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Contents
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Chapter No. Description Page No.
Chapter – I Introduction 1 - 2
Industry profile 3 - 5
Company profile 6 - 10
Chapter – II Research Methodology 11 - 13
Need for the study
Objectives of the study
Sources of data
Scope & Limitations of the study
Chapter – III Data Analysis and Interpretation 14 – 54
Chapter – IV Findings & Suggestions 55 – 56
Conclusion 57
Annexure 58 – 59
Bibliography 60
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with the planning and controlling of the firm’s finance. Finance is one of the
foundations of all kinds of economic activities. Finance is the life-blood of a
business. The financial management study deals with the process of
procuring necessary financial resource and their judicious use with a view to
maximizing the value of the firm and there by the value of the owners i.e.
equity share holders in a company. Practicing managers are interest in this
subject because among the most crucial decisions of the firm are those which
relate to finance, and an understanding of the theory of financial management
provides them with conceptual and analytical insights to make those decisions
skillfully.
FINANCIAL MANAGEMENT
Financial Management emerged as a distinct field of study at the turn
of this century many eminent persons defined it in the following ways.
DEFINITIONS: -
According the BONNEVILE AND DEWEY:” Financing consists in the
rising, providing and managing of all the money, capital or funds of any kind to
be used in connection with the business”.
According to Prof.EZRA SOLOMAN:”Financial Management is
concerned with the efficient use of any important economic resource, namely
capital funds”.
FINANCE FUNCTIONS: -
It may be difficult to separate the finance functions from production,
marketing and other functions, but the functions themselves can be readily
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identified. The functions of raising funds investing them in assets and
distributing returns earned from assets to shareholders are respectively
known as.
1. Long – term assets-mix (or) Investment Decision
2. Capital – Mix (or) Financing Decision
3. Profit allocation (or) Dividend Decision
4. Short – term asset –Mix (or) Liquidity Decision
GOALS OF FINANCIAL MANAGEMENT:-
• Maximize the value of the firm to its equity shareholders.
• Maximization of profit
• Maximization of earnings per share.
• Maximization of return on equity (defined as equity earnings/net worth)
• Maintenance of liquid assets in the firm.
• Ensuring maximum operational efficiency through planning directing
and controlling of the utilization of the funds.
• Building up of adequate reserves for financing growth and expansion.
INDUSTRY PROFILE
Sugarcane is one of the important crops for the Indian Farmer. Sugar
and Jiggery are the main products that we get from sugarcane. Sugarcane
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belongs to the genus SACCHARAM. The word Sugar is derived from the
Sanskrit word SHARKARAM from which the word SACCHARAM seems to
have been derived indicates the antiquity of knowledge of sugarcane in India.
Sugar Industry is the second largest agro-based industry in India, next to
textiles, producing an all time record of 186.22 lakh tones of direct plantation
sugar as on 30th Arial, 2003. It has emerged as the largest vacuum pan sugar
producer in the world.
Sugarcane is grown in about 102 countries in the world and India
occupies the first rank from the point of area followed by Brazil and Cuba.
Andhra Pradesh occupies the fifth place with regard to cane and cane
production in the country. There are around 490 sugar mills across the
country with an aggregate installed capacity of 16.2 million tones.
The history of sugar industry in India begins in 1903 when a sugar
factory was set up in Bihar and U.P each. In 1932 there were 32 factories
operating in the country. In India, the cultivation of sugarcane is 10,000 miles
tones. The average yield being 56 tones per acre of total cultivating land is
occupied by sugarcane cultivation. Sugarcane is grown in almost all part of
India, except in colder regions and extreme North Jammu& Kashmir,
Himachal Pradesh. The industry has developed at a fast rate in Maharashtra,
Andhra Pradesh, Karnataka and Tamil Nadu. In India U.P leads other States
in Sugarcane production, followed by T.N and Maharashtra.
Sugar comes under the Essential Commodities Act. Ipso facto, there
has been control on all facets of the sugar trade. The licensing regime that
regulates the installed capacity, the minimum support price for cane, the
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reservation of can area for mills and the control over price and movement of
sugar as well its byproduct molasses, have all triggered a situation totally out
of sync with market realities.
The Central Government will allot monthly sales sugar quota for each
factory based on the stock available in the concerned factory Godown. The
Central Government removed the controls imposed under the Essential
Commodities Act, 1955 on stocking and movement and requiring licensing of
dealers in respect of specified commodities with effect from 14th March, 2002
vide government of India’s Notification No. GSR 104(E), dated 15th February,
2002. With the coming into effect of the above order any dealer may freely
by, stock, sell, transport, distribute, dispose, acquire, use or consume any
quantity of wheat, paddy/rice, coarse grains, sugar, edible oil seeds and
edible oil and shall not require a permit or license therefore under any order
issued under the Essential Commodities Act, 1955.
Area wise distribution of sugar industry in A.P.
S.No Sector No. of
Industries
Costal
Area
Rayalaseem
a
Telangana
1 Co-operative 18 12 4 2
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2 Public sector 7 1 1 5
3 Private sector 11 8 2 1
Total 36 21 7 8
The list of Co-operative Sugar factories in A.P.
1. The Chittoor Co-operative sugars ltd, Chittoor.
2. The Chodavaram Co-operative sugars ltd, Chodavaram.
3. The Anakapalle Co-operative sugars ltd, Anakapalle.
4. The Etikuppaka Co-operative agricultural of industrial society ltd,
Ethikuppaka.
5. Sir Vijayarama Gajapathi Co-operative sugars ltd.
6. The Amadavalasa Co-operative agricultural industrial society ltd,
Srikakulam.
