A REPORT OFRATIO ANALYSIS

ONTATA CONSULTANCY SERVICES LIMITED

PREAPARED BY:NAME: MAHOMMADSHEJAD H. CHHIPAROLL NO.: 25CLASS: .MBA SEM-1YEAR: 2011-2012

GUIDED BY: DARSHITA MIRANI

PRESENTED TO:LATE SMT. SARDABEN GHANSHYAMBHAI PATELINSTITUTE OF MANAGEMENT STUDIES

AMRAPATLI TOWNSHIP, PATLAD,KHAMBHAT ROAD,DHARMAJ,DIST. ANANAD

PREFACE

In this advance age, practical knowledge are added advantage to theoretical

studies. I was supposed to prepare a report on “TATA CONSULTANCY

SERVICES LIMITED” in the subject of financial management.

Through this, I learn about the financial aspect of needed in every field

today. This report is based on the 2 years annual report of “TATA

CONSULTANCY SERVICES.” Ratios have been calculated with interpretation to

present clear picture of financial position of the company.

Preparation of this report for ratio analysis has proved to be a matter of pride

for me as a professional student.

Mo.Shejad H.ChhipaROLL NO.: 25

CLASS:MBA. SEM-1

ACKNOWLEDGEMENT

I am quite fortune enough to have cherished wishes of different personalities

in the preparation of this report, which I wish to acknowledged as under. Firstly, I

wish to extend my sincere feeling of gratitude to our Principal, Dr. Brhamchari Sir

has their moral support.

I am especially thankful to our faculty Darshita Mirani for guiding and

helping me during the preparation of this report. I also thankful to my friends who

also help me in preparing this report.

Last but not the least, I am really thankful to all those who help me directly

or indirectly in preparing this report.

Mo.Shejad H.ChhipaROLL NO.: 25

CLASS:MBA. SEM-1

INDEX

Sr. NO.

Particular Page no.

1 Company Profile 5

2 Result of Operation 8

3 Ratio Analysis 9

4 Summary of Ratio 38

5 Conclusion 39

COMPANY PROFILE

Name : TATA CONSULTANCY SERVICES

S.No. Location Type Address

1 Registered Office

9th Floor, Nirmal Building, Nariman Point Mumbai , Maharashtra - India Pincode : 400021 Phone : 67789595,,, Fax: 67789660,

2 Investor Service Centre

9th Floor, Nirmal Building, Nariman Point, Mumbai , Maharashtra - India Pincode : 400021 Phone : 55509576,,, Fax: 55509661,

3 Corporate OfficeTCS House, Raveline Street, Fort Mumbai , Maharashtra - India Pincode : 400001 Phone : 67789999,,, Fax: 67789000,

Board of Directors:

S.No Name Designation

1 Mr.R N Tata Chairman / Chair Person

2 Prof.Clayton M Christensen Director

3 Mr.Laura M Cha Director

4 Mr.V Thyagarajan Director

5 Mr.Aman Mehta Director

6 Dr.Ron Sommer Director

7 Mr.Phiroz Vandrevala Executive Director

8 Mr.S Mahalingam Executive Director & CFO

9 Mr.N Chandrasekaran Managing Director & CEO

10 Mr.S Ramadorai Non Executive Vice Chairman

Company Secretary:

Suprakash Mukhopadhyay

Auditors:

Delloite Haskins And Sells

History of the company:

Tata Consultancy Services was established in the year 1968 and is a pioneer in the industry. Despite unfavorable government regulations like the License Raj the company succeeded in establishing the Indian IT Industry.

It began as the "Tata Computer Centre", a division of the Tata Group whose main business was to provide computer services to other group companies. F C Kohli was the first general manager.JRD Tata was the first chairman, followed by Nani Palkhivala.

One of TCS' first assignments was to provide punch card services to a sister concern, Tata Steel (then TISCO). It later bagged the country's first software project, the Inter-Branch Reconciliation System (IBRS) for the Central Bank of India. It also provided bureau services to Unit Trust of India, thus becoming one of the first companies to offer BPO services.

