anil project working

7/31/2019 Anil Project Working

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I acknowledge my greatest thanks to Mr. R.R. SINGH for the gracious help

without which I could not have completed my project on study offinancial

statement analysis in ARSS INFRASTRUCTURE ltd Bhubaneswar.

I would like to pay my sincere gratitude which I owe to Mr. SWARUP PANIGRAHI

(FACULTY OF GIM) my esteemed project guide for his valued help and guidance

which he gave me when I needed it the most. It was only due to his sincere help

and effort that I was able to end up with this project.

Date :

Place :BHUBANESWAR

Signature:

I Mr. ANIL SHAW GOND, a student of MBA, 3rd semistar, Biju Pattnaik university

of technology, Rourkela, session(2011-2013) here by declaring that the summer

internship project report, entitled FINANCIAL STATEMENT ANALYSIS in ARSS

INFRASTRUCTURE LtdBHUBANESWAR is the outcome of my own work and the

same has not been submitted to any University/ Institute for the award of any

degree or any professional course.

All the data and analytic statement being stated in the project that had been

submitted by me may be accepted as fully authentic genuine.

Bhubaneswar

DATE: MBA (2010-2012)

Regd no: 1006278002


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INTRODUCTION

Financial statement analysis applies analytical tools and techniques to general

purpose. Financial statements and related data to derive estimates and

inferences useful in business decision. It is the screening tool in selecting

investment or merger decisions. It is the forecasting tool of future financialconditions and consequences.

It is the diagnostic tool in assessing financing, investing and operating activities

it describes our uncertainty in decision making.

DEFINATION OF FINANCIAL STATEMENT ANALYSIS:

It report a company is post financial performance and current financial position.

They are designed to provide four primary business activities.

(i) Planning(ii) Financing(iii) Investing(iv) Operating activities.

Financial statement analysis helps us to answer these questions.

Shareholders and creditors assess future company prospects for investing and

lending decisions. Board of directors used the financial statements information in

monitoring management decision. Employees and unions use financial

statements in labour negotiations. Supplier use financial statement inestablishing the credit terms. Credit rating analysis uses the financial statement

for the purpose of credit rating. Auditors use financial statement in assessing the

fair presentation on their clients financial statement numbers.

Financial statement analysis helps the share holders to answer the future

learning potential, current financial conditions, current capital strategies etc.

Use of the financial statement is broadly divided into the internal uses and the

external uses. By using the financial statement internal uses, taking the strategic

and operating decision of a firm. External uses are not directly involved in the

firm s operation. These uses must rely on information provided by management

as a part of the financial reporting process. Creditors looks to the financial

statement for evidence concerning the ability of the borrowers to pay periodic

interest payment and repay the principle amount when the lo0an matures.

Equity investors are generally invested in assessing the future profitability and

riskiness of projects.Merger and acquisition analysts are interested in

determining the economic value and assessing the financial and operating

compatibility of potential merger candidates.


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Company profile

ARSS is one of the fastest growing construction companies of India, focusing

on infrastructure construction segment including highways, buildings and railways.

Incorporated in 17th May 2000 by a group of professionals, it has rapidly achieved a

turnover of Rs. 1013.00 corers. It has completed 80 projects across India, with

aggregate contract value of over Rs. 7000 million, for various clients all over India.

ARSS has a unique business model, with proven expertise in innovative thinking,

project and cost management. We are focused on delivering high quality work within

budgeted time and costs, as evident in the various accolades and repeat business. Wehave also developed an appropriate blend of entrepreneurs and hands on

professionals, constantly thinking & executing innovative and cost effective solutions

to clients' requirements.

Today it is acknowledged as a company that continues to empower India, enabling

the nation to surge ahead in different core sectors. At the heart of all our development

efforts is the attempt to touch and improve the quality of life of people across the

length and breadth of the country.

In fact, ARSS, as an industry leader in engineering construction, currently nurtures

projects that span across such diverse segments as railway, real estate and highways,

all of which impact the nation of India, and the progress of its people.

ARSS, even as you read this, is bringing to bear its wealth of engineering and

construction expertise to develop infrastructure aimed at further propelling the nation

forward, into the 21st century and beyond.

BOARD OF DIRECTORS OF ARSS INFRASTRUCTURE LTD.

CHAIRMAN

Mr.Subash Agarwal


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Managing Director

Mr. Rajesh Agarwal

Chief Executive Officer

Mr. Sunil Agarwal

Chief Operating Officer

Mr.Anil Agarwal

VISIONs

To be a respected global player in the infrastructure development sector.

To satisfy our customers and enhance our shareholders wealth.

To have innovation and commitment as the two mantras that drives us.

To attract, develop and sustain the best talents in the industry.

To continue to focus on the culture of trust.

To provide continuous learning opportunities while meeting the

expectations of our employees, stakeholders and the community.

MISSION

To develop infrastructure through effective use of new ideas and cuttingedge technology.

To become a major player in the railway infrastructure sector. To conquer new horizons and new heights. To do this while enriching and enhancing the quality of human life. To diversify into marine, gas and oil pipelines systems as well as airport

projects.

To set our eyes on international arenas and no longer remain limited todomestic projects.

To be a leader in the road infrastructure sector.


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GOAL

Focus on profitability.

Focus on achievement.

Focus on quality.

Focus on connectivity.

Focus on linking lives.

Focus on bridging the gap.

Focus on competence.

Focus on achievements.

Focus on sustainability

.

ACHIEVMENT

Laurels and achievements In 2008-09, the company was awarded with

three World Bank-assisted projects by the government of Orissa.

Unprecedent growth Registered an increase of 99% in the consolidated

revenue over the previous year.

Strong order book Contracts worth Rs.2, 788.37 corers as on March 31,2010.

Risk reduction The best parts of our contracts are with esteemed clients

such as the government, PSUs and other government agencies, thereby

reduction the risk of default and delayed payments.

Nurturing relationships Maintained long-term relationship with these

reputed clients with our clients-centric policies. This resulted in repeat

orders from the government of Orissa, railways department, rail vikas

nigam limited and RITE.

Expansion into new arenas Diversified successfully into irrigation and

canal construction.

Growing bid capacity Enhanced our bid capacity by strengthening our

technical and financial capability and by drawing on our long years of

experience. Successfully bid and procured additional projects.

Expertise and experience Adequately mobilised resources including

equipment, raw material and personnel at short notice while maintaining atrack record of speedy completion of projects.


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CONTRACTS TAKEN BY COMPANY

The company has proposed to take high value technical contracts in entire

country and has also negotiated some important contracts for railway and

other important infrastructure projects. One of the most economical and

biggest project taken by the company is the Golden Quadrilateral project

joining the four metros in the country. The company has taken the

construction of NH-5 within Orissa and the work is going on with doubling of

the road track of the National High way.

A. ROAD WORKSL.NO NAME OF WORK Value of

contract

In lakhs

1 Improvement of Panikoili- Ragadi Road in the

district of Jaipur.

537.57

2 Improvement of Pattamundai- Raj Nagar Road

In the district of Kendrapara.

514.41

3 Repair such as widening & strengthening to

road from Pokhariput level crossing to

Khandagiri (NH-5) Via Gandamunda in

Bhubaneswar (4 laning of the road)

771.76

4 Providing a two lane carriage way to

Jagannathpur-Phulbaniroad as a part of

Vijayawada-Ranchi corrider.

1828.61

5 Special repair such as improvement to Jayadev

Vihar junction at Bhubaneswar for the year

2007-08

347.90

6 Widening of the single lane to two way carriage

way of NH-224

876.65

7 Construction of roads at paradeep Refinery 1346.15


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site, Paradeep, Orissa, IOCL.

B. RAILWAY WORKSL.NO NAME OF WORK Value of

Construction

In Lakhs

1 New BG railway line between Tomka Keonjhar-

Banshpani of Khurda Road division in E.Co.

Railway.

306.93

2 Khurda road Yard Remodelling: Supplying and

Staking of hard durable stones machine

crushed trak ballast at Khurda road.

44.79

3 Construction of road bed including major and

minor bridges facilities and general notification

in connection with construction of New BG line

between Haldharpur & paradeep in East cost

Railway in the State of Orissa, India.