7. The West Godavari Co-operative sugars ltd, Eluru.
8. Palakollu Co-operative agricultural & industrial society ltd, Palakollu.
9. The Thandara Co-operative sugars ltd, Visakapatnam.
10. Nizamabad Co-operative sugars ltd, Nizamabad.
11. Sir Venkateswara Cooperative sugars ltd, Renigunta.
12. The Cuddapah Co-operative sugars ltd, Chennur.
13. The Nandyal Co-operative sugars ltd, Ponnapuram.
14. The Kovur Co-operative sugars ltd, Nellore.
15. Nagarjuna Co-operative sugars mills ltd, Gurzala.
16. Nampaneni Venkata Rao Co-operative sugars ltd, Hanuman
Junction.
17. Sri Hanuman Co-operative sugars ltd, Hanuman Junction.
18. Palair Co-operative sugars ltd, Ammagudem.
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COMPANY PROFILE
INTRODUCTION: -
The Chittoor Co-operative Sugars Limited, Chittoor is the first agro-
based major Industry in Rayalaseema area. It was first registered on
22.08.1955 under the APCS Act. Its area of operation comprises of 192
villages in 21 Mandals. Factory is located along Cudalore - Kurnool National
High way No 18, 3 KM towards Kurnool from Chittoor town. It owns 85.96
acres of land. It was first commissioned on 18.1.1963 with a licensed and
installed capacity of 1000 tones cane crushing per a day. During 1974 its
cane crushing capacity has been expanded to 1600 tones a day. Since 1989
modernization is being done in phases. Presently factory is working at an
average cane crushing of 1800-2000 tones a day.
Capital Structure: -
Original project cost was RS.128.50 lakhs.
Present value of the Assets as on 31.3.2000
Rs.lakhs
a) Land 497.19
b) Buildings 423.85
c) Plant & Machinery 1155.70
d) Other Assets 34.73
e) Transport Vehicles 19.94
f) Total 2131.41
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Management: -
At present the elected board has assumed charge on 06.04.2000.
The present board of Directors as detailed below:
President 1
Board of Directors 14
Employees Director 1
Total 16
Chief Executive & Functioning of various Departments: -
a) Chief executive of the society is Managing Director having a seat on
the Board.
b) There are five major departments:
1. Administrative
2. Engineering
3. Manufacturing
4. Agriculture
5. Accounts & finance
c) All aspects of Accounting, sugar cane weighment and laboratory
analysis reports are computerized during 1989-90. For better cane
regulation, wireless System was also introduced during 1989. At all 8
division Head Quarters and at Administrative Office Wireless Stations
and sets are installed.
d) All policy matter is decided by Board/person-in-charge.
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Cane price: -
Before commencement of sugar cane crushing season, Government of
India notifies statutory minimum cane price payable by each sugar factory.
This is to be paid with in 14 days from the date of purchases. Over and above
the statutory minimum cane price state Government announces a State
advisory price payable by each Sugar Factory. This SAP is being paid by us.
We have crushed cane for the season 1999-2000 is 2, 82,202,592 Mts with
an average recovery 9.03%.
Sugar: -
Out of total sugar production of each season, 30% shall be delivered
to Government nominees for public distribution system at notified levy price.
For every season Government of India Notifies levy sugar price applicable to
each Sugar Factory. Every month. Open market sugar is sold on tender
system and is delivered against payment of cost plus duties.
Molasses: -
Molasses is a by product in the courses of manufacture of sugar. From
1993 June molasses prices are decontrolled. Molasses is sold by inviting
tenders on All India basis by publishing Tender notice.
Engineering & Manufacturing Departments: -
During off season engineering and manufacturing departments attend
to overhauling and preventive maintenance and keep ready the plant for Cane
Crushing. During season factory works round the Clock in three shifts.
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Cane Department:-
Cane department is provided with sufficient executive staff. They
collect cane supply offers, from cane growers. Offers are being accepted
restricting the quantities to individual member's 5 years supply average. Crop
loans are sanctioned by Banks under tie up arrangements with factory. One
month before commencement of Cane crushing, prepares maturity survey is
conducted by drawing cane samples from agreement Cane fields. They are
analyzed in Factory’s laboratory. Based on the analysis, cane harvest &
supply permits are issued to cane supply members limiting to factories daily
cane crushing capacity. Factory provides about 60 to 80 hired Lorries to
needy growers. 50% of transport charges up to 40km distance are subsidized
by factory. Transport charges beyond 40 km are subsidized 100%.
Liaison Farm: -
Factory is having a sugar cane liaison farm in an extent 4.80 Hec.
Factory brings improved varieties from sugar Cane research stations
multiplies in its liaison farm and supplies seed to growers.
Total Strength of the Establishment:-
1. Permanent (Non Seasonal) 68
2. Seasonal Permanent 94
3. Consolidate Wages (Seasonal) 167
4. Daily Wager (NMR) 244
5. Total 573
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Wage Structure: -
The Wages of workers are covered by "Sugar Wage Board"
recommendations at “All India level". The minimum monthly wage of an
unskilled worker at starting of timescale is Rs.3901/-.Sugar year (season) is
recorded from 1st Oct to 30th Sep next year. Generally cane crushing
operations are commenced during 3rd week of November and continued up to
end of April next year. From May to October is off-season.
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RESEARCH METHODOLOGY
NEED OF THE STUDY
Financial statements are prepared for the purpose of presenting a
periodical review or report by the management and deal with the state of
investment in business and result achieved during the period under review.
They reflect a combination of recorded facts, accounting conventions and
personal judgments.