In the early 1970s, Tata Consultancy Services started exporting its services. TCS's first international order came from Burroughs, one of the first business computer manufacturers. TCS was assigned to write code for the Burroughs machines for several US-based clients.

In the early 1990s, the Indian IT outsourcing industry grew tremendously due to the Y2K bug and the launch of a unified European currency, Euro. TCS pioneered the factory model for Y2K conversion and developed software tools which automated the conversion process and enabled third-party developers and clients to make use of it.

In 1999, TCS saw outsourcing opportunity in E-Commerce and related solutions and set up its E-Business division with ten people. By 2004, E-Business was contributing half a billion dollars (US) to TCS.

On 9 August 2004, TCS became a publicly listed company, much later than its rivals, Infosys, Wipro and Satyam.

During 2004, TCS ventured into a new area for an Indian IT services company - Bioinformatics

In 2008, the company went through an internal restructuring exercise that executives claim would bring about agility to the organization.

Results of Operation

Ratios 31-3-2010 31-3-2011Gross Profit 9242.28 10071.13Net Earning Before Tax 5003.86 5139.69Earning before Interest & Tax 5007.28 5147.13Capital Employed 11059.3 13545.65Shareholder Fund 11059.3 13545.65Debtors 3747.01 3717.73Creditors 1312.57 1239.37Bills Receivable 870.18 817.06Fixed Assets 2830.27 3354.21Current Asset 7329.57 9247.14Current Liability 3591.62 4951.36Net Sales 18979.67 21947.76

RATIO ANALYSIS

Meaning:

A relationship between various accounting figures, which are connected with each other, expressed in mathematical terms, is called accounting ratios.

According to Kennedy and Macmillan, "The relationship of one item to another expressed in simple mathematical form is known as ratio."

Robert Anthony defines a ratio as "simply one number expressed in terms of another."

Advantages and Uses of Ratio Analysis

To workout the profitability:

Accounting ratio help to measure the profitability of the business by calculating the various profitability ratios. It helps the management to know about the earning capacity of the business concern. In this way profitability ratios show the actual performance of the business.

To workout the solvency:

With the help of solvency ratios, solvency of the company can be measured. These ratios show the relationship between the liabilities and assets. In case external liabilities are more than that of the assets of the company, it shows the unsound position of the business. In this case the business has to make it possible to repay its loans.

Helpful in analysis of financial statement:

Ratio analysis help the outsiders just like creditors, shareholders, debenture-holders, bankers to know about the profitability and ability of the company to pay them interest and dividend etc.

Helpful in comparative analysis of the performance:

With the help of ratio analysis a company may have comparative study of its performance to the previous years. In this way company comes to know about its weak point and be able to improve them.

To simplify the accounting information:

Accounting ratios are very useful as they briefly summaries the result of detailed and complicated computations.

To workout the operating efficiency:

Ratio analysis helps to workout the operating efficiency of the company with the help of various turnover ratios. All turnover ratios are worked out to evaluate the performance of the business in utilizing the resources.

Limitations of Ratio Analysis

Limited Comparability:

Different firms apply different accounting policies. Therefore the ratio of one firm can not always be compared with the ratio of other firm. Some firms may value the closing stock on LIFO basis while some other firms may value on FIFO basis. Similarly there may be difference in providing depreciation of fixed assets or certain of provision for doubtful debts etc.

False Results:

Accounting ratios are based on data drawn from accounting records. In case that data is correct, then only the ratios will be correct. For example, valuation of stock is based on very high price, the profits of the concern will be inflated and it will indicate a wrong financial position. The data therefore must be absolutely correct.

Effect of Price Level Changes:

Price level changes often make the comparison of figures difficult over a period of time. Changes in price affect the cost of production, sales and also the value of assets. Therefore, it is necessary to make proper adjustment for price-level changes before any comparison.

