A Study on the Financial Perfomance of Western India Plywoods

A STUDY ON THE FINANCIAL PERFOMANCE OF THE WESTERN INDIA PLYWOODS LTD.

BALIAPATANAM KANNUR

PROJECT REPORT

Submitted in partial fulfilment

of the requirement for the Degree of

MASTER IN BUSINESS ADMINISTRATION

University of Calicut

BYAZHAR K.P

REGISTER No. MKAIMBA 007

UNDER THE GUIDENCE OF

Prof. Saji Kuriakose MBA, PGDIT

HEAD DEPARTMENT OF MANAGEMENT SCIENCE

MES COLLEGE OF ENGINEERING

DEPARTMENT OF MANAGEMENT SCIENCEMES COLLEGE OF ENGINEERING

(Affiliated to University of Calicut)

Project Report 2009 Western India Plywoods Ltd

KUTTIPURAM, KERALA, INDIA

Dept of Mgt Science MES College of Engineering


DEPARTMENT OF MANAGEMENT SCIENCE

MES COLLEGE OF ENGINEERING

KUTTIPPURAM, KERALA

PIN: 679573

(AFFILIATED TO UNIVERSITY OF CALICUT)

CERTIFICATE

This is to certify that the study titled “A Study on the Financial Perfomance of Western

India Plywoods Baliapattanam Kannur” submitted by Mr. AZHAR K.P, THIRD

semester MBA, in partial fulfilment of the requirements for the award of the Degree of

MASTER OF BUSINESS ADMINISTRATION by Calicut University. This is a

bonafide record of the work done by him under my supervision and guidance.

………………………………

Prof. SAJI KURIAKOSE, MBA, PGDIT

(Faculty Guide)

Head -Dept of management science

MES College of Engineering, Kuttippuram



DECLARATION

I, Azhar KP hereby declare that project work entitled “ A Study on the Financial

Performance of the Western India Plywoods” submitted by me for the partial fulfilment

of the requirement for the Degree of Masters of Business Administration (2008-2009) to

the Department of Management Studies, MES College of Engineering, is my original

work and has not been submitted earlier either to this institution or any other institution

for the fulfilment of the requirement for any course of studies. I also declare that no

chapter of this manuscript in whole or in part is lifted and incorporated in this report from

any earlier work done by others or me.

Date: Kuttipuram

Place: AZHAR K.P



ACKNOWLEDGEMENT

“Behind every successful effort, there lies a contribution from numerous sources

irrespective of their magnitude. My project is no exception and I take this opportunity to

express my sincere thanks to those helping hands whole heartily”.

The satisfaction that accompanying the successful completion of the task would be

incomplete without mentioning the people who made it possible with the constant

guidance and encouragement all throughout the period of study.

I would like to express my deepest sense of gratitude to my internal guide Mr. Saji

Kuriakose, Faculty Head-Department of Management Science, MES College of

Engineering for his encouragement for this desertion work.

I use it as a privilege to thank Mr. P.K Muhammed (M.D Western India Plywoods Ltd)

for giving me this opportunity to do this project. And also express my sincere gratitude to

Mr. Govindankutty (Finance Manager) for his guidance and advice during all time of my

project work.

I also express my gratitude to Mr. Majeed (Supervisor) and other staffs and workers of

Western India Plywoods Ltd for providing me all the information to complete the project

work.

Finally, I gratefully acknowledge the wholehearted cooperation and boosting motivation

of my parents and my friends.

AZHAR K.P



CONTENTS

SERIA

L NO LIST OF CONTENTS

PAGE

NO:

LIST OF TABLES

LIST OF CHARTS

1 CHAPTER I- INTRODUCTION

INTRODUCTION TO STUDY 2

STATEMENT OF THE PROBLEM 3

NEED FOR THE STUDY 3-5

OBJECTIVE OF THE STUDY 5

2 CHAPTER II- INDUSTRY PROFILE 6-8

3 CHAPTER III- COMPANY PROFILE 9-30

3 CHAPTER IV- LITRATURE REVIEW 31-32

4 CHAPTER V- RESEARCH METHODOLOGY 33-35

5 CHAPETER VI- ANALYSIS AND INTERPRETATION 36-77

6

CHAPTER VII- FINDINGS SUGGESSIONS AND

CONCLUSION 78-82

7 CHAPTER VIII- BIBLIOGRAPHY 83-84

8 CHAPTER XI- ANNEXURE 85-95

LIST OF TABLES



SERIAL NO

INDEX PAGE NO

1-5 COMPARITIVE BALANCE SHEET 38-42

6-10 COMPARITIVE INCOME STATEMENT 43-47

11 COMMON SIZE BALANCE SHEET 50-51

12 COMMON SIZE INCOME STATEMENT 52-53

13 TREND ANALYSIS BALANCE SHEET 55-56

14 TREND ANALYSIS INCOME STATEMENT 57-58

15 CURRENT RATIO 59

16 LIQUID RATIO 60

17 CASH RATIO 61

18 DEBT EQUITY RATIO 62

19 PROPRIETARY RAIO 63

20 CAPITAL GEARING RATIO 64

21 SOLVENCY RATIO 65

22 INTEREST COVERAGE RATIO 66

23 NET PROFIT RATIO 67

24 RETURN ON SHAREHOLDER’S FUND 68

25 PRICE EARNINGS RATIO 69

26 STOCK TURNOVER RATIO 70

27 FIXED ASSETS TURNOVER RATIO 71

28 WORKING CAPITAL TURNOVER RATIO 72

29 DEBTORS TURNOVER RATIO 73

30 AVERAGE COLLECTION PERIOD 73

31 CREDITORS TURNOVER RATIO 75

32 AVERAGE PAYMENT PERIOD 75

33 TOTAL ASSETS TURNOVER RATIO 77

LIST OF CHARTS



SERIAL NO

INDEX PAGE NO

1 CURRENT RATIO 59

2 LIQUID RATIO 60

3 CASH RATIO 61

4 DEBT EQUITY RATIO 62

5 PROPRIETARY RAIO 63

6 CAPITAL GEARING RATIO 64

7 SOLVENCY RATIO 65

8 INTEREST COVERAGE RATIO 66

9 NET PROFIT RATIO 67

10 RETURN ON SHAREHOLDER’S FUND 68

11 PRICE EARNINGS RATIO 69

12 STOCK TURNOVER RATIO 70

13 FIXED ASSETS TURNOVER RATIO 71

14 WORKING CAPITAL TURNOVER RATIO 72

15 DEBTORS TURNOVER RATIO 74

16 CREDITORS TURNOVER RATIO 76

17 TOTAL ASSETS TURNOVER RATIO 77



EXECUTIVE SUMMARY

This study was carried out at Western India Plywoods Ltd during the month of

September 2009. This report is an outcome of a study undertaken in WIP on the topic “A

study on the Financial Performance of the Westen Indial Plywoods” The analysis of WIP

fills me with academic and industrial exposure.

Ratio Analysis, Comparative Statements, Common Size Statements etc are being used for

the analysis of financial performance. Primary and Secondary data used for the purpose

supported by the above mentioned tools paved a direction for the study; primary data are

collected through direct interview, secondary data collected through financial statements.

The enterprises are organized to achieve economic and social development on the basis

of accounts maintained by the organizations; an attempt is made in this project report to

analysis the financial performance of the organization.

The basic objectives of the research are to analyse the financial position of the firm by

using the various financial technique and tools. To know the liquidity position of the

enterprise, we have to compare operation and cost position of company between the

profit and loss making periods.

The title ‘ratio analysis’ was chosen as it is used as a device to analyze and interpret

financial health of the enterprise and to draw a conclusion whether the performance of

the firm is improving or deteriorating.



CHAPTER-IINTRODUCTION



INTRODUCTION TO STUDY

No business can plan its activities without considering its financial resources. Financial

management is that part of management which deals with raising of funds in the most

economical and suitable manner, using the funds as profitability as possible, planning

future operations, inspections, controlling current performance and future development

through financial accounting and other means.

Finance in essence is considered with the acquisition and use of funds by a business firm.

The main objective of financial management is to control required funds for meeting

short term and long-term needs of business enterprise and to maximise the value of firm

to its equity share holders.

To have a clear understanding of the profitability and financial position of business, the

financial statements have to be analysed and interpreted. Financial statements are

prepared for decision making. They play a dominant role in setting the framework of

managerial decisions. But the information provided by the financial statement is not an

end in itself as no meaningful conclusions can be drawn from these statements alone.

However, the information provided by the financial statement is of immense use in

making decision through analysis and interpretation of financial statement. It helps to

summarise large quantities of financial data and to make quantitative judgement about

the firm’s financial performance.

The study entitled ‘An analytical study of Financial Performance with reference to The

Western India Ply woods Ltd. Kannur has been oriented with a view to study the

financial position of the company that help in making sound decision by analyzing the

recent trend.



STATEMENT OF THE PROBLEM

This problem is to find out how the debt and equity affects the financial strength and

weakness of Western India Plywoods.

The study of financial performance is composed of the following:

1. Analysis of the liquidity between current assets and current liabilities.

2. Analysis of liquidity and profitability of current assets and current liabilities.

3. Analysis of the long term finance of the firm over a period of time.

4. Analysis of various components of working capital e.g. cash.

5. Marketable securities receivable and inventories.

6. Find out the impact of business fluctuations, technical developments etc., on

financial performance.

NEED FOR THE STUDY

Ratio analysis is an important technique of analyzing the financial statement and it helps

the analyst to make quantitative judgment with regard to concern’s financial position and

performance.

The followings are the main points of importance of ratio analysis:

a) Managerial uses of ratio analysis:

Helps in decision-making

Helps in financial forecasting and planning

Helps in communication

Helps in co-ordination

Helps in control

b) Utility to shareholders/investors:

An investor in the company will like to access the financial position of the concern where

he is going to invest. His first interest will be the security of his investment and then a



return in the form of dividend or interest. For this purpose he will try to access the value

of fixed assets. Long-term solvency ratios will help him in accessing financial position of

the concern.

Profitability ratios, on the other hand, will be useful to determine the direction of change

and reflects whether the company’s performance and financial position has improved,

deteriorated or remained constant over a period of time, one has to be careful about the

changes, if any, in the firm’s policies and accounting policies.

c) Projected ratios:

Ratios can also be calculated for future standards based upon the projected or

performance financial statement. These future ratios may be taken as standards for

comparisons and the ratios calculated on actual financial statements can be compared

with the standard ratios to find out variances, if any, such variances help in interpreting

and taking corrective action improvement in future.

d) Inter-firm comparison:

Ratios of one firm can also be compared with the ratios of some other selected firms in

the same industry at the same point of time. This kind of comparison helps in evaluating

relative financial position and performance of the firm.

Finance is the life blood of the business. It is rightly termed as the science of money.

Finance is very essential for the smooth running business. Finance Management is that

managerial activity which is concerned with the planning and control of a firm’s financial

reserve. Financial Management as an academic discipline has undergone fundamental

changes as regards its scope and coverage. In the early years of its evaluation it was

treated synonymously with the raising of funds. In the current literature pertaining to this

growing academic discipline, a broader use of resources is universally reorganized.

The published financial statement of a business may of considerable to interest percent or

potential shareholder, bank, financial intuition government, researchers, trade



organization, many other group may be interested in different aspects of the business and

would us like to analyse the financial statement with their respective purpose in mind.

OBJECTIVE OF THE STUDY

1. To analyse the financial strength and weakness of the firm using various analytical

tools like Ratio Analysis, Trend Analysis and Comparative statements.

2. To find out how the Debt and Equity affect the financial performance.

3. To examine the various components of the financial statements of the company.

4. To understand the financial policies and procedures of the company.

5. To suggest ways and means to improve the financial performance.

6. To decide about the future prospects of the firm.

7. To make inter-firm comparison.

8. To measure managerial efficiency of the firm.



CHAPTER II

INDUSTRY PROFILE



INDUSTRY PROFILE

Plywood Manufacture in India

In 1916, Government of India set up a committee to explore the feasibility of

manufacturing tea chest plywood in Bengal and Assam and the other in North Bengal

were set up in 1917 to manufacture the same, but they stopped production owing to non-

availability of suitable bonding materials, indigenous lead lining nails and bands for

packing. Both the imported plywood and sawn wood chest were used together. No

development took place for some time until two factories in Assam took up the matter as

a challenge and started making plywoods for tea chest by around 1924 – 1925. These

were resistance from the tea industry for the use of locally made plywood on the ground

that quality of timber used was not suitable.