The Ratio Analysis is the most powerful tool of the financial analysis.
These people use rations to determine those financial characteristics of the
firm in which they are interested. With the help of ratios, one can determine:
1. The ability of the firm to meet its current obligations.
2. The extent to which the firm has used its along-term solvency by
borrowing funds.
3. The efficiency with which the firm is utilizing its assets ingenerating
sales revenue.
4. The overall operating efficiency and performance of the firm.
OBJECTIVES OF THE STUDY
The following are the objectives of the study:
• To assess the liquidity and profitability of CCS Ltd.
• To study financial position of the CCSL Ltd.
• To analyses the turn over efficiency of The CCS Ltd.
• To know the impact of liquidity solvency and turnover efficiency on the
shareholders of The CCS Ltd.
• To suggest feasible solution to improve the overall efficiency of The
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CCS Ltd.
SOURCES OF DATA
Primary Data
The primary data was collected mainly with the interactions and
discussions with the company’s executives.
Secondary Data
Most of the calculations are made on the financial statements of the
company and the company provided financial statements for 5 years.
Some of the information regarding to the theoretical aspects were
collected by referring standards texts and through internet.
SCOPE OF THE STUDY
• This project is as a reference guide or as a source of information. It
gives the idea about the financial analysis of a firm.
• The study aims to study the liquidity position of the firm. Ratio Analysis
has been used to analyses the financial position of a firm.
• It deals with analysis an interpretation of data collected through the
sources primary and secondary data. Graphs and diagrams and
tabulation method are used to analyze and interpret the data collected.
LIMITATIONS OF THE STUDY
• The information used is primarily from historical reports available to the
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public and the same doesn’t indicate the current situation of the firm.
• Detailed analysis could not be carried for the project work because of
the limited time span.
• Since financial matters are sensitive in nature these same could not be
acquired easily.
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RATIO ANALYSIS
Ratio Analysis is one of the powerful tools of the financial analysis. A
ratio can be defined as “The indicated quotient of two mathematical
expressions” and as “the relationship between two or more things”. Ratio is
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thus, the numerical or an arithmetical relationship between two figures”. Ratio
is, thus, the numerical or an arithmetical relationship between two figures. It
is expressed where on figure is divided by another. In finance analysis ratio is
used as a benchmark of a firm.
A ratio is the relationship between two accounting items expressed
mathematically. Ratio analysis helps the analyst to make quantitative
judgment with regard to concern’s financial position and performance. This
relationship can be expressed as a percentage or as quotient.
Ratio analysis is the systematic use of ratio to interpret the financial
statements so that the strengths and weakness of a firm as well as its
historical performance and current financial position can be determined.
Undisputedly the ratio analysis occupies place of prime importance.
DEFINITION:-
According to Prof. Spring field, Prof. Mass & Merrium, a ratio is defined
as “The indicated quotient of two mathematical impression” and as “The
relationship between two (or) more things”
SIGNIFICANCE OF RATIO ANALYSIS
Ratio analysis is of great help of commercial bankers, trade creditors
and institutional lenders. They judge the ability of borrowing enterprises by
observing various ratios like the current ratio, acid test ratio, and turnover of
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receivables, inventory turnover, and coverage of interest by the level of
earnings.
Ratio analysis also helps long term creditors in knowing the ability of a
borrowing enterprises to pay interest principal in case earnings decline they
find valuable the ratios of total debt to equity and total debt to total assets.
Investors in shares judge the performance of the company by
observing the per share into ratios like earnings per share, book value per
share, market price per share, dividends per share etc.
Lastly, ratio analysis is of great use of the management of the firm.
Management of the firm is interested in every aspect of ratio analysis as it is
their over all responsibility to see that the resources of the firm are used most
efficiently and effectively and that the firms financial conditions is sound.
STANDARDS FOR COMPARISON
For making a proper use of ratios, it is essential to have fixed standard
for comparison. A ratio by itself has very little meaning unless it is compared
to some appropriate standard. Selection of proper standards of comparison is
a most important element is ratio analysis. The four most common standard
used in ratio analysis are as follows:
1. Absolute 2. Historical
3. Horizontal 4. Budgeted
1. Absolute: -
Absolute standards are those, which become generally recognized as
being desirable regardless of the type of the company, the time, stage of
business cycle, or the objectives of the analyst.
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2. Historical: -
Historical standards involve comparing a company’s own past
performance as a standard for the present or future. But this standard may
not provide sound basis for judgment, as the historical figure a may not have
represented an acceptable standard.
3. Horizontal: -
Incase of horizontal standards one company is compared with another
or with average of other companies of the same nature. It is also called as
intra-firm comparison.
4. Budgeted: -
The budgeted standard is arrived at after preparing the budget for a
period. Ratios developed from actual performance are compared to the
planned ratios in the budget to examine the degree of accomplishment to the
anticipated targets of the firms.
ADVANTAGES OF RATIO ANALYSIS
1. It facilitate inter firm comparison. It reveals how well it serves. As a
useful aid in financial forecasting future trends can be known in
advance based on ratios relating to part sales, profits and financial
position.
2. It facilitates comparative study of the performance and, progress of a
firm over a period of years. Such a study will reveal the directions in
which the firm is moving.
3. It serves as a useful tool for cost control. It reveals now efficiently a
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firm is managed and how effectively its assets are utilized.
• It serves as a means of communication to report on the strength and
financial standing of a firm to the management and external parties.
• It facilitates trend analysis. It reveals the progress or decline of a firm over
the years.