1828.62

C. BRIDGE WORKConstruction of sub-structure consisting of Pile and open foundation,

piers, abutments and other ancillary works for 5 major bridges. CA NO/

IRCON/RVNL.RBRP/Major Bridges between Rajathagarh-Barang.

1. Construction of Road over Bridge of Punamagate Railway level crossingincluding the approaches on Bhubaneswar of R.D.

2. Construction of Steel Girder Bridge (30.5m span) in the work RailwaySiding from Gatora to in plant yard (KM 0.963 to KM 12.880) for NTPC-

SIPAT SSTPP PKG-1.

3. Construction four ROBs in the Railway Siding from Gatora to Inplantfor NTPC Sipat (total 4 nos.of ROB).

4. Construction of three nos.PSC girder bridges (Major Bridges) of MGRsystem of NTPC sipat to Dipak in Package-II and Package-V.

D. IRRIGATION WORKSWe are construction a Dam and its appurtenant works in the Panchkula

district of Haryana valuing Rs.120 Corers. This involves design / delivering


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/ erecting radical gates, Hoist Bridge mounted on trestles and allied

component.

The work is to provide an impound reservoir for storing base flow of

almost throughout the year. Work involved is 35 laces cubic metre of

earthwork, 50 thousand cubic meter of concrete, 20 thousand cubic meter

of RR masonry including and 300 square meter of spill way gate 10,000

meter of 46mm. Hole drilled and grouted for making the spill way & dam

structure.

Nature of Work Client

Contract

Value

(Rs. in

lacs)

Project

Status Start Date

Construction of K dam

and its apaushalya

purtenant works

Haryana

Irrigation

Department

11299.19 Joint

Venture

Mar7, 2008

Construction of

Baharagora distributory

dam Executive

Engineer

Konar

Canal

Division

3600.00 Independent Dec24, 2007

CURRENT CONTRACTS/PROJECTS

Widening and strengthening of the Chandbali- Bhadrak-Anadpur carriageway

to two lanes.

Widening and strengthening of the Bhawanipatna- Khariar Carriageway to two

lanes.


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Widening and strengthening of the Berhampur- Taptapani carriageway to twolanes.

Construction of bridges, platforms, station buildings, passenger amenities,

platform shelters and more between Tirunelveli and Tenkasi junctions.

Construction of pavements and repair of the Cuttack- Paradeep Road.

Enabling railway connectivity to coal and iron ore yards under Civil Works

Phase I, ENORE.

Construction of station buildings, platforms, approach road, service building

and more for the BG Railway line from New Maynaguri in West Bengal to

Jogighopa in Assam.

Construction of a four-lane approach road from NH-31 to the plant site of

Koderma TPS in Jharkhand.

Construction of rail infrastructure facility for transportation of coal from Naila

Railway Station.

Improvement of the Vijaywada-Ranchi corridor from Rairakhole to Naktideol.

Construction of major and minor bridges, retaining walls, stations and more

between Harsauli-Rewari.

AREAS OF OPERATION OF ARSS INFRASTRUCTURE

CORPORATE OFFICE - NEW DELHI.

REGISTERED OFFICE- BHUBANESWAR.

BRANCH OFFICE HARYANA, RAJASTAN, CHATISGARH, MUMBAI,

ANDHRA PRADESH, TAMIL NADU.

WORKS/SITE OFFICE ASSAM, JHARKHAND, KERALA.

ACCOUNTING POLICIES

1. BASIS OF ACCOUNTING

The financial statements are prepared under the historical cost

convention on accrual basis of accounting in accordance with generally

accepted accounting principles [GAAP] , accounting standards issued by

the institute of chartered accounting of India, as applicable and the

relevant provisions of the companies Act, 1956.

2. USE OF ESTIMATES


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In preparing the financial statements in conformity with accounting

principles generally accepted in India, Management is required to make

estimates and assumption that affect the reported amount of assets and

liabilities as at the date of the financial statements and the amounts of

revenue and expense during the reported period. Actual results could

differ from those estimates. Any revision to such estimates is recognised

in the period the same is determined.

3. FIXED ASSETS

Fixed assets are stated at cost of acquisition inclusive of taxes,

duties, freight and other incidental expenses related to acquisition and

installation less accumulated depreciation. Self-constructed assets are

capitalised at cost including an appropriate share of overhead.

4. DEPRECIATION

Depreciation is provided on straight line method at the rates

specified in schedule-XIV to the companies Act, 1956.

Depreciation on addition/deletion of fixed assets during the year is

provided on pro-rata basis with reference to the date of addition/deletion.

5. BORROWING COSTS

Borrowing costs that are attributable to the acquisition,construction or production of a qualifying asset are capitalised as part of

cost of such asset till such time the asset is ready for its intended use or

sale. All other borrowing costs are recognised as expense in the period in

which they are incurred.

6. INVESTMENT

Investment in integrated joint ventures are carried at cost net of

adjustments for the companys share in profits or losses as recognised.

7. INVENTORIES

1. Raw materials, stores and spares and finished goods.

Raw materials, construction materials and finished

Goods are valued at the lower of cost and net

Realisable value.

2. Work -in-progress

The work-in-progress is valued as percentage of

Completion contract method as per accountingStandard 7 on construction contracts issued


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by the institute of chartered accountants of India.

8. REVENUE RECOGNITION

The company follows the percentage of completion method as

accounting standard-7 on construction contracts issued by the institute

of chartered accountants of India to recognise revenue in respect of

contracts executed. Contract revenue is accounted for on the basis of bills

submitted to clients/bill certified by clients and does not include material

supplied by the clients free of cost. Other revenue and expenses are

accounted for on accrual basis.

9. TAXES ON INCOME

Tax on income for current period is determined on the basis of taxable

income and tax credits computed in accordance with the provisions of the

income tax Act, 1961.

Deferred tax is recognised on timing differences between the accounting income

and the taxable income for the year, and quantified using the tax rates and laws

enacted or substantively enacted as on the balance sheet date.

10. EMPLOYEE BENEFITS

1)Short-term employee benefits

All employee benefits falling due wholly within twelve

months of rendering the services are classified as short-employee benefits. The

benefits like salaries, wages short-term compensated absence etc. and the

expected cost of bonus is recognised in which the employee renders the related

services.

2) Post- employment benefits

Defined contribution plan: The Company has a defined contribution

plan for state governed provident fund scheme and employees state insurance

scheme. The contribution paid/payable under the scheme is recognised during

the period in which the employee renders related service.

3)The company is in the process of finalising a agency for managing

the gratuity fund ascertaining the liability on the basis of actuarial valuation.


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Pending finalisation of the same liability for current year has been provided on

adhoc basis.

11. CONTIGENT LIABILITES AND CONTIGENT ASSETS

No provision is made for liabilities which are contingent in nature, unless it

is probable that an asset has been impaired or aliability incurred as on the

balance sheet date and a reasonable estimate of the resulting loss can be made.

Details of contingent liabilities are given below:

Contingent assets are neither recognised nor disclosed in the financial

statements.

12. OVERDUE CHARGES IN RESPACT OF LOAN

SL. NO. Name of the statute to which the

liability relates

Amount

1 Orissa sales tax Act 106.27

2 Orissa entry tax Act 34.44

3 Central sales tax Act 500.16

4 Rajasthan vat Act 219.99

5 Andhra Pradesh commercial taxes

(ET)

2.08

6 Orissa electricity Act 47.22

7 Corporate guarantees to sister

concern of the company:

A ARSS bio fuel (P) Ltd. 260.00

B Anil contractors (P) Ltd. 600.00

8 Performance bank guarantee 12,689.36

TOTAL 14,459.52


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Overdue charges if any levied by financial institution/banks/NBFC

are not considered during the currency of the loan. The same is

considered as a financial expense in the year of final settlement of loan

amount.

CUSTOMERS OF ARSS INFRASTRUCTURE LTD

The companys valued customers are:

Govt. of Orissa

Govt. of Haryana

Rail Vikash Nigam Limited

RITES Limited

IRCON International LimitedNational Thermal Power Corporation(NTPC)

National Highway Authority of India (NHAI)

ESSEL Mining

Damodar Valley Corporation

Orissa State Disaster Mitigation Authority (OSDMA)

Indian Oil Corporation Limited (IOCL).

Hindustan Petroleum Corporation Limited (HPCL).