Qualitative factors are ignored:

Ratio analysis is a technique of quantitative analysis and thus, ignores qualitative factors, which may be important in decision making. For example, average collection period may be equal to standard credit period, but some debtors may be in the list of doubtful debts, which is not disclosed by ratio analysis.

Effect of window-dressing :

In order to cover up their bad financial position some companies resort to window dressing. They may record the accounting data according to the convenience to show the financial position of the company in a better way.

Costly Technique :

Ratio analysis is a costly technique and can be used by big business houses. Small business units are not able to afford it.

Misleading Results :

In the absence of absolute data, the result may be misleading. For example, the gross profit of two firms is 25%. Whereas the profit earned by one is just Rs. 5,000 and sales are Rs. 20,000 and profit earned by the other one is Rs. 10, 00,000 and sales are Rs. 40, 00,000. Even the profitability of the two firms is same but the magnitude of their business is quite different.

PROFITABILITY RATIO

Profit is the difference between revenue and expenses over a period of time profit is the ultimate output of the company and there will no future if it tails to make profits. The profitability ratios are calculated to measure the operating efficiency of the company, creditors want to get interest and repayment of the principal regularly. Owners want to get a reasonable return on their investment. This ratio includes.

a) Gross Profit Ratiob) Net Profit Ratioc) Operating Ratiod) Returns on Share Holders Fund

A) Gross Profit Ratio:

Meaning:

Gross profit ratio measures the gross earning of the company to its net sales which means for the sale of every 100 Rs. how much amount of money is earned as gross profit after deducting all manufacturing expense.

Gross Profit ratio is fund out with the help of gross profit and net sales. Manufacturing expense is like raw material, fuel; power, carriage inward, etc. are known as manufacturing expense. If the ratio is less it shows the in efficiency of company’s management.

Here net Sales means = Sales – Sales Return

Formula:Gross Profit Ratio = Gross Profit x 100

Net Sales

2009-10 = 9242.28 * 10018979.67

= 48.70%

2010-11 = 10071.13* 10021947.76

= 45.89%

TABLE: YEAR PERCENTAGE31-3-2010 48.70%31-3-2011 45.89%

Graph:

31-3-2010 31-3-201144.00%44.50%45.00%45.50%46.00%46.50%47.00%47.50%48.00%48.50%49.00%

GROSS PROFIT

YEAR

PERC

ENTA

GE

Interpretation:

Gross profit ratio shows gross profit earned as compared to its net sale. In the year 2009-10 ratio was 48.70% which means that the company earns Rs. 48.70 as gross profit with the sale of every Rs. 100 and spend on the manufacturing expense in the year 2010-11 with the sale of every Rs. 100 company earns Rs. 45.89 as Gross profit. The ratio is lower than last year’s ratio. Gross profit is not satisfactory and company should try to minimize the manufacturing cost with the help of R & D.

Even we already know that if the ratio is high it shows the efficiency of the company of the company’s management. So, here it proves the inefficiency of the company’s management.

B) Net Profit Ratio:

Meaning:Net profit ratio is useful to measure the overall performance of the business

as shows the efficiency of the company. Ratio shows the net profit earned by the company with the sale of every 100 Rs.

Here net profit means gross profit less all administrative expense, selling and distribution expense and other operating expense.

Here net Sales means,Sales= Sales Return- Excise duty

Formula:Gross Profit Ratio = Gross Profit x 100

Net Sales

2009-10 = 4508.76 * 10018979.67

= 23.76%

2010-11 = 4696.21* 10021947.76

= 21.40%

TABLE:

YEAR PERCENTAGE31-3-2010 23.76%31-3-2011 21.40%

Graph:

31-3-2010 31-3-201120.00%20.50%21.00%21.50%22.00%22.50%23.00%23.50%24.00%

NET PROFIT

YEAR

PERC

ENTA

GE

Interpretation:

Net profit ratio shows profitability of the company. Ratio shows how much company earns as net profit for the sale of every Rs. 100 after deducting all expense. In the year 2009-10 the ratio was 23.76, which means that the sale of every Rs. 100 the company is earning Rs. 21.40 as net profit. In the year 2010-11 the ratio is 21.40% which means the net earning of the company has declined.