• It serves as diagnostic too to assess the financial health of a firm. It
through light on its liquidity, solvency, profitability and capital gearing
position.
OBJECTIVES OF RATIO ANALYSIS
Ratio Analysis is the principal tool for analysis of financial statements.
Other conducts it not only by management but also like suppliers, banks
tending, and institutions, prospective investors etc.
The following are usually the objectives for which ratio analysis
is conducted.
I. To evaluate financial position and performance of a firm.
II. To indicate the trend or progress or down fall of a firm.
III. To assess the credit worthiness of a firm,
IV. To assess the efficiency with which working capital is being used in
a firm.
LIMITATIONS OF RATIO ANALYSIS
Standards for Comparison
Ratios of a company have meaning only when they are compared with
some standards and it is always a challenging job to find and adequate
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standard.
Company Differences
Situations of two companies are never same. Similarly the factors
influencing the performance of a company in one year change in another
year. Thus, the comparison of the ratios of two companies becomes difficult
and meaning less when are operating in different situations.
Price Level Challenges
The interpretation and comparison of the ratios are also rendered
invalid by the changing value of money; a change in the price level can
seriously affect the validity of comparison of ratios computed for different time
periods.
A STUDY OF RATIO ANALYSIS
Several ratios, calculated from the accounting date, can be grouped
into various classes according to financial activity or function to be evaluated.
Ratios are complied and studied for profitability’s, assessment of financial
position sufficiency of working capital strategies perused by the organization
short term and long term solvency. Liquidity etc
TYPES OF RATIOS
Classification according to nature of accounting statements is divided
into three categories there are:
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1. Balance sheet Ratios
2. Profit and Loss A/C Ratios
3. Combined Ratios
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1. Balance sheet Ratios: -
These ratios are calculated to judge the financial position of the
concern from long-term as well as short-term solvency point of view. These
ratios can be divided into two broad categories.
A. Liquidity Ratios: -
If it is decided to study the liquidity position of the concerns, in order to
highlight the relative strength of the concerns in meeting their current
obligations to maintain sound liquidity and to pin point the difficulties if any in
it, then liquidity ratios are calculated. These ratios are used to measure the
firm’s ability to meet short-term obligations. The important liquidity ratios are:
CURRENT RATIO:-
This is the most widely used ratio. It is the ratio of current assets to
current liabilities. It shows a firm’s ability to cover its current liabilities with its
current assets. This is also known as Working Capital Ratio. It is expressed
as follows:
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R A T I O S
YEARS
0
0.5
1
1.5
2
2.5
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
Current ratio measures the firm’s short-term solvency. The standard
norm for current ratio is (2:1). It is evident that in the year 2005-06 Current
Ratio 2.00 is satisfactory. In remaining years current ratio is less then 2 is not
satisfactory. There fore it can be calculated that the liquidity performance of
the company is poor.
QUICK RATIO: -
It shows a firm’s ability to met current Liabilities with its most liquid
(quick) Assets. Liquid Assets are those assets, which are readily converted
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into cash. This is also known as Liquid Ratio and Acid Test Ratio. It is
calculated as under;
=LiquidAssets
LiquidRatioCurrentLiabilities
TABLE 4.2
Year Wise Liquid Assets and Current Liabilities of
The CCSL Ltd., Chittoor.
YEAR LIQUID ASSETS CURRENTLIABILITIES
RATIO
IN %
2002-2003 6,80,79,952 18,91,05,178 0.36
2003-2004 7,90,11,591 14,23,09,387
0.55
2004-2005 9,79,87,205 14,87,32,016 0.66
2005-2006 7,66,08,657 18,96,05,315 0.40
2006-2007 9,34,86,511 27,31,27,341 0.34
(Source: Annual Reports of the CCSL)
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R A T I O S
YEARS
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
This is the more penetrating test of liquidity than the current ratio.
Generally a quick ratio is 1:1 it considered to represent a satisfactory current
financial condition. The quick ratio has never exceeded the standard ratio.
Empirically the quick ratio has increased from 0.36 to 0.66 in 2002-03 to
2004-05 and declined from 0.40 to 0.34 in 2005-06 to 2006-07. Therefore it
can be concluded the liquidity performance of the company is absolutely poor.
CASH RATIO: -
Cash is most liquid Asset, a financial analyst may examine cash ratio
and it’s equivalent to current liabilities. Trade investment or marketable
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securities are equivalent of cash; therefore, they may be included in the
computation of cash ratio. This Ratio also known as Absolute and Super
Quick Ratio.
+ −=
CashandBankBalance Short termmarketableSecuritiesCashRatio
CurrentLiabilities
TABLE 4.3
Year Wise Cash and Bank Balance plus short term securities and
Current Liabilities of
The CCSL Ltd., Chittoor.
YEAR CASH AND BANK CURRENT LIABILITIES
RATIO
IN %
2002-2003 53,79,219 18,91,05,178 0.028
2003-2004 1,59,03,765 1,23,09,387 0.11
2004-2005 2,00,18,969 14,87,32,016 0.13
2005-2006 73,90,813 18,96,05,315 0.03
2006-2007 1,79,39,018 27,31,27,341 0.06
(Source: Annual Reports of the CCSL)
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R A T I O S
YEARS
0
0.02
0.04
0.06
0.08
0.1
0.12
0.14
2003 2004 2005 2006 2007
2006-072005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
The desirable norm for cash ratio is 1:2. The cash ratio is very low in
2002-03, 2005-06 and 2006-07 years. There after it is increased slightly that
is 0.028, 0.11 and 0.13 on the years 2002-03 to 2004-05 respectively and
declined in 2005-06 to 0.03 then increases in 2006-07 to 0.06. Anyway finally
the company failed in keeping sufficient cash and bank balance and
marketable securities.