Jaipur Development Authority

East Coast Railway

South Eastern Railway

North Western Railway

Southern Railways

Central Railway

Northeast Frontier Railways

Tamil Nadu Industrial Road Infrastructure Corporation Limited.

Jindal Steel And Power Limited

Vishakhapattanam Steel Plant

Rourkela Steel plant.

Vedanta Aluminum Limited

JOINT VENTURES OF THE ARSS INFRASTRUCTURE LTD:


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The joint venture partners, in mutual consultation with one another determine

the quantum of work to be executed by each joint venture partners vide entering

into memoranda of understanding/joint venture agreement. The work awarded

to joint venture is executed by them independently or through the sub-

contracting to the third party including the joint ventures partners.

The Company has entered into following joint venture agreements: -

1. HCIL - ARSSSPL - TRIVENI (JV)

2. HCIL - KALINDEE - ARSSPL (JV)

3. HCIL - ADHIKARIYA - ARSS (JV)

4. NIRAJ - ARSS (JV)

5. ARSS - HCIL (CONSORTIUM)

6. ATLANTA - ARSS (JV)

7. PATEL - ARSS (JV)

8. ARSS - TRIVENI (JV)

9. SOM DATT BUILDERS -ARSS (JV)

10. ARSS-MVPL (JV)

11. BACKBONE-ARSS (JV)

12. ARSS-ANPR (JV)

CAPITAL RAISED DURING THE YEAR :( Amount in Thousands)

2005-

06

2006-07 2007-

08

2008-

09

2009-10 2010-

11

2011-

12


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Public

issue

Nil Nil Nil Nil 1030153000

Bonus

issue

Nil 69007000 Nil Nil Nil

Share

application

money

Nil Nil Nil Nil Nil

Right

issue

Nil Nil Nil Nil Nil

SCOPE OF THE STUDY

The present study is confirmed to ARSS infrastructure projects ltd. only.

Corporate office is situated at SBI colony paschim vihar. New Delhi and the

registered office are located at mancheswar industrial estate, Bhubaneswar,

Orissa. ARSS infrastructure projects ltd. Is a leading construction company of

India. It also holds most of the projects, relating to construction of high ways inOrissa.

ARSS infrastructure projects ltd. An ISO 9000: 2001 company (abbreviated as

ARSS) was in corporate on 17th may 2000 under the jurisdiction of the register

of companies, Orissa. With present turnover more than 100 corers, the company

has emerged as a major contributor towards growth of infrastructure related

activity in other spheres, in regard to developing infrastructure facilities related

to central and state govt. organization viz CPWD, state PWD and PSUs like

RITES ltd. Rail vikas nigam limited.

The study aims at analyzing the financial statements of ARSS infrastructure

projects ltd. The time period assumed under the study is limited to last five

financial years i.e. 2003-2004, 2004-2005, 2005-2006, 2006-2007 and 2007-

2008.

The scope of this study includes the following aspects:

Origin of ARSS infrastructure projects ltd. Operation of ARSS infrastructure projects ltd. Work force distribution. Information regarding finance department and its function.


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OBJECTIVES OF THE STUDY

Focus on determining financial strength and weakness of ARSSinfrastructure projects ltd.

To study and analyze the operating efficiency of the organization To know what is the liquidity position of the organization To analyze the trends in various items included in the balance sheet and

income statement using ratio analysis.

Interpreting the results of the study for meaningful conclusion andsuggestion

RESEARCH METHODOLOGY

Collection of data:

The study banks upon both the primary as well as secondary sources for

gathering the required information.

Primary data sources: primary data are collected from individuals, officials, a

guide views and meeting the various financial executives of ARSS infrastructure

projects ltd.

Secondary data sources: secondary dates are collected from internal sources

as well as external sources.

The secondary sources include: Annual report Commercial data Official records in the organization Files Books on subjects Published report relevant to the topic News, letters and other publications Website

LIMITATIONS OF THE STUDY

1. Limitation of time2. All the relevant data are not available3. Certain information was kept confidential by ARSS infrastructure projects

ltd. Managed on the ground of confidentiality.


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4. Extensive analysis could not be made due to limited source of funds.Inspite of all these difficulties, the researcher has tried his best collect all

relevant data or information to make his study successful.

5. Also there is another problem of not getting the monthly data of theinventory.

6. There was a problem of distance of that particular organization from us.7. Cross sectional analysis is absent

Areas of study

1. Ratio analysis2. Common size income analysis3. Common size positional analysis4. Comparative income statement analysis5. Comparative positional statement analysis6. Cash flow statement analysis.7. Time series analysis.

THEORITICAL PRESENTATION OF RATIOANALYSIS

1. MEANING OF RATIOA ratio is a simple arithmetical expression of the relationship of onenumber to another. It may be defined as the indicated quotient of two

mathematical expressions. According to accountants Handbook by Wixom,

Kelly and Bedford, a ratio is an expression of the quantitative relationship

between two numbers.

Ratio analysis stands for the process of determining relationship of items,

group of items in the financial statement. IT is an important technique of

financial analysis. It is a way by which financial stability and health of a

concern can be judged. The following are the main points in use of ratio

analysis.

Helps in decision making Helps in financial forecasting and planning Helps in communicating Helps in co-ordination Helps in control Utility to share holders Utility to creditors


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Utility to employees Utility to government Tax and audit requirement

The objectives of ratio analysis are the followings

Financial forecasting Facilitates comparisons Cost control Proper communication

Guidelines or precautions for use of ratios

The calculation of ratio may not be difficult task there use is not easy. The

information on which these are based, the constraints of financial statement,objectives for using them , the caliber of the analyst, etc. are important factors

which influence the use of ratios . Following guidelines or factors may be kept in

mind while interpreting various ratios.

Limitations for ratio analysis:

Limited use of time Lack of adequate standard Inherent limitations of accounting

Changes of accounting procedure Window dressing Personal bias Incomparable Absolute figures distortive Price level changes Ratios no substitute

Classification of ratios

The ratio analysis is one of the most powerful tools of financial analysis. Broadly

ratios are classified into four categories.

a) Liquidity ratiob) Activity ratioc) Profitability ratiod) Leverage ratio

LIQUIDITY RATIO

Liquidity refers to the ability of a concern to meet its current obligations as andwhen it becomes due. It determines the credit worthiness of a company to meet


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its short term liabilities or commitments. To measure the liquidity of a company,

the following ratios can be calculated.

i) current ratioii) quick or acid test or liquid ratioiii) absolute liquid ratio or cash position ratio

1. Current ratioCurrent ratio may be defined as the relationship between current asset and

current liabilities. Current ratio, also known as working capital ratio, is ameasure of general liquidity and is most widely used to make the analysis of a

short term financial position or liquidity of a firm. It is calculated by dividing the

total of current asset by current liabilities.

Current ratio = current asset/ current liability

A relatively high current ratio is an indication that the firm is liquid and has the

ability to pay its obligations in time as and when they become due. On the other

hand, a relatively low current ratio represents that the liquidity position of the

firm is not good and the firm shall not be able to pay its current liabilities. As a

conversion the minimum of 2:1 ratio is referred to a bankers of thumb rules.

In a time series analysis of current ratio for last five years it is assumed that on

the ground of liquidity position the ARSS infrastructure limited is sound. The

YEAR CURRENT ASSET CURRENT LIABILITIESCURRENTRATIOS

2011-12 140951.69 115689.41 121836294264

2010-11 12177114518 3232071801 3.767587872

2009-10 6988782501 1705834194 4.096988163

2008-09 3585863626 1320224186 2.716102056

2007-08 2156643952 951070095 2.267597271

2006-07 540845439 141025428 3.835091633

2005-06 307866662 131472347 2.341683776


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current ratio is excess than the target current ratio which is 1.50.that means

there is an excess blockage of capital, so management should take certain steps

to reduce the current asset.

2. Quick asset or acid test ratioQuick ratio also known as Acid test ratio or Liquid ratio is a more rigorous test of

liquidity than the current ratio. It may be refined as the relationship between

quick or liquid assets and current liability. Current asset excluding inventories,

work in progress and prepaid expenses are known as quick asset or liquid

assets.

