2003 37948.76 38613.35 3757.96 34600.97 2003-2004 40197.73 40364.11 3259.75 33403.06 2004-2005 41913.59 42212.14 3391.92 32606.29 2005-2006 42776.2 43074.93 3392.1 27753.85 2006-2007 43668.98 43834.13 3276.02 23050 2007-2008 43919.82 44126.96 3318.27 20231.02 2008-2009 44007.68 44758.15 3861.34 19565.23 2009-2010 48267.39 49434.26 4277.74 18969.04
Source: Compiled from the Review of Public Enterprises, Various issues, of
the Bureau of Public Enterprises , Government of Kerala . The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of KMML during 1990-91 to 2009-
2010 with the trend line and regression equation is shown in fig. 3(iv)
114
Fig. 3(iv) Net worth, Capital Employed, Capital Invested and Working capital of KMML
Source : Table 3.10
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y =3470.3x – 15465.The slope is 3470.3x and intercept is 15465. The
R² is 0.9480 which shows that the equation is most suitable for prediction. There is a
decrease in net worth of KMML during the initial period of liberalization but
afterwards there is an increase.
The trend line (linear trend of first degree) of the Capital Employed from
1990-91 to 2009-2010 is Y = 2983.7x – 7765.1. The slope is 2983.7x and intercept
is 7765.1.The R² is 0.9203 which shows that the equation is most suitable for
prediction. There is an increase in the capital employed of KMML during the
liberalization period.
The trend line (linear trend of first degree) of the Capital Invested from
1990-91 to 2009-2010 is Y = -677.11x + 13505.The slope is -677.11xand intercept
115
is 13505. The R² is 0.4635 which shows that the equation is most suitable for
prediction. There is a decrease in the capital invested of KMML during the
liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 1505.1x + 232.16. The slope is 1505.1x and intercept
is 232.16. The R² is 0.5506 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of KMML during the
liberalization period.
Analysis of Solvency and Profitability
i. Debt equity ratio
The debt equity ratio of KMML was 4.46:1 in 1990-91 which declined to
0.07:1 in 1995-96. It increased to 11.53:1 in 1999-2000. Then a declining trend was
seen and it was 0.38:1 in 2009-2010 (Table 3.11).
ii. Current Ratio
The current ratio of KMML during 1990-91 was 3.18:1which declined to
2.15:1 in 1994-95 period. It was 1.64 : 1 in 1995-96 which increased to 2.7 : 1 in
1998-99 and declined sharply to 2.66:1 in 1999-2000. Again there was a steep
increase to 2.69:1 in 2000-01 and almost similar picture is noticed in 2004-05 (2.57 :
1 ) and declined to 2.35 : 1 in 2009-10 . The overall trend shows that the ratios are
ideal in most of the years but a declining trend is noticed in certain other years
(Table 3.11).
116
iii. Return on Investment
The return on the capital employed by the KMML shows that the ratio is
negative in the first three years from 1990-91 to 1992-93. It was 85.77 per cent in
1994-95 and declined to 72.75 per cent in 1998-99 periods. It further declined to
48.98 per cent in 2000-01 and declined further to 9.1 per cent in 2004-05 and
increased to 16.93 per cent in 2009-10. Thus it is inferred that the return on
investment of KMML during the whole period of 20 years of study from 1990-91 to
2009-10 in not a promising one.( Table 3.11).
iv. Net Profit to Sales
KMML shows a loss in the first three years under study. The net profit to
sales in 1993-94 was 14.39 per cent which increased to 27.27 per cent in 1994-95. It
could make a profit of 40.2 per cent in 2000-01 which declined to 12.07 per cent in
2004-05. There was an increase of 16.84 per cent in 2009-10. It is clear from the
analysis of profit to sales of KMML that it failed to maintain a steady profitability
ratio during the whole period of 20 years under study from 1990-91 to 2009-10
(Table 3.11).
v. Receivables to Sales
This ratio reveals the trends in accounts receivable to sales. It was 0.03 in
1990-91 which slightly increased to 0.06 in 1994-95 and again increased to 2.45 in
1999-2000. It declined to 0.11 in 2000-01 which increased to 0.35 in 2004-05 and
again increased to 1.14 in 2009-10. A fluctuating trend is noticed during 1990-91 to
2009-10 the whole 20 year period under analysis (Table 3.11).
117
vi. Stock of Finished Goods to sales
This ratio reveals that the stock of finished goods to sales was 3 in 1990-91
which decreased to 1.02 in 1994-95. It declined to 0.85 in 1999-2000 which again
declined to 0.29 in 2004-05. It was 0.06 in 2009-10. A fluctuating trend is noticed
during 1990-91 to 2009-10, the whole 20 year period under analysis (Table 3.11).
vii. Stock of Raw materials to Consumption
This ratio reveals the trends in stock of raw materials to consumption. The
ratio was 1.45 in 1990-91which increased to 1.54 in 1994-95. It was 2.64 in 1995-
96 which declined to 1in 1999-2000 and it further declined to 0.69 in 2000-01. It
was 1.14 in 2001-02 which declined to 0.51 in 2004-05 and declined further to 0.44
in 2005-06 and increased to 0.82 in 2009-10. A fluctuating trend of increase is
noticed in all the 20 years from 1990-91 to 2009-10 ( Table 3.11).
viii. Consumption to Sales
It represents the ratio of raw materials consumed to sales expressed as
percentage and it was 9.10 per cent in 1990-91 which increased to 9.4 per cent in
1994-95.It was 7.45 per cent in 1995-96 but a very high percentage of 67.56per cent
was seen in 1999-2000. It declined to 23.58per cent in 2000-01 which increased to
28.06per cent in 2004-05. It was 35.96percentin 2005-06 which increased to 50.8per
cent in 2009-10. A fluctuating trend of increase is noticed during 1990-91 to 2009-
10, the whole 20 year period under analysis. The trend is somewhat high and
indicates that consumption depends on sales (Table 3.11).
118
Table 3.11 Financial and Operating ratios of KMML
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales (in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9 1990-1991 4.46:1 3.18:1 -16.2 0.03 3.00 1.45 9.10 -14.22
1991-1992 4.56:1 3.08:1 -17.3 0.04 3.07 1.55 10.07 -15.33
1992-1993 4.95:1 4.82:1 -11.39 0.69 2.49 1.74 9.18 -9.11
1993-1994 3.39:1 3.17:1 41.23 0.06 0.46 1.77 7.6 14.39
1994-1995 2.04:1 2.15:1 85.77 0.06 1.02 1.54 9.4 27.27
1995-1996 0.07:1 1.64:1 149.43 0.01 0.15 2.64 7.45 39.21
1996-1997 0.04:1 1.54:1 1.39 0.23 6.4 1.23 19.5 1.2
1997-1998 0.51:1 3.14: 23.57 0.32 2.43 0.81 11.84 13.03
1998-1999 .03:1 2.66:1 72.75 0.25 0.57 0.48 18.71 -27.67
1999-2000 11.53:1 0.44:1 -52.10 2.45 0.85 1 67.56 -50.85
2000-2001 5:1 2.69:1 48.98 0.11 1.13 0.69 23.58 40.02
2001-2002 3:1 3.29:1 30.68 0.17 0.96 1.14 21.63 33.21
2002-2003 0.21:1 3.10:1 24.35 1 1.48 0.7 24.35 31.76
2003-2004 .05:1 2.53:1 11.52 0.84 0.98 0.75 24.96 15.43
2004-2005 .10:1 2.57:1 9.1 0.35 0.29 0.51 28.06 12.07
2005-2006 .10:1 2.51:1 4.12 0.97 0.67 0.44 35.96 5.49
2006-2007 .06:1 2.25:1 4.74 0.53 1.88 0.55 38.86 6.32
2007-2008 .07:1 2.87:1 2.3 1 1.78 0.32 69.2 3.23
2008-2009 0.25:1 2.52:1 6.8 0.89 0.42 0.27 55.49 7.07
2009-2010 0.38:1 2.35:1 16.93 1.14 0.06 0.82 50.08 16.84
Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues. It is seen that direct correlation exists between net worth and capital
employed, working capital and consumption to sales and a negative correlation
exists between other items ( Table 3.12).
119
Table 3.12
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.984 3 Capital Invested -0.686 4 Working capital 0.867 5 Debt to Equity Ratio -0.409 6 Current Ratio -0.153 7 Return on Investment (%) -0.288 8 Receivable to sales ( in Months) 0.425 9 Stock of finished goods to sales( in months ) -0.375 10 Stock of raw materials to consumption -0.748 11 Consumption to Sales (%) 0.691 12 Net Profit to sales ( %) 0.193
Source: Computed from Table 3.10 and Table3.11
5. TRAVANCORE TITANIUM PRODUCTS LIMITED
Travancore Titanium Products Limited was incorporated in 1946 under the
Department of Industries, Government of Kerala. Manufacture and sale of Titanium
Dioxide and Sulphuric Acid are the main activities.
a. Net Worth
The net worth of Travancore Titanium Products Limited was Rs 3065.3
crores during 1990-91 which further increased to Rs 3517.97 crores. During1995-
96 the position of net worth was Rs 3687.5 crores which increased to Rs. 5395.2
crores in 1999-2000. It increased to Rs 5669.13 crores in 2000-01 which slightly
declined to Rs. 5658.72 crores in 2004-05. Again it declined to Rs 4854.32 crores in
2009-10. Overall position of net worth during the liberalization period shows an
increasing trend (Table 3.13).
120
b. Capital Employed
The capital employed of Travancore Titanium Products Limited was Rs
2734.3 crores during 1990-91 which increased to Rs 3155.1crores during 1994-95.
During 1995-96, capital employed was Rs 3225.4 crores which increased to Rs
4959.2 crores in 1999-2000. It was Rs 5296.13 crores in 2000-01 which again
increased to Rs 5568.94 crores in 2004-05. It was Rs 3949.8 crores in 2005-06
which increased to Rs 11268.21 crores in 2009-10. The capital employed during the
entire period under analysis shows an increasing trend with fluctuations(Table 3.13).
c. Capital Invested
The capital invested by Travancore Titanium Limited was Rs 175.35 crores
during 1990-91 which increased to Rs 176.8 crores during 1994-95. During 1995-96
it was Rs 218.09 crores which declined to Rs 176.75 in 1999-2000. In 2000-01 it
was Rs 176.75 crores which increased to Rs 330.07 crores in 2004-05. It was Rs
267.65 crores in 2005-06 which increased to Rs 6030.18 crores in 2009-10 showing
an abnormal increase compared to other years . It indicates a fluctuating trend of
increase during the entire period under analysis from 1990-91 to 2009-10 (Table
3.13).
d. Working Capital
The working capital of Travancore Titanium Products Limited was Rs
2318.82 crores during 1990-91 which declined to Rs 1159.72 crores during 1994-
95. It was negative in the next two years and increased up to Rs 2728.1 crores in
1999-2000 and Rs 3836.7 crores in 2004-05. It was Rs 2160.8 crores in 2005-06
which declined to Rs -49.20 crores in 2009-10. Thus the ratio shows a fluctuating
121
trend with negative working capital in certain years during the liberalization periods
(Table 3.13).
Table 3.13
Net worth, Capital Employed, Capital Invested and Working Capital of Travancore Titanium Products Limited
(Rs. in crores).
Year Net worth Capital Employed
Capital Invested Working Capital
1 2 3 4 5 1990-1991 3065.28 2734.26 175.35 2318.82 1991-1992 3177.36 2862.36 176.75 2416.92 1992-1993 3478.33 3162.33 176.75 2710.29 1993-1994 3504.87 3188.87 176.75 2037.18 1994-1995 3517.97 3155.1 176.75 1159.72 1995-1996 3687.53 3225.37 218.09 -310.93 1996-1997 3572.31 3068.81 176.75 -29.07 1997-1998 3886.52 3399.02 176.75 672.06 1998-1999 4592.29 4151.29 176.75 1758.95 1999-2000 5395.17 4959.17 176.75 2728.06 2000-2001 5669.13 5296.13 176.75 3231.87 2001-2002 5996.34 5685.34 176.75 3836.32 2002-2003 5718.24 5475.14 176.75 3855.05 2003-2004 5657.88 5414.78 176.75 3947.35 2004-2005 5658.72 5568.94 330.07 3836.66 2005-2006 4101.97 3949.77 267.65 2160.79 2006-2007 3778.48 4591.5 1232.87 -97.02 2007-2008 4519.72 10172.61 5841.89 -47.56 2008-2009 4225.76 10186.41 5848.64 -47.57 2009-2010 4854.32 11268.21 6030.18 -49.20
Source: Compiled from the Review of Public Enterprises, Various issues, Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Titanium Products Limited
122
during 1990-91 to 2009-2010 with the trend line and regression equation is shown in
fig. 3(v)
Fig. 3(v)
Net worth, Capital Employed, Capital Invested and Working capital of Travancore Titanium Products Limited
Source : Table 3.13
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y = 92.783x + 3428.7. The slope is 92.783x and intercept is 3428.7. The R²
is 0.3371 which shows that the equation is most suitable for prediction. There is a
decrease in net worth of Travancore Titanium Products Limited in certain years, but
on the whole it shows an increasing trend during the period of liberalization.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 354.6x + 1352.5. The slope is 354.6x and intercept is
1352.5. The R² is 0.5523 which shows that the equation is most suitable for
123
prediction. In certain years the capital employed of Travancore Titanium Products
Limited remains constant but on the whole it shows an increasing trend during the
liberalization period .
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 231.86x – 1331.3 The slope is 231.86x and intercept
is 1331.3. The R² is 0.2342 which shows that the equation is most suitable for
prediction. There is an increase and in some years the capital invested of Travancore
Titanium Products Limited remains constant.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = -42.989x + 2255.8. The slope is -42.989x and intercept
is 2255.8. The R² is 0.0083 which shows that the equation is most suitable for
prediction. There is a decrease in the working capital of Travancore Titanium
Products Limited during the liberalization period.
Analysis of Solvency and Profitability
(i) Current Ratio
The current ratio of Travancore Titanium Products Limited during 1990-91
was 1.78 :1 which declined to 1.47 : 1 in 1994-95 periods . It was 0.89 : 1 in 1995-
96 which increased to 1.36 : 1 in 1998-99 and again increased to 1.42 : 1 in 1999-
2000. It again increased to 1.44: 1 in 2000-01. It further increased to 1.74 :1 in
2004-05 and declined further to 0.95 : 1 in 2009-10 . The overall trend shows a
fluctuating one (Table 3.14).
124
(ii) Return on Investment
The return on the capital employed by the Travancore Titanium Products
Limited was 26.40 per cent in 1990-91 which declined to 2.82 per cent in 1994-95.
It was 24.07 per cent in 1998-99 and declined to 4.29per cent in 2004-05 periods and
again it declined to 5.22 per cent in 2009-10 . It is a clear indication from the ratios
that the return on investment of Travancore Titanium Products limited during the
whole period of 20 years of study from 1990-91 to 2009-10 in not a promising one
(Table 3.14).
(iii) Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of the Travancore
Titanium Products Limited was 14.21 per cent in 1990-91 which declined to 1.64
per cent in 1994-95 periods. The net profit to sales in 1998-99 was 11.22 per cent
and declined to 2 per cent in 2004-05 and there was loss during 2005-06 and 2006-
07 periods but profit was noticed at 6.57 per cent during 2009-10 periods .It is clear
from the analysis of profit to sales of Travancore Titanium Products Limited that
they are earning profit but the profit is not up to the mark during the whole period
of 20 years under study from 1990-91 to 2009-10 ( Table 3.14).
iv. Receivables to Sales
The receivables to sales of Travancore Titanium Products Limited was 0.75
in 1990-91 which slightly increased to 0.84 in 1994-95 and again increased to 1.08
in 1999-2000. It declined to 0.88 in 2000-01 which increased to 1 in 2004-05 and
again declined to 0.42 months in 2009-10. A fluctuating trend is noticed during
125
1990-91 to 2009-10 the whole 20 year period under analysis. The lower the months
in the receivable to sales is really good for increasing the amount of cash by way of
sales ( Table 3.14).
v. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 0.35 in 1990-91 which
declined to 0.24 in 1994-95. It further declined to 0.74 in 1999-2000 which
increased to 2.49 in 2004-05. It was 0.50 in 2005-06 and increased to 1.32 in 2009-
10 periods. A fluctuating trend is noticed during 1990-91 to 2009-10 the whole 20
year period under analysis. The lower the months in the stock of finished goods to
sales is an indication of increased sales ( Table 3.14).
vi. Stock of Raw materials to Consumption
The ratio of stock of raw materials to consumption was 2 in 1990-91 which
declined to 1.00 in 1994-95 . It was 1.74 in 1995-96 which again declined to 1.39
in 1999-2000.It increased to 2.28 in 2000-01 and declined to 0.87 in 2004-05which
again declined to 0.41 in 2009-10 . A fluctuating trend of increase is noticed in all
the 20 years from 1990-91 to 2009-10. The lesser the number of months in raw
materials to consumption is appreciable but in this case it must be remembered that
stock of raw materials was more than the consumption which means there is less
production ( Table 3.14).
vii. Consumption to Sales
It represents the ratio of consumption to sales expressed as percentage. It was
9.10 per cent in 1990-91 which increased to 32.55 per cent in 1994-95. It was 31.96
126
per cent in 1995-96 but it declined to 20.7 percent in 1999-2000. It was 20.09per
cent in 2000-01 which increased to 31.67per cent in 2004-05. It was 35.34per cent in
2007-08 which declined to 30.02 per cent in 2009-10. A fluctuating trend is noticed
during 1990-91 to 2009-10 the period under analysis. The trend is somewhat high
which indicates that consumption depends on sales ( Table 3.14).
Table 3.14 Financial and Operating Ratios of Travancore Titanium Products Ltd.
Year Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales ( in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit to sales
(%)
1 2 3 4 5 6 7 8
1990-1991 1.78:1 26.40 0.75 0.35 2.0 28.5 14.21 1991-1992 1.89:1 27.35 0.84 0.43 2.1 30.9 14.46 1992-1993 1.84:1 22.32 1.11 0.34 2.69 28.94 13.04 1993-1994 1.81:1 4.1 1.36 0.69 2.04 26.87 3.31 1994-1995 1.47:1 2.82 0.84 0.24 1 32.55 1.64 1995-1996 0.89:1 4.53 0.26 0.1 1.74 31.96 2.23 1996-1997 0.99:1 -0.41 0.7 1.32 1.81 32 -0.23 1997-1998 1.16:1 12.38 0.92 1.26 2.6 26.67 6.44 1998-1999 1.36:1 24.07 1.02 0.6 0.61 15.02 11.22 1999-2000 1.42:1 27.57 1.08 0.74 1.39 20.7 12.55 2000-2001 1.44:1 9.98 0.88 0.75 2.28 20.09 4.77 2001-2002 1.45:1 10.39 0.99 1.6 2.7 19.35 6.39 2002-2003 1.69:1 0.16 1.07 4.1 2.57 26.77 0.13 2003-2004 1.61:1 2.18 0.82 0.89 0.95 22.66 0.92 2004-2005 1.74:1 4.29 1 2.49 0.87 31.67 2 2005-2006 1.44:1 -39.32 0.64 0.5 0.79 28.41 -11.6 2006-2007 .98:1 -9 0.52 0.94 0.89 28.73 -3.54 2007-2008 0.99 5.92 0.56 1.68 0.45 35.34 6.57 2008-2009 0.97 5.82 0.46 1.45 0.43 33.51 5.50 2009-2010 0.95 5.22 0.42 1.32 0.41 30.02 4.60
Source: Compiled from the Review of Public Enterprises, Various issues, Bureau of Public Enterprises , Government of Kerala .
It is seen that direct correlation exists between net worth and capital
employed, working capital and stock of finished goods to sales (Table 3.15).
127
Table 3.15
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.566 3 Capital Invested -0.013 4 Working capital 0.696 5 Current Ratio 0.152 6 Return on Investment (%) 0.044 7 Receivable to sales ( in Months) 0.242 8 Stock of finished goods to sales( in months ) 0.560 9 Stock of raw materials to consumption 0.001 10 Consumption to Sales (%) -0.544 11 Net Profit to sales ( %) -0.021
Source: Computed from Table 3.13 and Table3.14
6. TRANSFORMERS AND ELECTRICAL KERALA LIMITED
Transformers and Electrical Kerala Limited was incorporated in 1963 under
the Department of Industries, Government of Kerala. Its activities include
manufacturing and supply of transformers and switch gears.
a. Net Worth
The net worth of Transformers and Electrical Kerala Limited was Rs -
2155.21 crores during 1990-91 which declined to Rs -647 .11 crores during 2005-
06 . During 2006-07 onwards there was positive net worth. It was Rs 2338 crores in
2006-07 which increased to Rs 9810 crores in 2009-10. The overall position of net
worth for a period of 16 years is negative and positive net worth is seen only 4 years
under study and the overall trend is not a favourable one (Table 3.16).
128
b. Capital Employed
The capital employed of Transformers and Electrical Kerala Limited was Rs
876.23 crores during 1990-91 which increased to Rs 1403.31 crores during 1994-95.
During 1995-96 capital employed was Rs 1124.38 crores which declined to Rs
495.48 crores in 1999-2000. It was Rs -279.79 crores in 2000-01 which again
increased to Rs 1913.88 crores with a very high increase compared to the past. It was
Rs 2440.93 crores in 2005-06 which increased to Rs 9809 crores in 2009-10. The
overall position of capital employed for a period of 20 years study from 1990-91 to
2009-2010 shows a fluctuating trend during the liberalization period(Table 3.16).
c. Capital Invested
The capital invested by Transformers and Electrical Kerala Limited was Rs
5288.20 crores during 1990-91 which increased to Rs 4707.4 crores during 1994-95.
During 1995-96 it was Rs 4178.7 crores which again increased to Rs 6175.2 crores
in 1999-2000. In 2000-01 it was Rs 7107.5 crores which decreased to Rs 7063.4
crores in 2004-05. It was Rs 7385.7 crores in 2005-06 which declined to Rs 4297
crores in 2009-10. The trend in capital invested for a period of 20 years under study
from 1990-91 to 2009-2010 shows a fluctuating trend of increase (Table 3.16).
d. Working Capital
The working Capital of the Transformers and Electrical Kerala was Rs
507.34 crores during 1990-91 which increased to Rs 1029.7 crores during 1994-95.