B. CAPITAL STRUCTURE RATIOS: -
These ratios help in ascertaining the long term solvency of a firm which
depends on firm’s adequate resources. To meet its long term funds
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requirements, appropriate debt equity mix to raise long term and earnings to
pay interest and installment of long term loans in time. The following ratios
can be calculated for this purpose:
DEBT EQUITY RATIO: -
This ratio is calculated to measure the relative proportions of outsider’s
funds and shareholders funds invested in the company. This ratio is
determined to ascertain the soundness of long-term financial policies of the
company and is also known as external equity ratio. It is calculated as
follows.
Term liabilities + Current LiabilitiesTotal Debt Ratio =
Equity
Debt to equity Ratio of 2:1 in case of (i) and 2:3 in cases (ii) are acceptable.
TABLE 4.6
Year Wise Fixed Assets and Capital Employed of
The CCSL Ltd., Chittoor.
YEAR LONG TERM DEBTSSHAREHOLDERS
FUNDS
RATIO
IN %
2002-2003 26,44,52,746 36,03,55,888 0.73
2003-2004 25,26,34,919 36,96,88,184 0.68
2004-2005 29,52,27,768 38,90,49,404 0.76
2005-2006 43,53,64,852 39,30,37,111 1.10
2006-2007 44,09,04,310 39,81,47,818 1.10 (Source: Annual Reports of the CCSL)
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R A
T I O S
YEARS
0
0.2
0.4
0.6
0.8
1
1.2
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
This ratio gives results relating to the capital structure of the firm. 2:3 is
the acceptable Debt Equity Ratio. Empirically the debt equity ratio declined
only in the year of 2003-04 (0.68) remaining that all years were increased
from 0.78 to 1.10. Therefore 1.10 means lenders have financed of CCSL
Capital Employed in 2006-07.
PROPRIETORY RATIO: -
A variant of debt to equity ratio is the proprietary ratio, which shows the
relationship between shareholders funds and total tangible assets. It focuses
the attention on the general financial strength of the business enterprise. This
ratio is worked out as follows:
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Shareholders FundsProprietary Ratio =
Total tangible Assets
TABLE 4.7
Year Wise Shareholders funds and Tangible Assets of
The CCSL Ltd., Chittoor.
YEAR SHAREHOLDERS
FUNDS
TOTAL TANGIBLE
ASSETS
RATIO
IN %
2002-2003 36,03,55,888 44,71,78,755 0.80
2003-2004 36,96,88,184 33,48,90,237 1.19
2004-2005 38,90,49,404 35,26,39,909 1.10
2005-2006 39,30,37,111 53,78,62,810 0.73
2006-2007 39,81,47,818 51,71,71,520 0.76
(Source: Annual Reports of the CCSL)
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YEARS
R A T I O S
0
0.2
0.4
0.6
0.8
1
1.2
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION:-
The proprietary ratio is variant of Debt Equity ratio. The standard norm
for proprietary Ratio is 1:3. The shareholder funds are high then compare to
total tangible assets. Empirically in the years 2003-04 and 2004-05 it is very
high that is 1.19 and 1.10. Therefore the company having a poor proprietary
ratio.
2) PROFITABILITY RATIO: -
Profitability is the overall measure of the companies with regard to
efficient and effective utilization of resources at their command.
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A company should earn profits to survive and grow over a long period
of time. Profitability reflects the final result of business operation of the
business, to be able to funds from investors and for expansion and growth
and to contribute toward social overheads for the welfare of the society.
GROSS PROFIT RATIO: -
The gross profit should be adequate to cover fixed expenses dividends
and building up of reserves. Higher the ratio, the better it is. A low ratio
indicates unfavorable trend in the form of reduction in selling prices. This ratio
tells gross margin on trading and is calculated as under:
= ×GrossProfit
GrossPr ofitRatio 100NetSales
TABLE 4.25
Year Wise Gross Profit and Net Sales of
The CCSL Ltd., Chittoor.
YEAR GROSS PROFIT NET SALESRATIO
IN %
2002-2003 -3,76,45,558 20,14,86,573 -0.186
2003-2004 -2,50,57,043 13,05,17,437 -0.191
2004-2005 -53,23,482 6,99,20,394 -0.07
2005-2006 4,96,30,153 12,40,87,187 0.3992006-2007 -3,64,74,371 36,88,53,567 -0.098
(Source: Annual Reports of the CCSL)
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YEARS
R
A T I O S
-0.2
-0.1
0
0.1
0.2
0.3
0.4
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
It expresses the relationship of gross profit on sales. A high gross
profit ratio indicates a sign of good management as it implies that the cost of
production is kept at low level. The GP Ratio seems negative balance accept
the year 2006-07 of 39.9. The CCSL is maintaining poor grass profit ratio.
OPERATING RATIO:-
This ratio indicates the proportion that the cost of sales bears to sales.
Cost of sales includes direct cost of goods sold as well as other operating
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expenses (i.e., Administration, Selling and Distribution Expenses) which have
matching relationship with sales. It is calculated as Follows:
+= ×
Costof GoodsSold OperatingExpensesOperatingRatio 100
NetSales
TABLE 4.26
Year Wise Cost of Goods Sold, Operating Expenses and Net Sales of
The CCSL Ltd., Chittoor.