Here the higher the ratio shows the better will be the profitability of the company. In the year 2010-2011 the net profit ratio is not satisfactory than the year 2009-11.

C) Operating Ratio:

Meaning:

Operating ratio shows the relationship between the cost of goods sold and operating expenditure with net sales Operating ratio shows how much company is spending out of the sale of Rs. 100.

Higher the ratio found, higher the inefficiency of the company for e.g. if the sale is Rs. 100 and the cost of goods sold is Rs. 50 and other expense of P & L A/c is Rs. 30 then the net profit will be Rs. 20 operating expense will be Rs. 80 with respect to the sale of Rs. 100.

Cost of goods sold = Sale – Gross profitOperating expense = expense of P & L A/cOperating expense = Operating expense + COGS

Formula:

Operating Ratio = C.O.G.S+ operating expenses x 100Net Sales

2009-10 = 14470.91 * 10018979.67

= 76.24%

2010-11 = 17251.55* 10021947.76

= 78.60%TABLE:

YEAR PERCENTAGE

31-3-2010 76.24%31-3-2011 78.60%

Graph:

31-3-2010 31-3-201175.00%75.50%76.00%76.50%77.00%77.50%78.00%78.50%79.00%

OPERATING RATIO

YEAR

PERC

ENTA

GE

Interpretation:

Operating ratio shows the relationship between cost of goods sold and operating expenditure to net sales.

In the year 2009-10 the ratio is 76.24% which means that with the sale of every Rs. 100 company is spending Rs. 76.24 as manufacturing expense and other expense. In the year 2010-11 the ratio is increased to 78.60% that means company is spending Rs. 78.60 as manufacturing and other expense. There is not much difference in the ratio.

Lower the ratio will increase the gross profit. But, here company will decrease their gross profit by increasing operating ratio in the year 2010-11.

D) Return on Shareholder Fund:

Meaning:

It measures the return that the shareholders get as compared to their investments made in the company. In other words, it measures the profitability of equity funds invested in the firm. It is influence by several factors like return on investment, equity ratio, cost of debtors and funds and tax returns.

Ratio shows how much money the shareholders earn as compared to their investments.

Formula:

Return on shareholder’s fund = N.P.A.T Share holder’s fund

2009-10 = 4508.76 11059.3

= 0.408

2010-11 = 4696.2113545.65

= 0.347

TABLE:

YEAR Rs.31-3-2010 0.40831-3-2011 0.347

Graph:

31-3-2010 31-3-20110.3

0.32

0.34

0.36

0.38

0.4

0.42

RETURN ON SHAREHOLDER'S FUND

YEAR

RS.

Interpretation:

As in the year 2009-10 for the every Rs. 100 invested by the shareholder in the company they get the return of Rs. 0.408 the ratio decrease to 0.347 in the year 2010-11 with the investment of Rs. 100, shareholders are earning 0.347 Rs. The ratio is not satisfactory.

The normal bank rate is 5% to 6% the shareholders are earning less than bank rate which means the company is not efficient. Equity shareholders do not get satisfactory amounts as compared to their risk bearing.

TURNOVER RATIO

Meaning:

Turnover ratio indicates the efficiency with which the resources are utilized in the business. Turnover means “Sales” So. Turnover is related to the sales.

This turnover ratio includes in it other ratio they are :a) Debtors Velocity Ratiob) Debtors Turnover Ratioc) Fixed Assets Turnover Ratiod) Capital Turnover Ratio

A) Debtor Velocity Ratio :

Meaning:

Debtor ratio shows the number of times of rotation of debtor cycle is done during a year. The ratio shows the number of days taken to collect the dues of credit sale. The lower the ratio good for the company.

This ratio is also known as average collection period or debtor's days or debt collection period. This ratio indicates days within which debts are collected or in other words, sales remain uncollected prompt debt collection is always in the interest of the business, because cash will be ready available.