It was Rs 786.5 crores in 1995-96 which declined to Rs 201.66 in 1999-00. It was
negative for further three years and positive figure is shown in 2003-04 with Rs
701.1 crores and again increased to Rs 1635.39 crores in 2004-05. It was Rs 2152.44
129
crores in 2005-06 which increased to Rs. 9303 crores in 2009-2010. The trend in
working capital for a period of 20 years study from 1990-91 to 2009-2010 shows a
fluctuating trend of increase with negative growth in some years (Table 3.16).
Table 3.16
Net worth, Capital Employed, Capital Invested and Working Capital of
Transformers and Electrical Kerala Limited
( Rs in Crores )
Year Net worth Capital
Employed Capital
Invested Working Capital
1 2 3 4 5 1990-1991 -2155.21 876.23 5288.2 507.34 1991-1992 -3164.18 978.43 5490.4 518.44 1992-1993 -2900.83 1319.39 5568.01 918.35 1993-1994 -2727.89 1188.99 5264.92 869.93 1994-1995 -1946.04 1403.31 4707.39 1029.71 1995-1996 -1696.23 1124.38 4178.65 786.47 1996-1997 -1517.66 1267.58 4143.48 908.42 1997-1998 -1348.82 1740.1 4447.16 1393.01 1998-1999 -2438.97 1184.03 4981.24 847.44 1999-2000 -4321.48 495.48 6175.2 201.66 2000-2001 -6205.02 -455.81 7107.45 -710.9 2001-2002 -2187.19 -279.79 6205.06 -521.53 2002-2003 -2081.57 64.93 6444.16 -155.84 2003-2004 -1461.23 936.76 6695.65 701.11 2004-2005 -851.8 1913.88 7063.36 1635.39 2005-2006 -647.11 2440.93 7385.7 2152.44 2006-2007 2338 2337 4297 2039 2007-2008 4798 4797 4297 4427 2008-2009 7802 7801 4297 7421 2009-2010 9810 9809 4297 9303
Source: Compiled from the Review of Public Enterprises , Various issues, of
the Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Transformers and Electricals
130
Kerala Limited during 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3(vi)
Fig. 3(vi) Net worth, Capital Employed, Capital Invested and Working capital of Transformers
and Electricals Kerala Limited
Source : Table 3.16
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y =460.6x-5481.4. The slope is 460.6x and intercept is 5481.4. The R² is
0.5100 which shows that the equation is most suitable for prediction. There is a
decrease in net worth of Transformers and Electrical Kerala Limited during the first
16 years under study and then an increasing trend is noticed.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 267.13x – 757.7. The slope is 276.13x and intercept
is 757.7. The R² is 0.3850 which shows that the equation is most suitable for
131
prediction. There is an increase in certain years but with decline in most of the years
as far as the capital employed of Transformers and Electrical Kerala Limited during
the liberalization period.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 12.864x + 5281.6. The slope is 12.864x and intercept
is 5281.6. The R² is 0.0040 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested Transformers and Electrical
Kerala Limited during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 269.22x – 1113.3. The slope is 269.22x and intercept
is 1113.3. The R² is 0.4041 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of Transformers and
Electrical Kerala Limited during certain years and decline in certain other years
under liberalization period.
Analysis of solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Transformers and Electrical Kerala Limited
during 1990-91 was 3.06 :1 which declined to 2.47 : 1 in 1994-95 periods . It was
2.06 : 1 in 1995-96 which increased to 2.67 : 1 in 1998-99 and increased to 3.55 : 1
in 1999-2000. Again there was a steep increase to 4.24 : 1 in 2000-01 but noticed a
decline in 2004-05 ( 0.64 : 1 ) and ultimately increased to 0.65 : 1 in 2009-10 .
The overall trend shows a trend of high fluctuations. In the initial years the ratio of
debt to equity was high but in the latter years it declined (Table 3.17).
132
ii. Current Ratio
The Current ratio of Transformers and Electrical Kerala Limited during
1990-91 was 1.25 : 1 which declined to 1.15 : 1 in 1994-95 periods . It was 1.13 : 1
in 1995-96 which declined to 1.12 : 1 in 1998-99 and a slow down to 1.03: 1 in
1999-2000. Again there was a decline and it came to 0.87 : 1 in 2000-01 and noticed
an increase to 1.25 :1 in 2004-05. It increased to 2.95 : 1 in 2009-10 . The overall
trend shows high fluctuations and in the initial years the ratio was not equal to ideal
but it reached to ideal position during 2008-09 and 2009-10 periods ( Table 3.17).
iii. Return on Investment
The return on the capital employed of the Transformers and Electrical Kerala
Limited is negative in certain years. It was 3.76 per cent in 1990-91 and increased to
47.66 per cent in 1998-99 periods .It declined to -325.64 per cent in 2000-01 and
increased to 3.34 per cent in 2004-05 and increased to 46.47per cent in 2009-10 . It
is a clear indication from the ratios that the return on investment of Transformers
and Electrical Kerala Limited during certain years is not at all promising except in
certain years (Table 3.17).
iv. Net Profit to Sales
The net profit position is very worse and a negative profit or loss is seen in
certain years under study. The net profit to sales in 1990-91 was 0.64 per cent and
increased to 7.43 per cent in 1994-95 and leads to loss in 1999-2000 . There was
meager profit of 0.68 per cent in 2004-05 which increased to 21.38 per cent in 2009-
10. It is clear from the analysis of profit to sales of Transformers and Electrical
133
Kerala Limited that the profit earned is not up to the mark during the whole period
of 20 years under study from 1990-91 to 2009-10 ( Table 3.17).
v. Receivables to Sales
The ratio of accounts receivable to sales was 4.89 in 1990-91 which slightly
increased to 5.77 in 1994-95 and again increased to 8.63 in 1999-2000. It declined to
4.77 in 2000-01 which increased to 5.58 in 2004-05anddeclined to 3.1in 2009-10. In
this case a fluctuating trend is noticed during 1990-91 to 2009-10. The lower the
months in the receivable to sales is really good for increasing the amount of cash by
way of sales (Table 3.17).
vi. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 2.82 in 1990-91 which
declined to 1.84 in 1994-95. It declined to 1.26 in 1998-99 which again declined to
0.64 in 2004-05. It was 0.49 in 2009-10. A fluctuating trend is noticed during 1990-
91 to 2009-10 the whole 20 year period under analysis. The lower the months in the
stock of finished goods to sales is an indication of increased sales and is appreciable
(Table 3.17).
vii. Stock of Raw materials to Consumption
The stock of raw materials to consumption was 1.25 in 1990-91 which
increased to 1.82 in 1994-95. It was 2.92 in 1995-96 which again declined to 1.71 in
1999-2000 and it further declined to 1.64 in 2000-01. It was 1.68 in 2001-02 which
increased to 2.03 in 2004-05 and again increased to 2.58 in 2009-10. Here a
fluctuating trend of increase is noticed in all the 20 years from 1990-91 to 2009-10.
134
The lesser the number of months in raw materials to consumption is appreciable one
(Table 3.17).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed was 65.48 per cent in
1990-91 which increased to 71.6 per cent in 1994-95. It was 63.38 per cent in 1995-
96 which increased to 68.77 per cent in 1999-2000. It declined to 62.36 per cent in
2000-01 which declined to 53.36 per cent in 2001-02. It was 60.72 per cent in 2005-
06 which declined to 50.68 per cent in 2009-10. A fluctuating trend of increase is
noticed during 1990-91 to 2009-10. The trend is somewhat high which indicates that
consumption depends on sales (Table 3.17).
135
Table 3.17 Financial and Operating Ratios of Transformers and Electricals Kerala Limited
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales (in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit to
sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 3.06:1 1.25:1 3.76 4.89 2.82 1.25 65.48 0.64
1991-1992 3.07:1 1.35:1 3.85 5.84 2.93 1.35 68.23 0.65
1992-1993 3.13:1 1.40:1 19.96 6.81 1.94 1.4 68.58 3.56
1993-1994 2.91:1 1.84:1 22.18 5.64 1.7 1.84 76.87 2.34
1994-1995 2.47:1 1.15:1 47.66 5.77 1.84 1.82 71.6 7.43
1995-1996 2.06:1 1.13:1 22.22 5.73 0.66 2.92 63.38 2.86
1996-1997 2.05:1 1.16:1 29.82 6.89 0.36 1.96 57.36 4.34
1997-1998 2.28:1 1.20:1 14.4 8.34 0.14 1.51 62.23 2.8
1998-1999 2.67:1 1.12:1 -69.84 10.09 1.26 0.74 90.37 -15.13
1999-2000 3.55:1 1.03:1 -369.39 8.63 1.49 1.71 68.77 -31.7
2000-2001 4.24:1 0.87:1 -325.64 4.77 1.95 1.64 62.36 -27.73
2001-2002 0.44:1 0.88:1 -564.12 3.37 1.25 1.68 53.36 -24.19
2002-2003 0.50:1 0.98:1 200.92 6.05 0.44 1.55 48.64 1.57
2003-2004 0.56:1 1.12:1 69.59 4.57 0.3 1.85 52.32 6.98
2004-2005 0.64:1 1.25:1 3.34 5.58 0.64 2.03 63.91 0.68
2005-2006 0.72:1 1.40:1 8.39 5.31 0.4 1.63 60.72 1.88
2006-2007 0.75 1.24:1 -18.27 4.93 0.28 2.02 57.52 -2.58
2007-2008 0.71 1.59:1 51.53 3.65 0.32 1.5 59.5 12.57
2008-2009 0.73 2.03:1 65.13 3.53 0.64 1.8 57.26 22.98
2009-2010 0.65 2.95:1 46.47 3.1 0.49 2.58 50.68 21.38 Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues
The correlation values depict that there is direct correlation between net
worth and capital employed, current ratio, working capital and net profit to sales
(Table 3.18).
136
Table 3.18 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.955 3 Capital Invested -0.514 4 Working capital 0.958 5 Debt to Equity Ratio -0.777 6 Current Ratio 0.814 7 Return on Investment (%) 0.279 8 Receivable to sales ( in Months) -0.553 9 Stock of finished goods to sales( in months ) 0.507 10 Stock of raw materials to consumption 0.350 11 Consumption to Sales (%) -0.410 12 Net Profit to sales ( %) 0.725
Source: Computed from Table 3.16 and Table3.17
7. KERALASTATE ELECTRONICS DEVELOPMENT CORPORATION LIMITED
Kerala State Electronics Development Corporation Limited was incorporated
in 1972 under the Department of Industries, Government of Kerala. The main
activities include designing, manufacturing and marketing of various IT / Electronic
products / systems.
a. Net Worth
The net worth of the Kerala State Electronics Development Corporation
Limited was Rs 1125.08 crores during 1990-91 which declined to Rs 238.31 crores
during 1994-95. During 1995-96 there was negative net worth and it continues
throughout the entire period under study (Table 3.19).
137
b. Capital Employed
The capital employed of the Kerala State Electronics Development
Corporation Limited was Rs 3886.79 crores during 1990-91 which increased to Rs
5455.84 crores during 1994-95. During 1995-96 capital employed was Rs 4450.23
crores which declined to Rs -1155.28 crores in 1999-2000. It was Rs -935.08 crores
in 2000-01 which again increased to Rs -13379.54 crores in 2004-05 and a positive
capital employed is seen from 2006-07 onwards (Rs. 12241.25 crores) . It was Rs
14923.76 crores in 2009-10.It is seen from the analysis that capital employed for a
period from 1990-91 to 2009-2010 shows an increasing trend except for 7 years
during which it was negative ( Table 3.19).
c. Capital Invested
The capital invested by the Kerala State Electronics Development
Corporation Limited was Rs 12635.82 crores during 1990-91 which increased to Rs
13707.9 crores during 1994-95. During 1995-96 it was Rs 14012.09 crores which
again increased to Rs 18369.95 crores in 1999-2000. In 2000-01 it was Rs 25040.96
crores which increased to Rs 30998.6 crores in 2004-05. It was Rs 33210.14 crores
in 2005-06 which increased to Rs 37826.28 crores in 2009-10. The trends in capital
invested for a period of 20 years under study from 1990-91 to 2009-2010 shows an
increasing one (Table 3.19).
d. Working Capital
The working capital of the Kerala State Electronics Development
Corporation Limited was Rs 2027.38 crores during 1990-91 which increased to Rs
3721.21 crores during 1994-95. It was Rs 2951.98 crores in 1995-96 which declined
138
to Rs -2555.8 crores in 1999-00. It was negative for further six years and positive
figure is shown from 2006-07 onwards to Rs 13528.33 crores in 2009-2010. The
analysis on working capital during the period from 1990-91 to 2009-2010 shows a
trend of increase except in seven years (Table 3.19).
Table 3.19
Net worth, Capital Employed , Capital Invested and Working Capital of Kerala State Electronics Development Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 1125.08 3886.79 12635.82 2027.38 1991-1992 1178.18 3995.89 12740.92 2037.67 1992-1993 1502.58 5470.67 14144.63 3574.33 1993-1994 1714.66 7329.62 15931.14 5513.06 1994-1995 238.31 5455.84 13707.9 3721.35 1995-1996 -966.47. 4450.23 14012.09 2951.98 1996-1997 -2473.4 4180.59 15836.43 2650.59 1997-1998 -4862.01 2937.89 16982.27 1446.69 1998-1999 -6026.65 553.96 16916.97 168.84 1999-2000 -9188.87 -1155.28 18369.95 -2555.78 2000-2001 -14011.23 -935.08 23412.51 -2323.26 2001-2002 -18660.97 -3956.37 25040.96 -5335.21 2002-2003 -24366.77 -7648.84 27425.35 -7532.41 2003-2004 -29551.01 -10861.12 29025.85 -12064.91 2004-2005 -34042.19 -13379.54 30998.61 -14489.89 2005-2006 -38155.38 -15281.2 33210.14 -16285.74 2006-2007 -8561.32 12241.25 33750.55 11310.36 2007-2008 -8072.27 14463.29 35483.54 13444.48 2008-2009 -8559.22 15266.95 36459.53 14094.36 2009-2010 -8210.66 14923.76 37826.28 13528.33
Source: Compiled from the Review of Public Enterprises , Various issues, of
the Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Kerala State Electronics
Development Corporation Limited during 1990-91 to 2009-2010 with the trend line
and regression equation is shown in fig. 3(vii)
139
Fig. 3(vii) Net worth, Capital Employed, Capital Invested and Working capital of Kerala State
Electronics Development Corporation Limited
Source : Table 3.19
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y =-1262.1x + 2803.2. The slope is -1262.1x and intercept is 2803.2. The
R² is 0.3353 which shows that the equation is most suitable for prediction. There is
a decrease in net worth of Kerala State Electronics Development Corporation
Limited during the 15 years under study.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 30.029x + 1781.7. The slope is 30.029x and intercept
is 1781.7. The R² is 0.0017 which shows that the equation is most suitable for
prediction. There is an increase in most of the years but the increase is not a
promising one as far as the capital employed of Kerala State Electronics
Development Corporation Limited during the liberalization period is considered .
140
The trend line (linear trend of first degree) of the Capital Invested from 1990-
91 to 2009-2010 is Y = 1484.9x + 7604. The slope is 1484.9x and intercept is 7604.
The R² is 0.9493 which shows that the equation is most suitable for prediction. The
position of capital invested by Kerala State Electronics Development Corporation
Limited shows an increase during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital from
1990-91 to 2009-2010 is Y = 79.444x – 40.051. The slope is 79.444xand intercept is
40.051. The R² is 0.0086 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of Kerala State Electronics
Development Corporation Limited during certain years and decline in certain other
years under liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Kerala State Electronics Development
Corporation Limited during 1990-91 was 0.58 : 1 which declined to 0.85 : 1 in
1994-95 periods . It was 0.86: 1 in 1995-96 which declined to 0.83 : 1 in 1998-99
and increased to 0.98 : 1 in 1999-2000. Again there was an increase to 0.99 : 1 in
2000-01 and noticed an increase to the extent of 2.14 :1 in 2004-05. It again
increased to 2.35: 1 in 2005-06 which slightly declined to 2.28 : 1 in 2009-10 . The
overall trend shows fluctuations. In the initial years the ratio shows that debt to
equity was lower and slightly increased gradually in the liberalization periods (Table
3.20).
141
ii. Current Ratio
The Current ratio of Kerala State Electronics Development Corporation
Limited during 1990-91 was 1.13 : 1 which increased to 1.25 : 1 in 1994-95 periods.
It was 1.20 : 1 in 1995-96 which declined to 0.96 : 1 in 1998-99 and to 0.89 : 1 in
1999-2000. Again there was a decline and it came down to 0.61 : 1 in 2004-05 and
noticed an increase to 1.70 :1 in 2009-10 . The overall position shows a trend of
fluctuations and the ratio was not ideal in any year under study ( Table 3.20).
iii. Return on Investment
The return on the capital employed by the Kerala State Electronics
Development Corporation Limited shows a negative figure in certain years. It was
-92 per cent in 1990-91 and shows a negative growth up to 2005-06 and positive
figures are shown in 2006-07, 2007-08 and 2009-10.It is clear from the computed
ratios that the return on investment of Kerala State Electronics Development
corporation is not a promising one during the entire period of 20 years from 1990-91
to 2009-10 (Table 3.20).
iv. Net Profit to Sales
The ratio of net profit to total sales position of Kerala State Electronics
Development Corporation Limited is very worse and a negative profit or loss is seen
in certain years under study. The net profit to sales in 1990-91 was 82.18per cent
and it declined to -22.9 per cent in 1994-95 . It was 52.62 per cent in 1998-99 which
increased to 62.07 per cent in 2003-04. In 2005-06 it was 37.22 per cent which
declined to 1.58 per cent in 2009-10 .It is clear from the analysis of profit to sales
142
of Kerala State Electronics Development corporation that the profit earned is not up
to the mark during the whole period of 20 years under study from 1990-91 to
2009-10 ( Table 3.20).
v. Receivables to Sales
This ratio reveals the trends in accounts receivable to sales and it was 10.31
in 1990-91 and which increased to 13.52 in 1994-95 and again increased to 15.78
in 1998-99 . It was 14.58 in 1999-2000 which declined to 12.11 in 2004-05 and
declined again to 8.22 in 2009-10. A fluctuating trend is noticed during 1990-91 to
2009-10, the whole 20 year period under analysis. The lower the months in the
receivable to sales is really good for increasing the amount of cash by way of sales
but the ratio is unfavourable (Table 3.20).
vi. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 1.3 in 1990-91 which
declined to 0.46 in 1994-95. It further declined to 0.40 in 1998-99 which again
declined to 0.28 in 1999-00.It was 0.11in 2004-05 which slightly increased to 0.12 in
2009-10. A fluctuating trend is noticed during 1990-91 to 2009-10, the whole 20
year period under analysis. The lower the months in the stock of finished goods to
sales is an indication of increased sales ( Table 3.20).
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to raw materials consumption was 6.18 in
1990-91 which declined to 3.73 in 1994-95. It was 6 in 1995-96 which declined to
5.31 in 1999-2000 and it further declined to 5.23 in 2000-01. It was 3.57 in 2004-05
143
which declined to 1.55 in 2009-10. A fluctuating trend of increase is noticed in all
the 20 years from 1990-91 to 2009-10. The lesser the ratio of raw materials to
consumption is appreciable (Table 3.20).
viii. Consumption to Sales
It represents the ratio of raw materials consumed to sales expressed as
percentage. It was 75.21 per cent in 1990-91 which declined to 69.09 per cent in
1994-95. It was 53.44 per cent in 1995-96 which increased to 56.27 per cent in
1999-2000. It declined to 55.32 per cent in 2000-01 which slightly increased to
55.91 per cent in 2004-05. It was 50.35 per cent in 2005-06 which increased to 62.4
per cent in 2009-10. A fluctuating trend of increase is noticed during 1990-91 to
2009-10, the whole 20 year period under analysis. The trend is somewhat high
which indicates that consumption depends on sales ( Table 3.20).
144
Table 3.20 Financial and Operating ratios of KSEDC
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods
to sales (in
months)
Stock of raw materials to consumption (in months)
Consumption to sale (%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 0.58:1 1.13:1 -92 10.31 1.3 6.18 75.21 82.18
1991-1992 0.59:1 1.14:1 -94 11.24 1.4 6.27 76.11 84.19
1992-1993 0.72:1 1.23:1 2.15 8.65 0.26 2.92 54.53 0.91
1993-1994 0.94:1 1.37:1 2.27 10.81 0.25 2.71 58.78 1.23
1994-1995 0.85:1 1.25:1 -31.38 13.52 0.46 3.73 69.09 -22.9
1995-1996 0.86:1 1.20:1 -30.49 17.72 1.14 6 53.44 25.47
1996-1997 0.94:1 1.16:1 -62.95 19.3 0.66 11.24 40.65 52.64
1997-1998 1.07:1 1.08:1 -81.36 15.82 0.48 6.34 50.05 36.01
1998-1999 .83:1 .96:1 -567.09 15.78 0.4 1.74 50.02 52.62
1999-2000 .98:1 .89:1 3.21 14.58 0.28 5.31 56.27 58.14
2000-2001 0.99:1 0.78:1 -4.22 14.96 0.22 5.23 55.32 57.59
2001-2002 1.63:1 0.82:1 --5.32 15.05 0.2 3.75 40.49 -74.9
2002-2003 1.76:1 .71:1 -6.54 14.4 0.18 3.68 51.3 76.55
2003-2004 1.95:1 .65:1 --7.58 13.04 0.13 3.2 55.51 62.07
2004-2005 2.14:1 .61:1 --8.33 12.11 0.11 3.57 55.91 -61.4
2005-2006 2.35:1 .60:1 --10.2 11.21 0.04 3.24 50.35 37.22
2006-2007 1.93:1 1.79:1 16.5 10.7 0.07 2.62 53.66 15.87
2007-2008 2.08:1 1.90:1 3.57 11.95 0.05 2.37 58.09 3.87
2008-2009 2.17:1 1.95:1 -3.06 10 0.22 1.93 54.87 -3.04
2009-2010 2.28:1 1.70:1 2.31 8.22 0.12 1.55 62.4 1.58
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
145
It is seen that direct correlation exists between net worth and capital
employed, current ratio ,working capital , Return on capital employed and stock of
finished goods to sales (Table 3.21).