Since independence, the plywood industry has regained strength and has grown to

a full-pledged industry in spite of some setbacks faced by the industry in the post war

period. In 1947, India was a net imports of plywood, mainly tea-chest plywood compared

to the plywood production in 1947 which was negligible, the present day production has

grown up to 62 Million M2. These have been a steady growth in the plywood industry.

Since the last 3-4 years.

The plywood industry consumes about 15 million M3 of timber. The other main

raw materials used by plywood industry in the synthetic rain, which is available within

the country.

In Kerala, there are more than 500 plywood industries including large scale

industries such as Hindustan New Print and Western India Plywood Ltd. In India

Plywood industry are mainly located in Assam, Karnataka, Kerala, Maharashtra, Madhya

Pradesh and Andaman & Nicobar Islands.



Role of Plywood Industries in India:-

Plywoods industries have played a significant role in the Socio-economic

development of the country. They provided various types of plywood products that are

required for various infrastructural developments. This industry means the strategic needs

of our country like portion plywood, plywood for pre-fabricated houses required for

soldiers on the Himalayan frontiers and other government needs. This industry also

means the packaging requirements of the country export. The industry also provides

employment to a large number of people directly and indirectly, through various sales

outlets.

Problems regarding Plywood:-

Wood based industries in India faces a lot of problems. Major are in the under

utilization of installed capacity due to the non-availability of required timber in India.

Most wood based industries depend upon the government owned forest for their raw

material. But due to the shortage in the effective forest cover, which was needed for

maintaining ecological stability, the central goal controls the falling of trees. Thus the

diminishing forest covers inadequate natural degeneration and subsequent for falling of

trees, led the industries into hardships. Due to non-availability the big industrial

consumers resorted to import, which increased their cost of production. However

plantation would have the inherent deficiency of susceptibility to bio deterioration and

therefore expanded use of preservation like Borax, and Boric acid is imperative. But this

may lead to environmental pollution. High cost of production due to increased cost of

gilth logs, urea formaldehyde and phenol formaldehyde, competition from private and

public sector, import restriction imposed by government, mismanagement labour, and

unrest are other factors which adversely affected growth and profitability of these

industries. The wood based industry also face strict competition from the metal and

plastic make industries.



CHAPTER IIICOMPANY PROFILE



COMPANY PROFILE

The western India plywoods Ltd., the largest wood integrated industrial Complex in

Southern Asia was started in the year 1975 at Baliapatam, Kannur.

Thanks to the dynamism and vision of its founder late Mr. A.K.Kaderkutty, who is

acknowledged doyen of the Indian Wood working industry.

The Company which commenced as a Plywood unit has steadily expanded to produce the

diverse products, which it now offers consumers.

A Hardboard plant was set up in 1959 - 1960 with West German Technical collaboration.

Initially with a capacity of 12.5 tones. This has now increased its capacity to 120 tonnes

per day. Besides plywoods and Hardboard the company also produces quality flush

doors, Block boards, Densified wood, Modern furniture items and a boost of other

products to suit the end market needs.

In 1978 the Western India Plywoods Ltd., set up a plant for manufacturing a Di-

Allylphalate(DAP) moulding powder, a thermoplastic that has to be imported until then,

significantly the technology developed in house with support from Shree Ram Institute

of industrial Research, Delhi.

In 1989, the company has put up a pre finishing plant with Italian and German Technical

support for printing wood grains and plain colours on plywoods and hardboards. The pre

finishing plant is the only one of its kind in the country and one of the very few plants in

the world. The State-of-the-art technology adopted here eliminates the pollution problem

completely.

The company has also for the first time in the country, put up a pilot plant for radiating

wood in collaboration with the Bhabha Atomic Research centre, Mumbai in order to

upgrade the quality of low-grade timber. The company has set up a modern Research and

the most important feature of wood based complex is its motto of ‘cent percent



utilization’ of wood. This has great significance in present times when the scarcity of

quality timber is keenly felt with in the country and we are totally dependent on imports.

GROWTH

The manufacture of plywood was stepped up steadily by addition of new

machinery, mostly imported. The company also diversified from Tea chests and

Commercial plywood to Decorative plywood, Block board, and Flush door, Shuttering

and Marine Plywood, Aircraft Plywood etc. The Company planned and executed the

hardboard plant between the years 1956 and 1958 with an initial installed capacity of

12.5 tonnes of hardboard per day. The company also installed its own synthetic resin

unit in 1959 with a capacity of 200 tones.

WIP moved into chemical plastics sector. In 1978 WIP setup a plant for

manufacturing Di-allyl Phthalate (DAT) moulding powder, a thermoplastic which has to

be improved, until then significantly, the technology was developed in-house with the

support from Shree Ram Institute of Industrial Research, Delhi.

All the raw materials and processes employed in the plant are 100% eco friendly.

From 1971 onwards the company have been exporting decorative Plywoods and veneers

to USA, Germany, France, Dubai, Sweden and other countries of Middle East. In the

present WIP products are exported to more than 29 countries spread across 4 continents

to buyers associated with the company for over three decades.

CORPORATE GOVERANANCE PHILISOPHY

As an ISO 9001 : 2000 unit, engaged in the business of manufacture and sale of

diverse range of products, the company envisages the assurance of product quality,

transparency; accountability and integrity in its operations and in its relation with all

the share holders, that is customers, investors, employees, the government and other

business associates.



SUBSIDIARY COMPANIES

The subsidiary companies of the Western Indian Plywoods Ltd., are M/s Southern

veneers and Wood Works Ltd. and the Kohinoor Saw Mill Co. Ltd.

ASSOCIATES

The associates of the Western Indian Plywoods Ltd., are Wood Plast Industries and

Western Indian Cottons Ltd.,

INDUSTRY STRUCTURE AND DEVELOPMENT

The company caters to a wide variety of customers, which include Railways,

Defence, Automobile, Civil Aviation, Electrical, and Transport, Office markets, Shipping

and other areas. Though the industry was facing the adverse effects of globalization and

liberalization in India, particularly due to the liberal import policy allowed by the govt.,

the company due to intelligent mix and aggressive marketing strategy during the year

could register a significant improvement in sales for the previous two years.

Sourcing good raw material continued to be problem. Even in the overseas market,

price fluctuated widely while there could be no guarantee about the quality. The company

continued to depend heavily on import of timber from different source all over the globe.

However the company has been able to overcome the problem to a great extent by

adopting improved technology, manufacturing methods and better marketing strategy.

Introduction of value added items also helped to offside the disadvantages to a great

extent.

In view of the increasing cost of petroleum products, in order to reduce the fuel

cost, the management decided to change over to the natural fuel. The company has

already purchased a Thermax boiler which is under installation and one this is

commissioned, the company will switch over to industrial fuel, this will lead to cost

effectiveness and considerable saving.



Vision:

The Western India Plywood Ltd. is the Asian leader in hardwood, plywood

production and innovative leader in the field.

Its brand name means superior products and service quality.

The Western India Plywoods are a team you want to work with.

Mission:

To provided utmost satisfaction to the consumer through best quality and customer

care.

To continuously upgrade the product through innovations and convergence of new

technology and to produce the best quality at the lowest cost.

To safeguard and enhance shareholder value.

To respect the dignity of all employees and together to become instrumental in the

development of the country while protecting the environment.

To utilize the surpluses for the welfare of employees and the society at large.

WIP’S LIST OF FIRSTS IN THE COUNTRY

First to make irradiated wood

First to make aircraft plywood

First to make synthetic rersin adhensive bonded plywood using hot pressing

techniques

First to make high pressure industrial laminates

First to make quality hardboard way back in 1959-1960

First to manufacture Di Allyl Phthalate molding powder

First to manufacture Gl-Plywood -GI sandwich panel for anechoic chambe

First to make prefinished Plywoods and hardboards using UV cured Surface

finishing techniques.

First to get ISO 9000 certification for hardboard and prefinished boards



FINANCE DEPARTMENT

The Chief Accounts officer is the head of the Accounts Department. He is assisted

by the Accounts Officers. All financial decisions are taken by the Accounts Department.

WIP Ltd. Maintains 5 subsidiary books. They are as follows:-

1. Cash Receipt a\c

2. Cash Payment a\c

3. Bank Receipt a\c

4. Bank Payment a\c

5. Journal

Journal entries are maintained in order to rectify the errors. The three personal ledgers

maintained are:-

1. Account receivables

2. Account Payables

3. Advance to Staff

Rest all entries are included under direct expenses. Each and every transaction is

reflected in general ledger. General Ledger includes direct expenditure and all other

items like total sales, purchases, payables, receivables etc. The sale Department

maintains Sales Day Book, Debit Note and Credit Note.

Depreciation is provided on the straight-line method at the rebate specified in

schedule XIV of the Companies Act 1956.

The audits, finance, share transfer and grievance committee regularly meets to

consider aspects relevant to each committee. It is ensured that the share transfer agents

promptly attend to all Shareholders grievances. There is comprehensive management



reporting system on all aspects of operation and the boards of directors review them

periodically.

FUNCTIONS

1. Allocation of Funds

2. Raising of Funds

3. Profit Planning

THE BANKERS

Indian Overseas Bank, State Bank of India, Dena Bank and Punjab National Bank

are the bankers of the Western India Plywoods Ltd.

DEMATERIALIZATION OF SHARES

The Company had entered into an agreement with National Securities Depositors

Service Ltd. (NSDL) from 15th March onwards for Company’s share traded in electronic

form.

SOURCES OF FUNDS

Shares

Reserves and Surplus

Loans

Secured Loans

Unsecured Loans

ACCOUNTING PROCEDURES

WIP follows double accounting system and also maintain four types of journals.

They are:-

1. CPB (Cash Payment Book)



2. BPB (Bank Payment Book)

3. CRB (Cash Receipt Book)

4. BRB(Bank Receipt Book)

For these 4 types of journals, a sub ledger is prepared. This sub ledger is classified into

three.

a. Accounts Receivable Book (ARB)

b. Accounts Payable Book (APB)

c. Personal Ledger (PL)

At the end of every month the sum total of the ledger are transferred to the main ledger.

Then there should have the equality in the amount of sub ledger and the main ledger.

Total amount of Sub Ledger = Total Amount of main Ledger

The next accounting procedure is preparing trial balance. At the end of every financial

year, profit and loss account and Balance sheet is prepared, from which financial position

of WIP is noticed.

CAPITAL STRUCTURE

The capital structure of WIP was made up of equity chare and preference shares. They

issue only redeemable preference shares. They also issue bonus shares at the time of high

profit. Their shares are registered in cochin and madras stock exchanges. A part of

company’s profit was transferred to profit and loss account is on the board’s decision.

Foreign Currency Transaction

Foreign currency liabilities outstanding as at the balance sheet are translated to exchange

rates prevailing on the date and the loss or gain arising out of the said transactions

relating to acquisition of fixed assets is adjusted to cost of relative assets and others are

charged to profit and loss account.



Revenue Recognition

Revenue from sales has been recognized on rising of sales invoices on respective parties

and inclusive of Excise duty but exclusive of Sales Tax.

Dividends

In view of the lack of disturbance profit, directors are unable to recommend any

dividends for the past five accounting years. Company is proposing to pay dividend in

the following year.

Retirement Benefits

Contribution to provident fund is made monthly, at the rate prescribed by the employees

Provident Fund Act and charged to Profit and Loss Account on accrual basis.

Income Tax

Provisions for income tax are made based on the assessable income as computed

accordance with the provision of the Income Tax Act, 1961. Timing differences between

accounting and taxable income capable of reversed in subsequent years are recognised as

deferred tax.

WIP publishes Annual Report every year, which includes the Profit and Loss account

Balance Sheet, accounting policies of the business etc.



MARKETING DEPARTMENT

Marketing is one of the most dynamic fields within the management arena. The main

duties of marketing department in an organization are to analyze market, find

opportunities, design product, formulate marketing strategies, develop specific methods

and action, propose a budget and establish a set of controls.

POLICY

High quality and high price is the policy of WIP. So the company aims quality conscious

customers.