Formula:

Debtor’s velocity period= 365 days Debtors ratio

2009-10 = 365 4.11

= 89 days

2010-11 = 365 4.84

= 75 days

TABLE:

YEAR Days31-3-2010 8931-3-2011 75

Graph:

31-3-2010 31-3-201165

70

75

80

85

90

95

DEBTORS VELOCITY PERIOD

YEAR

DAYS

Interpretation:

Debtor velocity ratio shows after how many days company will receive payment from the customer or debtors. In the year 2009-10 the ratio is 89 days which shows that company receive payment after 89 days from the date of sale. The ratio decreased to 75 days in the year 2010-11. It means that company receives payment after 75 days from the date of sale, and company will receive its due 14 days earlier than the previous year.

B) Debtors Ratio:

Meaning:

This indicates the number of times average debtors have been converted into cash during a year. It is determined by dividing the net credit sales by average debtors.

Net credit sales consist of gross credit sales minus sales return. Trade debtor includes sundry debtors and bill’s receivables. Average trade debtors (Opening + Closing balances / 2)

When the information about credit sales, opening and closing balances of trade debtors is not available then the ratio can be calculated by dividing total sales by closing balances of trade debtor.

Formula:

Debtor Turnover Ratio = Net Credit SalesAverage Trade Debtors

2009-10 = 18979.67 4617.19= 4.11 times

2010-11 = 21947.76 4534.79= 4.84 times

TABLE:

YEAR Times31-3-2010 4.1131-3-2011 4.84

Graph:

31-3-2010 31-3-20113.6

3.8

4

4.2

4.4

4.6

4.8

5

DEBTORS RATIO

YEAR

TIM

ES

Interpretation:

Debtors’ ratio shows how many times a debtor is converted into cash. In the year 2009-10 the ratio is 4.11 times which shows that company receives payment 4.11 times in a year. The ratio is increased to 4.84 times in the year 2010-11. It means that company receives payment more frequently than the previous year. So, higher is the ratio, good for the company so in the year 2010-11the company has improved its performance with respect to turnover of debtors.

C) Fixed Assets Turnover Ratio:

Meaning:

To ascertain the efficiency and profitability of the business the total fixed assets are compared to the sale. This ratio measured the sale of the company to its total asset used in the business.

It shows how many times sales is greater than asset. If the ratio is higher it means the company is using its fixed assets efficiently. If sale is less as compared to the fixed assets it mean that company is not utilizing its fixed asset efficiency.

This is a difficult set of ratios to interpret as asset values are based on historic cost.

Formula:

Fixed assets turnover ratio = Fixed Assets Net Sales

2009-10 = 2830.27 18979.67

= 0.149

2010-11 = 3354.2121947.76

= 0.153

TABLE:

YEAR Times31-3-2010 4.11

31-3-2011 4.84

Graph:

31-3-2010 31-3-20110.1470.1480.1490.15

0.1510.1520.1530.154

FIXED ASSETS TURNOVER RATIO

YEAR

TIM

ES

Interpretation:

The ratio is higher which shows that a company is efficient in the year 2010-11 the ratio is 0.153:1 times which shows that a sale is 1 times greater than fixed assets. The ratio is in the year 2009-10 is 0.149:1 times which shows that if company has fixed assets of Rs. 100 the company made sale Rs. 149 and in the year 2010-11 if fixed asset is Rs. 100 than the sale is Rs. 153. The ratio is increase in 2010-11 which shows the better utilization of the fixed asset in the company.

D) Capital Turnover Ratio:

Meaning:

Capital turnover ratio measure the sale of the company as compared to the capital employed in the business. It is shows how many times capital is rotated in the business. If capital is Rs. 100 and sales are Rs. 50 then we can say that capital turnover ratio is 5 times.

It measures the sale of the business as compare to its capital employed. The ratio indicates the extent of capital turnover in achieving sales of the firm higher the ratio, better for the company.