YEARCOST OF GOODS SOLD +
OPERATING EXP.,NET SALES
RATIO
IN %
2002-2003 180854056 201486573 0.897
2003-2004 43149294 130517437 0.330
2004-2005 126380237 69920394 1.807
2005-2006 297068848 124087187 2.394
2006-2007 399471811 368853567 1.083
(Source: Annual Reports of the CCSL)
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The difference between Current Assets and Current Liabilities
excluding short-term bank borrowing in called Net Working Capital or Net
Current Assets. Net Working Capital is some times used as a measure of a
firm’s Liquidity.
=NetWorkingCapital
NetWorkingCapitalRatioNetAssets
TABLE 4.5
Year Wise Net Working Capital and Net Assets of
The CCSL Ltd., Chittoor.
YEARNET WORKING
CAPITALNET ASSETS
RATIO
IN %
2002-2003 9,86,37,579 62,48,08,634 0.158
2003-2004 3,35,51,944 6,22,32,103 0.54
2004-2005 5,92,98,349 68,42,77,172 0.862005-2006 19,23,69,866 82,84,01,963 0.23
2006-2007 9,99,01,841 83,53,54,221 0.20
(Source: Annual Reports of the CCSL)
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YEARS
R
A T I O S
0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
0.8
0.9
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
The Net Working Capital Ratio declined from 0.86 in 2004-05 to 0.12 in
2006-07 and increased 0.16 in 2002-03 to 0.86 in 2006-07. The company has
not sufficient working capital. The lowest ratio in the year 2006-07 is 0.20 and
the highest ratio in the year 2004-05 is 0.86.
FIXED ASSETS TURNOVER RATIO: -
It measures the efficiency of the Assets use. The efficient use of
assets will generate greater sales per rupee invested in all the Assets of a
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concern. This ratio shows how well the fixed assets are being used to
generate sales in the business.
The ratio expresses the number of times fixed assets are being
turnover in a stated period. It is calculated as under:
=Sales
FixedAssetsTurnoverRatioNetFixedAssets
TABLE 4.11
Year Wise Sales and Net Fixed Assets of
The CCSL Ltd., Chittoor.
YEAR SALES NET FIXED ASSETS
RATIO
IN %
2002-2003 20,14,86,573 22,21,36,732 0.91
2003-2004 13,05,17,437 22,21,36,732 0.59
2004-2005 6,99,20,394 22,25,77,781 0.31
2005-2006 12,40,87,187 22,51,07,533 0.55
2006-2007 36,88,53,567 23,58,34,849 1.56
(Source: Annual Reports of the CCSL)
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YEARS
R A T I O S
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
This ratio measures the efficiency of the assets use. The high ratio is
the better performance. On the other hand, a low ratio indicates that fixed
assets are not being efficiently utilized. Therefore the CCSL did not utilize
well. Only in the years 2002-03 and 2006-07 utilized the fixed Assets
effectually.
TOTAL ASSETS TURNOVER RATIO: -
This ratio is calculated by dividing the net sales by the value of total
assets. A higher ratio is an indicator of over-trading of total assets while a low
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reveals idle capacitor. The traditional standard for the ratio is two times.
=NetSales
TotalAssetsTurnoverRatioTotalAssets
TABLE 4.12
Year Wise Net Sales and Total Assets of
The CCSL Ltd., Chittoor.
YEAR SALES TOTAL ASSETS
RATIO
IN %
2002-2003 20,14,86,573 51,46,60,808 0.39
2003-2004 13,05,17,437 40,27,85,783 0.32
2004-2005 6,99,20,394 43,59,05,864 0.16
2005-2006 12,40,87,187 60,98,74,373 0.20
2006-2007 36,88,53,567 61,16,60,751 0.60
(Source: Annual Reports of the CCSL)
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R A T I O S
YEARS0
0.1
0.2
0.3
0.4
0.5
0.6
0.7
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
The traditional standard for the ratio is two times. In the year 2006-07
got the higher total Assets Turnover ratio 0.60 on other hand lower ratio got in
the year 2004-05 of 0.16. Therefore the CCSL indicates idle capacity of total
Assets.
CURRENT ASSETS TURNOVER RATIO: -
By calculating this ratio we can that, for generating a sale of one rupee
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YEARS
R A T I O S
0
0.2
0.4
0.6
0.8
1
1.2
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
The higher CATR more efficient in management and utilization of
assets. Empirically the current asset turnover ratio is declined from 0.74 to
0.32 in years 2003-04 to 20005-06. The higher turnover recorded in the year
2006-07 i.e. 0.99. Therefore we conclude that the current Asset turnover ratio
of company shows poor results.
INVENTORY TURNOVER RATIO: -
It denotes the speed at which the inventory will be converted into sales,
thereby contributing for the profits of the concern. When all other factors
remain constant, greater the turnover of inventory more will be efficiency of its
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management. This ratio is calculated as follows:
=Costof GoodsSold
InventoryTurnoverRatio AverageStockheldduringthePeriod
TABLE 4.14
Year Wise Cost of Goods Sold and Average Stock held during
the period of
The CCSL Ltd., Chittoor.
YEARCOST OF GOODS
SOLDAVERAGE STOCK
RATIO
IN %
2002-2003 16,82,44,221 23,41,47,891 0.718
2003-2004 3,26,16,707 13,75,97,982 0.237
2004-2005 1,15,24,675 8,28,84,312 0.139
2005-2006 26,08,49,917 18,27,22,687 1.4272006-2007 38,23,18,650 26,48,82,289 1.443
(Source: Annual Reports of the CCSL)
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YEARS
R A T I O S
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERIPRETATION: -
The inventory turnover ratio indicates the efficiency of the firm in
producing and selling its products. A low inventory turnover implies excessive
inventory levels than required for production. The company have high ratio of
inventory except in the 2005-06 i.e. 0.139 it is not good. That is all stock
stored in god owns.