OVER ALL MARKETING STRATEGY

Marketing strategy revolve around its product quality. The company’s emphasis on

product performance and reliability has enabled it to command a performance premium

in the market it as entered. Significant brand equity in its target market coupled with

superior product development capabilities has enabled. The Western Indian Plywood Ltd.

to sustain its performance premium equity in to new market segment it enters.

MARKET

Due to high standard of quality maintained by the quality control department of this

company, the product of the company have found ready acceptance in the market both in

India and Aboard. The company has succeeded in arranging manufacturing programmes

on the basis of firm orders, which flow in regularly used for manufacture of TV cabinet,

bus bodies, building construction, railways, furniture industry etc. The Hardwood is used

for partition wall. False ceiling, furniture industry etc. The Densified wood is being

supplied to the electrical industries, in various forms and also to the textile and chemical

industries in the form of filter plates and as chequered board for flooring in buses and

railway coaches. The DAP and FRP compounds are being used by the electronic and

moulding industries. The furniture manufactured by the company is being absorbed by

the market in drawing rooms, Bed rooms, offices, gardens etc. The products of the



company are being exported to West Germany, France, USA, Sweden, West Asia and

South East Asian Countries regularly.

The company has also achieved 100% utilization of scarce raw materials due to its

integrated production system. Therefore it would be apt to call the Western India

Plywoods Ltd., “the company with a conscience”

PROMOTION

The very important point to be noted is that till now there has been no advertising for

WIP LTD. The main promotion activity of WIP is conducting and participating in

exhibitions to attract potential customers. They have more of a direct selling approach. It

has around 40 sakes depots nation wide

COMPETITORS

At first there was no strong competition. WIP was the monopolistic company. But now it

faces strong competition from IPM (Indian Plywood Manufacturing Company) as a slight

a competition from Polymer, Kitply and Century etc.

TARGET SEGMENTS

As wood based panels are essentially intermediate products that are used for further

processing and value addition, the most logical segmentation variable is end use of

application.

WIP distinguishes between industrial marketing, export marketing and marketing at the

retail level and has developed separate programmes for each.

Some of the major segments are:-

The interior design and furniture manufacture segment

The building construction segment

The automotive coach - building segment

The boat - building segment



Specific application segment for various heavy duty industrial uses.

MARKETING MIX

A description of the marketing mix adopted for WIP’s major product line is provided

below.

PRICING

Consequent to superior raw materials and additional processing incorporated in the

manufacture of the WIP’s plywood panels - they are more expensive than product offered

by the competitors. WIP’s philosophy of continuously upgrading its machinery to keep in

line with state - of-the art technology also adds to final produced cost. However the

additional perceived value arising out of such investments in more than the marginal cost

addition and hence customers are willing to retain loyal to WIP’s products.

PRODUCTION DEPARTMENT

Production is the process by which raw materials are converted into finished products.

The production manager manages the Production Department followed by production

Executive, production Assistant and production Supervisors. It is the responsibility of the

Production Manager to determine the product designed by the firm. Care should be taken

to ensure that the products manufactured are of high quality and produced in the specified

time.

The raw materials that are used to produce the output as follows:

1. Wood

2. Steams

3. Chemicals



WOOD

For general purpose the wood used are Kalpine, Cellapine, Mango, Neeli, Pali,

Mullanpali, Redcidar, Pula, Redpine, Cher etc.

For decorative purpose, the woods used are Rosewood, Teak, Mahogony, Padauk, Beech

Silver Oak, Kussia, Dhavala and Chempak.

STEAM

Steam is the energy used to operate the machines. The steam comes from boilers. There

are four to five types of boilers. They are:-

1. Saw Dust Boiler

2. Fire wood Boilers

3. Industrial Engineering & Agricultural Cooperation Boilers

4. Thermo Pack Boilers.

CHEMICALS

The various chemical used in the preparation of plywood are Urea formaldehyde,

Acralyte, Phenol Formaldehyde etc.

The product mix of WIP includes Hardboard, Plywood, Densified Wood, Industrial

Maminates, and Furniture and pre-finished Boards.



SALES DEPARTMENT

Sales department is one of the core departments in WIP Ltd. Sales volume is one of the

most important variables affecting profit. Sales are done directly by the company itself.

The finished goods after inspection are sent to Sales Department. They have their own

value department where all the company’s products are displayed and sold. WIP has their

own list of value customers like Indian Railway, Defence etc. Besides they have an

exciting range of specialty products from which customers can choose. Any wood

materials used at the time of construction of a house are available at the sales depots.

WIP Ltd engages in industrial sales, export sale and in domestic sale. The main industrial

customers of the company are Indian Railways, HMT, KSRTC, Shipyard etc. Products

are mainly exported to the countries like United States of America, France, Netherlands,

Sri Lanka, Japan and Canada. Domestic buyers are mainly carpenters, furniture

companies and local people.

The Commercial Tax Office (CTO) heads the sales tax division. Sales tax is the main

revenue to the government. Sales tax is paid according to the General Sales Act 1963.

Sales Tax is divided into Central sales Tax (CST) and Kerala Government Sales Tax

(KGST). There are five schedules to the General Sales Act. To exempt from tax various

firms submit F-form, C-form and H-form. If one copy of bill of dealing is shown, sales

tax need not be paid.

Separate return should files for KGST and CST. Annual return is filed on April 30th

every year. If sales tax is not paid in time, interest is calculated @ 24% per annum. The

Central tax rate will change according to the rate created by the Central / State

government

EXPORT

Export functions are carried out by General Manager (Administration) and Import

/Export - in-charge.



Quotation / Performa invoice is send to customer along with details of the

products to be supplied with samples wherever required for their approval.

Exports orders are obtained against payment through letters of credit or other terms

of payment.

Once the price is proved, the customer opens L/C ,covering value, quantity,

destination of supply, specification etc. / arranges for payment according to the terms.

On conformation of the order and consequently on the placement of order and

opening of L/C for arranging for payment according to the terms with the foreign buyer,

product note is send to the production department to start production strictly as per the

requirement of the foreign buyer and as per the delivery schedule given by them.

As soon as the cargo is ready, necessary clearance is obtained and cargo is move to

the nearest port of shipment to destination port. Besides, house stuffing is also arranged

according to the requirement of the importer, in WIP factory by bringing container from

the port of works.

The cargo is handed over at the port to WIP’s clearing agents and they undertake

all customs formalities to get the clearance for the shipment within the least possible

time, including getting back the AR 4 from the customs immediately after shipment for

submission to the Central Excise Department .

Once the shipment is effected and Bill of Lading obtained from the steamer agents,

the shipment documents are prepared for foreign buyer and negotiated through WIP’s

bankers immediately.

After negotiation of L/C or arrangement for payment according to the terms, the

payment for the cargo dispatched to the customer is obtained; customer takes release of

the cargo on its arrival at the destination port and also takes receipts of original

documents from their bankers.

Proper care and supervision are taken in all process of production, packing and

sufficient care is taken to ensure the products exported are top most quality and strictly

according to the requirement of the buyer so as to keep up WIP’s product image high in

the International market.



PERSONNEL DEPARTMENT

The western India Plywoods Ltd is a forward looking organization, committed to

identify, train, develop and sustain its human resources in such a manner as to integrate

the individual career aspirations of its executives with the fulfilment of the objectives.

Towards this, WIP accepts basically that fair equitable and performance oriented policy

with respect to its human resources.

WIP ltd is having a well-government personnel department, which is concerned with the

creation of harmonious relationship, among its employees, bringing about their utmost

individual development. This department is coming under the authority of general

Manager followed by Factory Executive and the Welfare Officer. The Chief time keeper

and the time clerks assist them. Welfare Officer deals with the welfare activities of the

company. The chief time keeper deals with the wage and salary administration, provident

fund etc. The clerks deal with attendance. Leave, time management, disciplinary action,

ESI and PF.

The company has ensured that the work force in the company is kept at the minimum.

The strength last year was 958, which has come down to 884 (including 150 staff

members) during the current year, which is 13% less than the previous year. WIP is an

ISO 9001:2000 certified company. Under the ISO set up, three company conduct regular

training programmes to the employee to impress on them the need for quality and

productivity, thereby improving their performance. These regular programmes have

helped to achieve cost effectiveness and improve the overall working of the organization.

The company has employees both permanent and temporary worker. The trainees are

selected by the supervisor according to their performance. The workers of the company

are paid by the time rate wage system i.e. according to time spent on work. Though the

basic pay defer, the dearness allowance remains the same. The bonus is paid once in a

year and it ranges from 8.33% to 20%.



Out of remuneration paid to the employees, 8.33% contributes to the Provident fund.

1.75% of workers’ wages is deposited in ESI and the management contributes 4.75% of

the worker’s salary. (ESI is applicable only to those employees whose salary is below

7500) ESI provides insurance and helps workers in case of accident. Staff members are

entitles to one leave for every 10 days works (2 1/2 days of leave in a month). The

workers are eligible for 12 leave if they had worked 240 days in the previous year. (One

leave for every 20 days work)

FUNCTIONS OF PERSONNEL DEPARTMENT

1. Employee Evaluation and Selection

2. Defining job or skill requirement

3. Arranging for induction and training

4. Co-coordinating personnel Appraisal

HRD POLICY

HRD Policy of the WIP Ltd is as follows:

Select

Develop

Maintain competent Personnel

At all functional positions within the organization.

HRD OBECTIVES

To integrate the growth opportunity of the enterprise, with the fulfilment of

company’s objectives.

To identify, train and develop competent personnel with the growth potential and

to provide a policy environment for high levels of performance.



To provide a system of equality in opportunity, equality in assessment and

uniformity in implementation

To ensure continuity of the management by systematic succession.

To seek and provide a continuous team of executors of sustained high levels of

competition in the company.



PURCHASE DEPARTMENT

Purchase department carries out the procurement of all indigenous items like raw

materials, machines, spares, other instruments etc. Purchase of materials is done

according to the recommendation and specification from the user department.

In WIP, there is no separate store department or stores manager. It comes under the

functions of the purchase department and the store keeper carries out the basic functions.

Purchase Procedure of a Non-Timber item:

1. Generation of Indent

Indent is obtained from stores as per the request of user department. This gives the

details of the material to be purchased. Colour coding system adopted to differentiate

different sections

2. Store Indent Register

Managing Director Signs all the indents received from the stores indent register and the

indent number is given for easy verification.

3. Sending Enquiry

The company decides from which supplier they have to buy the required material based

on the approved vendors list as enquiries are send to the approved vendors specifying the

requirements of the material in detail.

4. Offer of Quotation by the supplier

Quotation is to reach the company within a specified period. Quotations received are

clubbed together with the relevant indents and the copy of the enquiry is send to the

Works Manager or General Manager for taking decisions regarding the vendor’s

selection.

5. Issue of Order



The purchase order is issued to the recommended vendor. The purchase executive or the

Managing director prepares the purchase order. Five copies of the purchase order are

prepared.

9. Follow Up

If the supplier does not meet the order in time, follow up action is done by email,

telephone etc.

7. Receipt of Invoice

The purchase department receives the invoice copy for the party. It contains details

regarding terms of the payment, Dispatch details etc.

8. Checking the invoice

The purchase department checks the invoice with the purchase order in respect of

specification of materials, quantity, price etc. and sends it to the stores.

9. Arrangement for the collection of the materials.

Purchase department arranges for the collection of materials and delivers to the stores.

10. Payment of the bills

Bill entered in the purchase day book is sent from the purchase department duly signed

by the Purchase Executive and Secretary \ GM and it is passed to MS and then it is

passed to the Accounts Department for making payments.



RESEARCH AND DEVOLOPMENT

The company has a well equipped Research and Development laboratory which is one of

the best research centres in wood working industry in the country approved by the

department of Scientific and Industrial Research, Ministry of Science and Technology,

government of India, where continuous research is going on for improvement of quality

and development of new products, through technological and methodological up

gradation. The benefit of successful R & D activities has had the distinct advantage of

increasing the technical competence and problem solving capability of the organization

in general and the R & D group in particular.

A Pan Bit irradiator was set up in the R & D with the co-operation and assistance of Baba

Atomic Research Centre, Mumbai, the only one of its kind in the industry in India

employing nuclear energy for peaceful purposes. One of the noteworthy features of this

development is the employment of both thermoplastic and thermosetting system for the

up gradation of secondary species, an achievement of the first time in the world. The

process further utilizes one of the residues that did not find earlier an appropriate end use.