Liquid ratio= liquid assets/ current liabilities

Usually a high acid test ratio is an indication that the firm is liquid and has the

ability to meet its current obligations. on the other hand a low quick ration

represent that the firm liquidity position is not good. As a rule of thumb or as

convention quick ratio of 1:1 is considerable satisfactory.

YEAR QUICK ASSET CURRENTLIABILITY

ACID TEST RATIO

2011-12

2010-11

4133931536 3232071801 1.279034561

2009-10

3209282007 1705834194 1.881356358

2008-09

1619317130 1320224186 1.226547087

2007-08

1534540792 951070095 1.613488638

2006-07

467546604 141025428 3.315335473

2005-06

203660327 131472347 1.549073487

In a time series analysis of quick ratio, it is satisfactory position. According to

the rule of thumb quick ratio of 1:1 is a comfortable position for any company. If

we analysis the data for six years it is comfortable.

3. ABSOLUTE LIQUID RATIO


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Absolute liquid ratio is the relationship between the absolute liquid asset and the

current liabilities. Absolute liquid assets are finding out by subtracting the bills

receivable and sundry debtors from the liquid assets.

Absolute liquid ratio=(cash in hand + cash at bank +short term

marketable securities )/ current liabilities

The standard norm is 0:5:1 or 1:2 which means that re.1 of absolute liquid

assets are sufficient to pay Rs. 2 worth of current liabilities. This ratio is not used

widely because a huge amount of idle cash has to be kept.

With the above data it is analyzed that the cash and cash equivalent is sufficient

for the firm for current operation .on the ground of liquidity there is no problem

but on the ground of absolute liquid asset it is more than the current liability.

The absolute liquid asset is more due to presences of NSC certificate in the

marketable security .the company holding the same due to the some Security is

required in the process of taking the government contracts.

Comparison between the current ratio, quick ratio and cash ratio

YEAR CURRENTRATIOS

ACID TESTRATIO

CASH RATIO

2011-12

2010-11 3.767587872

1.279034561 1.142884926

2009-10 4.096988163

1.881356358 1.46647985

YEAR ABSOLUTE LIQUIDASSET

CURRENTLIABILITIES

CASH RATIO

2011-12

2010-11 3693886142 3232071801 1.142884926

200910 2501571472 1705834194 1.46647985

2008-09 1274625221 1320224186 0.965461196

2007-08 880966422 951070095 0.926289688

2006-07 322410299 141025428 2.286185574

2005-06 131868458 131472347 1.00301288

5


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2008-09 2.716102056

1.226547087 0.965461196

2007-08 2.267597271

1.613488638 0.926289688

2006-

07 3.835091633

3.315335473 2.286185574

2005-06 2.341683776

1.549073487 1.003012885

When it is compared between the current ratio & acid test ratio it is found that

acid test ratio is comfortable in all years .but current ratio is excessive in 2010-

11 and 2009-10.the excessive is Due to in these two years there is a huge

inventories .so management should use economic order quantity model to

reduce the inventory level. Cash ratio

(b) EFFICIENCY or ACTIVITY RATIO

Activity ratio measures the efficiency or effectiveness with which a firm manages

its resources or assets. These ratios are also called turnover ratios because they

indicate the speed with which the assets are converted into sales. Basically there

are three activity ratios:

(i) Inventory or stock turnover ratio(ii) Debtors turnover ratio(iii) Creditors or payable turnover ratio.

(i) inventory or stock turnover ratioEvery firm has to maintain a certain level of inventory of finished goods so as

to be able to meet the requirements of the business. The level of inventory

should neither be too high nor be too low. High level of inventory is not

satisfactory due to the unnecessary blockage of capital, over stocking,

chances of pilferage, theft etc. on the other hand, too low inventory shouldmaintained.

INVENTORY TURNOVER RATIO= COST OF GOODS SOLD/ AVERAGE

INVENTORY

Inventory turnover ratio measures the conversation of stock into sales.

Usually a high inventory turnover ratio indicates efficient management of

inventory because more frequently the stocks are sold; the lesser amount of

money is required to finance the inventory. On the other hand a low

inventory turnover ratio indicates an efficient management of inventory.


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Year

COST OF GOODS

SOLD

AVERAGE

INVENTORY

INVENTORY TURNOVER

RATIO2011-12

2010-11 8915457251 5736038128 1.554288352

2009-10 7625408085 2791896534 2.731264569

2008-09 4892335677 1252404050 3.906355682

2007-08 2530581376 347700998 7.278038863

2006-07 1069510979 88752585 12.05047694

2005-06 497891428 81317926 6.122775783

This time series analysis of inventory turn over ratio gives a clear picture that

from 2005-06 to 2010-11 the inventory turnover ratio decline except in

2006-07.decling this ratio means it is not a good indictor of inventory

management system .this is due to delay of the projects .So managementshould start the projects as soon as possible.

(ii) Debtor or receivable turnover ratioA concern may sell goods on cash or as well as on credit. Credit is one of the

important elements of sales promotion. Debtors arise due to the credit policy

adopted.

(a) Debtors turnover ratioDebtor turnover indicates the velocity of debt collection of the firm. In simple

words it indicates the number of times the debtors are turned over during a

year.


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DEBTOR TURNOVER RATIO= NET ANNUAL credit SALE/ AVERAGE

TRADE DEBTOR

Debtor velocity indicates the number of times the debtors are turned over during

a year. Generally, higher the value of debtors turnover ratio the more efficient is

the management of debtors or sales or more liquid is the debtors. Similarly lowdebtors turnover implies inefficient management of debtors or sales and less

liquid debtors.

YEARNET CREDIT ANNUALSALE

AVERAGE TRADEDEBTOR

DEBTORS TURNOVERRATIO

2011-2012

2010-11 12574659671 749181575 16.78452873

2009-10 10130855134 607328183 16.68102258

2008-09 6282413084 541053918 11.61143626

2007-08 3155032088 399355338 7.900312799

2006-07 1338321101 108464088 12.33884068

In a time series analysis it is found that debtors turnover ratio is comparatively

better in 2010-2011 &2009-10.it shows that there is a better receivable

management in recent years which is a good indictor of managerial efficiency.

With the holding of less cash company will manage effectively and

efficiently.

(b) Average collection period ratioThe average collection period represents the average number of days for which a

firm has to wait before its receivables are converted into cash.

AVERAGE COLLECTION PERIOD = (AVERAGE TRADE DEBTOR*NO

OF WORKING DAYS)/ NET credit SALES(day)

Average collection period ratio measures the quality of debtor. Generally, the

shorter the average collection period the better is the quality of debtors as a


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short collection period implies quick payment by debtors. Similarly, a higher

collection period implies an inefficient collection performance which adversely

affects the liquidity or short term paying capacity of the firm.

YEAR AVERAGE TRADEDEBTORS

SALES PER DAY AVERAGE COLLECTIONPERIOD

2011-12

2010-11 749181575 41633703.87 17.99459345

2009-10 607328183 33551680.94 18.10127439

2008-09 541053917.5 20812507.52 25.99657524

2007-08 399355338 10516773.60 37.973

2006-07 108464088 4461070.337 24.31346736

2005-06 36478584 2008223.503 18.16460366

Average collection period in 2010-11, 2009-10 &2005-06 are better than any

other year. In these years average collection period decreases which means

more multiple of cash holding for receivable. So with the less proportion of

cash firm manage the project efficiently.

Relationship between debtor turnover ratio and average collection

period

With the comparison of two data, we have found that there is an inverse

relationship between the debtor turnover ratio and average collection period.

(iii) Creditors or payable turnover ratioIn the course of business operations a firm has to make credit purchase and

short term liabilities. A supplier of goods, i.e., creditors is naturally interested in

the finding out how much time the firm is likely to take in repaying its trade

creditors.

It is calculated as net credit annual purchases / average creditors

YEAR DEBTORS TURNOVER RATIO AVERAGE COLLECTION PERIOD2011-12

2010-11 16.78452873 17.99459345

2009-10 16.68102258 18.10127439

2008-09 11.61143626 25.99657524

2007-08 7.900312799 37.973

2006-07 12.33884068 24.31346736


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The ratio indicates the velocity with which the creditors are turnover in relation

to purchases. Generally higher the creditors velocity better it is or otherwise

lower the creditors velocity, less favorable.