CAPITAL TURNOVER RATIO: -
It shows the efficiency of capital employed in the business by
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computing how many times capital employed is turned-over in a stated period.
The ratio is ascertained as follows:-
= SalesCapitalTurnoverRatioCapitalEmployed
TABLE 4.15
Year Wise Sales and Capital Employed of
The CCSL Ltd., Chittoor.
YEAR SALES CAPITAL EMPLOYED RATIO
IN %
2002-2003 20,14,86,573 62,48,08,634 0.32
2003-2004 13,05,17,437 62,23,23,103 0.21
2004-2005 9,69,20,394 68,42,77,172 0.14
2005-2006 12,40,87,187 82,84,01,963 0.15
2006-2007 36,88,53,567 83,90,52,028 0.44
(Source: Annual Reports of the CCSL)
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YEARS
R
A T I O S
0
0.05
0.1
0.15
0.2
0.25
0.30.35
0.4
0.45
0.5
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
The high capital turnover ratio it indicates greater profit on other hand
when it is low it indicates sufficient sales are not being made and profits and
lower. Empirically, the actual capital turnover ratio has declined from 0.32 to
0.14 and increased from 0.15 to 0.44 in 2005-06 to 2006-07. Finally the CCSL
capital Turnover Ratio is not Satisfactory. In the year 2006-07 is 0.44 the
CTR recorded.
WORKING CAPITAL TURNOVER RATIO: -
This ratio is also known as Sales to Working Capital. It shows the
number of times working capital is turned-over in a stated period. The higher
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is the ratio, the lower is the investment in working capital and the greater are
the profits. It is calculated as follows.
= SalesWorkingCapitalTurnoverRatioNetWorkingCapital
TABLE 4.16
Year Wise Sales and Net Working Capital of
The CCSL Ltd., Chittoor.
YEAR SALESNET WORKING
CAPITAL
RATIO
IN %
2002-2003 20,14,86,573 9,86,37,578 2.04
2003-2004 13,05,17,437 3,35,51,944 3.89
2004-2005 6,99,20,394 5,92,98,348 1.18
2005-2006 12,40,87,187 19,23,67,806 0.642006-2007 36,88,53,567 9,99,01,842 3.69
(Source: Annual Reports of the CCSL)
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YEARS
R A T I O S
0
0.5
1
1.5
2
2.5
3
3.5
4
4.5
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
This ratio measures the relationship between sales and net working
capital. In the years2003-04 and 2006-07 recorded as the highest working
capital turnover ratio i.e. 3.89 and 3.69 respectively. In the year 2005-06
recorded as the lowest working capital turnover ratio. The higher indicates
more favorable it is for the company. In CCSL WCTR is highly fluctuating in
the ratios
DEBTORS TURNOVER RATIO: -
It indicates the number of times on the average the receivable is turn
over in each year. The higher the value of ratio, the more is the efficient
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management of debtors. It measures the accounts receivables in terms of
number of days of credit sales during a particular period. It is calculated as
follows;
=CreditSales
DebtorsTurnoverRatio AverageDebtors
TABLE 4.18
Year Wise Credit Sales and Average Debtors of
The CCSL Ltd., Chittoor.
YEAR SALES AVERAGE DEBTORS
RATIO
IN %
2002-2003 20,14,86,573 5,38,40,312 3.74
2003-2004 13,05,17,437 5,46,53,535 2.39
2004-2005 6,99,20,394 6,09,75,610 1.15
2005-2006 12,40,87,187 6,28,32,487 1.97
2006-2007 36,88,53,567 5,90,67,738 6.24
(Source: Annual Reports of the CCSL)
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YEARS
R A
T I O S
0
1
2
3
4
5
6
7
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
The debtor’s turnover ratio indicates the rate of which cash is
generated by turnover of debtors. The debtor turnover ratio indicates a non-
satisfactory collection program. Empirically the debtor’s turnover ratio was
declined from 3.74 to 1.15 in the years 2002-03 to 2004-05. Then it is
increased form 1.97 to 6.24 in the years 2005-06 and 2006-07 respectively.
The high value of DTR was more efficient in management of credit. Therefore
we conclude that there is being poor debtor’s turnover ratio maintained by
CCSL.
DEBTORS COLLECTION PERIOD:-
It indicates on an average that credit sales are pending uncollected by
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the concern. The also reflects the credit policy and terms of the concern. It
shows the quality of debtors since it ventilates the speed at which debtors are
collected. The collection period will be calculated as under.
=
Daysinayear CollectionPeriod
DebtorsTurnoverRatio
TABLE 4.19
Year Wise Days in a year and Debtors Turnover Ratio of
The CCSL Ltd., Chittoor.
YEAR DAYS IN A YEARDEBTORS TURNOVER
RATIO
RATIO
2002-2003 365 0.74 97.59
2003-2004 365 2.39 152.72
2004-2005 365 1.15 317.39
2005-2006 365 1.97 185.28
2006-2007 365 6.24 58.49
(Source: Annual Reports of the CCSL)
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YEARS
R A T I O S
0
50
100
150
200
250
300
350
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
INTERPRETATION: -
Collection period measures the rapidity or slowness with which money
is collected from them. The average number of days for which the debtors
remain outstanding. Empirically the average collection period rose from 97.9
to 317.39 in the years from 2002-03 to 2004-05. Then reduced slightly from
185.28 to 58.49 in the years from 2005-06 to 2006-07
CREDITORS TURNOVER RATIO:-
This ratio gives the Average Credit period enjoyed from the creditors. A
low ratio indicates that creditors are not paid in time while a high ratio gives an
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0
0.5
1
1.5
2
2003 2004 2005 2006 2007
2006-07
2005-06
2004-05
2003-04
2002-03
R A T I O S
YEARS
idea that the business is not taking full advantages of credit period allowed by
the creditors.