Table 3.21
Correlation Sl. No. Item Correlation
1 Net worth 1 2 Capital Employed -0.567 3 Capital Invested -0.514 4 Working capital 0.754 5 Debt to Equity Ratio -0.707 6 Current Ratio 0.594 7 Return on Investment (%) 0.079 8 Receivable to sales ( in Months) -0.013 9 Stock of finished goods to sales( in months ) 0.504 10 Stock of raw materials to consumption 0.192 11 Consumption to Sales (%) 0.316 12 Net Profit to sales ( %) 0.385
Source: Computed from Table 3.19 and Table3.20
8. KERALA AGRO MACHINERY CORPORATION LIMITED
Kerala Agro Machinery Corporation Limited was incorporated in 1973 under
the Department of Agriculture, one of the administrative Departments of
Government of Kerala. Kerala Agro Machinery Corporation Limited is involved in
the manufacture and sale of power tillers, diesel engines and power reapers.
a. Net Worth
The net worth of Kerala Agro Machinery Corporation Limited was Rs 522.1
crores during 1990-91 which declined to Rs 100 crores during 1994-95. During
146
1995-96 there was negative net worth of Rs 3931.5 crores which increased to Rs
5994.1 crores in 2004-05. It was Rs 6466.7 crores in 2005-06 which again increased
to Rs 9097.89 crores in 2009-10. It is noticed from the data that the net worth
position shows a steep increase except in 1993-95 to 1995-96 periods (Table 3.22).
b. Capital Employed
The capital employed of Kerala Agro Machinery Corporation Limited was
Rs 544.11 crores during 1990-91 which increased to Rs 969.87 crores during 1994-
95. During 1995-96 capital employed was Rs 1146.22 crores which increased to Rs
3162.21 crores in 1999-2000. It was Rs 3756.5 crores in 2000-01 which again
increased to Rs 581.1 crores in 2004-05. It was Rs. 6291.7 crores in 2005-06 which
again increased to Rs 8933.31 crores. The position of capital employed for a period
of 20 years under study from 1990-91 to 2009-2010 shows a trend of increase
(Table 3.22).
c. Capital Invested
The capital invested by Kerala Agro Machinery Corporation Limited was Rs
161.46 crores during 1990-91 which remained stagnant up to 2006-07 and changed
to Rs 201.88 crores in 2009-10. The capital invested remains stagnant from 1990-91
to 2006-07 and then shows an increase in trend during the remaining years under
study (Table 3.22).
d. Working Capital
The Working Capital of Kerala Agro Machinery Corporation Limited was Rs
401.49 crores during 1990-91 which increased to Rs 582.03 crores during 1994-95.
147
It was Rs 615.93 crores in 1995-96 which increased to Rs 2207.15 crores in 1999-00
. It was Rs 5104.21 crores in 2004-05 which increased to Rs. 8193 .5 crores in 2009-
10. The analysis on working capital for a period of 20 years from 1990-91 to 2009-
2010 clearly shows an increasing trend( Table 3.22).
Table 3.22
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala Agro Machinery Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5
1990-1991 522.10 544.1 161.46 401.23
1991-1992 544.11 544.11 161.46 402.49
1992-1993 681.68 681.66 161.46 534.33
1993-1994 100 811.27 161.46 578.7
1994-1995 100 969.87 161.46 582.03
1995-1996 100 1146.22 161.46 615.93
1996-1997 1372.69 1222.69 161.46 766.56
1997-1998 1903.5 1753.5 161.46 1205.49
1998-1999 2545.78 2395.78 161.46 1751.36
1999-2000 3337.21 3162.21 161.46 2207.15
2000-2001 3931.49 3756.49 161.46 2817.27
2001-2002 4554.92 4379.92 161.46 3490.53
2002-2003 5144.19 4969.19 161.46 4141.38
2003-2004 5601.66 5426.66 161.46 4654.18
2004-2005 5994.1 5819.1 161.46 5104.21
2005-2006 6466.7 6291.7 161.46 5627.03
2006-2007 6987.66 6782.66 161.46 6163.32
2007-2008 7561.54 7398.04 202.96 6792.21
2008-2009 8274.39 8111.42 203.49 7495.23
2009-2010 9097.89 8933.31 201.88 8193.5 Source: Compiled from the Review of Public Enterprises, Various issues, of the Bureau of Public Enterprises , Government of Kerala .
148
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Kerala Agro Machinery
Corporation Limited during 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3(viii)
Fig. 3(viii)
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala Agro Machinery Corporation Limited
Source : Table 3.22
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y = 498.2x – 1490. The slope is 498.2x and intercept is 1490. The R² is
0.9665 which shows that the equation is most suitable for prediction. There is an
increase in net worth of Kerala Agro Machinery Corporation Limited during the 20
years under study.
149
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 465.46x – 1132.3. The slope is 465.46x and intercept
is 1132.3. The R² is 0.9739 which shows that the equation is most suitable for
prediction. There is an increase but at a reduced rate in most of the years and the
increase is not high and steep as far as the capital employed of Kerala Agro
Machinery Corporation Limited during the liberalization period is considered.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 1.5827x + 151.04. The slope is 1.5827x and intercept
is 151.04. The R² is 0.3990 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested by Kerala Agro Machinery
Corporation Limited during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 435.12x – 1392.5 The slope is 435.12x and intercept
is 1392.5.The R² is 0.9540 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of Kerala Agro Machinery
Corporation Limited during certain years and decline in certain other years during
liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Kerala Agro Machinery Corporation Limited
during 1990-91 was 1.25 : 1 which increased to 2.5 : 1 in 1994-95 periods . It was
2.01: 1 in 1995-96 which increased to 3.11: 1 in 1998-99 and increased to 3.52 : 1 in
150
1999-2000. Again there was an increase to 3.89 : 1 in 2000-01 which declined to
0.26:1 in 2004-05 and again declined to 0.25 : 1 in 2009-10. The overall trend
shows fluctuating one. The ratio gives an indication that the debt in their capital
structure is low (Table 3.23).
ii. Current Ratio
The Current ratio of Kerala Agro Machinery Corporation Limited during
1990-91 was 1.75 : 1 which increased to 2.03 : 1 in 1994-95 periods . It was 1.62 : 1
in 1995-96 which increased to 2.76 : 1 in 1998-99 and marginally declined to
2.70 : 1 in 1999-2000. Again there was an increase to 3.78: 1 in 2000-01 which
increased to 5.63:1 in 2004-05. Again in 2005-06 it increased to 6.54 :1 and declined
to 4.69 :1 in 2009-10 periods . The overall trend shows a trend of increase and all
time higher than ideal one in most of the years under study ( Table 3.23) .
iii. Return on Investment
The return on the capital employed by Kerala Agro Machinery Corporation
Limited shows negative one in certain years under study. It was 47.20 per cent in
1990-91 which declined to 16.35 per cent in 1994-95. It was 16.65 per cent in 1995-
96 which increased to 40.49 per cent in 1999-2000. It is very low in 2000-01 (0.74
per cent ) . In 2001-02 it was 22.5 per cent which declined to 12.56 per cent in 2004-
05 and again declined to 14.93 per cent in 2009-10 periods. The return on
investment of Kerala Agro Machinery Corporation shows a fluctuating trend
throughout the period under study (Table 3.23).
151
iv. Net Profit to Sales
The analysis on the net profit before tax and dividend to total sale of Kerala
Agro Machinery Corporation Limited shows that net profit to sales in 1990-91 was
12.54 per cent and it declined to 6.41 per cent in 1994-95. It was 5.19 per cent in
1995-96 which increased to 18.04 per cent in 1999-2000. It was 26.34 per cent in
2000- 01 which declined to 9.21 per cent and again it increased to 10.03 per cent in
2005-06 which declined to 9.55 per cent in 2009-10. It is clear from the analysis of
net profit to sales of Kerala Agro Machinery Corporation Limited that even though
they are earning profit in all years under study but the profit earned is not up to the
mark during the whole period of 20 years under study (Table 3.23).
v. Receivables to Sales
The ratio of receivables to sales was 0.30 in 1990-91 which decreased to 0.17
in 1994-95 and increased to 0.25 in 1998-99 . It was 0.33 in 1999-2000 which
increased to 1.35 in 2004-05 which increased to 2.67 in 2009-10 periods .A
fluctuating trend is noticed during 1990-91 to 2009-10 the whole 20 year period
under analysis. The lower the months in the receivable to sales is really good for
increasing the amount of cash by way of sales. It was not so good in certain years
under study ( Table 3.23).
vi. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 0.04 in 1990-91 which
increased to 0.13 in 1994-95 . It was 0.26 in 1998-99 which declined to 0.12 in
1999-2000. This ratio increased to 0.89 in 2004-05 and it further declined to 0.35 in
152
2009-10 .A fluctuating trend is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis. The lower the months in the stock of finished goods to sales is
an indication of increased sales (Table 3.23).
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to consumption was 2.17 in 1990-91
which increased to 3.62 in 1994-95. It was 2.91in 1995-96 which again decreased to
2.04 in 1999-2000. It was all time high in 2000-01 ( 61.8) but declined to 1.99 in
2004-05 and to 1.84 in 2009-10. A fluctuating trend of increase is noticed in all the
20 years from 1990-91 to 2009-10. The lesser number of months in raw materials to
consumption is appreciable ( Table 3.23).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage shows
62.38 per cent in 1990-91 which declined to 58.42 percent in 1994-95. It was 62.87
per cent in 1995-96 which declined to 58.74 per cent in 1999-2000. It declined to
14.53 per cent in 2000-01 which slightly increased to 63.83 per cent in 2004-05. It
was 72.66 per cent in 2005-06 which decreased to 72.38 per cent in 2009-10. A
fluctuating trend of increase is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis. The trend is somewhat high which indicates that consumption
depends on sales ( Table 3.23).
153
Table 3.23 Financial and Operating Ratios of Kerala Agro Machinery Corporation
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales ( in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 1.25:1 1.75:1 47.20 0.30 0.04 2.17 62.38 12.54
1991-1992 1.25:1 1.86:1 47.19 0.40 0.04 2.18 63.37 12.99
1992-1993 1.25:1 2.01:1 50.6 0.19 0.03 2.51 64.58 15.21
1993-1994 1.15:1 2.01:1 15.96 0.19 0.21 2.31 64.71 5.16
1994-1995 2.5:1 2.03:1 16.35 0.17 0.13 3.62 58.42 6.41
1995-1996 2.01:1 1.62:1 16.65 0.28 0.02 2.91 62.87 5.19
1996-1997 2.31:1 1.83:1 36.63 0.11 0.39 2.91 67.85 11.16
1997-1998 2.41:1 2.12:1 46.2 0.33 0.19 2.29 60.98 14.36
1998-1999 3.11:1 2.76:1 41.51 0.25 0.26 0.33 61.17 15.57
1999-2000 3.52:1 2.70:1 40.49 0.33 0.12 2.04 58.74 18.04
2000-2001 3.89:1 3.78:1 0.74 0.29 2.15 61.83 14.53 26.34
2001-2002 NA 3.93:1 22.48 1.05 0.92 1.58 65.01 14.6
2002-2003 NA 4.15:1 20.19 1.09 0.85 1.71 58.63 13.67
2003-2004 0.26:1 5.53:1 14.23 1.6 1.26 1.9 61.32 11.33
2004-2005 0.26:1 5.63:1 12.56 1.35 0.89 1.99 63.83 9.21
2005-2006 0.26:1 6.54:1 12.74 1.54 1.42 1.77 72.66 10.03
2006-2007 0.26:1 5.45:1 12.91 1.61 0.73 1.97 65.96 9.61
2007-2008 0.26:1 7.05:1 12.61 2.3 0.34 2.17 67.97 8.98
2008-2009 0.26:1 6.64:1 14.42 2.55 0.11 2.07 71.98 9.5
2009-2010 0.25:1 4.69:1 14.93 2.67 0.35 1.84 72.38 9.55 Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that direct correlation exists between net worth and capital
employed, capital invested, current ratio, working capital and Receivable to sales
(Table 3.24)
154
Table 3.24 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.993 3 Capital Invested 0.650 4 Working capital 0.989 5 Debt to Equity Ratio -0.886 6 Current Ratio 0.897 7 Return on Investment (%) -0.529 8 Receivable to sales ( in Months) 0.936 9 Stock of finished goods to sales( in months ) 0.374 10 Stock of raw materials to consumption -0.018 11 Consumption to Sales (%) 0.203 12 Net Profit to sales ( %) -0.004
Source: Computed from Table 3.22 and Table3.23
9. KERALA AUTOMOBILES LIMITED
Kerala Automobiles Limited (KAL), incorporated in March 1978, is a wholly
owned Company promoted by Government of Kerala. It has an installed capacity to
manufacture 5400 numbers of three wheelers per annum at Thiruvananthapuram,
with technical collaboration from Automobile Products of India Ltd. (APL). The
commercial production was started in the year 1985-86. The operations of the
company had been unsatisfactory since inception due to weak management, lopsided
organizational set up, teething troubles and stiff competition in the market. The
collaborators turned up to be the main competitor as most of the dealers were
common to both KAL and APL. Despite of the reliefs and concessions extended by
the institutions and banks during the period from 1989 to 1991, KAL continued to
incur losses and by the end of March 1993, the accumulated losses stood at Rs. 1403
155
lakh against net worth of Rs. 373 lakh. At the hearing held on 11th February 1993,
KAL was declared as a sick industrial company under section 3(1)(o) of the Sick
Industrial Companies Act (SICA) 1985 and Industrial Development Bank of India
(IDBI) was appointed as the Operating Agency (OA).
a. Net Worth
The net worth of the Kerala Automobiles Limited was Rs -872 .27 crores
during 1990-91and this negative trend repeated upto 2000-01 periods. It was Rs
468.89 crores in 2001- 02 which increased to Rs 975.11 crores in 2004-05. It was Rs
765.34 crores in 2005-06 which declined to Rs 85.56 crores in 2007-08 and turned to
negative net worth afterwards. It means that during the entire period under analysis
the net worth does not give a good picture ( Table 3.25).
b. Capital Employed
The capital employed of the Kerala Automobiles Limited was Rs 432.18
crores during 1990-91 which increased to Rs 439.77 crores during 1994-95. During
1995-96 capital employed was Rs 494.18 crores which increased to Rs 883.16
crores in 1999-2000. It was Rs 883.16 crores in 2000-01 which again increased to
Rs 1355.12 crores in 2004-05. It was Rs 1432.81 crores in 2005-06 which declined
to Rs 515.4 crores in 2009-10. The position of capital employed for a period of 20
years study from 1990-91 to 2009-2010 shows a fluctuating trend (Table 3.25) .
156
c. Capital Invested
The capital invested by the Kerala Automobiles Limited was Rs 1628.45
crores during 1990-91 which increased to Rs 2010.01 crores during 1994-95.
During 1995-96 it was Rs 2034.01 crores which declined to Rs 1537.66 crores in
1999-2000. In 2000-01 it was Rs 1537.44 crores which declined to Rs 1402.83
crores in 2004-05. It was Rs 1690.19 crores in 2005-06 which increased to Rs
1767.03 crores in 2009-10. The position of capital invested shows an increasing
trend in the liberalization period( Table 3.25) .
d. Working Capital
The working capital of Kerala Automobiles Limited was Rs 73.75 crores
during 1990-91 which increased to Rs 195.36 crores during 1994-95. It was Rs
225.38 crores in 1995-96 which declined to Rs 630.02 crores in 1999-00. It was Rs
630.02 crores in 2000-01 which increased to Rs 1151.63 crores in 2004-05 and it
declined to Rs 306.72 crores in 2009-2010. The working capital from 1990-91 to
2009-2010 shows an increasing trend (Table 3.25).
157
Table 3.25 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala
Automobiles Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5
1990-1991 -872.27 432.18 1628.45 73.75
1991-1992 -873.27 432.18 1628.45 73.75
1992-1993 -1269.77 200.04 1792.81 -67.33
1993-1994 -1258.1 397.91 1979.01 144.15
1994-1995 -839.25 439.77 2010.01 195.36
1995-1996 -808.84 494.18 2034.01 225.38
1996-1997 -815.51 416.62 1963.13 130.18
1997-1998 -741.72 332.2 1804.92 47.8
1998-1999 -793.94 457.79 1787.66 191.64
1999-2000 -118.57 883.16 1537.66 630.02
2000-2001 -118.57 883.16 1537.66 630.02
2001-2002 468.89 1160.74 1567.34 925.96
2002-2003 775.66 1178.02 1318.21 962.79
2003-2004 852.48 1203.01 1266.38 988.66
2004-2005 975.11 1355.12 1402.83 1151.63
2005-2006 765.34 1432.81 1690.19 1246.8
2006-2007 577.42 900.71 1346.11 721.01
2007-2008 85.56 290.51 1227.77 130.78
2008-2009 -230.99 356.58 1610.39 191.22
2009-2010 -228.81 515.4 1767.03 306.72
Source: Compiled from the Review of Public Enterprises, Various issues, of
the Bureau of Public Enterprises , Government of Kerala .
158
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Kerala Automobiles Limited
during 1990-91 to 2009-2010 with the trend line and regression equation is shown in
fig. 3(ix)
Fig. 3(ix) Net worth, Capital Employed, Capital Invested and Working capital of Kerala
Automobiles Limited
Source : Table 3.25
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y = 93.393x – 1203.1. The slope is 93.393xand intercept is 1203.1.
The R² is 0.5394 which shows that the equation is most suitable for prediction.
The trend line (linear trend of first degree) of the Capital Employed from
1990-91 to 2009-2010 is Y =29.101x + 382.55 . The slope is 29.101x and intercept
is 382.55. The R² is 0.1715 which shows that the equation is most suitable for
prediction. There is a decrease in most of the years and the increase noticed in some
159
years is not high and steep as far as the capital employed of Kerala Automobiles
Limited during the liberalization period is considered.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = -23.72x+1894.1 . The slope is -23.72xand intercept is
1894.1. The R² is 0.3762 which shows that the equation is most suitable for
prediction. There is a decrease in the capital invested by Kerala Automobiles
Limited during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 37.281x + 53.565 . The slope is 37.281x and intercept
is 53.565. The R² is 0.2452 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of Kerala Automobiles
Limited during all the years under liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Kerala Automobiles Limited during 1990-91 was
4.04: 1 which declined to 1.75 : 1 in 1994-95 periods . It was 1.78: 1 in 1995-96
which increased to 1.87: 1 in 1999-2000. It was 1.87: 1 in 2000-01 which declined to
0.37:1 in 2004-05. It again declined to 0.32 :1 in 2006-07 which slightly increased to
0.73:1 in 2009-10 . The overall trend is a fluctuating one. In the initial years the ratio
shows that debt to equity was lower and increased gradually during the liberalization
periods (Table 3.26).
160
ii. Current Ratio
The Current ratio of Kerala Automobiles Limited during 1990-91 was 1.17:
1 which increased to 1.30:1 in 1994-95 periods. It was 1.29 : 1 in 1995-96 which
decreased to 1.18 : 1 in 1998-99 and further increased to 1.94: in 1999-2000. Again
it increased to 2.46 : 1 in 2004-05 but declined to 1.27 :1 in 2009-10 . The overall
trend shows fluctuations and the ratio is not ideal in most of the years under study
(Table 3.26).
iii. Return on Investment
The return on the capital employed by the Kerala Automobiles Limited in
certain years is negative. It was -67.65 per cent in 1990-91 and shows a negative
growth in 1992 -93 and increased to 6.31 in 1995-96. It decreased to 0.73 in 2000-01
and then increased to 1.6 in 2004-05 . From 2005 -06 on wards there was negative
trend and in the year 2009-10 it was positive (0.42 per cent) . It is a clear indication
from the ratios that the return on investment of Kerala Automobiles Limited is not a
promising one during the entire period of 20 years from 1990-91 to 2009-10.(Table
3.26).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of Kerala
Automobiles Limited is not a promising one. The net profit to sales in 1990-91 was
52.63 per cent and it declined to 0.6 per cent in 1994-95. It was 3.2 per cent in 1998-
99 which declined to 0.45 per cent in 2004-05. In 2005-06 and 2006-07 there was
loss and again in 2007-08 onwards there was a profit of 19.33 per cent and came
161
down to 0.11 in 2009-10. It is clear from the analysis of profit to sales of Kerala
Automobiles Limited that even though they are earning profit in certain years the
profit earned is not up to the mark during the whole period of 20 years under study
from 1990-91 to 2009-10 ( Table 3.26).
v. Receivables to Sales
This ratio of accounts receivable to sales was 0.95 in 1990-91 which declined
to 0.6 in 1994-95 and again increased to 1.19 in 1999-2000 . It was 1.19 in 2000-01
which declined to 0.54 months in 2004-05 and then increased to 1.75 in 2009-10. A
fluctuating trend is noticed during 1990-91 to 2009-10, the whole 20 year period
under analysis. The lower the months in the receivable to sales is really good for
increasing the amount of cash by way of sales (Table 3.26).
vi. Stock of Finished Goods to Sales
This ratio reveals the trends in stock of finished goods to sales . It was 1.06
in 1990-91 which declined to 0.55 in 1994-95 . It increased to 0.610 in 1998-99
which again declined to 0.16 in 1999-00. It was 1.15 in 2004-05 which increased to
2.51 in 2005-06 and slightly declined to 2.21 in 2009-10 periods . A fluctuating
trend of increase is noticed during 1990-91 to 2009-10, the whole 20 year period
under analysis. The lower the months in the stock of finished goods to sales is an
indication of increased sales but the trend is not favourable (Table 3.26).
162
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to consumption was 4.48 in 1990-91
which declined to 2.46 in 1994-95 . It was 2.22 in 1995-96 which increased to 60.47
in 1999-2000 and it further declined to 1.56 in 2004-05. It was 1.83 in 2005-06
which again declined to 0.25 in 2009-10. In this case a fluctuating trend is noticed
in all the 20 years from 1990-91 to 2009-10 . The lesser is the number of months in
raw materials to consumption is appreciable one but more time is taken for
consumption of raw materials in this case ( Table 3.26).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage
was57.64 per cent in 1990-91 which increased to 66.44 per cent in 1994-95 . It was
68.09 per cent in 1995-96 which decreased to 7.18 per cent in 1999-2000. It was
58.42 per cent in 2001-02 which slightly increased to 61.17 per cent in 2004-05 . It
was 70.33 per cent in 2005-06 which decreased to 68.8 per cent in 2009-10. A
fluctuating trend of increase is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis (Table 3.26).