AVERAGE PAYMENT PERIOD RATIO

The average payment period ratio represents the average number of days taken

by the firm to pays its creditors. Generally lower the ratio better the liquidity

position of the firm and higher the ratio, less liquid is the position of the firm.

(iv) Working capital turnover ratioWorking capital turnover ratio indicates the no. of times the working capital is

turned over in the course of a year. It measures the efficiency with which the

working capital is being used by firm.

WORKING CAPITAL TURNOVER RATIO= COST OF SALES/ AVERAGE

WORKING CAPITAL

AVERAGE WORKING CAPITAL=( OPENING WORKING CAPITAL+

CLOSING WORKING CAPITAL)/2

A higher ratio indicates efficient utilization of working capital and a low ratioindicates otherwise. But a very high working capital turnover ratio is not good

for any firm. This ratio can be used for making of comparative and trend analysis

for different firms in the same industry and for various periods.

In this time series analysis it is found that working capital turnover ratio

decreases gradually. That means for one unit of cost of sale more working

capital is necessary. Which is a negative impact of the utilization of workingcapital .in the recent years there is not proper utilization of the working capital?

YEAR COST OF GOODSOLD

AVERAGEWORKINGCAPITAL

WORKING CAPITALTURNOVER RATIO

2011-12

2010-11

8915457251 7113995512 125.3227843

2009-10

7625408085 3774293873202.0353566

2008-09 4892335677 1735606649 281.8804411

2007-08

2530581376 802696933 315.2598785

2006-07

1069510979 288107162.5 371.2198509


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So management reduces the working capital so that working capital utilization

productively.

Profitability ratio

Profitability is the overall measures of the efficiency of the operations of thebusiness. It indicates the effectiveness of the decision taken by the management

from time to time. The main objective behind the calculation of profitability

ratios to enlighten the end results of the business activities which will be the

main criterion for the assessment of the efficiency of the business. The lower

profitability ratio may rise because of high expenditure, and other such reasons.

The external parties like bankers, creditors, suppliers, financial institutions etc.,

look at the profitability ratio of the company to safeguard for the interest on

lending. Equity share holders look after the profitability ratio from the point of

view of return to their investment. Let us discuss the important profitability

ratio.

Profitability ratios are divided in to 3 categories

1) Sales based profitability ratio2) Capital based profitability ratio3) Asset based profitability ratio

Sale based profitability ratio

i. Gross profit margin ratio:The gross profit margin ratio shows the margin left after meeting manufacturing

cost. It is calculated as= (contract revenue-direct contract

expenses)/contract revenue *100

If the gross profit ratio is higher it is better. A lower gross profit ratio indicatesthe unfavorable conditions such as lower selling price without proportionate

reduction in the cost of production etc. it may be used as an indicator of the

efficiency of the production operation and the relation between production cost

and selling price.


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In a time series analysis it is shown that gross profit ratio increases gradually. It

is a better signal to the ARSS infrastructure limited. It shows that for RS 1 of

income there is a gross profit of 28% .that shows that contract expenses

reduced. Gross profit ratio shows that it is adequate to cover other operating

expenses or not .there is a standard norm for that. It is a good indictor of firms

efficiency.

ii. Operating profit ratio:The operating profit ratio compares the relationship between the operating profit

and the sales. The ratio is calculated as under:

Operating profit ratio = operating profit/ net sales

Operating profit = gross profit- operating expenses

YEAR OPERATINGPROFIT

Contractrevenue

OPERATING PROFITRATIO

2011-12

2010-11 2425460566 12490111161 19.41904707

2009-10 1676240559 10065504283 16.65331922

2008-09 937449850 6243752255 15.014206392007-08 443332926 3136709419 14.13369448

2006-07 177485306 1338321101 13.26178791

2005-06 54108778 602467051 8.981201198

In the time series analysis it is shown that operating profit increases gradually

.so it shows the efficiency of the company increases. It was 8% in 2005-06while

in recent year it is more than 19 %.the operating efficiency of the firm increases.

iii. Net profit ratio:

YEAR GROSS PROFIT Contractrevenue

GROSSPROFITRATIO

2011-12

2010-11 3574653910 12490111161 28.6198727

2009-10 2440096198 10065504283 24.2421654

2008-09 1351416578 6243752255 21.6443017

2007-08 606128043 3136709419 19.3236912

2006-07 268810122 1338321101 20.0856223

2005-06 104575623 602467051 17.3578991


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The net profit ratio is also called as overall profitability ratio. This ratio shows the

earning capacity of the capital; employed in the business. It is calculated as:

Net profit ratio= net profit after tax / net sales

The ratio shows that the earnings left for the share holders (both equity andpreference) as a percentage of net sales. It measures the overall efficiency of

production, administration, selling, financing, and tax management. When the

net profit is calculated for this ratio purpose we should add non operating

expenses and deduct non operating income.

YEAR NETPROFIT

Contractrevenue

otherincome

net profit-otherincome

net profitratio

2011-

122010-11

1121652010

12574659671

84548510

1037103500 8.247567

2009-10

900732325 10130855134

65350851 835381474 8.245913

2008-09

500865072 6282413084

38660829 462204243 7.357113

2007-08

270978997 3155032088

29233380 241745617 7.662224

2006-07

94745106

1338321101

8307565 86437541 6.458655

2005-06

32587937 607647597

032587937 5.362966

In a time series analysis it is found that the net profit ratio is overall stable.

There is a very less

Volatility in the net profit. It is with in the range of 5% to 8 %.

Comparison of gross profit, operating profit and net profit ratio :

YEAR net profit

ratio

OPERATING PROFITRATIO

GROSS PROFIT

RATIO

2011-12

2010-11

8.2475671

48

19.41904707 28.6198727

2009-10

8.2459127

38

16.65331922 24.2421654


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2008-09

7.3571132

11

15.01420639 21.6443017

2007-08

7.6622237

19

14.13369448 19.3236912

2006-07

6.4586548

73

13.26178791 20.0856223

2005-06

5.3629664

89

8.981201198 17.3578991

If we compare the three sales ratios in this time series analysis it shows that in

every year net profit, gross profit and operating profit increases gradually. That

signifies productive efficiency increases gradually.

iv. Return on capital employed:This ratio is also called the overall profitability ratio. This ratio shows the earning

capacity of the capital employed in the business. It is calculated as:

Return on capital employed= operating profit/ capital employed

Operating profit is the profit before interest and tax. Capital employed includes

the total of equity share capital, preference share capital, undistributed profit,

reserve and surplus, long term liabilities less fictitious assets and non business

assets.

The ratio reflects the overall efficiency with which the capital is employed.

If we analyzed the ratios in a time series analysis we have found that in 2010-11efficiency of capital decreases. But it is not due to the increases in operating

YEAR OPERATINGPROFIT

NET CAPITALEMPLOYED

RETURN ON CAPITALEMPLOYED(%)

2011-12

24254605662010-11 12177114518 20.13

2009-10 1676240559 7969969779 21.03

9374498502008-09 3770395572 24.86

2007-08 443332926 2009063422 22.066

2006-07 177485306 686376327 25.85

2005-06 54108778 309327274 17.49


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expenses .it is due to blockage of capital in current assets. In this company

inventory turn over ratio decreases.

Comparison between return on capital employed, inventory turn over

ratio and operating profit ratio

Return on capital employed depends upon two important ratios

Inventory turn over ratio Operating profit ratio

When inventory turn over ratio increases than return of capital employed

increases

When operating profit ratio increases return on capital employed increases.

In 2010-11 ROCE is 20.13% at that time inventory turn over ratio is 1.55but due

to high operating profit margin return on capital employed increases.

In 2006-07 it is highest .that is 25.85%.it is because of increase in the inventory

turn over ratio is

YEAR RETURN ONCAPITALEMPLOYED(%)

INVENTORY TURNOVERRATIO

OPERATING PROFITRATIO(%)

2011-12

1.554288352 19.419047072010-11 20.13

2.7312645692009-10 21.03 16.65331922

15.014206392008-09 24.86 3.906355682

14.133694482007-08 22.066 7.278038863

2006-07 25.85 12.05047694 13.26178791

8.981201198

2005-06 17.49 6.122775783


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12.05, although operating profit is 13.26.in this 2006-07 capital invested in

inventory is efficiently utilized because the highest velocity in the inventory. so it

increases the return on capital employed.