The company has also diversified its activities into the manufacture of Resorcinol based

glues, dially phythalate and sheet molding compounds, the development dially phythalate

based molding compounds, a raw material used in the electronic component industry was

the results of WIP’s indigenous research and development efforts. This R & D work

enabled India to become the third country in the world (other two countries being USA

and Japan) to produce this special item. The DAP moulding compound is an import

substitution and improved formulation and the in-house technology enabled the material

to compete favourable with imported material.



QUALITY MANAGEMENT SYSTEM (QMS)

A well defined Quality Management System is in place. The QMS is certified by ISO

9001, the international benchmark of progressive organization.

Quality Policy

Quality policy of WIP is to manufacture products as per national and/ or international

standards to upgrade the quality on a continual basis through regular improvement

efforts. A well –defined QMS has been implemented. This system is continuously

reviewed to enhance its effectiveness and updated to meet the challenging need.

Quality Objectives

1. Suitable equipment and machinery for process control at all stages.

2. Provisions of adequate resources including raw material and personnel to ensure

consistent product quality.

3. Well- defined product and product characteristics to enable monitoring, analysis

and continual improvement.

4. Communication of requirement of products including customer requirement,

statutory/ regulatory requirements, aspects of QMS including policy and objectives

among all employees.

Quality policy and objectives are displayed for general awareness. Internal

communication is achieved through periodic awareness programs as well as discussions

and interactions by Head of the Department (HODs) with the employees.

The management representative has total responsibility for the Quality

Management System. Master copies of all QMS documents viz. Quality System Manual,

Work Instructions and other documents are available with the Management

Representative.



CHAPTER IVLITRATURE REVIEW



LITRATURE REVIEW

A paper in the title of Efficiency, Customer Service and Financing performance among

Australian financial institutions (Elizabeth Duncan, and Elliott, 2004) showed that all

financial performance measures as interest margin, return on assets, and capital adequacy

are positively correlated with customer service quality scores. Generally, the concept of

efficiency can be regarded as the relationship between outputs of a system and the

corresponding inputs used in their production. Within the financial efficiency literature,

efficiency is treated as a relative measure, which reflects the deviations from maximum

attainable output for a given level of input (English M. and Warng, 1992). However,

there have been numerous studies analyzed the efficiency of financial positions of the

organizations. Among these, (Rangan N. and Grabowski, 1988) use data envelopment

analysis to analyze technical efficiency in US banking into pure technical and scale

efficiency.

(Aly H., and Rangan 1990) extend this analysis to contain analysis of allocative

efficiency, and (Field, 1990), (Dark, 1992), (Chu-Meiliu, 2001), (Tser- Yieth Chen,

and Tasi Yeh, 1998), and (Leigh D.,and Howcroft, B., 2002)have conducted some

studies into banking efficiency.

Reference: The hindu, February 25th 2009

Ben, Director of Mc clure & co mentioned that “there are many different ways to

measure the financial performance, but all measures should be taken in aggregation line

items such as revenue from operations, operating income and cash flow from operations

can be used as well as total unit sales. Furthermore, the analyst or investor may wish to

look further deeper into financial statements & seek out margin growth rate or any

declining debts.

Reference: Insight into the operations, business standard.com



CHAPTER VRESEARCH

METHEDOLOGY



RESEARCH DESIGN

The study is partly descriptive and partly analytical. It is descriptive as it traces

theoretical frame work of financial management. It is analytical in the sense that it makes

an appraisal of the financial management in Western India Plywoods Ltd.

A Research Design is needed because it felicitates the smooth sailing of the various

research operations. There by making research as efficient as possible yielding maximum

information with minimum expenditure.

The study is primarily based on the internal records and annual accounts of the company.

Besides this, information will be gathered through discussion with the officers of the

company. Further personal interview will be held with various personnel working in the

company.

TYPE OF RESEARCH

Descriptive Research

The study is primarily based on the internal records and the annual records of the

company. Besides, information is gathered through discussions held with the officers of

the company.

UNIVERSE

The entire financial data of the company is considered as the universe of data.

SAMPLE SIZE

Financial data which is relevant to 5 years is taken as the sample size.

SAMPLE METHOD

Convenience sampling method is used to collect data for the study.

PERIOD OF STUDY



The study was conducted for 21 days.

DATA COLLECTION

The data for the study are to be collected from secondary and primary sources. The study

mainly depends on secondary data.

SOURCES

The primary data have to be collected with the help of informal discussion with Account

Officers.

SECONDARY DATA

Annual Report of Western India Plywoods

Informal discussion with Account Officers

Company Website

Journals and Magazines

TOOLS OF ANALYSIS

Ratio Analysis

Trend Analysis

Comparative Statements

Common Size Statements

LIMITATIONS

The period of study is limited to data of 5 years

The study is based on secondary data provided by the unit.

It is difficult to judge the financial strength and weakness with the said ratios.



CHAPTER VANALYSIS

AND

INTEPRETATIONS



COMPARITIVE FINANCIAL STATEMENTS

Comparative financial statements are ones, which have been prepared in a systematic

manner and provides statistical information about a particular event (financial

transaction) or aspect, taking place on different dates or during different periods.

The comparative financial statements are chalked out in a columnar form (in majority of

the cases). One is also able to view comparative accounts of different companies.

Comparative financial statements, like all other financial statements have the following

types of financial statements:

Income statements

Balance sheet

Income statements:

Also known as profit and loss financial statement, these types of comparative financial

statements suggest profit amount earned by a company as well as amount of money lost

by a company. Loss or profit may not always mean, loss or profit of money, it may also

include any asset or stock, which has an economic value. Income statements also include

expenditure incurred for conducting activities, related to operations. This type of a

financial statement is referred to as an operating financial statement.

Balance sheet:

Information pertaining to expenses and profit earned by a company are recorded in the

balance sheet.



COMPARITIVE BALANCE SHEET FOR THE YEAR ENDING

MARCH 31ST 2003-04

Table No: 1

PARTICULARS 2003 2004Increase

or Decrease (Amount)

Increase or Decrease (Percentage)

ASSETS Fixed Assets: Net Block 553851 527947 -25904 -4.68Capital Work in Progress 2870 2090 -780 -27.18Current Assets: Inventories 387717 378623 -9094 -2.35Sundry Debtors 72097 71838 -259 -0.36Cash and Bank Balances 10794 11041 247 2.29Loans and Advances 53826 64067 10241 19.03Investments 2739 2588 -151 -5.51Miscellaneous Expenses 298 149 -149 -50.00Profit and Loss Account 33384 74138 40754 122.08

TOTAL ASSETS 1117576 1132481 14905 1.33LIABILITIES

Share Capital: Equity 84873 84873 0 0Preference 46000 46000 0 0Reserves and Surplus 41296 41296 0 0Secured Loan: Term Loans 449763 503717 53954 12.00Others 253798 240060 -13738 -5.41Unsecured Loan 6784 6808 24 0.35Current Liabilities 199897 174234 -25663 -12.84Provisions 33328 35493 2165 6.50Deferred Tax Liability 1837 0 -1837 -100.00TOTAL LIABILITIES 1117576 1132481 14905 1.33




30th SEPTEMBER 2004-05

Table No: 2




ASSETS Fixed Assets: Net Block 527947 477999 -49948 -9.46Capital Work in Progress 2090 40153 38063 1821.20Current Assets: Inventories 378623 366324 -12299 -3.25Sundry Debtors 71838 80975 9137 12.72Cash and Bank Balances 11041 11930 889 8.05Loans and Advances 64067 37054 -27013 -42.16Investments 2588 3611 1023 39.53Miscellaneous Expenses 149 0 -149 -100.00Profit and Loss Account 74138 52285 -21853 -29.48

TOTAL ASSETS 1132481 1070331 -62150 -5.49LIABILITIES

Share Capital: Equity 84873 84873 0 0.00Preference 46000 46000 0 0.00Reserves and Surplus 41296 41296 0 0.00Secured Loan: Term Loans 503717 341188 -162529 -32.27Others 240060 243361 3301 1.38Unsecured Loan 6808 10509 3701 54.36Current Liabilities 174234 249398 75164 43.14Provisions 35493 53706 18213 51.31Deferred Tax Liability TOTAL LIABILITIES 1132481 1070331 -62150 -5.49




MARCH 31th 2005-06

Table No: 3

PARTICULARS 2005 2006Increase or Decrease (Amount)


ASSETS Fixed Assets: Net Block 477999 494547 16548 3.46Capital Work in Progress 40153 0 -40153 -100.00Current Assets: Inventories 366324 383094 16770 4.58Sundry Debtors 80975 83306 2331 2.88Cash and Bank Balances 11930 13424 1494 12.52Loans and Advances 37054 46674 9620 25.96Investments 3611 5631 2020 55.94Miscellaneous Expenses 0 Profit and Loss Account 52285 0 -52285 -100.00


Share Capital: Equity 84873 84873 0 0.00Preference 46000 138327 92327 200.71Reserves and Surplus 41296 41720 424 1.03Secured Loan: Term Loans 341188 241060 -100128 -29.35Others 243361 23985 -219376 -90.14Unsecured Loan 10509 23904 13395 127.46Current Liabilities 249398 196773 -52625 -21.10Provisions 53706 60634 6928 12.90Deferred Tax Liability TOTAL LIABILITIES 1070331 1026676 -43655 -4.08




MARCH 31th 2006-07

Table No: 4

PARTICULARS 2006 2007

Increase or

Decrease (Amount)


ASSETS Fixed Assets: Net Block 494547 450754 -43793 -8.86Capital Work in Progress 0 3456 3456 100.00Current Assets: Inventories 383094 424145 41051 10.72Sundry Debtors 83306 97695 14389 17.27Cash and Bank Balances 13424 29272 15848 118.06Loans and Advances 46674 42515 -4159 -8.91Investments 5631 5632 1 0.02Miscellaneous Expenses Profit and Loss Account 0

TOTAL ASSETS 1026676 1053469 26793 2.61LIABILITIES

Share Capital: Equity 84873 84873 0 0.00Preference 138327 138327 0 0.00Reserves and Surplus 41720 84488 42768 102.51Secured Loan: Term Loans 241060 241729 669 0.28Others 239385 238286 -1099 -0.46Unsecured Loan 23904 19635 -4269 -17.86Current Liabilities 196773 186623 -10150 -5.16Provisions 60634 59508 -1126 -1.86Deferred Tax Liability TOTAL LIABILITIES 1026676 1053469 26793 2.61




MARCH 31th 2007-08

Table No: 5




ASSETS Fixed Assets: Net Block 450754 415081 -35673 -7.91Capital Work in Progress 3456 0 -3456 -100.00Current Assets: Inventories 424145 417870 -6275 -1.48Sundry Debtors 97695 112722 15027 15.38Cash and Bank Balances 29272 47558 18286 62.47Loans and Advances 42515 47589 5074 11.93Investments 5632 5632 0 0.00Miscellaneous Expenses Profit and Loss Account


Share Capital: Equity 84873 84873 0 0.00Preference 138327 138327 0 0.00Reserves and Surplus 84488 121790 37302 44.15Secured Loan: Term Loans 241729 234704 -7025 -2.91Others 238286 235082 -3204 -1.34Unsecured Loan 19635 18256 -1379 -7.02Current Liabilities 186623 145105 -41518 -22.25Provisions 59508 51316 -8192 -13.77Deferred Tax Liability 16999 16999 100.00TOTAL LIABILITIES 1053469 1046452 -7017 -0.67