163
Table 3.26 Financial and Operating ratios of Kerala Automobiles Ltd
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales ( in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9
1991-1992 4.04:1 1.17:1 -67.65 0.95 1.06 4.48 57.64 52.63
1992-1993 4.55:1 0.85:1 -196.55 1.34 0.83 2.09 62.72 49.63
1993-1994 5.13:1 1.30:1 2.54 1.03 0.23 2.49 57.54 -0.75
1994-1995 1.75:1 1.30:1 2.54 0.43 0.55 2./46 66.44 0.6
1995-1996 1.78:1 1.29:1 6.31 0.6 0.51 2.22 68.09 1.32
1996-1997 1.69:1 1.13:1 1.79 0.9 0.48 0.36 64.38 0.24
1997-1998 1.47:1 1.05:1 22.02 0.76 0.55 0.2 63.65 2.16
1998-1999 2.34:1 1.18:1 30.65 0.79 0.61 0.25 60.76 3.2
1999-2000 1.87:1 1.94:1 0.73 1.19 0.16 60.47 7.18 30.01
2000-2001 1.87:1 1.94:1 0.73 1.19 0.16 60.47 7.18 30.01
2001-2002 0.79:1 2.63:1 21.36 0.37 1.05 0.13 58.42 5.64
2002-2003 0.44:1 2.02:1 22.92 0.46 1.58 0.14 61.29 5.91
2003-2004 0.38:1 2.46:1 17.01 0.58 1.38 1.59 60.3 4.63
2004-2005 0.37:1 2.02:1 1.6 0.54 1.15 1.56 61.17 0.45
2005-2006 0.65:1 2.40:1 -14.69 0.65 2.51 1.83 70.33 -5.56
2006-2007 0.32:1 2.45:1 -14.69 2.36 2.49 0.81 66.81 -3.33
2007-2008 0.20:1 2.09:1 -134.57 3.48 2.41 0.17 54.73 -19.33
2008-2009 0.57:1 2.16:1 -115.22 3.32 2.68 0.59 59.05 -35.51
2009-2010 0.73:1 2.26:1 0.42 1.75 2.21 0.25 68.8 0.11
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that there is direct correlation between net worth and capital
employed, current ratio, working capital and Stock of finished goods to sales (Table
3.27)
164
Table 3.27
Correlation
Sl. No. Item Correlation 1 Net worth 1 2 Capital Employed 0.875 3 Capital Invested -0.788 4 Working capital 0.908 5 Debt to Equity Ratio -0.795 6 Current Ratio 0.800 7 Return on Investment (%) 0.261 8 Receivable to sales ( in Months) -0.003 9 Stock of finished goods to sales( in months ) 0.534 10 Stock of raw materials to consumption 0.012 11 Consumption to Sales (%) -0.022 12 Net Profit to sales ( %) 0.319
Source: Computed from Table 3.25 and Table3.26
10. KERALA AGRO INDUSTRIES CORPORATION LIMITED
The Kerala Agro Industries Corporation Limited was incorporated in 1968
under the Agriculture Department, one of the Administrative Departments of the
Government of Kerala, involved in the process of trading of agricultural machineries
and implements, fabrication of farm equipment, implementation of Government
sponsored schemes and projects .
a. Net Worth
The net worth of Kerala Agro Industries Corporation Limited was Rs 18
crores during 1990-91 which increased to Rs 21 crores during 1993-94 and shows
negative figures for further two years. It was Rs 538.7 crores in 1999-2000. During
2000-01 it was Rs 542.55 crores which declined to Rs. 490.6 crores in 2002-03.
165
There is negative net worth in most of the period under analysis during the
liberalization period ( Table 3.28).
b. Capital Employed
The capital employed of Kerala Agro Industries Corporation Limited was Rs
110. 58 crores during 1990-91 which declined to Rs 46.23 crores during 1994-95.
During 1995-96 capital employed was Rs 2.69 crores which increased to Rs 658.4
crores in 1999-2000. It was Rs 689.24 crores in 2000-01 which declined to Rs 5.72
crores in 2004-05. It was Rs 238. 62 crores in 2005-06 which increased to Rs 373.85
crores in 2009-10. The overall position of capital employed for a period of 20 years
under study from 1990-91 to 2009-2010 shows a trend of increase with fluctuations
and negative growth in certain years(Table 3.28) .
c. Capital Invested
The capital invested by Kerala Agro Industries Corporation Limited was Rs
575.64 crores during 1990-91 which declined to Rs 541.9 crores during 1994-95.
During 1995-96 it was Rs 541.9 crores which declined to Rs 620.9 crores in 1999-
2000. It was Rs 911.89 crores in 2005-06 which increased to Rs 1081.89 crores in
2009-10. The position of capital invested for a period of 20 years under study from
1990-91 to 2009-2010 shows an increasing trend (Table 3.28).
d. Working Capital
The Working Capital of Kerala Agro Industries Corporation Limited was Rs
75.82 crores during 1990-91 which declined to Rs 18.67 crores during 1994-95. It
was negative working capital from 1995-96 to 2009-10 with exception on 2002-03.
166
The overall position of working capital for a period of 20 years study from 1990-
91 to 2009-2010 shows declining a trend. (Table 3.28).
Table 3.28 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala Agro
Industries Corporation Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 18 110.58 575.64 75.82 1991-1992 7 111.65 578.76 79.87 1992-1993 19.3 135.28 590.09 105.48 1993-1994 21.03 147.78 600.86 120.23. 1994-1995 -21.56 46.23 541.9 18.67 1995-1996 -65.1 2.69 541.9 -25.36 1996-1997 538.27 605.96 541.9 -87.27 1997-1998 449.6 542.29 566.9 -152.5 1998-1999 437.07 583.76 620.9 -108.59 1999-2000 538.71 658.4 620.9 -5.46 2000-2001 542.55 689.24 620.9 -0.01 2001-2002 512.66 659.35 620.9 -30.2 2002-2003 490.6 688.29 671.9 2.14 2003-2004 -258.64 -60.95 671.9 -750.37 2004-2005 -191.97 5.72 671.9 -686.08 2005-2006 -199.06 238.62 911.89 -450.93 2006-2007 -185.57 332.11 991.89 -355.94 2007-2008 -433.07 84.61 991.89 -601.44 2008-2009 -349.2 168.48 991.89 -517.82 2009-2010 -233.83 373.85 1081.89 -309.95
Source: Compiled from the Review of Public Enterprises, Various issues, of the Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of the Kerala Agro Industries
Corporation Limited during 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3 (x )
167
Fig. 3(x) Net worth, Capital Employed, Capital Invested and Working capital of the Kerala
Agro Industries Corporation Limited
Source : Table 3.28
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y =-21.593x + 309.07. The slope is -21.593x and intercept 309.7.
The R² is 0.2327 which shows that the equation is most suitable for prediction.
There is a decrease in net worth of the Kerala Agro Industries Corporation Limited
during the 20 years under study.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 4.5619x + 258.3 The slope is 4.5619x and intercept is
258.3. The R² is 0.0012 which shows that the equation is most suitable for
prediction. There is an increase in most of the years but the increase is not high and
168
steep as far as the capital employed of the Kerala Agro Industries Corporation
Limited during the liberalization period.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 25.885x + 428.54 The slope is 25.885x and intercept
is 428.54. The R² is 0.7678 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested the Kerala Agro Industries
Corporation Limited during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = -35.685x + 184.7. The slope is -35.685x and intercept
is 184.7. The R² is 0.0.5561 which shows that the equation is most suitable for
prediction. A decrease and sometimes even negative working capital was noticed in
the analysis of the working capital of Kerala Agro Industries Corporation Limited
during all the years under study .
Analysis of Solvency and Profitability
(i) Debt to Equity Ratio
The debt to equity ratio of Kerala Agro Industries Corporation Limited
during 1990-91 was 0.22 : 1 which declined to 0.14 : 1 in 1994-95 periods . It was
1.14 : 1 in 1995-96 which declined to 0.31 : 1 in 1999-2000. It was 0.31 : 1 in 2000-
01 which increased to 0.42:1 in 2004-05 and again increased to 0.92 :1 in 2005-06.
It increased to 1.09 : 1 in 2006-07 and again increased to 1.28 :1 in 2009-10. The
trend shows an increase but with fluctuations. In the initial years the ratio shows that
169
debt to equity was lower and slightly increased gradually in the liberalization periods
(Table 3.29).
ii. Current Ratio
The Current ratio of Kerala Agro Industries Corporation Limited during
1990-91 was 1.18 : 1 which declined to 1.02 : 1 in 1994-95 periods . It was 0.96 : 1
in 1995-96 and increased to 1.00:1 in 1999-2000. It was 0.87:1 in 2009-10 .The
trend shows a fluctuating one and the ratio is not ideal in majority of the cases
(Table 3.29).
iii. Return on Investment
The return on the capital employed by the Kerala Agro Industries
Corporation Limited was negative in 1990-91 (-56.24per cent) and continues till
1997 -98. It increased to 14.8 per cent in 1999-2000. From 2001-02 on wards there
was negative return and a very high figure is noticed in 2004-05 and it was increased
to 30.9 in 2009-10.The ratios on return on investment of Kerala Agro Industries
Corporation Limited is not a promising one during the entire period of 20 years
from 1990-91 to 2009-10 (Table 3.29 ).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of Kerala Agro
Industries Corporation Limited during 1990-91 was 10.80 per cent and it declined to
0.16 per cent in 1993-94 .From 1994-95 onwards there was a loss up to 1998-99
periods. In the next two years there was profit and another two years loss .A slow
growth in profit is seen from 2006-07 ( 0.62 per cent ) to 2.62 per cent in 2009-10
170
periods. The analysis of profit to sales of Kerala Agro Industries Corporation
Limited shows that even though they are earning profit in certain years, the profit
earned is not up to the mark during the whole period of 20 years under study from
1990-91 to 2009-10 (Table 3.29 ).
v. Receivables to Sales
The ratio of accounts receivable to sales was 3.12in 1990-91 and which
increased to 6.16 in 1994-95 and declined 0.72 in 2000-01 periods. It was 6.12 in
2001-02 which declined to 1.97 in 2004-05 and again increased to 3.32 in 2009-
10.A fluctuating trend of increase is noticed during 1990-91 to 2009-10 the whole
20 year period under analysis. The lower the months in the receivable to sales is
really good for increasing the amount of cash by way of sales ( Table 3.29).
vi. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 1.59 in 1990-91 which
increased to 2.16 and declined to 0.34 in 2000-01. It was 1.61 in 2001-02 which
declined to 0.42 in 2005-06 and it declined further to 0.37 in 2009-10 periods . A
fluctuating trend of increase is noticed during 1990-91 to 2009-10 the whole 20 year
period under analysis. The lower the months in the stock of finished goods to sales is
an indication of increased sales and is favourable (Table 3.29).
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to raw materials consumption was 0.03 in
1990-91 which increased to 0.18 in 1995-96 . It was 0.15 in 1997-98 which
increased to 0.45 in 2002-03 and increased to 0.76 in 2005-06 and declined to 0.65
171
in 2009-10 periods . In this case a fluctuating trend of increase is noticed in all the
20 years from 1990-91 to 2009-10 (Table 3.29).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage was
2.01 per cent in 1990-91 which declined to 1.11 per cent in 1994-95 . It was 1.11per
cent in 1995-96 which declined to 0.19 per cent in 2000-01. It was 2.63 per cent in
2001-02 which declined to 0.50per cent in 2005-06 .A high level of consumption
was attained from 2006-07 (55.27 per cent) to 2009-10 (87.9 per cent). A fluctuating
trend of increase is noticed in the initial years and a very high consumption was seen
from 2006-07 on wards during the 20 years period under analysis. The trend is
somewhat high and it indicates that consumption depends on sales (Table 3.29).
172
Table 3.29 Financial and Operating ratios of Kerala Agro Industries Corporation
Year Debt-equity ratio
Current ratio
Return investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales ( in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit to
sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 0.22 1.18: -56.24 3.12 1.59 0.03 2.01 10.80
1991-1992 0.22:1 1.18:1 -56.24 3.12 1.59 0.03 2.05 11.09
1992-1993 0.24:1 1.06:1 7.98 5.22 1.79 0.03 1.78 1.94
1993-1994 0.27:1 1.26:1 1.04 1.78 1.17 0.29 1.02 0.16
1994-1995 0.14:1 1.02:1 -98.79 6.16 2.16 0.35 1.11 -5.63
1995-1996 0.14:1 0.96:1 -1618.59 4.19 1.39 0.18 1.11 -4.61
1996-1997 0.14:1 0.91:1 -11.07 5.36 1.54 0.15 1.07 -5.75
1997-1998 0.20:1 0.84:1 -16.36 3.95 0.97 0.15 0.79 -5.85
1998-1999 .31:1 .90:1 2.16 2.97 0.58 0.62 1.34 -0.66
1999-2000 .31:1 1.00:1 14.81 538.71 5.38 0.62 1.11 3.54
2000-2001 .31:1 1.00:1 3.3 0.72 0.34 0.9 0.19 0.56
2001-2002 .31:1 .97:1 -15.19 6.12 1.61 0.41 2.63 -8.97
2002-2003 .42:1 1.00:1 -3.17 4.63 1.11 0.45 1.73 -1.4
2003-2004 .42:1 .54:1 -35.91 3.33 0.71 0.46 1.47 1.23
2004-2005 .42:1 .58:1 1161.36 1.97 0.5 0.78 0.51 2.2
2005-2006 .92:1 .74:1 -3.04 2.54 0.42 0.76 0.50 -0.2
2006-2007 1.09:1 .79:1 14.33 1.18 0.41 0.77 0.55 0.62
2007-2008 1.09:1 0.84:1 95.78 0.68 0.09 0.72 0.97 0.6
2008-2009 1.09:1 0.78:1 49.78 2.6 0.29 0.69 0.91 1.71
2009-2010 1.28:1 0.87:1 30.86 3.32 0.37 0.65 0.87 2.62 Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues A direct correlation exists between net worth and capital employed ,current
ratio , working capital ,stock of finished goods to sales, stock of raw material to
consumption (Table 3.30).
173
Table 3.30
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.852 3 Capital Invested - 0.631 4 Working capital 0.686 5 Debt to Equity Ratio -0.630 6 Current Ratio 0.398 7 Return on Investment (%) -0.0494 8 Receivable to sales ( in Months) 0.320 9 Stock of finished goods to sales( in months ) 0.404 10 Stock of raw materials to consumption 0.315 11 Consumption to Sales (%) -0.618 12 Net Profit to sales ( %) -0.324
Source: Computed from Table 3.28 and Table3.29
11. TRAVANCORE SUGARS AND CHEMICALS LIMITED
Travancore Sugars and Chemicals Ltd (TSCL), originally owned by M/s
Parry and Company was taken over by Government of Kerala in the year 1974 by
acquiring the shares held by them. The company’s product profile included sugar,
spirit, Indian Made Foreign Liquor (IMFL) and arrack. In all the years under study,
the company’s operations were not upto the mark. The plant in the Sugar Unit is
quite old with a cane crushing capacity of 900 Tonnes per day (tpd), whereas the
economically viable capacity is 2500 tpd. Even for 900tpd, the availability of
sugarcane was uncertain. The company has only seven per cent sugar recovery from
crushed cane and as such, is capable of producing only about 60 tpd of sugar at 100
per cent capacity utilization which is not a viable scale of operation.
174
The Distillery Unit was commissioned in 1951 with an installed capacity of
46.53 lakh litres. This unit has also not been functioning efficiently which is evident
from the low and diminishing capacity utilization ranging from 25 per cent to 35 per
cent. The main raw material for the Distillery Unit is molasses. Only ten per cent of
the molasses requirement was being met from the Sugar Unit and the Company was
depending on imported molasses from other States for the balance 90 per cent
requirements. This has resulted in the steep increase in raw material cost. Being an
old plant, the efficiency and output were very poor.
a. Net Worth
The net worth of the Travancore Sugars and Chemicals was Rs 8 crores
during 1990-91 and Rs 9 crores in 1991-92. In all other years except during 2009-10
there is negative net worth . In 2009-10 it was Rs 55.05 crores. There is negative net
worth in all period under analysis except two years (Table-3.31)
b. Capital Employed
The capital employed of Travancore Sugars and Chemicals Limited was Rs 8
crores during 1990-91 and a negative capital employed is seen except during 2009-
10 ( Rs 57. 88 crores) . The overall position of capital employed for a period of 20
years study from 1990-91 to 2009-2010 shows a negative growth. During the entire
period under analysis the capital employed is found declining (Table 3.31).
c. Capital Invested
The capital invested by Travancore Sugars and Chemicals Limited was Rs 50
crores during 1990-91 which increased to Rs 111 crores during 1994-95. During
1995-96 it was Rs 148 crores which declined to Rs -210.4 crores in 1999-2000. In
2000-01 it was Rs 184.5 crores which increased to Rs 291.5 crores in 2004-05. It
175
was Rs 173.97 crores in 2005-06 which declined to Rs 146.07 crores in 2009-10.
During the entire period under analysis the capital invested is seen increasing but
with a fluctuating trend (Table 3.31).
d. Working Capital
The working Capital of Travancore Sugars and Chemicals Limited was Rs -
29.3 crores during 1990-91 which continues up to 2008-09 the whole 19 years with
exception of the year 2009-10 . During this year there was Rs 22.88 crores as
working capital. During the entire period under analysis there is negative working
capital with the exception of 2009-10 (Table 3.31).
Table 3.31
Net worth, Capital Employed, Capital Invested and Working Capital of Travancore Sugars and Chemicals Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 8 8 50 -29.31 1991-1992 9 9 51 -38.22 1992-1993 -18.22 -18.6 51 -61.3 1993-1994 -51.45 -51.45 51 -88.46 1994-1995 -156.95 -96.95 111 -134.45 1995-1996 -295.47 -200.47 148 -233.55 1996-1997 -417.22 -292.22 176 -321.58 1997-1998 -711.59 -334.76 438.06 -360.57 1998-1999 -285.87 -214.95 -238.96 -238.9 1999-2000 -250.88 188.98 -210.35 -210.35 2000-2001 -297.11 -244.2 184.48 -263.5 2001-2002 -215.62 -172.18 175 -186.93 2002-2003 -297.09 -253.66 175 -266.79 2003-2004 -264.77 -95.86 300.48 -107.31 2004-2005 -250.65 -90.74 291.48 -113.57 2005-2006 -183.88 -141.48 173.97 -164.05 2006-2007 -113.13 -78.58 166.12 -100.37 2007-2008 -58.5 -24.43 165.64 -47.57 2008-2009 -35.17 -11.1 155.64 -43.03 2009-2010 55.05 57.88 146.07 22.88
Source: Compiled from the Review of Public Enterprises, Various issues of the Bureau of Public Enterprises , Government of Kerala .
176
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of Travancore Sugars and
Chemicals Limited during 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3(xi)
Fig. 3(xi) Net worth, Capital Employed, Capital Invested and Working capital of Travancore
Sugars and Chemicals Limited
Source : Table 3.31
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y = 1.6153x –208.4. The slope is 1.6153x and intercept is 208.4. The R² is
0.1008 which shows that the equation is most suitable for prediction. There is a
negative net worth of the Travancore Sugars and Chemicals Limited during the 20
years under study.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 1.6081x –119.7. The slope is 1.6081x and intercept is
177
119.7. The R² is 0.0763 which shows that the equation is most suitable for
prediction. There is negative capital employed in Travancore Sugars and Chemicals
Limited during the liberalization period .
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 7.5166x + 49.107. The slope is 7.5166x and intercept
is 49.107. The R² is 0.0572 which shows that the equation is most suitable for
prediction. The capital invested in the Travancore Sugars and Chemicals Limited
during the liberalization period shows an increase.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 2.8472x –179.24. The slope is 2.8472x and intercept
is179.24. The R² is 0.1915 which shows that the equation is most suitable for
prediction. There is a decrease or negative working capital in Travancore Sugars
and Chemicals Limited during all the years under liberalization period .
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of Travancore Sugars and Chemicals Limited during
1990-91 was 1.15 : 1 which increased to 1.18 :1 in 1994-95 periods . It was 1.86 : 1
in 1995-96 which declined to 0.49 : 1 in 1999-2000 . It was 0.40 : 1 in 2000-01
which increased to 1.22 :1 in 2004-05 and declined to 0.11 :1 in 2009-10. The trend
shows an increase but at a slow rate with fluctuations which depicts that the debt
content in the capital is declining ( Table 3.32).
178
ii. Current Ratio
The Current ratio of Travancore Sugars and Chemicals Limited during 1990-
91 was 0.87 : 1 which declined to 0.74 : 1 in 1994-95 periods. It was 0.52 : 1 in
1995-96 which declined to 0.46 :1 in 1999-2000. It was 0.44 :1 in 2000-01 which
increased to 0.76 : 1 in 2004-05 and again there was increase up to 1.06 :1 in 2009-
10. The trend shows an increase with fluctuations but it is not ideal ( Table 3.32).
iii. Return on Investment
The return on the capital employed by the Travancore Sugars and Chemicals
Limited was -534.32 per cent in 1990-91 and increased to 69.66 in 1995-96. From
1998-99 to 1999-2000 and many of the years there was negative return on
investment but a high return was seen in (218.4 per cent) during 2009-10. The ratios
give an indication that the return on investment of the Travancore Sugars and
Chemicals Limited is not a promising one during the entire period of 20 years from
1990-91 to 2009-10. (Table 3.32).
iv. Net Profit to Sales
The ratio of net profit to total sales of the Travancore Sugars and Chemicals
Limited in 1990-91 was -7.25per cent and it continues till 1995-96. A good profit
was shown in 1998-99 (111.43 per cent) to 1997-98 (110 per cent). During 2003-04
profit was 34.13 per cent which decreased to 8.45 per cent in 2009-10. The analysis
of profit to sales of the Travancore Sugars and Chemicals Limited shows that even
though there was profit in certain years, heavy loss was incurred in the other years
(Table 3.32).
179
v. Receivables to Sales
The ratio of accounts receivable to sales was 0.15 in 1990-91 which
increased to 0.16 in 1994-95 and declined to 0.09 in 1998-99. It was 6.39 in 2000-01
periods but declined to 0.01 in 2005-06 and again increased to 2.85 in 2009-10. A
fluctuating trend of increase is noticed during 1990-91 to 2009-10, the whole 20 year
period under analysis. The lower the months in the receivable to sales is really good
for increasing the amount of cash by way of sales but in this case the ratio is not
suitable in all cases (Table 3.32).
vi. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 1.10 in 1990-91 which
increased to 5.4 in 1994-95. It was 0.97 in 1995-96 which increased to 2.24 in 1999-
2000. It was 0.01 in 2004-05 and increased to 0.13 in 2009-10. A fluctuating trend of
increase is noticed during 1990-91 to 2009-10 the whole 20 year period under
analysis. The lower the months in the stock of finished goods to sales is an
indication of increased sales. It is seen appreciable from 2004-05 onwards (Table
3.32).