Formula:

Capital Turnover Ratio = Sales Capital Employed

2009-10 = 18979.67 11059.3

= 1.716

2010-11 = 21947.7613545.65

= 1.620

TABLE:

YEAR Times31-3-2010 1.71631-3-2011 1.620

Graph:

31-3-2010 31-3-20111.561.581.6

1.621.641.661.681.7

1.721.74

CAPITAL TURNOVER RATIO

YEAR

TIM

ES

Interpretation:

This ratio shows that how much sales is generated with respect to capital employed. In the year 2009-10 the ratio is 1.716:1 times which mean that if Rs. 100 is invested in the business then with the capital of Rs. 100 sales is 171.6 Rs. The ratio decrease in the year 2010-11 it comes to 1.620:1 times which shows that with the capital of Rs. 100 the sale is made of Rs. 162. The ratios are not satisfactory and we can observe that company is not efficiently doing sales with respect to capital employed.

FINANCIAL RATIOMeaning:

Financial ratio indicates the financial balance and stability of a firm.They are divided into two types.

a) Long-term solvency ratio, which represents the solvency of the company over long period of time.

b) Short-term solvency ratio, which indicate the solvency state of the company for a short period of time.

a) Current Ratiob) Liquid Ratioc) Proprietary Ratiod) Debt-Equity Ratio

A) Current Ratio :

Meaning:

Current Ratio is also known as working capital ratio which measures the capability of the company to pay the debt, which is due within 12 months period as compared to current liabilities. It shows company had how much current assets as compared to current liability.

The ideal ratio is 2:1 mean it means company must have 2 times current asset as compared to current liability. The standard ratio by chore commission is 1:33:1 means that company must have current asset of Rs. 1.33 for every current liability of Rs. 1.

Formula:

Current Ratio = Current Assets Current Liabilities

2009-10 = 7329.573591.62

= 2.04

2010-11 = 9247.144951.36

= 1.87

TABLE:

YEAR Times31-3-2010 2.0431-3-2011 1.87

Graph:

31-3-2010 31-3-20111.75

1.8

1.85

1.9

1.95

2

2.05

2.1

CURRENT RATIO

YEAR

TIM

ES

Interpretation:

Current Ratio shows how much company has current asset as compared to current liability. As per the ratio of the year 2009-10 ratio is 2.04:1 which means company has current asset of Rs. 204 for every current liability or Rs. 100. The ratio decrease to 1.87:1 in the year 2010-11. Company’s ratio is not satisfactory from the point of view of ideal ratio and also it does not satisfy the standard ratio of chore commission but it requires further improvement by the company.

B) Liquid Ratio:

Meaning:

Liquid ratio measure the liquid position of the company to pay off its debt within a very short period of time. It shows the liquid asset of the company as compared to its liquid liability.

The standard ratio is 1:1 means that company have liquid asset is equal to liquid liability.

Liquid Asset = Current Asset – stockLiquid Liability = Current Liability - BOD

Formula:

Liquid Ratio = Liquid Assets Liquid Liabilities

2009-10 = 5145.781187.44

= 4.334

2010-11 = 6140.341450.23

= 4.234

TABLE:

YEAR Times31-3-2010 4.33431-3-2011 4.234

Graph:

31-3-2010 31-3-20114.184.2

4.224.244.264.284.3

4.324.344.36

LIQUID RATIO

YEAR

TIM

ES

Interpretation:

Liquid ratio measures the short term liability of the company. Company must have liquid asset is equal to liquid liability. In the year 2009-10 the ratio is 4.334:1 which explain that company has liquid asset of Rs. 4.334 for the liquid liability of Rs. 1. The ratio is good. In the year 2010-11company is having a liquid asset of Rs. 4.234 for liquid liability of Rs. 1. The ratio of the year 2010-11 is decrease than the

ratio of the year 2009-10. But it does not make any difference. The ratio is satisfactory as it satisfies standard ratio.