COMPARITIVE INCOME STATEMENT FOR THE YEAR ENDING MARCH 31st 2003-04

Table No: 6






INCOME

Sales 491595 499305 7710 1.57

Other Income 4966 91193 86227 1736.35

Deferred Tax Liability 11763 1837 -9926 -84.38

Increase/Decrease in Stock 49315 -4114 -53429 -108.34

TOTAL INCOME 557639 588221 30582 5.48

EXPENDITURE

Purchase of Finished Goods 1231 752 -479 -38.91

Material consumed 126652 14135 -112517 -88.84

Power And Fuel 112466 128447 15981 14.21

Salaries, Wages and Bonus 85381 78030 -7351 -8.61

Repairs and Maintenance 15955 21169 5214 32.68

Insurance 2425 2579 154 6.35

Travelling Expenses 3476 3635 159 4.57

Miscellaneous Expenses 8743 4933 -3810 -43.58

Packing and Forwarding 25494 25812 318 1.25

Commission and Discount 11533 8095 -3438 -29.81

Advertisement Expenses 496 489 -7 -1.41

Research and Development 219 196 -23 -10.50

Interest on Fixed Assets 48005 61650 13645 28.42

Interest on other loans 38001 31470 -6531 -17.19

Excise Duty 55464 54277 -1187 -2.14

Prior Period Adjustment 630 428 -202 -32.06

Bad And DD Written off 397 0 -397 -100.00

Provision for Doubtful Debts 2237 2375 138 6.17

Provision for Taxation 0 0 0

Depreciation 0 41764 41764 100.00

Other Expenditure 18102 21518 3416 18.87

TOTAL EXPENDITURE 556907 628975 72068 12.94

PROFIT AND LOSS ACCOUNT 732 -40754 -41486 -5667.49COMPARITIVE INCOME STATEMENT FOR THE YEAR ENDING

SEPTEMBER 30th 2004-05

Table No: 7

PARTICULARS 2004 2005 Increase Increase



or Decrease

(Amount)

or Decrease

(Percentage)INCOME

Sales 499305 858160 358855 71.87Other Income 91193 1519886 1428693 1566.67Deferred Tax Liability 1837 0 -1837 -100.00Increase/Decrease in Stock -4114 -25403 -21289 517.48

TOTAL INCOME 588221 984743 396522 67.41EXPENDITURE

Purchase of Finished Goods 752 1297 545 72.47Material consumed 14135 229678 215543 1524.89Power And Fuel 128447 153703 25256 19.66Salaries, Wages and Bonus 78030 143519 65489 83.93Repairs and Maintenance 21169 27879 6710 31.70Insurance 2579 6108 3529 136.84Travelling Expenses 3635 5938 2303 63.36Miscellaneous Expenses 4933 11049 6116 123.98Packing and Forwarding 25812 65560 39748 153.99Commission and Discount 8095 13564 5469 67.56Advertisement Expenses 489 935 446 91.21Research and Development 196 464 268 136.73Interest on Fixed Assets 61650 60659 -991 -1.61Interest on other loans 31470 5654 -25816 -82.03Excise Duty 54277 99601 45324 83.50Prior Period Adjustment 428 47 -381 -89.02Bad And DD Written off 0 33015 33015 100.00Provision for Doubtful Debts 2375 16052 13677 575.87Provision for Taxation 0 1246 1246 100.00Depreciation 41764 65721 23957 57.36Other Expenditure 21518 21201 -317 -1.47

TOTAL EXPENDITURE 628975 962890 333915 53.09PROFIT AND LOSS ACCOUNT -40754 21853 62607 -153.62

COMPARITIVE INCOME STATEMENT FOR THE YEAR ENDING

MARCH 31st 2005-06

Table No: 8

PARTICULARS 2005 2006 Increase Increase




or Decrease

(Percentage)INCOME

Sales 858160 328091 -530069 -61.77Other Income 1519886 25500 -1494386 -98.32Deferred Tax Liability 0 9134 9134 100.00Increase/Decrease in Stock -25403 20466 45869 -180.57

TOTAL INCOME 984743 383191 -601552 -61.09EXPENDITURE

Purchase of Finished Goods 1297 310 -987 -76.10Material consumed 229678 95400 -134278 -58.46Power And Fuel 153703 54302 -99401 -64.67Salaries, Wages and Bonus 143519 47949 -95570 -66.59Repairs and Maintenance 27879 9558 -18321 -65.72Insurance 6108 2169 -3939 -64.49Travelling Expenses 5938 1257 -4681 -78.83Miscellaneous Expenses 11049 1665 -9384 -84.93Packing and Forwarding 65560 23321 -42239 -64.43Commission and Discount 13564 5571 -7993 -58.93Advertisement Expenses 935 405 -530 -56.68Research and Development 464 130 -334 -71.98Interest on Fixed Assets 60659 1899 -58760 -96.87Interest on other loans 5654 18896 13242 234.21Excise Duty 99601 37338 -62263 -62.51Prior Period Adjustment 47 -1748 -1795 -3819.15Bad And DD Written off 33015 56 -32959 100.00Provision for Doubtful Debts 16052 0 -16052 -100.00Provision for Taxation 1246 2956 1710 100.00Depreciation 65721 22500 -43221 -65.76Other Expenditure 21201 6548 -14653 -69.11

TOTAL EXPENDITURE 962890 330482 -632408 -65.68PROFIT AND LOSS ACCOUNT 21853 52709 30856 141.20


MARCH 31st 2006-07

Table No: 9






INCOME Sales 328091 719255 391164 119.22Extra Ordinary Income 25500 0 -25500 -100.00Deferred Tax Liability 9134 1282 -7852 -85.96Increase/Decrease in Stock 20466 21001 535 2.61


Purchase of Finished Goods 310 797 487 157.10Material consumed 95400 205950 110550 115.88Power And Fuel 54302 109582 55280 101.80Salaries, Wages and Bonus 47949 83183 35234 73.48Repairs and Maintenance 9558 20013 10455 109.38Insurance 2169 4510 2341 107.93Travelling Expenses 1257 4253 2996 238.35Miscellaneous Expenses 1665 3513 1848 110.99Packing and Forwarding 23321 39742 16421 70.41Commission and Discount 5571 15179 9608 172.46Advertisement Expenses 405 1177 772 190.62Research and Development 130 315 185 142.31Interest on Fixed Assets 1899 21602 19703 1037.55Interest on other loans 18896 36289 17393 92.05Excise Duty 37338 82069 44731 119.80Prior Period Adjustment -1748 1447 3195 -182.78Bad And DD Written off 56 2466 2410 100.00Provision for Doubtful Debts 0 0 0 0.00Provision for Taxation 2956 5630 2674 100.00Depreciation 22500 46607 24107 107.14Other Expenditure 6548 14446 7898 120.62TOTAL EXPENDITURE 330482 698770 368288 111.44PROFIT AND LOSS ACCOUNT 52709 42768 -9941 -18.86


MARCH 31st 2007-08

Table No: 10






INCOME Sales 719255 816052 96797 13.46Other Income 1282 7702 6420 500.78Increase/Decrease in Stock 21001 -4522 -25523 -121.53


Purchase of Finished Goods 797 1037 240 30.11Material consumed 205950 246220 40270 19.55Power And Fuel 109582 123158 13576 12.39Salaries, Wages and Bonus 83183 96317 13134 15.79Repairs and Maintenance 20013 22732 2719 13.59Insurance 4510 3112 -1398 -31.00Travelling Expenses 4253 3586 -667 -15.68Miscellaneous Expenses 3513 4482 969 27.58Packing and Forwarding 39742 51182 11440 28.79Commission and Discount 15179 13026 -2153 -14.18Advertisement Expenses 1177 2116 939 79.78Research and Development 315 258 -57 -18.10Interest on Fixed Assets 21602 23037 1435 6.64Interest on other loans 36289 32629 -3660 -10.09Excise Duty 82069 61850 -20219 -24.64Prior Period Adjustment 1447 3534 2087 144.23Bad And DD Written off 2466 0 -2466 100.00Provision for Doubtful Debts 0 10123 10123 0.00Provision for Taxation 5630 22732 17102 100.00Depreciation 46607 46599 -8 -0.02Extra Ordinary Expenses 9964 Other Expenditure 14446 15702 1256 8.69

TOTAL EXPENDITURE 698770 793396 94626 13.54PROFIT AND LOSS ACCOUNT 42768 25836 -16932 -39.59

COMMON SIZE FINANCIAL STATEMENTS

Common size ratios are used to compare financial statements of different-size companies

or of the same company over different periods. By expressing the items in proportion to



some size-related measure, standardized financial statements can be created, revealing

trends and providing insight into how the different companies compare.

The ratios often are expressed as percentages of the reference amount. Common size

statements usually are prepared for the income statement and balance sheet, expressing

information as follows:

Income statement items - expressed as a percentage of total revenue

Balance sheet items - expressed as a percentage of total assets

The common-size statement is a financial document that is often utilized as a quick

and easy reference for the finances of a corporation or business. Unlike balance sheets

and other financial statements, the common-size statement does not reflect exact figures

for each line item. Instead, the structure of the common size statement uses a common

base figure, and assigns a percentage of that figure to each line item or category reflected

on the document.

A company may choose to utilize financial statements of this type to present a

quick snapshot of how much of the company’s collected or generated revenue is going

toward each operational function within the organization. The use of a common-size

statement can make it possible to quickly identify areas that may be utilizing more of the

operating capital than is practical at the time, and allow budgetary changes to be

implemented to correct the situation.

The common size statement can also be a helpful tool in comparing the financial

structures and operation strategies of two different companies. The use of percentages in

the common size statements removes the issue of which company generates more

revenue, and brings the focus on how the revenue is utilized within each of the two

businesses. Often, the use of a common-size statement in this manner can help to identify

areas where each company is utilizing resources efficiently, as well as areas where there

is room for improvement.



Common-size statements can be prepared for any review period desired.

Companies that choose to make use of financial statements of this type may choose to

utilize this format for quarterly, semi-annual, or annual reviews. When there is concern

about operational costs, the common-size statement may be prepared on a more frequent

basis, such as monthly. Because the common-size statement is very easy to read and does

not necessarily contain information that would be considered proprietary, the format can

often be employed as part of general information that is released to the public.

COMMON SIZE BALANCE SHEET 2004-2008



Table No: 11

Particulars 2004 % 2005 % 2006 % 2007

ASSETS: Fixed Assets: Net Block 527947 47% 477999 45% 494547 48% 450754Capital Work in Progress 2090 0.18% 40153 4% 0 0% 3456 Current Assets: Inventories 378623 33.43% 366324 34% 383094 37% 424145Sundry Debtors 71838 6% 80975 8% 83306 8% 97695Cash and Bank Balances 11041 1% 11930 1% 13424 1% 29272Loans and Advances 64067 6% 37054 3% 46674 5% 42515Investments 2588 1% 3611 0.34% 5631 1% 5632Miscellaneous Expenditure 149 0.01% 0 0% 0 0%Profit and Loss Account 74138 7% 52285 5% 0 0%

TOTAL ASSETS 1132481 100% 1070331 100% 1026676 100% 1053469LIABILITIES: Share Capital: Equity 84873 7% 84873 8% 84873 8% 84873Preference 46000 4% 46000 4% 138327 13% 138327Reserves and Surplus 41296 4% 41296 4% 41720 8% 84488Secured Loan: Term Loans 503717 44% 341188 32% 241060 23% 241729Others 240060 21% 243361 23% 239385 22% 238286 Unsecured Loans 6808 1% 10509 1% 23904 2% 19635Deferred Tax Payments 0 0% 0 0% 0 0%Current Liabilities 174234 15% 249398 23% 196773 19% 186623Provisions 35493 3% 53706 5% 60634 6% 59508

TOTAL LIABILITIES 1132481 100% 1070331 100% 1026676 100% 1053469



COMMON SIZE INCOME STATEMENT 2004-08

Table No: 12

Particulars 2004 % 2005 % 2006 % 2007



INCOME

Sales 499305 84.88% 858160 87% 328091 86% 7E+05Extra Ordinary Income 0 0.00% 0% 25500 7% 0Other Income 91193 15.50% 2E+06 15% 9134 2% 1282Deferred Tax Liability 1837 0.31% 0 0% 0 0% 0Increase/Decrease in Stock -4114 -1% -25403 -2% 20466 5% 21001

TOTAL INCOME 588221 100% 984743 100% 383191 100% 7E+05EXPENDITURE

Purchase of Finished Goods 752 0.12% 1297 0.13% 310 0.10% 797

Material consumed 14135 23% 229678 24% 95400 29% 2E+05

Power And Fuel 128447 20% 153703 16% 54302 16% 1E+05Salaries, Wages and Bonus 78030 12% 143519 15% 47949 14% 83183Repairs and Maintenance 21169 3% 27879 3% 9558 3% 20013Insurance 2579 0.41% 6108 1% 2169 1% 4510Travelling Expenses 3635 1% 5938 1% 1257 0.48% 4253Miscellaneous Expenses 4933 1% 11049 1% 1665 1% 3513Packing and Forwarding 25812 4% 65560 7% 23321 7% 39742Commission and Discount 8095 1% 13564 1% 5571 2% 15179Advertisement Expenses 489 0.05% 935 0.05% 405 0.22% 1177Research and Development 196 0.03% 464 0.05% 130 0.04% 315Interest on Fixed Assets 61650 10% 60659 6% 1899 1% 21602Interest on other loans 31470 5% 5654 1% 18896 6% 36289Excise Duty 54277 9% 99601 10% 37338 11% 82069Prior Period Adjustment 428 0.06% 47 0.01% -1748 -1% 1447Bad And DD Written off 0 0% 33015 300% 56 0.28% 2466Provision for Doubtful Debts 2375 0.33% 16052 2% 0 0% 0Provision for Taxation 0 0% 1246 0.13% 2956 1% 5630Depreciation 41764 7% 65721 7% 22500 7% 46607Extra Ordinary Expenses 0 0% 0 0% 0 0% 0Other Expenditure 21518 3% 21201 2% 6548 2% 14446

TOTAL EXPENDITURE 628975 100% 962890 100% 330482 100%69877

0

PROFIT AND LOSS ACCOUNT -40754 -8.16% 21853 2.50% 5270916.07

% 42768





TREND ANALYSIS

Trend analysis is a form of comparative analysis that is often employed to identify

current and future movements of an investment or group of investments. The process

may involve comparing past and current financial ratios as they related to various

institutions in order to project how long the current trend will continue. This type of

information is extremely helpful to investors who wish to make the most from their

investments.