Return on share holders fund

Return on share holders fund: profit after interest and tax/ share

holders fund *100

This ratio measures the profitability of the firm from the view point of share

holders. The ratio can be calculated as:

A higher ratio is better which indicates a good return to the share holders.

YEAR PROFIT AFTER INTERESTAND TAX SHARE HOLDERS FUND Return on shareholdersFund (%)

2011-12

2010-11 1121652010 4484068964 25.01415609

2009-10 900732325 3379668127 26.65150219

2008-09 500865072 1483513976 33.76207303

2007-08 270978997 997336456 27.17026891

2006-07 94745106 293892012 32.23806777

2005-06 32587937 123762906 26.33094039

Return on equity capital:

The return on equity (ROE) is important profit indicator to share holders of the

firm. It is calculated as

Return on equity= net profit after tax-preference dividend / equity

share capital

YEAR NET PROFIT minus PREFERENCEDIVIDEND

EQUITY SHARECAPITAL

RETURN ONEQUITY capital

2011-12

2010-11 1121652010 148432300 755.665721

2009-10 900732325 148432300 606.8304035

2008-09 500865072 125540000 398.9685136

2007-08 270978997 125540000 215.8507225

2006-07 94745106 107960500 87.75904706

2005-06 32587937 25970000 125.4830073


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In this analysis return on equity capital increases significantly .this is due to

existence of huge amount of reserve and surplus. This reserve and surplus are

share premium reserve, free reserve and capital reserve. Because this company

has very less pay out ratio, the retaining earnings are reinvested and due to that

return on equity capital increases. Return on share holder fund decreases in the

recent year is due to the return on the total asset. in 2010-11 return on total

asset is 6% while in other years such as2006-07 it is 11%.and 2007-08 &2008-

09 it is 9%.decreases in the return on total asset is a major reason for decrease

in return on share holder s fund.

v. Return on total asset:

The return on total ratio indicates the profit after tax against the investment in

total asset. It helps to know whether the assets are using properly or not. It can

be calculated as :

Return on total asset: net profit after tax/ total asset*100

YEARPROFIT AFTERTAX TOTAL ASSET

RETURN ON TOTALASSET (%)

2011-12

2010-11 1121652010 17330417538 6.472158028

2009-10 900732325 9675803973 9.309121263

2008-09 500865072 5090619757 9.83898024

2007-08 270978997 2960133518 9.154282918

YEAR RETURN ON EQUITYcapital (%)

Return on shareholdersfund

RETURN ON CAPITALEMPLOYED(%)

2011-122010-11 755.665721 25.01415609 20.13

2009-10 606.8304035 26.65150219 21.03

2008-09 398.9685136 33.76207303 24.86

27.170268912007-08 215.8507225 22.066

2006-07 87.75904706 32.23806777 25.85

2005-06 125.4830073 26.33094039 17.49


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2006-07 94745106 827401757 11.45091912

2005-06 32587937 431738074 7.548080413

Return on the total asset decreases in recent year is due to the huge presence of

illiquid inventory. Data shows that inventory possess around 63% of current

asset. Huge inventory magnify the problem on return on total asset. so

management should try to reduce the inventory.

vi. Earnings per share :The earnings per share ratio help in determining the market price of equity share

of the company and its capability to pay the dividend to share holders. It iscalculated as:

Earnings per share = net profit after tax/ no. of equity share

YEAR PROFIT AFTER TAX-PREFERENCEDIVIDEND

NO.OF EQUITYSHARE

EARNING PERSHARE

2011-12

2010-11 1121652010 14843230 75.5665721

2009-10 900732325 14843230 70.482008-09 500865072 12554000 39.90

2007-08 270978997 12454000 23.77

2006-07 94745106 10671050 10.53

2005-06 32587937 2597000 18

(In 2005-06 there is a face value of RS 100.in 2006-07 there a stock split and

the face value reduced to RS 10.so we adjust accordingly.)

(this company does not issue any preferential share.)

The earnings per share ratio are mainly useful for companies with public trade

shares.

vii. Price earnings ratio:Price earnings ratio shows the market value of every rupee earning in the firm.

The ratio is mainly used to compare the industry average. A high price earnings

ratio indicates an overvalued share and low ratio shows the share is

undervalued. The ratio is calculated as:


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Price earnings ratio: market price per equity share/ earnings per share

Yearmarketprice EPS

P/ERATIO

2011-12

2010-11 953 75.57 12.61082

2009-10 539 70.48 7.64756

(The market prices are the average prices on 31st march 2010 & 2011 in national

stock exchange)

(The face value of the share is Rs 10)

If we compare the stock between the two years it is found that on March 2009-

10it is relatively cheaper than 2010-11.because in 2009-10 P/E ratios is 7.64

viii. Payout ratio:The payout ratio shows the portion of earning per share used for the distribution

of dividend and the portion retained for the plouhging back of profit. This ratio is

calculated as:

Payout ratio= dividend for equity share/ earnings per share

year DIVIDEND PER EQUITYSHARE

EPS PAYOUT RATIO%

2011-122010-11 1 75.57 1.323276432

2009-10 2 70.48 2.837684449

2008-09 1 39.9 2.506265664

2007-08 1 23.77 4.206983593

2006-07 0 10.5 0

With the time series analysis of five year it is shown that pay out ratio is less

than 5%.That signifies that the company is more growth oriented .the company

reinvests its capital in its core business &expands the business .so due to thatin near future there is a chance of high capital appreciation of share prices.


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(c) Coverage ratioCoverage ratios are used to test the adequacy of cash flows generated through

earnings for the purpose of meeting debt and lease obligations, including the

interest coverage ratio and the fixed charge coverage ratio. Coverage ratio give

the relationship between the financial charges of a firm and its abilities to serve

them. There are mainly three ratios under this head. Those are :

i. interest coverage ratio: fixed interest cover ratio or interestcoverage ratio measures the ability of the concern to service its debt.

This ratio tells us how many times the firm covers or meets the

interest payments associated with debt. From lenders point of view,

this ratio assumes greater importance. This ratio is computed as:

Interest coverage ratio= earnings before interest and tax/ interest

expenses

YEAR EBIT INTERESTEXPENSES

FIXED INTEREST COVERRATIO

2011-12

2010-11 2510009076 990312007 2.534563913

2009-10 1741591411 530739775 3.281441288

2008-09 976110679 270174025 3.612896092

2007-08 472566305 94163206 5.018587674

2006-07 177485306 37559074 4.725497386

This ratio indicates that ability of the firm to repay the interest on time .this

ratio is very important for the creditor point of view. This is in decline that

means credit risk increases in comparative previous years.

.

(d) Leverage ratio or test of solvencyThe term solvency refers to the ability of a concern to meet its long term

obligations. The long term creditors of a firm are primarily interested in knowing

the firms ability to pay regularly interest on long term borrowings, repayment of

the principal amount on maturity and security of their loans. Long term solvency

ratios indicate a firms ability to meet the fixed interest and costs and

repayments of long term borrowings. The following are the ratios determines the

solvency of the concern:


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i. Debt equity ratioii. Proprietary ratioiii. Interest coverage ratioiv. Leverage ratio

i. Debt equity ratio:Debt equity ratio also known as the external- internal equity ratio is calculated

to measure the relative claims of outsiders and the owners (I.e., shareholders)

against the firms asset. This ratio indicates the relationship between the

external equities or the outsiders funds and the internal equities or the share

holders fund.

Debt equity ratio= long term debt/ share holders fund

The share holders fund consist of equity share capital, preference share capital,

reserves, revenue reserves, reserves for contingencies, sinking funds etc.

outsiders fund include both current and fixed liabilities.

The debt equity ratio is calculated to measures the extent to which the debt

financing has been used in a business. The ratio indicates the proportionate

claims of owners and the outsiders claim against the firms asset. A ratio of

1:1may be usually considered to be satisfactory ratio.