C) Proprietary Ratio:

Meaning:

The ratio indicates the relationship between proprietors fund and total assets. The proprietary ratio shows the proportion of the proprietary fund to the total asset employed in the business.

The proprietary fund or shareholder fund consists equity share capital reserve and surplus, etc. Total assets include fixed, current and factious assets. This ratio measures the proportion of contribution as compared to the total asset of business.

It show the fund contributed by the owner. Proprietary fund.

Formula:

Proprietary Ratio = Proprietary fund Total Assets

2009-10 = 10959.311077.55

= 0.989

2010-11 = 13445.6513586.02

= 0.990

TABLE:

YEAR Times31-3-2010 0.98931-3-2011 0.990

Graph:

31-3-2010 31-3-20110.98840.98860.98880.989

0.98920.98940.98960.9898

0.990.9902

PROPRITARY RATIO

YEAR

TIM

ES

Interpretation:

Here in the year 2009-10 with the every 1 Rs. of shareholders Rs. 0.989 is invested in the fixed asset. The higher the ratio shows strong position of the business.

It shows that large amount of shareholders fund is invested in fixed asset. The ratio is minor change 0.989 to 0.990 in the year 2010-11. There is no standard ratio for comparison but it should be sufficient to cover the fixed assets. The ratio is no down ward no upward trend.

D) Debt Equity Ratio:

Meaning:

It measures the portion of debt taken by the company as compare to owner’s fund. This ratio shows the relationship between debt and equity of the company.

Debt means outsider fund and it includes debentures, long term borrowings and secured & unsecured loans while, equity is owner’s fund.

Equity = Equity Capital. + Pref. sh. Capital + P & L A/c (All Reserve Surpluses)

The standard debt equity ratio is 1:1 it shows that for every debt of 1 Re company has equity of 1 Re.

Formula:

Debt-equity Ratio = Debt Equity

2009-10 = 18.2511059.3

= 0.002

2010-11 = 40.37 13545.65

= 0.003TABLE:

YEAR Times31-3-2010 0.00231-3-2011 0.003

Graph:

31-3-2010 31-3-20110

0.0005

0.001

0.0015

0.002

0.0025

0.003

0.0035

DEBT EQUITY RATIO

YEAR

TIM

ES

Interpretation:

This ratio helps us to know the proportion of external liabilities in relation to equity shareholder fund. Here, in the year 2009-10 the ratio was 0.002:1 which shows every Rs. 0.002 debt for the shareholder’s fund of Rs. 1. In the year 2010-11 company has moderate change in that ratio. Company is having a debt of Rs. 0.003:1 for shareholder’s fund or equity of Rs. 1. The ratio is satisfactory.

Summary of Ratio

No. Particular Ratio [2010-11)

Ratio [2009-10)

Increase Decrease

1. Gross Profit Ratio 45.89% 48.70% - 2.81%

2. Net Profit Ratio 21.40% 23.76% - 2.36%

3. Operating Ratio 78.60% 76.24% 2.36% -

4. Return on Share holder's fund 0.347Rs. 0.408Rs. - 0.061

5. Debt-equity Ratio 0.003:1 0.002:1 0.001:1 -

6. Capital Turnover Ratio 1.620times 1.716times - 0.096times

7. Fixed Assets Turnover Ratio 0.153times 0.149times 0.004times -

8. Current Ratio 1.87:1 2.04:1 - 0.17:1

9. Liquid Ratio 4.234:1 4.334:1 - 0.1:1

10. Proprietary Ratio 0.990:1 0.989:1 0.001:1 -

13. Debtors Ratio 4.84 times 4.11times 0.73times -

14. Debtors Velocity Ratio 75 days 89 days - 14days

CONCLUSION

This is one of the oldest companies among all other companies. The products produced in this company are comparatively of better quality and different sizes of product are also available here.

The various ratios which we have studied are very important ratios. The company seems to maintain better ratios at a satisfactory level. But the important thing is that the Company has increased its profitability much more than the last year i.e. in the year 2010.