Trend analysis is an important tool of horizontal financial analysis. This is helpful in

making a comparative study of the financial statements for several years. Under this

method trend percentages are calculated for each item of the financial statements taking

the figure of base year as 100. The starting year is taken as the base year.

The trend percentages show the relationship of each item with its preceding year’s

percentages. These percentages can also be presented in the form of Index Numbers

showing relative change in the financial date of certain period. This will exhibit the

direction to which the concern is proceeding. The trend ratio may be compared with the

industry, in order to know the strong or weak points of a concern. These are calculated

only for major items instead of calculating for all items in the financial statements.



TREND ANALYSIS BALANCE SHEET 2004-2008

Table No: 13

PARTICULARS 2004 2005 2006 2007 2008 2004(%)2005(%

)ASSETS: Fixed Assets: Net Block 527947 477999 494547 450754 415081 100% 91%Capital Work in Progress 2090 40153 0 3456 0 100% 1921% Current Assets: Inventories 378623 366324 383094 424145 417870 100% 97%Sundry Debtors 71838 80975 83306 97695 112722 100% 113%Cash and Bank Balances 11041 11930 13424 29272 47558 100% 108%Loans and Advances 64067 37054 46674 42515 47589 100% 58%Investments 2588 3611 5631 5632 5632 100% 140%Miscellaneous Expenditure 149 0 0 0 0 100% 0%Profit and Loss Account 74138 52285 0 0 0 100% 71%

TOTAL ASSETS 1132481 1070331 1026676 1053469 1046452 100% 95%LIABILITIES: Share Capital: Equity 84873 84873 84873 84873 84873 100% 100%Preference 46000 46000 138327 138327 138327 100% 100%Reserves and Surplus 41296 41296 41720 84488 121790 100% 100%Secured Loan: Term Loans 503717 341188 241060 241729 234704 100% 68%Others 240060 243361 239385 238286 235082 100% 101% Unsecured Loans 6808 10509 23904 19635 18256 100% 154%Deferred Tax Payments 0 0 0 0 16999 100% 0%Current Liabilities 174234 249398 196773 186623 145105 100% 143%Provisions 35493 53706 60634 59508 51316 100% 151%

TOTAL LIABILITIES 1132481 1070331 1026676 1053469 1046452 100% 95%





TREND ANALYSIS INCOME STATEMENT 2004-2008

Table No: 14

PARTICULARS 2004 2005 2006 2007 2008 2004(%) 2005%

INCOME

Sales 499305 858160 328091 71925581605

2 100% 172%Extra Ordinary Income 0 25500 0 0 100% 0%

Other Income 91193151988

6 9134 1282 7702 100% 16%Deferred Tax Liability 1837 0 0 0 0 100% 0%Increase/Decrease in Stock -4114 -25403 20466 21001 -4522 100% 617%

TOTAL INCOME 588221 984743 383191 74153874153

8 100% 167%EXPENDITURE

Purchase of Finished Goods 752 1297 310 797 1037 100% 173%

Material consumed 14135 229678 95400 20595024622

0 100% 163%

Power And Fuel 128447 153703 54302 10958212315

8 100% 120%Salaries, Wages and Bonus 78030 143519 47949 83183 96317 100% 184%Repairs and Maintenance 21169 27879 9558 20013 22732 100% 132%Insurance 2579 6108 2169 4510 3112 100% 237%Travelling Expenses 3635 5938 1257 4253 3586 100% 163%Miscellaneous Expenses 4933 11049 1665 3513 4482 100% 224%Packing and Forwarding 25812 65560 23321 39742 51182 100% 254%Commission and Discount 8095 13564 5571 15179 13026 100% 168%Advertisement Expenses 489 935 405 1177 2116 100% 191%Research and Development 196 464 130 315 258 100% 237%Interest on Fixed Assets 61650 60659 1899 21602 23037 100% 98%Interest on other loans 31470 5654 18896 36289 32629 100% 18%Excise Duty 54277 99601 37338 82069 61850 100% 184%Prior Period Adjustment 428 47 -1748 1447 3534 100% 11%Bad And DD Written off 0 33015 56 2466 0 100% 100%Provision for Doubtful Debts 2375 16052 0 0 10123 100% 676%Provision for Taxation 0 1246 2956 5630 22732 100% 100%Depreciation 41764 65721 22500 46607 46599 100% 157%



Extra Ordinary Expenses 0 0 0 0 9964 100% 0%Other Expenditure 21518 21201 6548 14446 15702 100% 99%

TOTAL EXPENDITURE 628975 962890 330482 69877079339

6 100% 153%PROFIT AND LOSS ACCOUNT -40754 21853 52709 42768 25836 100% -54%



RATIO ANALYSIS

1) LIQUIDITY RATIO

1.1) CURRENT RATIOCURRENT RATIO = Current Assets

Current Liability

Table No: 15 (Rs in ‘000s)

Year Current Assets Current Liability Current Ratio2003-04 525569 209727 2.52004-05 496283 303104 1.62005-06 526498 257407 2.02006-07 593627 246131 2.42007-08 625739 196421 3.2

Sources Company Records

Chart No: 1

2003-04 2004-05 2005-06 2006-07 2007-080

0.5

1

1.5

2

2.5

3

3.52.5

1.62

2.4

3.2

CURRENT RATIO

INFERENCE:

In the year 2004-05 companies’ current liability is comparatively high compared to last

year as there is an increase in its liability. After 2004-05 company started to recover and



the current liabilities came down considerably. Current ratio has shown an increasing

trend in the past three years which means the company is able to maintain sufficient

margin of working capital after paying off the liabilities.

1.2) LIQUID RATIO OR QUICK RATIO

LIQUID RATIO = Liquid Assets Liquid Liabilities


Year Quick Assets Quick Liability Quick Ratio2003-04 146946 209727 072004-05 129959 303104 0.432005-06 143404 257407 0.562006-07 169482 246131 0.72007-08 207869 196421 1.05


Chart No: 2

2003-04 2004-05 2005-06 2006-07 2007-080

0.2

0.4

0.6

0.8

1

1.2

0.700000000000001

0.430.56

0.700000000000001

1.05

QUICK RATIO

INFERENCE:

In the year 2004-05 the quick ratio has come down to 0.43 as the current liability is high

during the year. After 2004-05 company started to recover as there is an increasing trend

in quick ratio. The company has become successful in achieving this ratio which means

its quick assets are sufficient to pay off the short term obligations. The current quick ratio



of the firm is greater than 1:1 hence it can be said that the financial position of the firm is

good.

1.3) CASH RATIO

CASH RATIO = Cash and Bank + Cash in Hand Current Liabilities


Year Cash Current Liabilities Current Ratio2003-04 11041 209727 0.0522004-05 11930 303104 0.0392005-06 13424 257407 0.0522006-07 29272 246131 0.1192007-08 47558 196421 0.242


Chart No: 3

2003-04 2004-05 2005-06 2006-07 2007-080

0.05

0.1

0.15

0.2

0.25

0.052 0.039 0.052

0.199

0.242

CASH RATIO

YEAR

CASH

RAT

IO

INFERENCE:



As the company was maintaining a small amount of cash the cash ratio is too low during

the year 2003-04 to 2005-06. From the year 2006-07 company started to maintain high

cash by which the cash ratio has increased to 0.199 in the year 2006-07 and to 0.242 in

the year 2007-08. The acceptable norm for the ratio is 0.5:1. Cash position of the

company is not satisfactory.

2) LEVERAGE RATIO OR SOLVENCY RATIO

2.1) DEBT EQUITY RATIO

Debt Equity Ratio = Long Term debt Share Holders Fund

Table No: 18(Rs in ‘000s)

Year Outsider’s Fund Share Holders Fund Debt Equity Ratio2003-04 713444 172169 4.142004-05 644292 172169 3.742005-06 498467 264920 1.92006-07 487860 307688 1.62007-08 431125 344990 1.24

Sources Company Record

Chart No: 4

2003-04 2004-05 2005-06 2006-07 2007-080

0.51

1.52

2.53

3.54

4.54.14

3.74

1.91.6

1.24

DEBT EQUITY RATIO

YEAR

DEBT

EQ

UITY

RAT

IO

INFERENCES



The debt equity ratio during 2003-04 is high as the company depended mostly on

outsiders fund during the year and it has decreased over the years as there is a decreasing

trend in ratio. The ratio indicates extend the firm depends upon outsiders for its existence.

The decreasing trend in the ratio shows that their dependence has decreased when it

comes from 2003-04 to 2007-08.

2.2) PROPRIETARY RATIO

Proprietary Ratio = Shareholder’s Fund Total Assets


Year Share Holders Fund Total Assets Proprietary Ratio2003-04 172169 1055606 0.162004-05 172169 1017822 0.172005-06 264920 1021045 0.262006-07 307688 1047837 0.292007-08 344990 1040820 0.33


Chart No: 5

2003-04 2004-05 2005-06 2006-07 2007-080

0.05

0.1

0.15

0.2

0.25

0.3

0.35

0.16 0.17

0.260.29

0.330000000000002

PROPRIETARY RATIO

YEAR

PRO

PRIE

TARY

RAT

IO



INFRENCE:

The increasing trend of proprietary ratio indicates the firm’s dependence on creditors for

its working capital has been decreasing. The firm has not reached the ideal proprietary

ratio of 0.5:1 which is alarming for the creditors but the creditors increasing trend in the

ratio is also satisfactory for them.

2.3) CAPITAL GEARING RATIO

Capital Gearing Ratio = Fixed Income bearing funds Equity shareholder’s fund


Year Fixed Income bearing Funds

Equity Shareholder’s Fund

Capital Gearing Ratio

2003-04 46000 84873 0.542004-05 46000 84873 0.542005-06 138727 84873 1.632006-07 138727 84873 1.632007-08 138727 84873 1.63


Chart No: 6

2003-04 2004-05 2005-06 2006-07 2007-080

0.20.40.60.8

11.21.41.61.8

0.54 0.54

1.63 1.63 1.63

CAPITAL GEARING RATIO

YEAR

CAPI

TAL G

EARI

NG R

ATIO

INFERNCE:



From the above table and chart it can be seen that the capital gearing ratio has increased

from 0.54:1 to 1.61:1 and is being constant for about the past three accounting years.

Company invested in more fixed income bearing funds in the year 2005-06 and the

equity shareholder’s fund has remained constant for the past five years which indicates

risk to the equity shareholders.

2.4) SOLVENCY RATIO

Solvency Ratio = Total assets Total Liabilities


Year Total Assets Total Liability Solvency Ratio2003-04 1055606 713444 1.482004-05 1017822 644292 1.582005-06 1021045 498467 2.052006-07 1047837 487860 2.152007-08 1040820 431125 2.41


Chart No: 7

2003-04 2004-05 2005-06 2006-07 2007-080

0.5

1

1.5

2

2.5

3

1.48 1.58

2.05 2.152.41

SOLVENCY RATIO

YEAR

SOLV

ENCY

RAT

IO

INFERENCE:



Solvency ratio is low in the year 2003-04 as the total liability was high during the year.