YEAR LONGTERMDEBT SHARE HOLDERSFUND DEBT EQUITYRATIO

2011-12

2010-11 12846348575 4484068964 2.864886485

2009-10 6296135846 3379668127 1.862945002

2008-09 3607105782 1483513976 2.4314606

2007-08 1962797061 997336456 1.96803902

2006-07 533509743 293892012 1.81532577

2005-06 317036714 123762906 2.561645684

The low debt equity ratio is favorable which signifies the low financial risk is

there in a company. But here it shows that in the recent year 2010-2011 debt

equity ratios is higher, that is 2.86. Means in this company there is a financial

risk increases. It happens due to the more debt capital is there compare to the

share holders fund.

ii. Interest coverage ratio


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This ratio is used to test the debt servicing capacity of a firm. This ratio is

calculated by dividing the net profit before interest and taxes by fixed interest

charge.

Interest coverage ratio= net profit before interest and tax/ fixed

interest

Interest coverage ratio indicates the number of times interest is covered by the

profits available to pay the interest charges. Generally, higher the ratio, safer is

the long term creditors.

YEAREBIT

INTEREST INTEREST COVERAGERATIO

2011-12

2010-

11

2510009076 990312007 2.53456

2009-10

1741591410 530739775 3.28144

2008-09

976110679 270174025 3.6129

2007-08

472566306 94163206 5.01859

2006-07

177485306 37559074 4.7255

2005-06

59289324 20192164 2.93625

Interest coverage ratio indicates the number of times interest covered by the

profits available to pay the interest charges. Too high interest coverage ratio

may imply that firm is not using debt as a source of finance so as to increase the

earning per share. Interest coverage ratio decreases gradually after the year

2007-2008. Means this is a good symbol for Arss infrastructure projects limited.

In the recent year 2010-2011 the interest coverage ratio is 2.53.

iii. Leverage ratio:All the business enterprises employee debt fund, equity fund, so as to maximize

the profits and earnings available for the equity share holders. The basic

advantage of using the debt is i.e. the after tax cost of debt is less and the

interest is deductable. The term leverage refers to employment of debt fund. A

leverage ratio indicates the use of debt fund in the capital structure of the

concern. When earning exceeds the cost of fund, it is said to be favorable and

when the return is the less the cost of fund it is said to be unfavorable.

The leverage is three types.


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Operating leverage Financial leverage Combined leverage

Operating leverage: it indicates the extent of the change of earnings before

interest and tax due to the change in sales volume. It is calculated as:

Operating ratio= contribution/ EBIT

Contribution is nothing but sales minus variable cost. There is inverse

relationship between the operating leverage and fixed cost. Higher the fixed

cost, lower the contribution. Lower the fixed cost, higher the contribution. EBIT

is not anything but sales less variable cost less fixed cost.

A high operating ratio means large effect on EBIT due to small changes in

sales. The operating leverage explains the impact of changes in sales revenue

and operating incomes.

Financial leverage: when the firm uses debt fund in its capital structure to

finance its need, then the firm is said to financial leverage. Financial leverage

measures the changes in the earnings before tax due to the change in earnings

before interest and tax(operating incomes) .the calculation is as :

Financial leverage= EBIT/ EBT

The leverage may be favorable or unfavorable. When the return on investment

exceeds the cost of debt capital, a firm is said to have favorable financial

leverage. It is also known as trading on equity. When the cost of debt capital

exceeds the return on investment, then the firm said to have unfavorable

financial level.

2005-06 2006-07

2006-07 2007-08

2007-08 2008-09

2008-09 2009-10

2009-10 20


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Common size income statement analysis

We prepare the common size statement analysis for knowing the percentage ofany item as per the sales which is taken as 100 percent. Here in this above

income statement it is shown that the operating profit gradually increases,

because the direct expenses are gradually decreases. And also the net profit

after tax increases slowly because of the proper management. Also the selling

expenses are gradually decreases.

100 1338321101 100 3136709419 100 6243752255 100 10065504283 100 12

82.6421 1069510979 79.91 2530581376 80.68 4892335677 78.36 7625408085 75.76 8

17.3579 268810122 20.09 606128043 19.32 1351416578 21.64 2440096198 24.24 3

0.51344 12890331 0.963 29828204 0.951 140461371 2.25 262364862 2.607

2.77166 31787216 2.375 50703745 1.616 97277799 1.558 172315888 1.712

3.16558 29137580 2.177 42761762 1.363 102739612 1.645 193751628 1.925

1.92603 17509689 1.308 39501406 1.259 73487946 1.177 135423261 1.345

8.9812 177485306 13.26 443332926 14.13 937449850 15.01 1676240559 16.65 2

0.85989 0 0 29233380 0.932 38660829 0.619 65350851 0.649

9.84109 177485306 13.26 472566306 15.07 976110679 15.63 1741591410 17.3 2

2.72856 37559074 2.806 94163206 3.002 270174025 4.327 530739775 5.273

7.11253 139926232 10.46 378403100 12.06 705936654 11.31 1210851635 12.03 1

1.70345 38455481 2.873 107424103 3.425 205071582 3.284 310119311 3.081

5.40908 101470751 7.582 270978997 8.639 500865072 8.022 900732324 8.949 1


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Common size balance sheet statement analysis


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In the above balance sheet it is shown that the share holders fund in this year is

25.87 % of the total liability. Whereas the previous years record it was 34.93%

of the total liability. It means the equity share capital is going down and a

increase in the borrowing or debt capital.

COMPARATIVE BALANCE SHEET STATEMENT ANALYSIS:

2006-2007

2006-2007

2007-2008

2007-2008

2008-2009

2008-2009

2009-2010 2009-2010

2010-2011

2010-2011

20-1

CUL

rel

107960500

13 125540000

4.241

125540000

2.466

148432300

1.534

148432300

0.856

erve

us

1859315

12

22.

5

87179645

6

29.4

5

13579739

76

26.6

8

32312358

27

33.4 43356366

64

25.0

2

eers

293892012

35.5

997336456

33.69

1483513976

29.14

3379668127

34.93

4484068964

25.87

ured 378665727

45.8

975277469

32.95

2182193801

42.87

4457664482

46.07

9298977607

53.66

ecuren

0 0 10000000 0.338

41061473 0.807

12226366 0.126

99156117 0.572

eredability

13818588

1.67

26449497 0.894

63626322 1.25 120410804

1.244

216143050

1.247

rentty

sion

141025428 17 951070096 32.13 1320224183 25.93 1705834194 17.63 3232071801 18.65

ities 533509743

64.5

1962797062

66.31

3607105779

70.86

6296135846

65.07

12846348575

74.13

ities8274017

55100

2960133518

100 5090619755

100 9675803973

100 17330417539

100

ock 267822016

32.4

777522645

26.27

1466203210

28.8 2583740502

26.7 4739831072

27.35

tmen 18256201 2.21 25436921 0.859 38212921 0.751 34440872 0.356 361851873 2.088nt 3348609

3340.

516496767

9555.7

330284533

4859.4

955823015

6557.6

999909800

1357.6

5nd

nces2059845

0724.

950696715

717.1

355741027

810.9

514064809

3614.5

421861345

0612.6

1

ditur478100 0.0

6530000 0.01

8340000 0.00

768840098 0.71

151620074 0.29

8

t8274017

57100

2960133518

100 5090619757

100 9675803973

100 17330417538

100


43/50

Comparative balance sheet is the study of that trend of the same items ,group

of items and computed items in two or more balance sheet of the same business

enterprise on the different dates.

Comparative balance sheet of an enterprise as on two or more dates can be

used for comparing assets, liabilities and capital and ascertaining increase ordecrease on those items.

PARTICULARS 2009-2010 2010-2011 %

(percentage)

1 Contract revenue 10,065,504,283 12,490,111,161 124.08828022 contract direct expenses 7625408085 8915457251 116.9177722

3 gross profit(1-2) 2,440,096,198 3,574,653,910 146.4964337

4 personal expenses 262,364,862 419,228,525 159.7883656

5 administrative expenses 172,315,888 263,421,011 152.8709941

6 selling expenses 193,751,628 184,312,599 95.12828403

7 Depreciation 135,423,261 282,231,209 208.4067441

8 operating profit(3-4-5-6-7) 1,676,240,559 2,425,460,566 144.696449

9 other income 65350851 84,548,510 129.3762953


44/50

COMPARATIVE PROFIT AND LOSS ACCOUNT STATEMENT ANALYSIS:

The profit and loss account shows the net profit and net loss on the account of

business operations. A comparative profit and loss account shows the operating

results for a number of accounting periods so that changes in data in terms of

money and percentage from one period to another may be known.