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to consumption was 0.42 in 1990-91
which increased to 6.25 in 1994-95. It was 26.27in 1997-98 which declined to 1.91
in 2001-02 and increased to 5.29 in 2005-06. It declined to 0.46 in 2009-10 period.
A fluctuating trend of increase is noticed in all the 20 years from 1990-91 to 2009-
10 .The lesser the number of months in raw materials to consumption is appreciable
and avoids unnecessary blocking of funds in raw materials (Table 3.32).
180
viii. Consumption to Sales
The ratio of raw materials to sales expressed as percentage was 52.48 per
cent in 1990-91 which increased to 82.05 per cent in 1994-95. It was 38.87 per cent
in 1995-96 which increased to 24.02 per cent in 1999-2000. It was 22.84 per cent in
2001-02 which increased to 46.57 per cent in 2005-06. It was 46.22 per cent during
2009-10. A fluctuating trend of increase is noticed in the initial years and a very high
consumption level is noticed from 2002-03 onwards .The trend is somewhat high
which indicates that consumption depends on sales (Table 3.32).
Table 3.32
Financial and Operating ratios of Travancore Sugars and Chemicals Ltd
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales ( in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 1.15:1 0.87:1 -534.32 0.15 1.10 0.42 52.48 -7.25 1991-1992 1.15:1 0.88:1 -574.78 0.14 1.23 0.58 53.58 -8.35 1992-1993 1.16:1 0.82:1 -68.26 0.18 0.71 1.66 46.32 -4.57 1993-1994 1.17:1 0.79:1 74.31 0.87 1.29 3.05 50.62 -19.01 1994-1995 1.18:1 0.74:1 88.65 0.16 5.4 6.25 82.05 -35.3 1995-1996 1.86:1 0.52:1 69.66 0.1 0.97 4.06 38.87 -61.85 1996-1997 2.45:1 0.40:1 -67.25 0.42 9.2 8.64 28.31 -124.92 1997-1998 6.15:1 0.35:1 -0.18 0.12 1.28 26.27 -15.27 -111.43 1998-1999 .56:1 .36:1 -118.45 0.09 0.32 2.36 27.52 110.02 1999-2000 .49:1 .46:1 -18.49 0.08 2.24 4.62 24.02 13 2000-2001 .40:1 .44:1 -0.19 6.39 11.44 16.71 -45.4 -2 2001-2002 .33:1 .62:1 -0.18 0.01 0.13 1.91 22.84 -14.84 2002-2003 .33:1 .53:1 -0.17 0.03 0.28 1.3 37.13 -50.47 2003-2004 1.28:1 .78:1 -61.99 0.03 0.14 3.54 35.23 34.13 2004-2005 1.22:1 .76:1 -15.54 0.01 0.01 1.26 48.9 2.08 2005-2006 .32:1 .66:1 -47.7 0.01 0.01 5.29 46.57 10.3 2006-2007 .26:1 .73:1 -90.81 1.73 0.03 3.26 44.42 9.95 2007-2008 .26:1 .85:1 -225.01 1.26 0.05 1.71 45.42 5.83 2008-2009 0.18:1 0.89:1 -212.07 1.49 0.17 3.43 45.14 2.52 2009-2010 0.11:1 1.06:1 218.35 2.85 0.13 0.46 46.22 8.45
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
181
It is seen that direct correlation exists between net worth and capital
employed, working capital current ratio, receivable to sales, consumption to sales,
and net profit to sales the result of which is shown in Table 3.33.
Table 3.33 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.729 3 Capital Invested - 0.351 4 Working capital 0.914 5 Debt to Equity Ratio -0.849 6 Current Ratio 0.845 7 Return on Investment (%) -0.250 8 Receivable to sales ( in Months) 0.146 9 Stock of finished goods to sales( in months ) - 0.282 10 Stock of raw materials to consumption -0.764 11 Consumption to Sales (%) 0.465 12 Net Profit to sales ( %) 0.497
Source: Computed from Table 3.31 and Table3.32
12. SITARAM TEXTILES LIMITED
Sitaram Textiles Limited was incorporated in 1975 under Industries
Department, one of the administrative Department of the Government of Kerala. The
main activity of it is to carry out the manufacturing of cotton yarn.
a. Net Worth
The net worth of the Sitaram Textiles was Rs -1062.82 crores during 1990-91
and a negative net worth is seen in all the years under study (Table 3.34).
182
b. Capital Employed
The capital employed of the Sitaram Textiles was Rs -165.21 crores during
1990-91 and the negative capital employed is seen in all the years under study. The
overall position of capital employed for a period of 20 years study from 1990-91 to
2009-2010 shows a negative growth ( Table 3.34).
c. Capital Invested
The capital invested by the Sitaram Textiles Limited was Rs 1142.42crores
during 1990-91 which increased to Rs 1666.25 crores during 1994-95. During 1995-
96 it was Rs 1771.79crores which increased to Rs 2242.1 crores in 1999-2000. In
2000-01 it was Rs 2516.02 crores which increased to Rs 3406.55 in 2004-05. It was
Rs 3540.98 crores in 2005-06 which increased to Rs 4419.83 crores in 2009-10. The
overall position of capital invested for a period of 20 years under study from 1990-
91 to 2009-2010 shows a fluctuating trend of increase (Table 3.34).
d. Working Capital
The working Capital of the Sitaram Textiles Limited is analysed for
knowing the trend in current assets over current liabilities for meeting its short term
obligations. The working capital invested was Rs -280.1crores during 1990-91 and
this negative trend continued during the entire period under analysis (Table 3.34).
183
Table 3.34 Net worth, Capital Employed, Capital Invested and Working Capital of the Sitaram
Textiles Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 -1062.82 -165.21 1142.42 -280.10 1991-1992 -1074.96 -179.33 1162.63 -300.5 1992-1993 -1111.19 -57.71 1448.48 -166.1 1993-1994 -958.1 164.28 1542.38 40.27 1994-1995 -1176.91 69.34 1666.25 -74.25 1995-1996 -1325.26 26.53 1771.79 -134.08 1996-1997 -1558.88 -60.64 1918.24 -202.89 1997-1998 -1760.21 -137.8 2042.41 -254.83 1998-1999 -2001.61 -274.57 2147.04 -360.25 1999-2000 -2045.98 -223.88 2242.1 -301.59 2000-2001 -2128.41 206.39 2516.02 -279.64 2001-2002 -2398.36 -372.09 2620.27 -440.15 2002-2003 -2654.06 -413.54 2834.52 -476.25 2003-2004 -2981.32 -503.22 3072.1 -560.62 2004-2005 -3254.13 -441.58 3406.55 -497.4 2005-2006 -3426.06 -479.08 3540.98 -531.15 2006-2007 -3519.1 -391.51 3721.59 -512.52 2007-2008 -3754.55 -258.63 4089.92 -379.02 2008-2009 -3909.99 -236.06 4267.93 -332.38 2009-2010 -3874.53 -48.7 4419.83 -126.33
Source: Compiled from the Review of Public Enterprises , Various issues of
the Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth,
Capital Employed, Capital Invested and Working capital of the Sitaram Textiles
Limited from 1990-91 to 2009-2010 with the trend line and regression equation is
shown in fig. 3(xii)
184
Fig. 3(xii)
Net worth, Capital Employed, Capital Invested and Working capital of the Sitaram
Textiles Limited
Source : Table 3.34
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y = -174.71x – 464.39 . The slope is -174.71x and intercept is 464.39. The
R² is 0.97796 which shows that the equation is most suitable for prediction. There is
a negative net worth of the Sitaram Textiles Limited during the 20 years under study.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = -17.725x – 2.7364 . The slope is -17.725x and
intercept is 2.7364. The R² is 0.2794 which shows that the equation is most suitable
for prediction. A negative capital trend is seen during the liberalization period.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 174.49x+746.48. The slope is 174.49x and intercept is
746.48.The R² is 0.9796 which shows that the equation is most suitable for
185
prediction. There is an increase in the capital invested the Sitaram Textiles Limited
during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = -15.132x -149.61. The slope is -15.132x and intercept
is 149.61.The R² is 0.3229 which shows that the equation is most suitable for
prediction. A declining trend is noticed in the working capital during all the years
under liberalization period.
Analysis of Solvency and Profitability
(i) Debt to Equity Ratio
The debt to equity ratio of the Sitaram Textiles Limited during 1990-91 was
3.25 : 1. It was 3.22:1 in 1995-96 period. It was 3.57 : 1 in 1996-97 which increased
to 3.41 : 1 in 2001-02. It was 4.96 : 1 in 2005-06 which increased to 6.44 :1 in 2009-
10. The trend shows an increase but with fluctuations in certain years in the
liberalization era ( Table 3.35).
ii. Current Ratio
The Current ratio of the Sitaram Textiles Limited during 1990-91 was 0.52 :
1 which increased to 0.81 : 1 in 1995-96 periods . It was 0.49 : 1 in 1999-2000 which
declined to 0.26 :1 in 2005-06 and increased to 0.69 : 1 in 2009-10. The trend
shows an increase with fluctuations and is not favourable because it is not ideal
(Table 3.35).
186
iii. Return on Investment
The return on the capital employed by the Sitaram Textiles Limited in all the
years from 1990-91 to 2009-10 is negative (Table 3.35).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sales of the Sitaram
Textiles Limited in 1990-91 was 10.25 per cent which increased to 11.14 per cent in
1995-96. It was 23.93 per cent in 1999-2000 which increased to 40.47 per cent in
2004-05 and it declined to 3.6 per cent during 2009-10. It is clear from the analysis
of profit to sales of the Sitaram textiles Limited that even though they are earning
profit in certain years but the profit earned is not up to the mark. (Table 3.35).
v. Receivables to Sales
The ratio of accounts receivable to sales was 0.70 in 1990-91 and which
increased to 1.35 in 1995-96. It was 1.19 in 1999-2000 which declined to 0.04
months in 2005-06 and shows a slight increase during 2009-10 (0.07). A fluctuating
trend of increase is noticed during 1990-91 to 2009-10, the whole 20 year period
under analysis. The lower the months in the receivable to sales is really good for
increasing the amount of cash by way of sales and is favourable towards the end of
the period under study ( Table 3.35).
vi. Stock of Finished Goods to Sales
The trend in stock of finished goods to sales was 1.52 in 1990-91 which
increased to 1.72 in 1995-96. It was 0.41 in 2000-01 which increased to 0.59 in
2005-06 and again declined to 0.24 in 2009-10. A fluctuating trend of increase is
187
noticed during 1990-91 to 2009-10, the whole 20 year period under analysis. The
lower the months in the stock of finished goods to sales is an indication of increased
sales. It also reveals that it was not so favourable in the initial years under
study(Table 3.35).
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to raw materials consumption was 0.75 in
1990-91 which declined to 0.67 in 1995-96. It was .60 in 2000-01 which increased to
2.66 in 2005-06 and declined to 0.38 in 2009-10.A fluctuating trend of increase is
noticed in all the 20 years from 1990-91 to 2009-10 . The lesser the number of
months in raw materials to consumption is appreciable and is favourable (Table
3.35).
viii. Consumption to Sales
It represents the ratio of raw materials consumed to sales expressed as
percentage. It was 70.01 per cent in 1990-91 which decreased to 67.42 per cent in
1995-96. It was 59.63 per cent in 1996-97 which increased to 60.98 per cent in
2001-02. It was 58.19 per cent in 2005-06 which declined to 56.61 per cent in
2009-10. A fluctuating trend of increased is noticed in all the 20 years period under
analysis (Table 3.35).
188
Table 3.35 Financial and Operating ratios of Sitaram Textiles Limited
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales (
in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 3.25 0.52:1 -45.10 0.70 1.52 0.75 70.01 10.25
1991-1992 3.35:1 0.58:1 -ve 0.72 1.61 0.81 70.04 11.99
1992-1993 2.67:1 0.78:1 -ve 1.76 0.75 0.45 63.99 10.63
1993-1994 2.67:1 0.90:1 -50.18 1.92 0.86 0.61 53.27 -7.05
1994-1995 2.97:1 0.82:1 -235.23 1.4 0.98 2.16 68.64 14.06
1995-1996 3.22:1 0.81:1 -558.73 1.35 1.72 0.67 67.42 11.14
1996-1997 3.57:1 0.73:1 -ve 1.42 1.28 0.47 59.63 13.52
1997-1998 3.86:1 0.65:1 -ve 1.67 0.73 0.68 59.23 16.57
1998-1999 4.11:1 0.50:1 -ve 1.22 0.79 0.53 69.75 24.18
1999-2000 4.34:1 0.49:1 -ve 1.19 0.66 0.12 65.99 23.93
2000-2001 3.24:1 0.51:1 1.03 0.74 0.41 0.60 60.08 27.58
2001-2002 3.41:1 0.35:1 -ve 1.27 0.77 0.16 60.98 33.97
2002-2003 3.77:1 0.33:1 -ve 2.29 1.34 0.26 62.77 64.86
2003-2004 4.17:1 0.27:1 -ve 1.71 0.61 0.11 60.94 43.78
2004-2005 4.73:1 0.21:1 -ve 0.5 0.27 0.48 64.02 40.47
2005-2006 4.96:1 0.26:1 -ve 0.04 0.59 2.66 58.19 -27
2006-2007 4.26:1 0.24:1 -ve 0.04 1.24 0.41 56.63 13.78
2007-2008 5.89:1 0.26:1 -ve 0.14 0.57 0.23 61.79 29.36
2008-2009 6.19:1 0.28:1 -ve 0.26 0.39 0.15 62.49 20.21
2009-2010 6.44:1 0.69:1 -72.83 0.07 0.24 0.38 56.61 3.6 Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that direct correlation exists between net worth and capital
employed, current ratio, working capital, receivables to sales, stock of finished
goods to sales, stock of raw materials to consumption ( Table 3.36).
189
Table 3.36 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.591 3 Capital Invested - 0.989 4 Working capital 0.617 5 Debt to Equity Ratio -0.912 6 Current Ratio 0.765 7 Return on Investment (%) -0.357 8 Receivable to sales ( in Months) 0.684 9 Stock of finished goods to sales( in months ) 0.548 10 Stock of raw materials to consumption 0.622 11 Consumption to Sales (%) 0.035 12 Net Profit to sales ( %) 0.293
Source: Computed from Table 3.34 and Table3.35
13. HANDICRAFTS DEVELOPMENT CORPORATION LIMITED
Handicrafts Development Corporation was incorporated in 1968 and is under
Industries Department, one of the Administrative Departments of Government of
Kerala. It is engaged in procuring and marketing handicraft products by giving fair
returns to the artisans through its Kairali emporia spread all over India .
a. Net Worth
The net worth of the Handicrafts Development Corporation Limited was Rs
31.52 crores during 1990-91 which increased to Rs 155.09 crores in 1995-96. It was
Rs 148.83 crores in 1996-97 which decreased to Rs 138.81 crores in 1999-00. But a
negative net worth was noticed from 2000-01 to 2007-08. It turned into positive net
worth of Rs 344.39 crores in 2009-10. The overall picture of net worth shows a
positive one but in some years negative trend is noticed (Table 3.37).
190
b. Capital Employed
The capital employed of the Handicrafts Development Corporation Limited
was Rs 84.72 crores during 1990-91 which increased to Rs 204.42 crores in 1994-
95. It was Rs 223.86 crores in 1995-96 which increased to Rs 389.49 crores in 1999-
2000. It was Rs 262.76 crores in 2000-2001 which declined to Rs 255.68 crores in
2004-05. It was Rs 181.87 crores in 2005-06 which increased to Rs 1098.11 crores
in 2009-10. The overall position of capital employed for 20 years of study from
1990-91 to 2009-2010 shows an increasing trend with fluctuations. It means that
during the period under analysis the capital employed is seen increasing (Table
3.37).
c. Capital Invested
The capital invested by the Handicrafts Development Corporation was Rs
212.11 crores during 1990-91 which increased to Rs 278.03 crores during 1994-95.
During 1995-96 it was Rs 293.03 crores which increased to Rs 507.22 crores in
1999-2000. In 2000-01 it was Rs 579.63 crores which increased to Rs 743.36 crores
in 2004-05. It was Rs 768.42 crores in 2005-06 which increased to Rs 1030.51
crores in 2009-10. The overall position of capital invested for a period of 20 years
under study from 1990-91 to 2009-2010 shows an increasing trend (Table 3.37).
d. Working Capital
The working Capital of the Handicrafts Development Corporation Limited
is analysed for knowing the trend in current assets over current liabilities for meeting
its short term obligations. It is seen from Table 3.37 that the working capital invested
was Rs 46.58 crores during 1990-91 which increased to Rs 163.6 crores in 1994-
191
95. It was Rs 219.75 crores in 1996-97 which increased to Rs 341.59 crores in 1999-
2000. It was Rs 227.84 crores in 2000-01 and decreased to Rs 213.98 crores in 2004-
05. It was Rs 143.71 in 2005-06 which increased to Rs 963.84 crores in 2009-10. It
means that during the entire period under analysis that the working capital is
increasing but with a trend of fluctuations (Table 3.37).
Table 3.37
Net worth, Capital Employed, Capital Invested and Working Capital of Handicrafts Development Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 31.52 84.72 212.11 46.58 1991-1992 32.87 85.73 223.12 47.59 1992-1993 80.98 137 238.78 102.92 1993-1994 109.54 168.31 258.03 134.16 1994-1995 140.65 204.42 278.03 163.6 1995-1996 155.09 223.86 293.03 186.11 1996-1997 148.83 259.32 357.03 219.75 1997-1998 174 294.49 377.03 253.24 1998-1999 161.63 390.26 485.17 347.24 1999-2000 138.81 389.49 507.22 341.59 2000-2001 -17.15 262.76 546.45 227.84 2001-2002 -98.29 207.8 579.63 169.85 2002-2003 -195.92 132.19 604.9 89.12 2003-2004 -218.28 169.93 665 126.61 2004-2005 -210.89 255.68 743.36 213.98 2005-2006 -309.76 181.87 768.42 143.71 2006-2007 -196.93 462.17 935.89 422.93 2007-2008 -143.01 520.94 940.74 471.86 2008-2009 76.43 760.41 960.77 708.74 2009-2010 344.39 1098.11 1030.51 963.84
Source: Compiled from the Review of Public Enterprises, Various issues of the Bureau of Public Enterprises, Government of Kerala
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of the Handicrafts Development
192
Corporation Limited during 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3(xiii)
Fig. 3(xiii)
Net worth, Capital Employed, Capital Invested and Working capital of the
Handicrafts Development Corporation of Kerala Limited
Source : Table 3.37
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y = -10.724x + 122.83. The slope is -10.724x and intercept is 122.83.
The R² is 0.1448 which shows that the equation is most suitable for prediction. The
net worth of the Handicrafts Development Corporation Limited during the 20 years
under study was found to be negative.
193
The trend line (linear trend of first degree) of the Capital Employed from
1990-91 to 2009-2010 is Y = 28.745x + 12.655. The slope is 28.745x and intercept
is 12.655. The R² is 0.4494 which shows that the equation is most suitable for
prediction. There is increase in the capital employed by the Handicrafts
Development Corporation Limited during the liberalization period.
The trend line (linear trend of first degree) of the Capital Invested from
1990-91 to 2009-2010 is Y = 45.486x + 72.659. The slope is 45.486x and intercept
is 72.659. The R² is 0.9746 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested by the Handicrafts
Development Corporation Limited during the liberalization period .
The trend line (linear trend of first degree) of the Working Capital from
1990-91 to 2009-2010 is Y =26.969x – 14.114. The slope is 26.969x and intercept is
14.114. The R² is 0.4567 which shows that the equation is most suitable for
prediction. There is an increase in the working capital of the Handicrafts
Development Corporation Limited for most of the years under liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of the Handicrafts Development Corporation Limited
during 1990-91 was 0.21 : 1 which increased to 0.31 : 1 in 1995-96. It was 0.45 : 1
in 1996-97 which increased to 1.05 : 1 in 2000-01. It was 1.78 : 1 in 2005-06 which
increased to 2.72 :1 in 2009-10. The overall trend shows an increase but with
fluctuations in the liberalized era ( Table 3.38).
194
ii. Current Ratio
The Current ratio of the Handicrafts Development Corporation Limited
during 1990-91 was 1.21 : 1 which increased to1.65 : 1 in 1995-96 periods . It was
1.80 : 1 in 1999-2000 which declined to 1.20 :1 in 2005-06 and increased to 3.48 : 1
in 2009-10. The overall trend shows an increase with fluctuations in the liberalized
era but the ratio for most of the years is less than the ideal one 2:1 ( Table 3.38).
iii. Return on Investment
The return on the capital employed by the Handicrafts Development
Corporation Limited was 3.11 per cent during 1990-91 which declined to 0.07 in
1995-96. From 2001-02 onwards till 2005-06 the return on investment is negative. It
was 6.11 per cent in 2006-07 which increased to 8.38 per cent in 2009-10. It clearly
indicates that the return on investment during the period under analysis shows an
increase in certain years and negative return in certain other years (Table 3.38).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of Handicrafts
Development Corporation Limited in 1990-91 was 0.70 per cent which declined to
0.03 per cent in 1995-96. It was 23.93 per cent in 2001-02 which increased to 21.56
per cent in 2005-06 and it increased to 14.12 per cent in 2009-10. It is clear from the
analysis of profit to sales that it is not up to the mark during the whole period of 20
years under study from 1990-91 to 2009-10 ( Table 3.38).