After 2004-05 total assets has increased and the total liability has come down and this has

caused to an increase in the solvency ratio. Solvency ratio measures the ability of a firm

to pay the outside liabilities out if total assets. Higher the ratio stronger is the financial

position of the firm. Increasing trend of the ratio had proven favourable for the company.

2.5) INTEREST COVERAGE RATIO

Interest Charges Ratio = Profit before depreciation and tax Interest charges


Year Profit before Interest and tax

Interest Charges Interest Coverage Ratio

2003-04 1010 93120 0.112004-05 88820 66313 1.342005-06 78165 20795 3.762006-07 95005 57891 1.642007-08 95167 55666 1.71


Chart No: 8

2003-04 2004-05 2005-06 2006-07 2007-080

0.51

1.52

2.53

3.54

0.11

1.34

3.76

1.64 1.71

INTEREST COVERAGE RATIO

YEAR

INTE

REST

CO

VERA

GE R

ATIO

INFERENCE:



During the year 2003-04 company’s profit was too low and the company recovered in the

year 2004-05 and the interest coverage ratio has increased. In the year 2005-06 it shows

the highest ratio as the company as the interest charges were too low during the year. The

firm’s interest coverage ratio is far below the standard ratio which is 6 to 7 times. Low

ratio indicates excessive use of debt and the inability to offer assured payment of interest

to creditors.

3) PROFITABILY RATIO

3.1) NET PROFIT RATIO

Net Profit Ratio = Net Profit * 100 Net Sales


Year Net Profit Net sales Net Profit Ratio2003-04 -40754 445028 NA2004-05 21853 758559 2.882005-06 52709 290753 18.132006-07 42768 630840 6.782007-08 25836 750864 34.4


Chart No: 9



2004-05 2005-06 2006-07 2007-080

5

10

15

20

25

30

35

2.88

18.13

6.78

34.4

NET PROFIT RATIO

YEAR

NET

PRO

FIT

RATI

O

INFERENCE:

From the above table and chart it is clear that the net profit ratio of the company is

constantly fluctuating. In the year 2003-04 the company has incurred a loss. Net profit

ratio measures the overall profitability of the firm. The ideal net profit is 5% to 10%.

3.2) RETURN ON SHAREHOLDER’S FUND

Return on Shareholder’s fund = Net Profit after Interest and tax * 100

Shareholder’s Fund


Year Net Profit after Interest and Tax

Shareholder’s fund Return on Shareholder’s Fund

2003-04 -40754 172169 NA2004-05 21853 174924 12.52005-06 52709 264920 19.82006-07 42768 307688 13.92007-08 25836 344990 7.5


Chart No: 10



2003-04 2004-05 2005-06 2006-07 2007-080

5

10

15

20

25

12.5

19.8

13.9

7.5

RETURN ON SHAREHOLDER’S FUND

YEAR

RETU

RN O

N S

HARE

HOLD

ER'S

FUN

D

INFERENCES

From the above table and chart it can be inferred that return on shareholder’s fund

is constantly fluctuating. The net profit kept fluctuating during the years and the share

holders fund kept on increasing. Higher ratio indicates better utilization of owner’s funds

and higher productivity. Although return on equity shareholder’s fund is satisfactory for

the company but it has shown a decrease in the last two accounting year.

3.3) PRICE EARNINGS RATIO

Price Earnings Ratio = Market Price per Share Earnings per Share


Year Market Price Per Share Earnings per Share Price Earnings Ratio2003-04 100 -54 NA2004-05 100 12 8.332005-06 100 -7 NA2006-07 100 2.5 42007-08 100 3.7 2.7


Chart No: 11



2003-04 2004-05 2005-06 2006-07 2007-080

1

2

3

4

5

6

7

8

9 8.33

4

2.7

PRICE EARNINGS RATIO

YEAR

PRIC

E EA

RNIN

GS R

ATIO

INFERENCE:

From the above table and chart it is clear that in the year 2003-04 earnings per share is

negative and again in the year 2005-06 it again went to negative. The ratio indicates the

number of times the earnings per share is covered by its market price. This ratio is mainly

used to value company’s performance as expected by equity shareholders

4) ACTIVITY RATIOS

4.1) STOCK TURNOVER RATIO

Stock Turnover Ratio = Net Sales Average inventory at selling price


Year Cost of Goods Sold Average Stock Stock Turnover Ratio2003-04 445028 304464 1.642004-05 758559 309641 2.82005-06 290753 307172 1.072006-07 630840 327906 2.22007-08 750864 336145 2.43




Chart No: 12

2003-04 2004-05 2005-06 2006-07 2007-080

0.5

1

1.5

2

2.5

3

1.64

2.8

1.07

2.22.43

STOCK TURNOVER RATIO

YEAR

STO

CK T

URN

OVE

R RA

TIO

INFERENCE:

From the above table and chart it can be seen that the cost of goods sold kept fluctuating

due to the changes in sales. Whereas the Average Stock was able to maintain balance as

the production was steady. The ratio measures how quickly inventory is sold. The firm’s

stock turnover is not very high which indicates the inventories are not sold so fast.

4.2) FIXED ASSETS TURNOVER RATIO

Fixed Assets Turnover Ratio = Net Sales Net fixed assets


Year Net Sales Fixed Assets Fixed Assets Turnover Ratio2003-04 445028 530037 0.942004-05 758559 518152 1.652005-06 290753 494547 0.662006-07 630840 454210 1.62007-08 750864 415081 2.00




Chart No: 13

2003-04 2004-05 2005-06 2006-07 2007-080

0.5

1

1.5

2

2.5

0.940000000000001

1.65

0.660000000000005

1.6

2

FIXED ASSETS TURNOVER RATIO

YEAR

FIXE

D AS

SETS

TUR

NO

VER

RATI

O

INFERENCE:

From the above table and chart it can be seen that there is a fluctuation in the sales. And

the company has been selling out its fixed assets as the amount came down gradually

Higher the ratio better is for the firm. Higher ratio indicates better utilization of fixed

assets. Fixed asset turnover ratio of the firm is in the increasing trend for the past three

accounting years which is favourable for the company.

4.3) WORKING CAPITAL TURNOVE RATIO

Working Capital Turnover Ratio = Net sales Net Working capital


Year Net Sales Net Working Capital Working Capital Turnover Ratio2003-04 445028 315842 1.62004-05 758559 193179 4.442005-06 290753 269091 1.222006-07 630840 347496 2.002007-08 750864 429318 1.90




Chart No: 14

2003-04 2004-05 2005-06 2006-07 2007-080

0.51

1.52

2.53

3.54

4.55

WORKING CAPITAL TURNOVER RATIO

YEAR

WO

RKIN

G CA

PITA

L TUR

NO

VER

RATI

O

INFERENCE:

From the above table and chart it is clear. Compared to 2003-04 the net sales increased in

2004-05. The working capital started to increase after 2004-05 and it showed a increasing

trend. The ideal working capital turnover ratio is 7 or 8 times. The company’s working

capital turnover ratio is far below the standard ratio which indicates working capital is

not effectively utilised in making sales.

4.4) DEBTORS TURNOVER RATIO

Debtors Turnover Ratio = Net Credit Sales

Average debtors including bills receivable

Average Collection Period = No of days in an accounting year

Debtors Turnover ratio

Table No: 29

DEBTORS TURNOVER RATIO (Rs in ‘000s)

Year Net Credit Sales Debtors Debtors Turnover Ratio2003-04 445028 71838 6.19



2004-05 758559 80975 9.372005-06 290753 83306 3.492006-07 630840 97695 6.462007-08 750864 112722 6.66


Table No: 30

AVERAGE COLLECTION PERIOD (Rs in ‘000s)

Year No of Days Debtors Turnover Ratio

Average Collection Period

2003-04 365 6.19 58.962004-05 546 9.37 58.272005-06 182 3.49 52.152006-07 365 6.46 56.502007-08 365 6.66 54.80


Chart No: 15



2003-04 2004-05 2005-06 2006-07 2007-080123456789

10

6.19

9.37

3.49

6.46 6.66

DEBTORS TURNOVER RATIO

YEAR

DEBT

ORS

TUR

NO

VER

RATI

O

INFERENCE:

From the above table and chart it can be inferred that. Debtor’s turnover ratio measures

the efficiency in management of debtors. The ideal turnover ratio is 7 and the firm’s

turnover ratio is also coming in this range which is a very satisfactory figure. Average

collection period of the firm is coming around 56 days which means debtors remain

outstanding for about 56 day.

4.5) CREDITORS TURNOVER RATIO

Creditors Turnover Ratio = Net Credit Purchase



Average Creditors including bills payable

Average Payment Period = No of days in an accounting year

Creditor’s turnover ratio

Table No: 31

(Rs in ‘000s)

Year Net Credit Purchase Average Creditors Creditors Turnover Ratio2003-04 138641 128263 1.082004-05 239837 180654 1.332005-06 92892 169939 0.552006-07 227611 164057 1.392007-08 254163 81438 3.12


Table No: 32

(Rs in ‘000s)

Year No of Days Creditors Turnover Ratio Average Payment Period2003-04 365 1.08 3382004-05 546 1.33 4112005-06 182 0.55 3312006-07 365 1.39 2632007-08 365 3.12 117


Chart No: 16



2003-04 2004-05 2005-06 2006-07 2007-080

0.5

1

1.5

2

2.5

3

3.5

1.081.33

0.55

1.39

3.12

CREDITORS TURNOVER RATIO

YEAR

CRED

ITO

RS T

URN

OVE

R RA

TIO

INFERENCE:

From this above table and chart it is clear that creditors turnover ratio of the company is

1.08:1 in the year 2003-04, 1.33:1 in the year 2004-05 and 0.55:1 in the year 2005-06.

The ratio reached1.39:1 in the year 2006-07 and 3.12:1 in the year 2007-08. Creditor’s

turnover ratio of the company is low which means payment to creditors is delayed. The

creditors by the company is more than one year in the first three accounting years but

payment period has been decreased in the past two accounting years.

4.6) TOTAL ASSET TRUNOVER RATIO

Total Assets Turnover Ratio = Net Sales



Total Assets

Table No: 33

(Rs in ‘000s)

Year Net Sales Total Assets Total Asset Turnover Ratio2003-04 445028 1055606 0.422004-05 758559 1017822 0.752005-06 290753 1021045 0.282006-07 630840 1047837 0.602007-08 750864 1040820 0.72


Chart No: 17

2003-04 2004-05 2005-06 2006-07 2007-080

0.1

0.2

0.3

0.4

0.5

0.6

0.7

0.8

0.42

0.750000000000004

0.28

0.600000000000001

0.720000000000001

TOTAL ASSET TURNOVER RATIO

YEAR

TOTA

L ASS

ET T

URN

OVE

R RA

TIO

INFERENCE

From the above table and chart it can be seen that total asset turnover ratio has been

constantly fluctuating. In the year 2003-04 the ratio is 0.42:1 which increased to 0.75:1 in

2004-05. The ratio then decreased to 0.28:1 in the year 2005-06. The ratio again showed

an increase in the year 2006-07 and reached 0.61:1. In the year 2007-08 the ratio became

0.71:1.



CHAPTER VIIFINDINGS, SUGGETION

AND CONCLUSION

FINDINGS

1. Company’s average current ratio is coming around the ideal current ratio 2:1 which

indicates the firm’s capacity to meet the short term liabilities. Current ratio has shown



an increasing trend in the past three years which means the company is able to

maintain sufficient margin of working capital after paying off the current liabilities.

2. The company has become successful in achieving the ideal quick ratio of 1:1 which

means the its quick assets are sufficient to pay off the short term obligations. Since

the current quick ratio of the firm is greater than 1:1, it can be said that the financial

position of the firm is good.

3. Cash position of the company is not satisfactory.

4. Debt-equity ratio indicates the extent the firm depends upon the outsiders for its

existence. The decreasing trend in the ratio shows that their dependence on the

outsiders has decreased when it comes from 2004-04 to 2007-08.

5. Proprietary ratio shows the financial health of the firm. It tells the proportion of

shareholder’s fund in the total assets of the business. The increasing trend of

proprietary ratio indicates the firm’s dependence on creditors for its working capital

has been decreasing. The firm has not reached the ideal proprietary ratio of 0.5:1

which is alarming for the creditors but the increasing trend in the ratio is also

satisfactory for them.