2009-20102009-2010 2010- 2011 2010-2011

% increase/decrease

PARTICULARS

a)sharecapital 148432300 100 148432300 100 0b)reserve andsurplus 3231235827 100 4335636664 134.1788992 34.17889922

share holdersfund 3379668127 100 4484068964 132.6777895 32.67778952

a)secured loan 4457664482 100 9298977607 208.6064944 108.6064944

b)unsecuredloan 12226366 100 99156117 811.0023616 711.0023616c)deffered taxliability 120410804 100 216143050 179.5046979 79.50469793d)currentliability andprovision 1705834194 100 3232071801 189.471627 89.47162698

Liabilities 6296135846 100 12846348575 204.0354416 104.0354416

total liabilities 9675803973 100 17330417539 179.1108789 79.11087892

net block 2583740502 100 4739831072 183.4484178 83.44841784Investment 34440872 100 361851873 1050.646665 950.6466648

current asset 5582301565 100 9990980013 178.9759994 78.97599936loan andadvances 1406480936 100 2186134506 155.4329284 55.43292838misc.expenditure 68840098 100 51620074 74.98547431

-25.01452569

total asset 9675803973 100 17330417538 179.1108789 79.11087891


45/50

Cash flow statement

Cash is the basic input needed to keep the operations of the business going on a

continuing basis. It is also the final output expected to be realized by selling the

products manufactured by the manufacturing unit. Cash is both the beginning

and the end of the business. Sometimes it so happens that a business unit earns

efficient profit but in spite of this it is not able to pay its liabilities when they

become due. So the business unit should always try to keep sufficient of cash

neither more nor less because the shortage of cash will threaten the firms

liquidity and solvency where as excessive cash will not be fruitfully utilized willsimply remain idle and will affect profitability of the business.

Effective cash management implies a proper balancing between the two

conflicting objectives of liquidity and profitability. It is also difficult to predict

cash inflow and outflow accurately and there is no perfect confidence between

the inflows and outflows of cash giving rise to either cash outflows exceeding

inflows or cash inflows exceeding outflows. It is one of the important tool of cash

management because it throws light on cash inflows and outflows of a particular

period.

Cash flows comprise cash on hand and demand deposits with banks. Cash

equivalents are held for the purpose of meeting short term cash commitment

rather than for investment or purposes. Cash flows as inflows and outflows of

cash and cash equivalents.

Classification of cash flows


46/50

According to As-3(revised) cash flows for a period can be classified into 3

categories cash flows:

. Cash flow from operating activities is derived from the principal revenue

producing activities of the enterprise.

. Cash flows from investing activities are the activities involving acquisitions and

disposal of the long term asset and other investment not included.

. Cash flow from financing activities are the activities that results in the changes

in the size and composition of the owners capital including preference share

capital and the borrowings of the enterprise.

Objectives

It provides the information to user of financial statement with a basis toassess the ability of the enterprise to generate cash and cash equivalents.

The needs of the enterprise to utilize these cash flows. AS-3 deals with the provisions of information about the historical changes

in cash and cash equivalents.

Scopes:

An enterprise should prepare a cash flow statement and should present itfor each period for which financial statements are presented.

Users of enterprises financial statements are interested in how theenterprise generates and uses cash and cash equivalents.

USEFULNESS:

Predicts future cash flows. Determine the ability to pay dividends and other commitments. Shows the relationship of net income to changes in the business cash. Efficiency in cash management. Discloses success or failure of cash planning. Evaluates management decisions. Enhances the comparability of reports.

LIMITATIONS:

It gives the main items of inflows and outflows of cash only and does notshow the liquidity position of the company.


47/50

This statement is not a substitute of income statement which shows bothcash and non cash items. Therefore net cash flows dont necessarily mean

net income of the business. It cannot replace the funds flow statement as

it cant show the financial position of the concern in totality.

composition of cashinflow

particulars 2005-2006 2006-2007

2007-2008 2008-2009

2009-2010 2010-2011

cash flow from operatingactivity

-35.335910

5

-9.726420

86

-51.574140

9

43.7149495

-265.4059

98

-183.7911

47

cash flow from investingactivity

-107.27845

6

-260.3970

75

-216.10639

6

-225.696

18

-353.4450

98

-670.4860

74

cash flow from financingactivity

242.6143663

370.1234958

367.680537

281.981229

718.8510955

954.2772211

Total 100 100 100 100 100 100

calculation of total cashinflow

2005-2006 2006-2007 2007-2008 2008-2009 2009-2010 2010-2011

ash flow fromperating activity

-11151578 -6397739

-132841307 150036559

-1002904487 -758434569

ash flow fromnvesting activity

-33855759

-171281147

-556632754

-774624663

-1335582760

-2766835200

ash flow fromnancing activity 76566105 243455795 947047536 967803779 2716362840 3937930868

otal cash inflow 31558768 65776909 257573475 343215675 377875593 412661099


48/50

SWOT ANALYSIS

STRENGTH OF THE COMPANY

The company depends upon the services of its key managerial personneland to attract and retain them.

It competitive strengths include its projects management expertise. Thecompany has successfully executed 86 projects involving construction of

300 km roads and highways, 200 km of rail tracks, 10 minor and major

bridges, and other general civil engineering works over the span of nine

years. It owns a sizable fleet of construction equipment, enabling it to rapidly

mobilizes the same project sites.

Majority of the clients are the government of the states or centralgovernment, public sector undertakings and other government agencies.

Large corpus of equipment Professional human resource approach Track record of time bound execution of projects. Decentralized control and management with adequate delegation of

power.

It has a good brand recall in eastern India

Weakness of the company

Some of group companies namely Anil contracts private limited, M/SHindustan construction, and M/S Anil Agarwal and ARSS engineering and

technology private limited are in the same type of business, which may

arise the conflict between the group of companies and the business

strategy of the company. The group companies incurred the loss in previous year which can affect

the business of the company.

The company has not carried out an independent appraisal of the workingcapital management.

The companys revenue totally depends on the contracts awarded bycentral and state government and their agencies.

There are no certainties regarding the completion of the projects. It canbe cancelled, postponed the payment, delayed etc. by which the cash flow

statement, revenues and earnings etc are affected.

The insurance coverage of the company may not project against certainoperating hazard.


49/50

The working capital requirement of the company is depend on the bankfinance. Any changes in interest rates or banking policy will adversely

affect the companys business.

Excessive dependence on govt. work orders. The company intends tominimizes this risk with attention to private sector projects in parallel.

Opportunity for the company

companys emphasis on the railways segment can be a positive from thegrowth point of view, given that Indian Railways are likely invest huge

sums in expanding and upgrading the railways infrastructure in the

country.

The company is totally concentrated on a single stats i.e. Orissa can be apositive side for the company. Because every year new projects come to

the Orissa; in recent years POSCO and Arcelor- Mittal steel project come

to Orissa. A huge growth in railway construction is based on the proposed outlays

planned through the Eleventh 5 years plan, Mission 2015 and several new

initiatives. The ministry of railways has also floated the integrated

Modernization plan to keep pace with the expected growth in business for

railways.

Thrust on infrastructure development by the union and state Govt.coupled with massive allocation of funds.

Facilitation activities by the Govt. The company can use its brand value.

Threats of the company

Increasing competition in bidding process, face competition from nationaland international companies.

High working capital requirement; if deficiency will occur, that will affectthe financial strength of the company.

Increase in cost or non availability of equipment, materials or fuel; Engagement of sub contractors or other agencies in the course of

execution of roads and railway projects.

Dependence on the joint ventures to qualify for the bidding process. Seasonality and weather condition. The company may be liable for the defaults committed by the joint

venture partners in the course of execution of the project undertake by it

jointly.

The company should complete the project in time. The company should look after their inventory.

Suggestion

The company has to take more care of their inventory


50/50

In the recent years the inventory gradually decreases, means it is not agood indication for the company. So the management should have to take

more care of the inventory.

CONCLUSION

ARSS infrastructure limited is a growing company but its total value isnt

reflected in market because of lack of efficient management in inventory poor

asset management system and so on. So ARSS infrastructure limited should

develop strategies to improve the inventory management system.

anil project working

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