195
v. Receivables to Sales
The trends in accounts receivable to sales was 0.42 in 1990-91 and which
increased to 0.46 in 1995-96. It was 0.68 in 1999-2000 which increased to 0.71in
2001-02. It increased to 1.03 which declined to 0.63 during 2009-10. In this case a
trend of increase with fluctuations is seen. The lower the months in the receivable to
sales is really good for increasing the amount of cash by way of sales and is
appreciable ( Table 3.38).
vi. Stock of Finished Goods to Sales
The trend in stock of finished goods to sales was 4.39 in 1990-91 which
increased to 5.81 in 1995-96. It was 0.06 in 2000-01 which increased to 8.11 in
2005-06 and then declined to 6.12 in 2009-10. A fluctuating trend of increase is
noticed during 1990-91 to 2009-10, the whole 20 year period under analysis. The
lower the months in the stock of finished goods to sales is an indication of increased
sales but greater value is seen in certain years and is unfavourable (Table 3.38).
vii. Stock of Raw materials to Consumption
The ratio of stock of raw materials to raw materials consumption was 0.21 in
1990-91 which declined to 0.20 in 1995-96. It was 53.64 in 2000-01 which declined
to 0.01in 2005-06 and increased to 2.37 in 2009-10. A fluctuating trend of increase
is noticed in all the 20 years from 1990-91 to 2009-10. The lesser the number of
months in raw materials to consumption is appreciable one but in this case the
number of months is more and hence it is unfavourable, the materials are procured
not based on production ( Table 3.38).
196
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage was
5.28 per cent in 1990-91 which increased to 5.71 per cent in 1995-96 . It was 5.61
per cent in 1996-97 which increased to 53.82 per cent in 2001-02. It was 56.38 per
cent in 2005-06 which declined to 33.2 per cent in 2009-10 . A fluctuating trend of
increase is noticed in all the 20 years, the period under analysis but the percentage of
consumption is not seen high in all the years, hence it is not favourable ( Table 3.38).
Table 3.38
Financial and Operating Ratios of Handicrafts Development Corporation Ltd
Year
Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales (in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit to
sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 0.21:1 1.21:1 3.11 0.42 4.39 0.21 5.28 0.70 1991-1992 0.31:1 1.23:1 3.22 0.45 5.29 0.31 5.08 0.72 1992-1993 0.31:1 1.45:1 26.5 0.48 5.87 0.28 6.01 7.91 1993-1994 0.30:1 1.54:1 6.17 0.52 6.11 0.29 6.02 2.09 1994-1995 0.30:1 1.67:1 0.85 0.57 6.78 0.30 6.82 0.35 1995-1996 0.31:1 1.65:1 0.07 0.46 5.81 0.20 5.71 0.03 1996-1997 0.45:1 1.69:1 -1.13 0.81 5.82 0.31 5.61 -0.46 1997-1998 0.47:1 1.62:1 0.06 0.75 6.49 0.42 5.62 0.03 1998-1999 .89:1 1.95:1 0.93 0.61 6.87 0.45 56.23 0.58 1999-2000 .98:1 1.80:1 -9.17 0.68 7.12 0.03 55.38 -5.59 2000-2001 1.05:1 1.49:1 0.55 0.58 0.06 0.53 -4.03 -7.12 2001-2002 1.12:1 1.31:1 -56.85 0.71 8.45 0.09 53.82 -23.93 2002-2003 1.19:1 1.15:1 -94.41 0.68 8.22 0.3 57.88 -24.68 2003-2004 1.40:1 1.19:1 -78.25 0.97 8.46 0.4 53.85 -28.83 2004-2005 1.69:1 1.30:1 -4.17 0.63 8.63 0.11 54.5 -2.45 2005-2006 1.78:1 1.20:1 -54.36 1.03 8.11 0.01 56.38 -21.56 2006-2007 2.38:1 2.10:1 6.11 0.68 4.26 0.01 30.21 3.95 2007-2008 2.40:1 2.26:1 7.47 0.7 4.47 0.10 33.19 6.31 2008-2009 2.47:1 3.05:1 7.83 0.67 4.7 0.20 33.5 9.97 2009-2010 2.72:1 3.48:1 8.38 0.63 6.12 2.37 33.2 14.12
Source : Computed from Annual Reports of Bureau of Public Enterprises, various issues
197
The correlation value shows that direct correlation exists between net worth
and capital employed, working capital, current ratio, return on investment, stock of
raw materials to consumption and net profit to sales.(Table 3.39).
Table 3.39
Correlation Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.398 3 Capital Invested - 0.353 4 Working capital 0.388 5 Debt to Equity Ratio -0.324 6 Current Ratio 0.526 7 Return on Investment (%) 0.601 8 Receivable to sales ( in Months) - 0.087 9 Stock of finished goods to sales( in months ) - 0.179 10 Stock of raw materials to consumption 0.076 11 Consumption to Sales (%) -0.421 12 Net Profit to sales ( %) 0.641
Source: Computed from Table 3.37 and Table3.38
14. KERALA STATE BAMBOO CORPORATION LIMITED
Kerala State Bamboo Corporation was set up in 1971 with the objective to
develop and promote industries based on bamboo, reed, cane and rattan, provide
financial and technical assistance and guidance to the bamboo workers/artisans. The
major activities of the corporation is to collect good quality reeds from Government
forest, distribute the reeds to the registered bamboo mat weavers of the corporation
on credit basis and to procure woven mats, thus providing employment and means of
livelihood to the weaker sections of the society.
198
Bamboo Species in Kerala is a major biodiversity source which accounts for
19 per cent of the total bamboo distributed in India. Bamboo industry in Kerala is
providing livelihood to a majority of tribes and other weaker sections of the society,
majority of which are women.
a. Net Worth
The net worth of the Kerala State Bamboo Corporation Limited was Rs
215.22 crores during 1990-91 which increased to Rs 378.04 crores in 1994-95. It
was Rs 388.04 crores in 1995-96 which increased to Rs 725.51 crores in 1999-2000.
It was Rs 677.26 crores in 2000-2001 which declined to Rs 229 crores in 2003-04.
After that there was negative net worth up to 2009-10. The net worth shows an
increasing trend till 2003-04 but turns negative after that ( Table 3.40).
b. Capital Employed
The capital employed of the Kerala State Bamboo Corporation Limited was
Rs 274.29 crores during 1990-91 which increased to Rs 471.98 crores in 1994-95. It
was Rs 486.98 crores in 1995-96 which increased to Rs 851.29 crores in 1999-2000.
It was Rs 818.03 crores in 2000-01 which declined to Rs 492.36 crores in 2004-05.
It was Rs 318.51 crores in 2005-06 which increased to Rs 896.71 crores in 2009-
10.The trends in capital employed for a period of 20 years study from 1990-91 to
2009-2010 shows an increasing trend with fluctuations (Table 3.40).
c. Capital Invested
The capital invested by the Kerala State Bamboo Corporation Limited was
Rs 334.78 crores during 1990-91 which increased to Rs 434.86 crores during 1994-
95. During 1995-96 it was Rs 444.86 crores which increased to Rs 749.74 crores in
1999-2000. In 2001-02 it was Rs 933.82 crores which declined to Rs 118.14 crores
199
in 2004-05. It was Rs 1198.97 crores in 2005-06 which increased to Rs 1873.1
crores in 2009-10. The trends in capital invested for a period of 20 years under study
from 1990-91 to 2009-2010 is an increasing one but with fluctuations (Table 3.40).
d. Working Capital
The working Capital of the Kerala State Bamboo Corporation was Rs 215.1
crores during 1990-91 which increased to Rs 412.6 crores in 1994-95. It was Rs
406.1 crores in 1996-97 which increased to Rs 616.55 crores in 1999-2000. It was
Rs 719.5 crores in 2001-02 which declined to Rs 364.25 crores in 2004-05. It was Rs
209.7 crores in 2005-06 which increased to Rs 590.96 crores in 2009-10. It means
that during the entire period under analysis that the working capital is increasing but
with a trend of fluctuations (Table 3.40 ).
200
Table 3.40
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala State Bamboo Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 215.22 274.29 334.78 215.10 1991-1992 217.35 274.29 336.88 217.2 1992-1993 281.64 350.58 365.88 295.22 1993-1994 352.91 441.85 424.86 391.38 1994-1995 378.04 471.98 434.86 412.6 1995-1996 388.04 486.98 444.86 406.1 1996-1997 628.54 639.98 570.38 519.6 1997-1998 695.4 749.54 658.08 601.09 1998-1999 701.25 763.82 666.51 575.05 1999-2000 725.51 851.28 749.74 616.55 2000-2001 677.26 818.03 774.74 591.5 2001-2002 609.89 902.24 933.82 719.5 2002-2003 491.14 918.58 1069.91 755.33 2003-2004 229 747.01 1 163.48 615.52 2004-2005 -36.31 492.36 118.14 364.25 2005-2006 -220.99 318.51 1198.97 209.7 2006-2007 -313.71 236.43 1209.61 132.03 2007-2008 -359.91 415.39 1444.42 191.97 2008-2009 -309.28 529.78 1578.18 316 2009-2010 -187.25 896.71 1873.1 590.96
Source: Compiled from the Review of Public Enterprises, Various issues of the Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth,
Capital Employed, Capital Invested and Working capital of Kerala State Bamboo
Corporation Limited from 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3(xiv)
201
Fig. 3(xiv) Net worth, Capital Employed, Capital Invested and Working capital of the Kerala
State Bamboo Corporation Limited
Source : Table 3.40
The trend line (linear trend of first degree) of the Net worth 1990-91 to
2009-2010 is Y = -37.171x + 648.49. The slope is -37.171x and intercept is648.49.
The R² is 0.4131 which shows that the equation is most suitable for prediction.
There is a negative net worth of the Kerala State Bamboo Corporation Limited
during the last part of the years under study.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 11.134x + 462.08. The slope is 11.134x and intercept
is 462.08. The R² is 0.0351 which shows that the equation is most suitable for
prediction. There is increase in capital employed of the Kerala State Bamboo
Corporation Limited during the liberalization period.
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 60.954x + 119.37. The slope is 60.954x and intercept
202
is 119.37. The R² is 0.5038 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested in Kerala State Bamboo
Corporation Limited during the liberalization period.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 2.3632x + 412.02. The slope is 2.3632x and intercept
is 412.02. The R² is 0.0011 which shows that the equation is most suitable for
prediction. There is an increase in working capital of the Kerala State Bamboo
Corporation Limited during all the years under liberalization period .
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of the Kerala State Bamboo Corporation Limited
during 1990-91 was 0.20 : 1 which increased to 0.29 : 1 in 1995-96 periods . It was
0.02 : 1 in 1996-97 which increased to 0.22 : 1 in 2000-01. It was 0.82: 1 in 2005-06
which increased to 1.37 :1 in 2009-10 . The overall trend is a fluctuating one during
the period under study. The ratio is lower means that they are not depending on the
debt capital (Table 3.41).
ii. Current Ratio
The current ratio of the Kerala State Bamboo Corporation Limited during
1990-91 was 2.5 : 1 which declined slightly to2.35 : 1 in 1995-96 periods . It was
3.98: 1 in 1999-2000 which declined to 1.68 :1 in 2005-06, but increased to 2.97: 1
in 2009-10. The overall trend shows a trend of increase with fluctuations .The ratios
are favourable only in certain years (Table 3.41).
203
iii. Return on Investment
The return on the capital employed by the Kerala State Bamboo
Corporation Limited was 18.32 per cent during 1990-91 which declined to 2.22 per
cent in 1995-96. It was 3.2 per cent in 1996-97 which declined to 0.83 per cent in
1999-2000. It was 1.07 per cent in 2000-01. After that it turned negative till 2006-07
periods and increased to 9.48 per cent in 2009-10. It clearly indicates that the return
on investment during the period under analysis shows an increasing trend in certain
years but turns negative in certain other years. In most of the years the values are not
appreciable (Table 3.41).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of Kerala State
Bamboo Corporation Limited in 1990-91 was 8.2 per cent which declined to 4.92
per cent in 1995-96. It was 21.26 per cent in 2005-06 which declined to 5.66 per cent
in 2009-10. The percentage of profit to sales is lower and it is not adequate during
the 20 years under study ( Table 3.41).
v. Receivables to Sales
The trends in accounts receivable to sales was 1.34 in 1990-91 and which
increased to 1.88 in 1995-96. It was 3.47 in 1999-2000 which declined to 0.32 in
2005-06 which increased to 0.36 during 2009-10. A trend of increase with
fluctuations is seen and lower the months in the receivable to sales is really good for
increasing the amount of cash by way of sales (Table 3.41).
204
vi. Stock of Finished Goods to Sales
The ratio of stock of finished goods to sales was 0.32 in 1990-91 which
increased to 1.15 in 1995-96. It was 1.63 in 2000-01 which increased to 1.88 in
2005-06 and then again increased to 2.66 in 2009-10. A fluctuating trend of increase
is noticed during 1990-91 to 2009-10 the whole 20 year period under analysis. The
increased ratio is an indication of lower amount of sales(Table 3.41).
vii. Stock of Raw materials to Consumption
The trends in stock of raw materials to consumption was 1.20 in 1990-91
which increased to 1.27 in 1995-96 . It was 8.24 in 2000-01 which declined to 0.9
months in 2005-06 and increased to 1.35 in 2009-10. In this case a fluctuating trend
of increase is noticed in all the 20 years from 1990-91 to 2009-10 . The lesser the
number of months in raw materials to consumption is appreciable one but it is very
high in certain years (Table 3.41).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage was
65.78 per cent in 1990-91 which increased to 72.37 per cent in 1995-96 . It was
84.03 per cent in 1996-97 which decreased to 71.47 per cent in 1999-2000. It was
64.26 per cent in 2005-06 which declined to 49.29 per cent in 2009-10 . A
fluctuating trend is noticed in all the 20 years under analysis (Table 3.41).
205
Table 3.41 Financial and Operating ratios of Kerala State Bamboo Corporation
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales (in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 0.20:1 2.53:1 18.32 1.34 0.32 1.20 65.78 8.2 1991-1992 0.20:1 2.53:1 19.44 1.44 0.35 1.26 67.85 8.9 1992-1993 0.23:1 2.78:1 11.65 0.88 0.82 0.98 73.95 7.68 1993-1994 0.26:1 2.27:1 20.29 0.94 1.78 1.24 70.62 12.02 1994-1995 0.28:1 2.36:1 8.7 1.62 1.43 1.25 73.35 4.92 1995-1996 0.29:1 2.35:1 2.22 1.88 1.15 1.27 72.37 1.21 1996-1997 0.02:1 3.21:1 3.2 1.33 2.47 1.27 84.03 2.31 1997-1998 0.09:1 4.46:1 0.27 1.31 1.84 1.2 73.32 0.19 1998-1999 .10:1 3.71:1 4.67 3.29 2.88 0.1 77.17 3.01 1999-2000 .20:1 3.98:1 0.83 3.47 3.01 0.32 71.47 0.61 2000-2001 .22:1 3.77:1 1.07 2 1.63 8.24 -2.61 -3.11 2001-2002 .46:1 4.66:1 -8.3 0.78 4.30 2.25 87.33 -6.45 2002-2003 .67:1 4.97:1 -12.26 0.91 4.80 3.08 71.47 -11.3 2003-2004 .80:1 3.39:1 -35.4 0.78 5.7 2.75 65.06 29.47 2004-2005 .80:1 2.70:1 -57.62 0.66 2.26 1.65 54.8 29.35 2005-2006 .82:1 1.68:1 -61.51 0.32 1.88 0.9 64.26 21.26 2006-2007 .83:1 1.38:1 -83.24 0.24 1.12 1.07 62.56 21.57 2007-2008 1.16:1 1.51:1 5.55 0.5 0.9 0.92 55.51 1.71 2008-2009 1.14:1 1.65:1 3.06 0.05 2.5 1.06 59.8 1.32 2009-2010 1.37:1 2.97:1 9.48 0.36 2.66 1.35 49.29 5.66
Source: Computed from Annual Reports of Bureau of Public Enterprises, various
issues It is seen that direct correlation exists between net worth and capital
employed, working capital , current ratio and receivables to sales(Table 3.42).
206
Table 3.42
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.562 3 Capital Invested - 0.550 4 Working capital 0.709 5 Debt to Equity Ratio -0.850 6 Current Ratio 0.814 7 Return on Investment (%) 0.431 8 Receivable to sales ( in Months) 0.747 9 Stock of finished goods to sales( in months ) 0.227 10 Stock of raw materials to consumption 0.262 11 Consumption to Sales (%) 0.176 12 Net Profit to sales ( %) 0.293
Source: Computed from Table 3.40 and Table3.41
15. KERALA STATE CIVIL SUPPLIES CORPORATION LIMITED
The Kerala State Civil Supplies Corporation better known as Supplyco was
set up in the state in 1974 with the mission of “food security for Kerala” and acts as
a second line of Public Distribution System in the State by distributing essential
commodities like rice, sugar, pulses and spices at reduced prices through a network
of 2975 outlets spread all over the State. Prices of essential items distributed by
Supplyco is on an average 30 per cent to 60 per cent less than open market prices.
The intervention of Supplyco in the market in respect of essential commodities has
given immense relief to the people of the State.
207
a. Net Worth
The net worth of the Kerala State Civil Supplies Corporation during 1990-91
was Rs- 3068.22 crores which increased to Rs -623.31 crores in 2009-10.The overall
picture of net worth shows negative trend in all the years under study (Table 3.43).
b. Capital Employed
The capital employed of the Kerala State Civil Supplies Corporation shows a
negative one from 1990- 91 to 1994-95. In the remaining years under study it shows
a positive one. It was Rs 517.4 crores in 1995-96 which increased to Rs.11847.7
crores in 1999-2000 with an abnormal increase. It was Rs 13,024.58 crores in 2000-
01 which increased to Rs 14696.4 crores. It was Rs 15,216.06 crores in 2005-06
which declined to Rs 12722.2 crores in 2009-10. The trends in capital employed for
a period of 20 years study from 1990-91 to 2009-2010 shows an increasing trend
with fluctuations in certain years(Table 3.43).
c. Capital Invested
The capital invested by the Kerala State Civil Supplies Limited was Rs
3821.09 crores during 1990-91 which increased to Rs 9292.7 crores during 1994-95.
During 1995-96 it was Rs 12284.48 crores which increased to Rs 35839.2 crores in
1999-2000. In 2000-01 it was Rs 41345.3 crores which increased to Rs 68627.98
crores in 2004-05. It was Rs 68685.08 crores in 2005-06 which declined sharply to
Rs 14201.5 crores in 2009-10. The trends in capital invested for a period of 20 years
under study from 1990-91 to 2009-2010 shows mostly an increasing trend (Table
3.43).
208
d. Working Capital
The working Capital of the Kerala State Civil Supplies Corporation during
1990-91 was Rs -588.81 crores which increased to Rs. 1696.54 crores during
1996-97. It increased to Rs 10976.93 crores in 1999-2000. It was Rs 12090.94 crores
in 2000-01 which declined to Rs 6225.74 crores in 2006-07.It was Rs. 10729.44
crores in 2009-10. It means that during most of the years under analysis, the working
capital shows an increasing trend with wide fluctuations(Table 3.43) .
Table 3.43
Net worth, Capital Employed, Capital Invested and Working Capital of Kerala State Civil Supplies Corporation Limited
( Rs in Crores )
Year Net worth Capital Employed
Capital Invested
Working Capital
1 2 3 4 5 1990-1991 -3068.22 -2.10 3821.09 -588.81 1991-1992 -3068.22 -2.15 3922.07 -588.81 1992-1993 -5498.78 -764.62 5590.16 -1380.73 1993-1994 -7489.19 -1144.81 7200.38 -1755.31 1994-1995 -8847.91 -411.24 9292.67 -1019.77 1995-1996 -10911.08 517.4 12284.48 -114.54 1996-1997 -14637.93 2336.47 17830.41 1696.54 1997-1998 -14815.46 4931.32 20602.78 4250.17 1998-1999 -21111.97 8870.92 30838.89 8183.02 1999-2000 -23136.12 11847.69 35839.21 10976.93 2000-2001 -27464.74 13024.58 41345.32 12090.94 2001-2002 -32732.12 13689.9 47278.02 12806.81 2002-2003 -37127.33 15505.13 53488.46 14644.13 2003-2004 -45431.78 14120.07 60407.85 13199.66 2004-2005 -53075.62 14696.36 68627.98 13639.78 2005-2006 -52613.02 15216.06 68685.08 14255.74 2006-2007 -59026 7603.79 67485.75 6225.74 2007-2008 -57274.66 9355.09 67485.75 7829.86 2008-2009 -55570.78 11058.97 67485.75 9419.53 2009-2010 -623.31 12722.2 14201.51 10729.44
Source: Compiled from the Review of Public Enterprises, Various issues of the
Bureau of Public Enterprises, Government of Kerala
209
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of the Kerala State Civil Supplies
Corporation Limited during 1990-91 to 2009-2010 with the trend line and regression
equation is shown in fig. 3(xv)
Fig. 3(xv)
Net worth, Capital Employed, Capital Invested and Working capital of the Kerala State Civil Supplies Corporation Limited
Source : Table 3.43
The trend line (linear trend of first degree) of the Net worth 1990-91 to
2009-2010 is Y =-2646.5x + 1112. The slope is -2646.5x and intercept is 1112.5.
The R² is 0.4131 which shows that the equation is most suitable for prediction. On
the whole a negative net worth was noticed during the 20 year period under study .
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 861.5`2x – 1387.5. The slope is 861.52x and intercept
is 1387.5. The R² is 0.0351 which shows that the equation is most suitable for
prediction. The capital employed of the Kerala State Civil Supplies Corporation
Limited during the period under study shows an increasing trend.
210
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 3509.5x – 1664.2 The slope is 3509.5x and intercept is
1664.2. The R² is 0.5038 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested by Kerala State Civil Supplies
Corporation Limited during the period under study.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 801.8x – 1693.9. The slope is 808.8x and intercept is
1693.9. The R² is 0.0011 which shows that the equation is most suitable for
prediction. There is an increase in working capital of the Kerala State Civil Supplies
Corporation Limited during all the years under study.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of the Kerala State Civil Supplies Corporation
Limited during 1990-91 was 3.57: 1 which increased to 13.35 : 1 in 1995-96 periods.