6. Fixed income bearing funds has increased but equity shareholder’s fund has remained

constant for the past five years which indicates risk to the equity shareholders.

7. Solvency ratio measures the ability of a firm to pay the outside liabilities out of total

assets. Higher the ratio stronger is the financial position of the firm. Solvency ratio of

the company is showing an increasing trend and hence it can be said that company’s

financial position in improving.

8. The firm’s interest coverage ratio is far below the standard ratio of 6 to 7 times. Low

ratio indicates excessive use of debt and inability to offer assured payment of interest

to creditors.

9. Net profit ratio of the company is constant fluctuating. But presently the profitability

of the company is satisfactory.

10. Return on equity shareholders fund is satisfactory for the company but it has shown a

decrease in the last two accounting years.



11. Price earnings ratio indicates the number of times the earnings per share is covered

by its market price. The company’s price earnings ratio is not satisfactory.

12. Stock turnover ratio measures how quickly inventory is sold. The firm’s stock

turnover ratio is not very high which indicates the inventories are not sold fast.

13. Fixed asset turnover ratio of the firm is in the increasing trend for the past three

accounting years which means company is effectively utilising its fixed assets.

14. The ideal working capital turnover ratio is 7 or 8 times. The company’s working

capital turnover is far below the standard ratio which indicates working capital is not

effectively utilised in making sales.

15. Debtor’s turnover ratio means the efficiency in management of debtors. The ideal

turnover ratio is 7.and the firms turnover ratio is coming in this range which is a very

satisfactory figure. Average collection period of the firm is coming around 56 days

which means debtors remain outstanding for about 56 days.

16. Creditor’s turnover ratio of the company is low which means payment to creditors is

delayed. The credit enjoyed by the company is more than one year in the first three

accounting years but payment period has been decreased in the two accounting years.

SUGGESTIONS

1. Cash position of the company is not satisfactory. It is not coming in the ideal range.

Company should see to it that they maintain a constant cash ratio.



2. The company is not depending much on outsider’s fund which may affect its

functioning. Company should try to effectively utilise outsider’s fund.

3. Firm’s dependence on creditors for its working capital has been decreasing which is

alarming for creditors.

4. The firm’s interest coverage ratio is far below the standard ratio which is 6 to 7 times.

It shows inability to offer assured payment of interest to creditors. Company should

try to take necessary action regarding the payment of creditors.

5. Firm should take necessary action to decrease the stock velocity. Management should

take necessary steps to improve inventory management.

6. The company should effectively utilise its working capital in generating sales.

7. Creditor’s management has to be properly done by the company. Steps should be

taken so that the creditors are paid in time.

CONCLUSION



The Western India Plywoods Ltd has been serving the state for more than 60 years. It has

contributed much to the industrial development of the state and is providing employment

to hundreds of people. Company is providing their products to various sectors like

railways, automobiles, civil aviation, transport etc. Over the last few years the company

has made an indelible mark in the wood industry.

The study conducted to measure the financial performance of the company has observed

that the financial position of the company is satisfactory, further improvement has to be

made.

To an extend the debt and equity of the company is affecting the financial performance of

the company.



CHAPTER VIIIBIBLIOGRAPHY

BIBLIOGRAPHY



PRASANNA CHANDRA: "FINANCIAL MANAGEMENT THEORY AND

PRACTICE", Fourth Edition, Tata McGraw Hill Companies.

Last five years Annual Report (2004 to 2008) of Western India Plywoods Limited,

Kannur.

R.K SHARMA AND GUPTHA: "MANAGEMENT ACCOUNTING" 2nd edition,

Kalyani publishers, New Delhi.

I M PANDEY : Financial Management, 8th Edition, Vikas Publishing House

Wood Talk, Western India Plywoods

WEBSITES

www.wipltd.org

www.wekipedia.org

www.google.com



CHAPTER IX

ANNEXURE



INCOME STATEMENT 2003-04


INCOME Sales 491595 499305Other Income 4966 91193Deferred Tax Liability 11763 1837Increase/Decrease in Stock 49315 -4114

TOTAL INCOME 557639 588221EXPENDITURE

Purchase of Finished Goods 1231 752Material consumed 126652 14135Power And Fuel 112466 128447Salaries, Wages and Bonus 85381 78030Repairs and Maintenance 15955 21169Insurance 2425 2579Travelling Expenses 3476 3635Miscellaneous Expenses 8743 4933Packing and Forwarding 25494 25812Commission and Discount 11533 8095Advertisement Expenses 496 489Research and Development 219 196Interest on Fixed Assets 48005 61650Interest on other loans 38001 31470Excise Duty 55464 54277Prior Period Adjustment 630 428Bad And DD Written off 397 0Provision for Doubtful Debts 2237 2375Provision for Taxation 0 0Depreciation 0 41764Other Expenditure 18102 21518TOTAL EXPENDITURE 556907 628975PROFIT AND LOSS ACCOUNT 732 -40754





INCOME Sales 499305 858160Other Income 91193 1519886Deferred Tax Liability 1837 0Increase/Decrease in Stock -4114 -25403


Purchase of Finished Goods 752 1297Material consumed 14135 229678Power And Fuel 128447 153703Salaries, Wages and Bonus 78030 143519Repairs and Maintenance 21169 27879Insurance 2579 6108Travelling Expenses 3635 5938Miscellaneous Expenses 4933 11049Packing and Forwarding 25812 65560Commission and Discount 8095 13564Advertisement Expenses 489 935Research and Development 196 464Interest on Fixed Assets 61650 60659Interest on other loans 31470 5654Excise Duty 54277 99601Prior Period Adjustment 428 47Bad And DD Written off 0 33015Provision for Doubtful Debts 2375 16052Provision for Taxation 0 1246Depreciation 41764 65721Other Expenditure 21518 21201TOTAL EXPENDITURE 628975 962890PROFIT AND LOSS ACCOUNT -40754 21853





INCOME Sales 858160 328091Other Income 1519886 25500Deferred Tax Liability 0 9134Increase/Decrease in Stock -25403 20466


Purchase of Finished Goods 1297 310Material consumed 229678 95400Power And Fuel 153703 54302Salaries, Wages and Bonus 143519 47949Repairs and Maintenance 27879 9558Insurance 6108 2169Travelling Expenses 5938 1257Miscellaneous Expenses 11049 1665Packing and Forwarding 65560 23321Commission and Discount 13564 5571Advertisement Expenses 935 405Research and Development 464 130Interest on Fixed Assets 60659 1899Interest on other loans 5654 18896Excise Duty 99601 37338Prior Period Adjustment 47 -1748Bad And DD Written off 33015 56Provision for Doubtful Debts 16052 0Provision for Taxation 1246 2956Depreciation 65721 22500Other Expenditure 21201 6548TOTAL EXPENDITURE 962890 330482PROFIT AND LOSS ACCOUNT 21853 52709





INCOME Sales 328091 719255Extra Ordinary Income 25500 0Deferred Tax Liability 9134 1282Increase/Decrease in Stock 20466 21001


Purchase of Finished Goods 310 797Material consumed 95400 205950Power And Fuel 54302 109582Salaries, Wages and Bonus 47949 83183Repairs and Maintenance 9558 20013Insurance 2169 4510Travelling Expenses 1257 4253Miscellaneous Expenses 1665 3513Packing and Forwarding 23321 39742Commission and Discount 5571 15179Advertisement Expenses 405 1177Research and Development 130 315Interest on Fixed Assets 1899 21602Interest on other loans 18896 36289Excise Duty 37338 82069Prior Period Adjustment -1748 1447Bad And DD Written off 56 2466Provision for Doubtful Debts 0 0Provision for Taxation 2956 5630Depreciation 22500 46607Other Expenditure 6548 14446TOTAL EXPENDITURE 330482 698770PROFIT AND LOSS ACCOUNT 52709 42768





INCOME Sales 719255 816052Other Income 1282 7702Increase/Decrease in Stock 21001 -4522


Purchase of Finished Goods 797 1037Material consumed 205950 246220Power And Fuel 109582 123158Salaries, Wages and Bonus 83183 96317Repairs and Maintenance 20013 22732Insurance 4510 3112Travelling Expenses 4253 3586Miscellaneous Expenses 3513 4482Packing and Forwarding 39742 51182Commission and Discount 15179 13026Advertisement Expenses 1177 2116Research and Development 315 258Interest on Fixed Assets 21602 23037Interest on other loans 36289 32629Excise Duty 82069 61850Prior Period Adjustment 1447 3534Bad And DD Written off 2466 0Provision for Doubtful Debts 0 10123Provision for Taxation 5630 22732Depreciation 46607 46599Extra Ordinary Expenses 9964Other Expenditure 14446 15702TOTAL EXPENDITURE 698770 793396PROFIT AND LOSS ACCOUNT 42768 25836

BALANCE SHEET 2003-04




ASSETS Fixed Assets: Net Block 553851 527947Capital Work in Progress 2870 2090Current Assets: Inventories 387717 378623Sundry Debtors 72097 71838Cash and Bank Balances 10794 11041Loans and Advances 53826 64067Investments 2739 2588Miscellaneous Expenses 298 149Profit and Loss Account 33384 74138

TOTAL ASSETS 1117576 1132481LIABILITIES

Share Capital: Equity 84873 84873Preference 46000 46000Reserves and Surplus 41296 41296Secured Loan: Term Loans 449763 503717Others 253798 240060Unsecured Loan 6784 6808Current Liabilities 199897 174234Provisions 33328 35493Deferred Tax Liability 1837 0TOTAL LIABILITIES 1117576 1132481





ASSETS Fixed Assets: Net Block 527947 477999Capital Work in Progress 2090 40153Current Assets: Inventories 378623 366324Sundry Debtors 71838 80975Cash and Bank Balances 11041 11930Loans and Advances 64067 37054Investments 2588 3611Miscellaneous Expenses 149 0Profit and Loss Account 74138 52285

TOTAL ASSETS 1132481 1E+06LIABILITIES

Share Capital: Equity 84873 84873Preference 46000 46000Reserves and Surplus 41296 41296Secured Loan: Term Loans 503717 341188Others 240060 243361Unsecured Loan 6808 10509Current Liabilities 174234 249398Provisions 35493 53706Deferred Tax Liability TOTAL LIABILITIES 1132481 1E+06





ASSETS Fixed Assets: Net Block 477999 494547Capital Work in Progress 40153 0Current Assets: Inventories 366324 383094Sundry Debtors 80975 83306Cash and Bank Balances 11930 13424Loans and Advances 37054 46674Investments 3611 5631Miscellaneous Expenses 0 Profit and Loss Account 52285 0


Share Capital: Equity 84873 84873Preference 46000 138327Reserves and Surplus 41296 41720Secured Loan: Term Loans 341188 241060Others 243361 23985Unsecured Loan 10509 23904Current Liabilities 249398 196773Provisions 53706 60634Deferred Tax Liability TOTAL LIABILITIES 1070331 1026676





ASSETS Fixed Assets: Net Block 494547 450754Capital Work in Progress 0 3456Current Assets: Inventories 383094 424145Sundry Debtors 83306 97695Cash and Bank Balances 13424 29272Loans and Advances 46674 42515Investments 5631 5632Miscellaneous Expenses Profit and Loss Account 0


Share Capital: Equity 84873 84873Preference 138327 138327Reserves and Surplus 41720 84488Secured Loan: Term Loans 241060 241729Others 239385 238286Unsecured Loan 23904 19635Current Liabilities 196773 186623Provisions 60634 59508Deferred Tax Liability TOTAL LIABILITIES 1026676 1053469





ASSETS Fixed Assets: Net Block 450754 415081Capital Work in Progress 3456 0Current Assets: Inventories 424145 417870Sundry Debtors 97695 112722Cash and Bank Balances 29272 47558Loans and Advances 42515 47589Investments 5632 5632Miscellaneous Expenses Profit and Loss Account


Share Capital: Equity 84873 84873Preference 138327 138327Reserves and Surplus 84488 121790Secured Loan: Term Loans 241729 234704Others 238286 235082Unsecured Loan 19635 18256Current Liabilities 186623 145105Provisions 59508 51316Deferred Tax Liability 16999TOTAL LIABILITIES 1053469 1046452


Documents

A Study on the Financial Perfomance of Western India Plywoods