=CreditPurchases
CreditorsTurnoverRatio Aberage AccountsPayable
TABLE 4.20
Year Wise Credit Purchases and Average Account Payable of
The CCSL Ltd., Chittoor.
(Source: Annual Reports of the CCSL)
INTERPRETATION: -
The creditor’s turnover ratio on the basis of credit purchases. Low ratio
indicates that creditors are not paid in time. In the period of 2003-04 company
did not purchase raw material so in that period the creditor’s ratio is nil. In
YEAR PURCHASESAverage Accounts
Payable
RATIO
IN %
2002-2003 10,57,81,021 9,45,03,276 1.12
2003-2004 4,74,68,010 7,11,05,381 0.66
2004-2005 5,68,36,705 7,43,16,695 0.80
2005-2006 17,43,54,860 9,47,53,345 1.84
2006-2007 24,08,95,871 13,65,14,358 1.76
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2004-05 recorded low ratio i.e. 0.80 it is not good. In the year 2005-06 and
2006-07 recorded high ratio 1.84 and 1.76 respectively
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increased to 39.90 in 2005-06, but it was not sufficient to the company.
It is shows very poor performance of the company. Remaining years
are shows loss.
The operating expenses are too high in this study. The operating
expenses are very large than the sales. The position is very danger to
the CCSL.
SUGGESTIONS
The CCSL has to increase its current asset such as cash in hand and cash
at bank etc. By disposing off the unutilized assets such as old machinery
and there by increase its liquidity position. The company has to maintain
standard liquidity ratios to meet the liquidity obligation.
The company is maintaining the lower equity fund. But, the CCSL having
the insolvency position for increasing the debt fund. It is suggest that the
company has to convert the reserves to assets.
The Debtor Turnover Ratio has decreased from 5.07 times to 1.98 times.
Generally, the higher the value of Debtor Turnover, the more efficient to
the management of credit. The CCSL has to improve the debt collection
ratio.
The lower gross profit margin might reflect higher cost of goods sold due
to the firm’s inability to purchase raw material (can etc.,) at favorable term,
inefficient utilization of plant and machinery of over investment in plant and
machinery, resulting in higher cost of production. It suggests the Chief
Account Officer has detected the causes of a falling Gross margin and
initiate action to improve the Gross Margin.
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Cash on Hand 12,83,980 22,575 18,78,931 141,219 95,083Balance with Bank:-
Current Account
Saving Account
17,15,099
23,80,140
13,49,422
1,45,31,768
91,72,861
89,67,176
1,66,827
70,82,767
33,68,313
Shares in other Co-
operative Institutions 2,28,550 2,28,550 2,28,550 2,28,550 2,28,550Deposits with various
Agencies 12,54,826 12,61,226 12,71,226 12,67,226 12,67,226Fixed Deposits with Banks
2,50,000 22,50,000 27,50,000 2,50,000 2,50,000Loan’s & Advances to
Members 64,61,883
63,86,630 90,85,236 87,82,893 1,41,93,990Loans to other Co-op.,
Sugar Factories 30,00,000 10,00,000 10,00,000 10,00,000 10,00,000 Adjusting Heads “Due to”
5,44,12,361 5,48,94,708 6,70,56,512 586,08,462 5,95,27,013Interest Receivable 18,26,489 18,26,489 18,26,489 18,26,489 18,26,489
Value of Assets 12,62,06,460 12,62,06,460 1266,47,509 12,91,77,261 13,99,04,578Value of Closing Stock
1. Stores Stocks
2. Packing Material
3. Stationery
4. Sugar
5. Sugar in Process
6. Molasses
7. Molasses in
Process
8. FMP Raw Material
& Feed
9. Pesticides
10. Fertilizers
2,02,69,709
1,78,240
26,375
19,19,96,948
2,54,382
69,07,475
9,200
20,474
00
00
2,01,00,2
65
1,78,240
18,671
7,60,05,445
2,34,802
2,86,092
5,7
50
20,474
00
00
2,00,46,5
21
93,100
43,727
7,88,6,404
00
1,06,60,683
00
20,474
362250
00
200,66,210
6,85,016
28,366
26,77,46,257
82,93,497
82,22,629
3,02,613
20,474
00
00
1,88,
22,314
22,784
40,809
24,67,11,289
62,98,461
66,19,003
8,01,5
97
20,4
74
00
205940
Deficits 47,944 47,944 47,944 47,944 47,944
Total 51,46,60,807 40,27,85,782 43,59,05,864 60,98,74,333 611660751
66
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http://slidepdf.com/reader/full/42610615-ratio-analysis-project-report 67/68
BIBLIOGRAPHY
1. Pandey I.M, FINANCIAL MANAGEMENT, Vikas Publishing House
Pvt., Ltd., New Delhi, 9th Edition
2. Jain S.P & Narang K.L, FINANCIAL ACCOUNTING & ANALYSIS,
67
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http://slidepdf.com/reader/full/42610615-ratio-analysis-project-report 68/68
kalyani Publishers, Ludhiana.
3. Prasanna Chandra, FUNDAMENTALS OF FINANCIAL
MANAGEMENT, Tata Mc Graw-Hill Publishing Company Ltd.,
New Delhi.
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