It was 19.83: 1 in 1996-97 which increased to 47.30: 1 in 2000-01. It was 79.24: 1 in
2005-06 which decreased to 15.59:1 in 2009-10. The overall trend shows an
increasing one but with fluctuations and is favourable in the sense that there is
reduced risk in capital ( Table 3.44).
ii. Current Ratio
The Current ratio of the Kerala State Civil Supplies Corporation Limited
during 1990-91 was 0.90 : 1 which increased to1.43 : 1 in 1995-96 periods . It was
211
2.76: 1 in 1999-2000 which increased to 3.53:1 in 2005-06 and declined to 1.52: 1
in 2009-10 . The overall trend shows increase but with fluctuations (Table 3.44)
iii. Return on Investment
The return on the capital employed by the Kerala State Civil Supplies
Corporation Limited remained negative from 1990-91 to 1994-1995. In 1996-97 it
was -159.51 per cent which increased to -17.09 per cent in 1999-2000. It was 2.26
per cent in 2000-01 but turned to negative till 2006-07 periods and increased to
13.11 per cent in 2009-10. It clearly indicates that the return on investment during
the period under analysis shows an increase but it is too low and is not adequate
(Table 3.44).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of Kerala State
Civil Supplies Corporation Limited in 1990-91 was 8.64 per cent which declined to -
8.79 per cent in 1995-96. It was negative in 2001-02. It was 0.66 per cent in 2005-06
which increased to 0.72 per cent in 2009-10. It is clear from the analysis of profit to
sales that it is not up to the mark during the whole period of 20 years under study
from 1990-91 to 2009-10 ( Table 3.44).
v. Receivables to Sales
The trends in accounts receivable to sales was 0.45 in 1990-91 and which
decreased to 0.16 in 1995-96. It was 1.12 in 1999-2000 which increased to 1.76 in
2005-06. It decreased to 0.24 during 2009-10. In this case a trend of increase with
212
fluctuations is seen. The lower the months in the receivable to sales is really good
for increasing the amount of cash by way of sales and is favourable (Table 3.44).
vi. Stock of Finished Goods to Sales
The trends in stock of finished goods to sales ratio was 2.10 in 1990-91
which decreased to 0.95 in 1995-96. It was 0.62 in 2000-01 which increased to 1.31
in 2005-06 and then again decreased to 1.29 in 2009-10. A fluctuating trend of
increase is noticed during 1990-91 to 2009-10 the whole 20 years. The lower ratio of
stock of finished goods to sales is an indication of increased sales ( Table 3.44).
vii. Stock of Raw materials to Consumption
The trend in stock of raw materials to consumption was 0.21 months in 1990-
91 which increased to 0.23in 1995-96. It was 0.48 in 2000-01 which declined to 0.9
in 2005-06 and increased to 1.35 in 2009-10. In this case a fluctuating trend of
increase is noticed in all the 20 years from 1990-91 to 2009-10. The lower ratio of
raw materials to consumption is appreciable ( Table 3.44).
viii. Consumption to Sales
It was 96.01 in 1990-91 and decreased to 94.35 in 1995-96. The consumption
to sales was 99.94 in 1989 – 99. It decreased to 90.89 in 2009-2010 (Table 3.44).
213
Table 3.44 Financial and Operating ratios of Kerala State Civil Supplies Corporation
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales ( in months)
Stock of raw materials to consumption (in months)
Consumption to sales
(%)
Net profit
to sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 3.57:1 0.90:1 -ve 0.45 2.10 0.21 96.01 8.64
1991-1992 3.58:1 0.91:1 -ve 0.51 2.18 0.13 98.01 10.93
1992-1993 5.53:1 0.76:1 -ve 0.25 1.33 0.30 94.89 -6.45
1993-1994 7.41:1 0.79:1 -ve 0.19 1.11 0.21 98.15 -8.61
1994-1995 9.86:1 0.97:1 -ve 0.19 1.01 0.10 97.20 6.03
1995-1996 13.35:1 1.43:1 -398.76 0.16 0.95 0.23 94.35 -8.79
1996-1997 19.83:1 1.48:1 -159.51 0.12 1.09 0.22 96.28 11.56
1997-1998 23.07:1 2.53:1 -3.6 0.09 0.82 0.18 98.86 -0.38
1998-1999 35.03:1 2.44:1 -18.71 0.53 4.46 0.04 99.94 -2.75
1999-2000 40.87:1 2.76:1 -17.09 1.12 0.82 0.04 94.02 -3.21
2000-2001 47.30:1 3.04:1 2.26 1.26 0.62 0.48 -7.89 33.23
2001-2002 54.23:1 0.13:1 -38.48 3.61 0.95 0.43 3.01 12.87
2002-2003 61.49:1 4.25:1 -28.35 3 0.94 0.02 3.25 11.37
2003-2004 69.57:1 3.78:1 -55.56 2.51 0.95 0.03 97.03 -17.1
2004-2005 79.17:1 3.37:1 -52.01 1.78 1 0.01 97.96 -13.3
2005-2006 79.24:1 3.53:1 3.04 1.76 1.31 0.01 97.81 0.66
2006-2007 77.84:1 1.52:1 -26.56 0.56 0.77 0.53 92.7 -2.04
2007-2008 77.84:1 1.51:1 14.97 0.51 1.34 0.52 89.41 1.12
2008-2009 77.84:1 1.44:1 15.41 0.38 1.13 0.51 88.96 0.93
2009-2010 15.59:1 1.52:1 13.11 0.24 1.29 0.42 90.89 0.72 Source: Computed from Annual Reports of Bureau of Public Enterprises, various
issues
214
It is seen that direct correlation exists between net worth and capital
employed, working capital, current ratio and receivables to sales (Table 3.45).
Table 3.45
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.543 3 Capital Invested - 0.551 4 Working capital 0.794 5 Debt to Equity Ratio -0.853 6 Current Ratio 0.840 7 Return on Investment (%) 0.435 8 Receivable to sales ( in Months) 0.791 9 Stock of finished goods to sales( in months ) 0.227 10 Stock of raw materials to consumption 0.262 11 Consumption to Sales (%) 0.189 12 Net Profit to sales ( %) 0.235
Source: Computed from Table 3.43 and Table3.44
16. KERALA STATE ARTISANS DEVELOPMENT CORPORATION
LIMITED
The Kerala Artisans Development Corporation ( KADCO) was established in
1981. It is one of the State agencies which provide assistance to artisans for
establishing production units, promoting marketing of products and providing
employment opportunities through the activities of trade fairs and marketing centres.
KADCO has also been nominated as one of the State channelizing agencies for the
implementation of schemes announced by the National Backward Classes Finance
and Development Corporation (NBCFDC).
215
a. Net Worth
The net worth of the Kerala Artisans Development Corporation shows
negative growth during 1990-91 to 1996-97 periods. It was Rs 40.54 crores during
1997-98 which declined to 19.04 in 1999-2000. It was 21.51 crores in 2000-01 and
nearly to the same level of Rs 21.51 crores in 2004-05 periods. It increased to Rs
47.95 crores during 2005-06 which increased to Rs 132.07 crores in 2009-10.The
trends in net worth was negative in the initial years but later turns positive and shows
an increasing trend (Table 3.46) .
b. Capital Employed
The capital employed of the Kerala Artisans Development Corporation was
Rs 1.82 crores during 1990-91 which increased to Rs 18.89 crores in 1994-95. It was
Rs 15.1crores in 1995-96 which increased to Rs 205.5 crores in 1999-2000 with an
abnormal increase. It was Rs 208.72 crores in 2000-01 which increased to Rs 228.41
crores in 2004-05. It was Rs 248.42 crores in 2005-06 which increased to Rs 383.97
crores in 2009-10. The trends in capital employed for a period of 20 years from
1990-91 to 2009-2010 is an increasing one with fluctuations ( Table 3.46).
c. Capital Invested
The capital invested by the Kerala Artisans Development Corporation was
Rs 68.41crores during 1990-91 which increased to Rs106.69 crores during 1994-95.
During 1995-96 it was Rs 122.5 crores which increased to Rs 381.8 crores in 1999-
2000. In 2000-01 it was Rs 400.02 crores which increased to Rs 441.8 crores in
2004-05. It was Rs 467.58 crores in 2005-06 which increased to Rs 687.93 crores in
216
2009-10. The trends in capital invested for a period of 20 years under study from
1990-91 to 2009-2010 is an increasing one. During the entire period under analysis
capital invested shows an increasing trend with minor fluctuations (Table 3.46).
d. Working Capital
The working capital of the Kerala Artisans Development Corporation was
Rs 0.82 crores during 1990-91 which increased to Rs.17.51 crores in 1994-95. It was
Rs 13.7 crores in 1995-96 which increased to Rs 191.02 crores in 1999-2000. It was
Rs 145.52 crores in 2000-01 which increased to Rs 227.27 crores in 2004-05. It was
Rs 247.75 crores in 2005-06 which increased to Rs 381.24 crores in 2009-10.It
means that during the entire period under analysis the working capital is increasing
with a trend of fluctuations (Table 3.46).
217
Table 3.46 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala
Artisans Development Corporation ( Rs in Crores )
Year Net worth Capital Employed
Capital Invested
Working Capital
1 2 3 4 5 1990-1991 -24.04 1.82 68.41 0.82 1991-1992 -26.04 1.93 69.51 0.92 1992-1993 -32.12 2.07 80.63 -1.06 1993-1994 -27.07 16.41 91.79 15.68 1994-1995 -31.49 18.89 106.69 17.51 1995-1996 -43.12 15.09 122.52 13.7 1996-1997 -68.07 11.94 150.32 11.07 1997-1998 40.54 135.31 290.08 134.33 1998-1999 22.01 228.82 402.12 227 1999-2000 19.04 205.53 381.8 191.02 2000-2001 21.51 208.72 400.02 145.52 2001-2002 25.51 205.25 402.55 194.49 2002-2003 34.39 263.24 466.66 255.4 2003-2004 14.73 216.55 428.63 213.56 2004-2005 21.81 228.41 441.81 227.27 2005-2006 47.95 248.42 467.58 247.75 2006-2007 40.51 259.93 494.63 259.33 2007-2008 37.43 268.5 510.78 268.33 2008-2009 136.33 417.4 660.78 413.31 2009-2010 132.07 383.97 687.93 381.24
Source: Compiled from the Review of Public Enterprises, Various issues of the Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth,
Capital Employed, Capital Invested and Working capital of the Kerala Artisans
Development Corporation from 1990-91 to 2009-2010 with the trend line and
regression equation is shown in fig. 3(xvi)
218
Fig. 3(xvi) Net worth, Capital Employed, Capital Invested and Working capital of the Kerala
Artisans Development Corporation
Source : Table 3.46
The trend line (linear trend of first degree) of the Net worth from 1990-91 to
2009-2010 is Y = 7.2693x – 59.234. The slope is 7.2693x and intercept is 59.234.
The R² is 0.6901 which shows that the equation is most suitable for prediction.
There is a negative net worth in the initial years but turns positive during latter part
of the 20 years under study.
The trend line (linear trend of first degree) of the Capital Employed from
during 1990-91 to 2009-2010 is Y = 21.004x – 53.631 . The slope is 21.004x and
intercept is 53.631. The R² is 0.8722 which shows that the equation is most suitable
for prediction. An increase is noticed in capital employed of the Kerala Artisans
Development Corporation during the liberalization period.
219
The trend line (linear trend of first degree) of the Capital Invested from
1990-91 to 2009-2010 is Y = 32.485x – 4.835. The slope is 32.485x and intercept is
4.835. The R² is 0.9227 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested by Kerala Artisans
Development Corporation during the period under study.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 20.888x – 58.468. The slope is 20.888x and intercept
is 58.468. The R² is 0.8812 which shows that the equation is most suitable for
prediction. An increasing trend is noticed in the working capital of the Kerala
Artisans Development Corporation during all the years under study.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of the Kerala Artisans Development Corporation
during 1990-91 was 0.80 : 1 which increased to 0.91 : 1 in 1995-96 periods. It was
1.14 : 1 in 1996-97 which declined to 0.88 : 1 in 2000-01. It was 0.75: 1 in 2005-06
which declined to 0.58 :1 in 2009-10 . The overall position shows a trend of increase
but with fluctuations in the liberalized era and is favourable since the months
involved in it is low (Table 3.47).
ii. Current Ratio
The Current ratio of the Kerala Artisans Development Corporation during
1990-91 was 1.25 : 1 which increased to 4.99: 1 in 1995-96 periods . It was 59.78 : 1
in 1999-2000 which declined to 3.68 :1 in 2005-06 which further declined to 1.92 :
220
1 in 2009-10 . The trend shows an increasing one with fluctuations during the
period under study (Table 3.47).
iii. Return on Investment
The return on the capital employed by the Kerala Artisans Development
Corporation shows a negative growth in all most all the years from 1990-91 to 2009-
10. It clearly indicates that the return on investment during the period under analysis
shows an unsatisfactory position ( Table 3.47).
iv. Net Profit to Sales
The ratio of net profit before tax and dividend to total sale of Kerala Artisans
Development Corporation was 85.20 per cent in 1990-91 which declined to 68.30
per cent in 1995-96. It was negative in all other years. It is clear from the analysis of
profit to sales of the Kerala Artisans Development Corporation for the whole period
of 20 years under study from that it is not satisfactory (Table 3.47).
v. Receivables to Sales
The accounts receivable to sales ratio was 2.08 in 1990-91 which declined to
0.88 in 1995-96. It was 2.83 in 1999-2000 and increased to 84.66 in 2005-06. It
declined to 5.89 during 2009-10. The lesser the months in the receivable to sales is
really good for increasing the amount of cash by way of sales and more the number
of months it is unfavourable. The ratio shows an increasing trend with fluctuations in
certain years ( Table 3.47).
221
vi. Stock of Finished Goods to Sales
The stock of finished goods to sales ratio was 1.50in 1990-91 which declined
to 1.20 in 1995-96. It was 7.73 in 2000-01 which declined to1.45 in 2005-06 and
then again declined to 0.02 in 2009-10 . A fluctuating trend is noticed during 1990-
91 to 2009-10, the whole 20 year period under analysis. The lower the months in the
stock of finished goods to sales is an indication of increased sales but abnormal trend
is seen in certain years (Table 3.47).
vii. Stock of Raw materials to Consumption
A very low ratio is seen from 1990-91 to 2009-10 .It means production needs
are met at each time and there is no unnecessary blocking (Table 3.47).
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage was
40.20 per cent in 1990-91 which increased to 74.27 per cent in 1995-96. It was 63.24
per cent in 1996-97 which increased to 63.41 per cent in 1999-2000. It was 85.30 per
cent in 2005-06 which increased to 90.59 per cent in 2009-10. In this case a
fluctuating trend of increase is noticed in almost all the years under analysis except
negative trend in certain years (Table 3.47).
222
Table 3.47
Financial and Operating Ratios of Kerala State Artisans Development Corporation Ltd
Year Debt-equity ratio
Current ratio
Return on
investment (%)
Receivable to
sales (in months)
Stock of finished goods to sales (in months)
Stock of raw materials to consumptio
n (in months)
Consumption to sales
(%)
Net profit to sales
(%)
1 2 3 4 5 6 7 8 9 1990-1991 0.80:1 1.25:1 -685.05 2.08 1.50 -ve 40.20 85.20 1991-1992 0.81:1 1.35:1 -687.05 3.10 0.80 -ve 35.10 92.60 1992-1993 0.86:1 1.38:1 -495.17 1.80 0.50 -ve 42.60 32.40 1993-1994 0.90:1 7.62:1 -44.36 2.10 1.50 -ve 48.40 40.20 1994-1995 0.89:1 6.61:1 -65.75 3.60 1.40 -ve 52.58 48.20 1995-1996 0.91:1 4.99:1 -130.02 0.88 1.20 -ve 74.27 68.30 1996-1997 1.14:1 1.63:1 -214.32 0.92 1.08 -ve 63.24 -78.2 1997-1998 0.49:1 13.17:1 -12.11 0.90 1.02 -ve 54.20 -84.4 1998-1999 1.06:1 28.22:1 -8.1 0.9 1.01 -ve 72.47 -47.76 1999-2000 0.95:1 59.78:1 -1.44 2.83 0.48 -ve 63.41 -4.19 2000-2001 0.88:1 58.2:1 4.36 0.48 7.73 -ve -19.2 -7.2 2001-2002 0.81:1 26.83:1 -0.5 7.04 0.82 -ve 95 -2.25 2002-2003 0.96:1 31.05:1 -2.32 8.99 0.72 -ve 90.02 -15.99 2003-2004 0.89:1 10.85:1 -3.72 54.69 0.69 -ve 82.20 -63.77 2004-2005 0.88:1 3.68:1 -0.58 84.66 1.42 -ve 85.30 -10.63 2005-2006 0.75:1 3.01:1 -2.36 72.94 1.45 -ve 88.20 -33.41 2006-2007 0.80:1 2.62:1 -6.13 45.72 1.47 -ve 90.10 -61.84 2007-2008 0.83:1 5.63:1 -2.82 3.62 0.14 -ve 92.18 -3.9 2008-2009 0.74:1 6.15:1 -0.26 0.83 0.04 -ve 88.4 -0.2 2009-2010 0.58:1 1.92:1 -0.1 5.89 0.02 -ve 90.59 -0.05
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
The correlation values indicate that direct correlation exists between net
worth and capital employed ,capital invested and net profit to sales the result of
which is shown in Table 3.48.
223
Table 3.48
Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.930 3 Capital Invested 0.900 4 Working capital 0.932 5 Debt to Equity Ratio -0.612 6 Current Ratio -0.623 7 Return on Investment (%) 0.494 8 Receivable to sales ( in Months) - 0.067 9 Stock of finished goods to sales( in months ) -0.277 10 Stock of raw materials to consumption 0.349 11 Consumption to Sales (%) 0.349 12 Net Profit to sales ( %) 0.644
Source: Computed from Table 3.46 and Table3.47
17. KERALA STATE PALMYRAH DEVELOPMENT AND WORKER’S
WELFARE CORPORATION LIMITED
Kerala State Palmyrah Development and Workers Welfare Corporation
Limited which comes under welfare agency was incorporated in 1985. It comes
under the Industries Department being the Administrative department of the
Government of Kerala. The financial performance evaluation is made as follows:
a. Net Worth
The net worth of the Kerala State Palmyrah Development and Worker’s
Welfare Corporation Limited was negative during 1990-91 to 1991-92 periods. It
was Rs 0.17 crores during 1992-93 which increased to Rs 26.01 crores in 1994-95.
It was Rs 43.49 crores in 1995-96 which increased to Rs 98.15 crores in 1999-00.
224
It declined to Rs 40.27 crores in 2009-10 .The overall picture of net worth shows a
trend of increase in all the years but with fluctuations (Table 3.49).
b. Capital Employed
The capital employed of the Kerala State Palmyrah Development and
Worker’s Welfare Corporation Limited was Rs 6.95 crores during 1990-91 which
increased to Rs 34.17 crores in 1994-95.It was Rs 47.57 crores in 1995-96 which
increased to Rs 98.15 crores in 1999-2000. It was Rs 98.15 crores in 2000-01 which
declined to Rs 54.15 crores in 2004-05. It was Rs 58.34 crores in 2005-06 which
increased to Rs 131.69 crores in 2009-10. The capital employed for a period of 20
years study shows an increasing trend but with fluctuations in certain years (Table
3.49).
c. Capital Invested
The capital invested by the Kerala State Palmyrah Development and
Worker’s Welfare Corporation was Rs 16.35 crores during 1990-91 which increased
to Rs 50.16 crores during 1994-95. During 1995-96 it was Rs 62.08 crores which
increased to Rs 116.08 crores in 1999-2000. In 2000-01 it was Rs 87 crores which
increased to Rs 701.4 crores in 2004-05. It was Rs 99.87 crores in 2005-06 which
increased to Rs 177.99 crores in 2009-10. The capital invested for a period of 20
years under study from 1990-91 to 2009-2010 shows an increasing trend but with
fluctuations (Table 3.49).
d. Working Capital
The working Capital of the Kerala State Palmyrah Development and
Worker’s Welfare Corporation Limited was Rs 6.61 crores during 1990-91 which
225
increased to Rs 26.03 crores in 1994-95. It was Rs 21.11 crores in 1995-96 which
increased to Rs 21.68 crores in 1999-2000. It was Rs 43.28 crores in 2000-01 which
decreased to Rs 11.36 crores in 2004-2005. It was Rs 20.32 crores in 2005-06 which
increased to Rs 87.81 crores in 2009-10. It means that during the entire period under
analysis that the working capital is increasing but with a trend of fluctuations during
the period under study (Table 3.49).
Table 3.49
Net worth, Capital Employed , Capital Invested and Working Capital of Kerala State Palmyrah Development and Worker’s Welfare Corporation Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 -4.21 6.95 18.35 6.61 1991-1992 -5.27 6.98 19.25 6.66 1992-1993 0.17 15.42 29.25 14.25 1993-1994 8.8 22.58 39.75 17.8 1994-1995 26.01 34.17 50.16 26.03 1995-1996 43.49 47.57 62.08 21.11 1996-1997 65.74 65.74 75 42 1997-1998 77.78 77.78 87 49.4 1998-1999 98.15 98.15 103.58 26.43 1999-2000 98.15 98.15 116.08 21.68 2000-2001 98.15 98.15 87 43.28 2001-2002 92.23 92.23 87 35.77 2002-2003 69.49 69.49 87 16.97 2003-2004 67.87 71.82 90.95 23.44 2004-2005 41.75 54.15 701.38 11.36 2005-2006 47.45 58.34 99.87 20.32 2006-2007 39.2 65.64 113.44 29.42 2007-2008 39.66 65.04 112.38 32.03 2008-2009 36.86 61.86 112 21.4 2009-2010 40.27 131.69 177.99 87.81
Source: Compiled from the Review of Public Enterprises, Various issues of the
Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth, Capital
Employed, Capital Invested and Working capital of the Kerala State Palmyrah
226
Development and Worker’s Welfare Corporation Limited during 1990-91 to 2009-
2010 with the trend line and regression equation is shown in fig. 3(xvii)
Fig. 3(xvii)
Net worth, Capital Employed, Capital Invested and Working capital of the Kerala
State Palmyrah Development and Worker’s Welfare Corporation Limited
Source : Table 3.49
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y = 2.0487x + 27.576 .The slope is 2.0487x and intercept is 27.576. The R²
is 0.0642 which shows that the equation is most suitable for prediction.
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 3.6959x + 23.288. The slope is 3.6959x and intercept
is 23.288. The R² is 0.3588 which shows that the equation is most suitable for
prediction. There is an increase in capital employed by the Kerala State Palmyrah
Development and Worker’s Welfare Corporation Limited during the period under
study.
227
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 9.8858x + 9.6742. The slope is 9.8858x and intercept
is 9.6742. The R² is 0.1450 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested by Kerala State Palmyrah
Development and Worker’s Welfare Corporation Limited during the period under
study.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 1.367x + 13.335. The slope is 1.367x and intercept is
13.335. The R² is 0.1451 which shows that the equation is most suitable for
prediction. There is an increase in working capital of the Kerala State Palmyrah
Development and Worker’s Welfare Corporation Limited during all the years under
liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of the Kerala State Palmyrah Development and
Worker’s Welfare Corporation Limited during 1990-91 was 1.70: 1 which declined
to 0.07 : 1 in 1995-96 periods .It was 0.05 : 1 in 1996-97 which increased to 1.55 : 1
in 2000-01. It was an 0.15: 1 in 2005-06 which increased to 1.05 :1 in 2009-10 .
The overall trend shows an increasing one but with fluctuations certain years under
study. The ratio indicates their reduced dependence on debt capital (Table 3.50).
228
ii. Current Ratio
The Current ratio of the Kerala State Palmyrah Development and Worker’s
Welfare Corporation Limited during 1990-91 was 8.2 : 1 which increased to 8.79 : 1
in 1995-96 periods. It was 2.73 : 1 in 1999-2000 which declined to 1.61 :1 in 2005-
06 and then increased to 2.74 : 1 in 2009-10. The overall trend shows an increasing
one with some fluctuations in the period under study. The current ratio indicates that
it was abnormal in certain years and reaches towards ideal in certain other years
(Table 3.50).
iii. Return on Investment
The return on the capital employed by the Kerala State Palmyrah
Development and Worker’s Welfare Corporation Limited shows a negative one in
all most all the years from 1990-91 to 2008-09. It means that the return on
investment during the period under analysis shows an unfavourable one ( Table
3.50).
iv. Net Profit to Sales
The net profit before tax and dividend to total was 32.2 per cent in 1990-91
which declined to -3 per cent in 1995-96. It was negative in all most all the years. In
2009-10 it was 33.93 per cent. It is clear from the analysis of profit to sales that it is
not up to the mark during the whole period of 20 years under study from 1990-91
to 2009-10 ( Table 3.50).
229
v. Receivables to Sales
The accounts receivable to sales was 1.27 in 1990-91 and which increased to
3.92 in 1995-96. It was 3.84 in 1999-2000 which increased to 17.95 in 2005-06
which declined to 10.96 during 2009-10. In this case a trend of increase with
fluctuations is seen. The lower the months in the receivable to sales is really good
for increasing the amount of cash by way of sales but the trend seen here is an
unfavourable one ( Table 3.50).
vi. Stock of Finished Goods to Sales
The stock of finished goods to sales was 4.78 in 1990-91 which increased to
8.58 in 1995-96. It was 0.14 in 2000-01 which increased to 1.76 months in 2005-06
and then again declined to 1.00 in 2009-10. A fluctuating trend of increase is noticed
during 1990-91 to 2009-10, the whole 20 year period under analysis. The lower the
months in the stock of finished goods to sales is an indication of increased sales but
it is abnormal in the initial periods under study and are favourable in the remaining
years Table 3.50).
vii. Stock of Raw materials to Consumption
The stock of raw materials to raw materials consumption was 30.22 in 1990-
91 which increased to 40.85 in 1995-96. It was 62.99 in 2000-01 which declined to
25 in 2005-06 which again declined to 4.43 in 2009-10. A fluctuating trend of
increase is noticed during 1990-91 to 2009-10 the whole 20 year period under
analysis. The lower the months in the stock of finished goods to consumption is an
indication of increased production and is appreciable ( Table 3.50).
230
viii. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage was
64.81 per cent in 1990-91 which increased to 78.37 per cent in 1995-96. It was 79.31
per cent in 1996-97 which increased to 90.35 per cent in 2001-02. It was 29.98 per
cent in 2005-06 which increased to 35.82 per cent in 2009-10. A fluctuating trend of
increase is noticed in all the 20 years under analysis and is favourable in the initial
periods under study ( Table 3.50).
Table 3.50 Financial and Operating Ratios of Kerala State Palmyrah Development and
Workers’ Welfare Corporation Ltd
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Stock of finished goods to sales (in months)
Stock of raw materials to consumption (in months)
Consumption to sales (%)
Net profit to
sales (%)
1 2 3 4 5 6 7 8 9
1990-1991 1.70:1 8.2:1 -38.5 1.27 4.78 30.22 64.81 32.02 1991-1992 1.75:1 10.12:1 -46.7 1.36 5.21 32.40 65.91 -74.09 1992-1993 1.08:1 4.18:1 -16.6 0.27 6.43 38.40 227.76 -30.37 1993-1994 0.53:1 11.79:1 -14.9 0.34 3.30 36.33 71.22 -14.9 1994-1995 0.19:1 25.10:1 -3.39 2.05 8.25 35.25 38.63 -9.13 1995-1996 0.07:1 8.79:1 -0.82 3.92 8.58 40.85 78.37 -3 1996-1997 0.05:1 16.67:1 -1.02 1.38 11.19 45.35 79.31 -6.38 1997-1998 0.12:1 24.86:1 -1.77 5.31 4.09 50.40 30.87 -6.48 1998-1999 0.19:1 3.58:1 1.09 3.43 0.82 60.62 40.93 4.08 1999-2000 0.33:1 2.73:1 0.6 3.84 2.12 61.72 31.01 1.83 2000-2001 1.55:1 4.30:1 9.65 0.44 0.14 62.99 -9.63 -2.65 2001-2002 2.78:1 29.04 -27.39 29.04 0.65 61.89 90.35 -223.54 2002-2003 1.83:1 13.04 -69.03 28.01 0.51 60.78 86.23 -641.31 2003-2004 0.05:1 2.23:1 -26.64 31.81 2.42 40.30 63.36 -655.14 2004-2005 0.17:1 1.31:1 -83.56 14.89 1.58 38.20 62.22 -677.4 2005-2006 0.15:1 1.61:1 -68.17 17.95 1.76 25.10 29.98 -727.06 2006-2007 0.30:1 1.71:1 -72.82 13.18 2.78 18.30 30.51 -612.82 2007-2008 0.29:1 1.63:1 1.25 12.51 0.43 11.66 26.99 8.81 2008-2009 0.29:1 1.40:1 -4.53 17.23 1.78 8.23 43.74 -49.38 2009-2010 1.05:1 2.74:1 2.6 10.96 1 4.43 35.82 33.93
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
231
It is seen that direct correlation exists between net worth and all items except
stock of finished goods to sales and consumption to sale (Table 3.51)
Table 3.51 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.781 3 Capital Invested 0.044 4 Working capital 0.299 5 Debt to Equity Ratio 0.047 6 Current Ratio 0.125 7 Return on Investment (%) 0.231 8 Receivable to sales ( in Months) 0.225 9 Stock of finished goods to sales( in months ) -0.039 10 Stock of raw materials to consumption 0.992 11 Consumption to Sales (%) -0.424 12 Net Profit to sales ( %) 0.174
Source: Computed from Table 3.49 and Table3.50
18. KERALA SHIPPING INLAND NAVIGATION CORPORATION
LIMITED
The Corporation was formed in 1989 by the statutory amalgamation of
Kerala Inland Navigation Corporation Limited (KINCO) and Kerala Shipping
Corporation Limited ( KSC), two Government of Kerala Companies. The main
objective of the company is to develop passenger and cargo transportation through
Inland Waterways of Kerala, docking and repair of marine vessels, construction of
boats, conducting navigation training programmes, conducting tourist cruises,
providing navigational aids and maintenance in National Waterway-III. The
Corporation at present has 12 barges, 11 boats and 2 Jhankars. With the
commissioning of Goshree bridges the ferry services of the Corporation slumped and
have since diversified into tourism sector.
232
Construction and repair of boats, barges and other marine vessels of the
Corporation and of the customers in the public and private sector are carried out by
the corporation leasing a slipway complex from Cochin Port Trust since 1991. The
Corporation had also started a Marine Training Institute for giving training for
operating Inland Vessels and Crafts.
a. Net Worth
The net worth of the Kerala Shipping Inland Navigation Corporation Limited
was Rs 470.10 crores in 1990-91 which increased to Rs 761.6 crores in 1994-95. It
was Rs 851.2 crores in 1995-96 which increased to Rs 1320.08 crores in 1999-2000.
It was Rs 1470.47 crores in 2000-01 which declined to Rs 204.91 crores in 2004-05.
It was Rs 1115.32 crores in 2005-06 which increased to Rs 2154.55 crores in 2009-
10. The overall picture of net worth shows an increasing one with some fluctuations
(Table 3.52).
a. Capital Employed
The capital employed of the Kerala Shipping Inland Navigation Corporation
was Rs 530.32 crores during 1990-91 which increased to Rs 866.51 crores in 1994-
95. It was Rs 947.81 crores in 1995-96 which increased to Rs.1323.08 crores in
1999-2000. It was Rs 1473.47 crores in 2000-01 which declined to Rs 204.91 crores
in 2004-05. It was Rs 115.32 crores in 2005-06 which increased to Rs 2157.48
crores in 2009-10. The capital employed for a period of 20 years study from 1990-
91 to 2009-2010 shows an increasing trend fluctuations ( Table 3.52).
233
c. Capital Invested
The capital invested by the Kerala Shipping Inland Navigation Corporation
Limited was Rs 556.30 crores during 1990-91 which increased to Rs 783.87 crores
during 1994-95. During 1995-96 it was Rs 855.57 crores which increased to Rs
1166.96 crores in 1999-2000. In 2000-01 it was Rs 1266.96 crores which declined
to Rs 915.99 crores in 2004-05. It was Rs 915.99 crores in 2005-06 which increased
to Rs 2726.89 crores in 2009-10. The trends in capital invested for a period of 20
years under study from 1990-91 to 2009-2010 shows an increasing one ( Table
3.52).
b. Working Capital
The working Capital of the Kerala Shipping Inland Navigation Corporation
Limited was Rs 322.21 crores during 1990-91 which increased to Rs 562.1 crores in
1994-95. It was Rs 664.46 crores in 1995-96 which increased to Rs 1011.18 crores
in 1999-2000. It was Rs 1149.87 crores in 2000-01 which declined to –Rs 35.62
crores in 2004-05 and increased to Rs 1119.18 crores in 2006-07. It again increased
to Rs 1514.1 crores in 2009-10.It shows that during most of the years under analysis
the working capital shows an increasing trend with some fluctuations (Table 3.52).
234
Table 3.52 Net worth, Capital Employed, Capital Invested and Working Capital of Kerala
Shipping Inland Navigation Corporation Limited ( Rs in Crores )
Year Net worth Capital Employed Capital Invested Working Capital
1 2 3 4 5 1990-1991 470.10 530.32 556.30 322.21 1991-1992 472.26 565.48 557.28 344.28 1992-1993 543.7 606.76 597.02 381.77 1993-1994 687.64 771.7 691.02 551.97 1994-1995 761.6 866.51 783.87 562.1 1995-1996 851.2 947.81 855.57 664.46 1996-1997 950.87 1032.97 946.06 715.18 1997-1998 1013.04 1026.04 976.96 722.78 1998-1999 1155.02 1158.02 1066.96 871.59 1999-2000 1320.08 1323.08 1166.96 1011.18 2000-2001 1470.47 1473.47 1266.96 1149.87 2001-2002 291.74 291.74 828.99 -60.28 2002-2003 1582.15 1585.15 1336.96 1254.29 2003-2004 312.27 312.27 915.99 34.12 2004-2005 204.91 204.91 915.99 -35.62 2005-2006 115.32 115.32 915.99 -87.66 2006-2007 1572.48 1575.41 1526.89 1119.18 2007-2008 1115.72 1118.65 1576.89 628.24 2008-2009 1672.1 1675.03 2126.89 1125.19 2009-2010 2154.55 2157.48 2726.89 1514.1
Source: Compiled from the Review of Public Enterprises, Various issues of the Bureau of Public Enterprises , Government of Kerala .
The graphical representation of the trends in the growth of Net worth,
Capital Employed, Capital Invested and Working capital of the Kerala Shipping
Inland Navigation Corporation Limited from 1990-91 to 2009-2010 with the trend
line and regression equation is shown in fig. 3(xviii)
235
Fig. 3(xviii) Net worth, Capital Employed, Capital Invested and Working capital of the Kerala
Shipping Inland Navigation Corporation Limited
Source : Table 3.52
The trend line (linear trend of first degree) of the Net worth 1990-91 to 2009-
2010 is Y = 41.726x + 497.74. The slope is 41.726x and intercept is 497.74. The R²
is 0.1602which shows that the equation is most suitable for prediction. There is a
positive net worth and it shows an increasing trend during the whole 20 years under
study .
The trend line (linear trend of first degree) of the Capital Employed during
1990-91 to 2009-2010 is Y = 36.284x + 585.92. The slope is 36.284x and intercept
is 585.92.The R² is 0.1215 which shows that the equation is most suitable for
prediction. There is increase in capital employed of the Kerala Shipping Inland
Navigation Corporation Limited during the period under analysis .
236
The trend line (linear trend of first degree) of the Capital Invested during
1990-91 to 2009-2010 is Y = 72.528x + 355.28. The slope is 72.528x and intercept
is 355.28.The R² is 0.6074 which shows that the equation is most suitable for
prediction. There is an increase in the capital invested by the Kerala Shipping Inland
Navigation Corporation Limited during the period under study.
The trend line (linear trend of first degree) of the Working Capital during
1990-91 to 2009-2010 is Y = 21.637x + 412.26. The slope is 21.637x and intercept
is 412.26. The R² is 0.0541 which shows that the equation is most suitable for
prediction. There is an increase in working capital of the Kerala Shipping Inland
Navigation Corporation Limited during all the years under liberalization period.
Analysis of Solvency and Profitability
i. Debt to Equity Ratio
The debt to equity ratio of the Kerala Shipping Inland Navigation
Corporation Limited during 1990-91 was 0.20 : 1 which declined to 0.13 : 1 in 1995-
96 periods . It was 0.10 : 1 in 1996-97 which decreased to 0.02: 1 in 2000-01. It
was an 0.41 : 1 in 2005-06 which declined to 0.10:1 in 2009-10 . The trend shows
an increasing one but with fluctuations and is a clear indication that they are not
depending on debt capital ( Table 3.53).
ii. Current Ratio
The Current ratio of the Kerala Shipping Inland Navigation Corporation
Limited during 1990-91 was 4.75 : 1 which increased to 5.23 : 1 in 1995-96 periods .
It was 5.48 : 1 in 1999-2000 which declined to 0.81 :1 in 2004-05 which increased to
237
1.53 : 1 in 2009-10 . The overall trend shows an increase but with high fluctuations
in the initial period under study but it has not reached to an ideal one (Table 3.53).
iii. Return on Investment
The return on the capital employed by the Kerala Shipping Inland Navigation
Corporation Limited was 1.75 per cent in 1990-91 which declined to 0.98 per cent in
1995-96. It was 4.94 per cent in 2000-01 and shows a negative one in all other years
under study. It clearly indicates that the return on investment during the period under
analysis shows a very low per cent which is not favourable( Table 3.53).
iv. Net Profit to Sales
The ratio of net profit to total sales of Kerala Shipping Inland Navigation
Corporation Limited in 1990-91 was 4.89 per cent which declined to 2.89 per cent
in 1995-96. It was 5.22 per cent in 2000-01 which increased to 89.02 per cent in
2005-06 and declined to -8.48 per cent in 2009-10. It is clear from the analysis of
profit to sales that it is not up to the mark during the whole period of 20 years under
study from 1990-91 to 2009-10. ( Table 3.53).
v. Receivables to Sales
The trends in accounts receivable to sales was 2.10 in 1990-91 and which
increased to 2.64 in 1995-96. It was 4.8 in 1999-2000 which declined to 4.1 in 2005-
06 which again declined to 3.11 during 2009-10. In this case a trend of increase with
fluctuations is seen .The lower the months in the receivable to sales is really good
for increasing the amount of cash by way of sales (Table 3.53).
238
vi. Consumption to Sales
The ratio of raw materials consumed to sales expressed as percentage was
28.25 per cent in 1990-91 which declined to 16.12 per cent in 1995-96 . It was 18.13
per cent in 1996-97 which increased to 40.62 per cent in 2001-02. It was 18.54 per
cent in 2005-06 which declined to 16.69 per cent in 2009-10. A very high fluctuation
is noticed in all the 20 years period under analysis and thus it is concluded that is
not so favourable (Table 3.53).
Table 3.53
Financial and Operating Ratios of Kerala Shipping Inland Navigation Corporation Ltd
Year Debt-equity ratio
Current ratio
Return on investment
(%)
Receivable to sales (in
months)
Consumption to sales (%)
Net profit to sales (%)
1 2 3 4 5 8 9
1990-1991 0.20:1 4.75:1 1.75 2.10 28.25 4.89 1991-1992 0.20:1 4.78:1 1.77 2.39 30.54 5.87 1992-1993 0.12: 4.57:1 1.67 2.91 28.22 5.17 1993-1994 0.14:1 8.46:1 7.06 1.75 10.81 26.79 1994-1995 0.15:1 4.71:1 3.28 1.47 14.28 10.15 1995-1996 0.13:1 5.23:1 0.98 2.64 16.12 2.89 1996-1997 0.10:1 5.54:1 1.74 2.61 18.13 5.26 1997-1998 0.01:1 3.53:1 2.48 2.73 18.8 6.86 1998-1999 0.01:1 4.74:1 7.42 1.52 12.31 15.27 1999-2000 0.08:1 5.48:1 6.05 4.8 15.46 2.64 2000-2001 0.02:1 9.15:1 4.94 1.82 13.62 5.22 2001-2002 0.02:1 .16:1 -24 1.77 40.62 -625.55 2002-2003 0.03:1 3.62 3.13 3.62 50.59 10.1 2003-2004 0.04:1 1.81:1 1.48 2.16 38.45 2.72 2004-2005 0.32:1 .81:1 -52.78 46.46 22.53 2.72 2005-2006 0.41:1 .42:1 -73.74 4.1 18.54 89.02 2006-2007 0.10:1 3.78:1 -5.73 14.41 12.85 -16.49 2007-2008 0.19:1 1.92:1 -17.33 5.16 31.19 -21.83 2008-2009 0.13:1 2.92:1 -5.17 5.1 30 -13.01 2009-2010 0.10:1 1.53:1 -2.93 3.11 16.69 -8.48
Source: Computed from Annual Reports of Bureau of Public Enterprises, various issues
It is seen that direct correlation exists between net worth and all items except
debt equity ratio, receivable to sales, consumption to sale (Table 3.54)
239
Table 3.54 Correlation
Sl. No.
Item Correlation
1 Net worth 1 2 Capital Employed 0.997 3 Capital Invested 0.817 4 Working capital 0.979 5 Debt to Equity Ratio -0.833 6 Current Ratio 0.244 7 Return on Investment (%) 0.488 8 Receivable to sales ( in Months) - 0.197 9 Consumption to Sales (%) -0.238 10 Net Profit to sales ( %) 0.202
Source: Computed from Table 3.52 and Table3.53 Hypotheses Testing
Based on the analysis, the researcher here attempts to test the hypotheses
already formulated. For that a summary table showing the overall financial
performance of Public Sector Enterprises is prepared and depicted in Table 3.55.
Table 3.55 Overall Financial Performance of PSEs
Item Increase Decrease Fluctuating Total
Net Worth 10 (55.6) 8 (44.4) - 18 (100)
Capital Employed 15 (83.3) 3 (16.7) - 18 (100)
Capital Invested 16 (88.9) 1 (5.55) 1 (5.55) 18 (100)
Working Capital 12 (66.67) 6 (33.33) - 18 (100)
Debt to Equity - 3 (17.6) 14 (82.4) 17 (100) Current Ratio 2 (11.1) 1 (5.6) 15 (83.3) 18 (100)
Return on Investment 1 (5.6) 6 (33.3) 11 (61.1) 18 (100) Net Profit to Sales - 8 (44.4) 1 0(55.6) 18 (100) Recievables to Sales - 1 (5.88) 16 (94.12) 17 (100)
Figures in bracket shows the percentage to total
Source : Computed values
240
From Table 3.55 it is found that the average net worth of selected public
sector enterprises in Kerala shows an increase in 10 out of 18 cases under study.
Hence the null hypothesis that public sector enterprises failed to attract ownership
funds during the liberalization period stands rejected.
It is clear from the trend line analysis done in this chapter that there is
increase in both the capital employed and the capital invested, but in certain years
they are not in the same proportion. Further the correlation analysis of capital
employed and capital invested with respect to net worth shows that positive
correlation exists in majority of the cases for capital employed and negative
correlation exists for capital invested. Hence the hypothesis that there exists
disparity in fund invested and the capital employed in public sector enterprises in
Kerala during the liberalization period stands accepted.
It is seen from the analysis that the debt equity ratio of 14 out of 17 PSEs
under study shows a fluctuating trend and in 3 cases there is a declining trend (Table
3.55).It means that they are not able to collect debt funds for its investment
compared to equity funds. So the hypothesis that during the liberalization era, the
public sector enterprises failed to attract debt funds into the business stands
accepted.
Table 3.55 clearly indicates that the current ratio, which is the indicator of
short term solvency showed a fluctuating trend in 15 out of 18 cases. Hence the
hypothesis that public sector enterprises in Kerala failed to manage short term funds
during the liberalization period stands accepted.
241
It is seen from Table 3.55 that the return on investment of majority of PSEs
under study showed a fluctuating trend in 11 out of 17 cases. In 6 cases there is a
declining trend. It is an indication that investments are not properly allocated in the
form of fixed assets. So the hypothesis that lack of adequate return on investment
hinders the development of public sector enterprises in Kerala stands accepted.
It is seen from the analysis that PSEs earn less profit and sometimes even
incurs loss on account of inadequate sales. From Table 3.55 it is seen that net profit
to sales ratio shows a fluctuating trend in 10 out of 18 cases and in 8 cases there is a
declining trend. In none of the 18 selected cases, it showed an increasing trend.
Hence the hypothesis that profit earned by majority of public sector enterprises is
meager stands accepted.
The trends in the financial management of Public Sector Enterprises are
analysed during the period of liberalization and it is seen that there is an increasing
trend in some cases but remains static in certain other cases. The debt to equity ratio,
current ratio, return on investment and net profit to sales shows a fluctuating trend
during the period under study.
From the analysis it is clear that a distinct trend set is visible for different
categories of Public Sector Enterprises which is a function of behavioural pattern of
decisions makers involved in the context of liberalization. Hence, the study
proceeded by analyzing the opinion from the selected respondents and is dealt in
Chapter IV.
242
REFERENCES
1 Eaton, Marquis. 1957. “Financial Reporting in a Changing Society,” The
Journal of Accountancy, August. p 25
2 Report of the Study Group on the Objectives of Financial Statements,
October, 1973 P.37 (Tuyeblood Committee Report).
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