Ratio Analysis

STUDY ON RATIO ANALYSIS WITH REGARD TO SOLVENCY AND PROFITABILITY

CHAPTER 1

INTRODUCTION

KRISTU JYOTI COLLEGE OF MANAGEMENT AND TECHNOLOGY Page 1


1.1 INTRODUCTION

Financial statements aim at providing financial information about a business enterprise to

meet the information needs of the decision makers. Financial statements prepared by a business

enterprise in the corporate sector are published and are available to the decision-makers. These

statements provide financial data which require analysis comparison and interpretation for taking

decision by the external as well as internal users of accounting information. The act is termed as

financial statement analysis. It is regarded as an integral and important part of accounting.

Accounting ratios are an important tool of financial statement analysis. A ratio is a

mathematical number calculated as a reference to relationship of two or more numbers and can

be expressed as a fraction, proportion, percentage and a number of times. When the number is

calculated by referring to two accounting numbers derived from financial statements, it is termed

as accounting ratio.

Accounting ratios exhibit relationship if any between accounting numbers extracted from

financial statements, they are essentially derived numbers and their efficiency depends a great

deal upon the basic numbers from which they are calculated. Hence if the financial statements

contain some errors, the derived numbers in terms of ratio analysis would also present an

erroneous scenario. Further, a ratio must be calculated using numbers which are meaningfully

correlated. A ratio calculated by using two unrelated numbers would hardly serve any purpose.



1.2 STATEMENT OF THE PROBLEM

The present investigation is undertaken to measure solvency and profitability of a private

company and hence the title, STUDY ON RATIO ANALYSIS WITH REGARD TO

SOLVENCY AND PROFITABILITY.

1.3 OBJECTIVE OF THE STUDY

* To understand the relationship of profitability between two significant periods (years) of the

company.

* To estimate whether the company has significant solvency potential.

* To understand whether the firm is able to utilize effectively outside sources of funds (using

gross profit ratio)

* To know whether the firm is able to secure a good rapport with creditors (using Proprietary

ratios)

1.4 NATURE OF STUDY

A business firm is basically a profit earning organisation. The income statement of the

firm shows the profit earned by firm during the accounting period. Profitability is an indication

of the efficiency with which the operations of the business are carried on. Poor operational

performance may indicate poor sales and hence poor profits. The profit figure has however

different meanings to different parties interested in financial analysis.

Financial analysts are interested in the relative use of debt and equity in the firm. Debt

equity ratio, proprietary ratio and solvency ratio to measure the long term solvency position of

the firm. These ratios show the financial strength of the company. From the view point of

creditors, it represents a satisfactory capital structure of the business.



1.5 LIMITATIONS OF STUDY:

The time constraint was one of the major problems.

The study is limited to the different schemes available under the working capital

requirements.

The study is limited to analysis of different years of the concerned company.

The lack of information sources for the analysis part.



CHAPTER 2

PROFILES



2.1 INDUSTRY PROFILE

India is targeting a gross domestic product (GDP) growth rate of 8-9 % in the coming

years. To enable this growth, the country is economy needs the support of its power sector,

which is witnessing heavy investments that will enable it to cater to India’s increasing power

demand. The capacity addition target in the 12th Plan (2012-2017) is expected to be 88.5

gigawatts (GW). Close to 100 GW of capacity addition is envisaged in the 13th Plan (2017-

2022). Though coal will likely remain the major fuel type in the future, the introduction of new

and efficient technologies for power generations is being aggressively pursued with greater stress

on renewable energy sources such as wind, solar and nuclear. Within the thermal segment,

installation of large supercritical units is being encouraged with the view to enable rapid capacity

addition, enhance efficiency and reduce coal consumption, water requirement and green house

emissions. Globally, further advances in technology have resulted In developing advanced ultra-

supercritical technologies.

India’s electrical equipment industry is expected to play a critical role in improving its

power infrastructure. Undoubtedly, the health of the Indian electrical equipment industry is of

prime importance. The industry faces challenges both domestically and internationally. Low

capacity utilizations especially in the transmission and distribution (T&D) segment, and the

growing threat of cow cost imports are some of the key challenges. The Department of Heavy

Industry (DHI) recognizes the power sector’s strategic nature and the resulting importance of the

EE industry. To address the various challenges, interventions needed to identified and

implemented in a mission mode. Thus, DHI has developed a Mission Plan to support the

domestic electrical equipment industry’s future development and enhance its global

competitiveness.

The Government of India is convinced that the aspirations unfolded in the Mission Plan

will be achieved and the Indian electrical equipment industry will be able to meet the

competition globally and evolve into a world-class industry. The Mission Plan is envisioned as a

blueprint for the industry’s future and will require close collaboration between the government

and the industry. Assured availability of quality power at competitive rate is a sine qwa non for



industrial and economic development. For an efficient and developed power sector in a country

of India’s size, a strong domestic electrical equipment manufacturing base is essential.

Considering that the government plans to increase power generation capacity from 200 GW in

2012 to about 400 GW by 2022 with commensurate T&D capacity enhancement, Indian EE

manufacturers not only have to meet demand of such huge capacity addition., but also that of

metros, airports, railways, other infrastructure projects and increase in domestic consumer

demand too. Per capita electricity consumption in India in 2010-11 was 819 Kilowatt hour

(KWH), less than one fourth the global average.

Presently, the domestic electrical equipment industry size exceeds 1.20 lakh crores with

the share of generation equipment (boilers, turbines, generators- BTG) being about one-fourth

and that of T&D being three-fourth of the total. The domestic EE industry contributed 1.5 % to

the nation’s GDP in 2011-12 and 10.5 to the manufacturing GDP. The industry provides direct

employment to about 0.5 million persons and indirectly to about 1 million persons. The entire

value chain would account for a total employment of over 5 million persons. The domestic

industry is now by and large geared up to meet the current and future demand of the power and

other sector’s of the economy.

The industry’s share of exports is about 1.5 % of the country’s total export, whereas its

share of imports is about 3.2 % of the total imports. The country’s trade deficit in EE is widening

every year, which is a matter of serious concern. The capacity utilisation of the T&D equipment

industry is broadly only 70 % which is a matter of concern for the industry. At present the total

manufacturing capacity of BTG equipment in the country is about 25,000 megawatt (MW) per

annum and is expected to increase to 40,000 MW per annum by 2014-15, once six more joint

ventures become operational. As a result, even the generation equipment sector will soon be

siiting on huge surplus capacity. Imports have captured about 43 % of the market for electrical

equipment in India, whereas there is significant domestic overcapacity.

Considering the domestic EE industry’s importance for the power sector, GDP growth

and also employment, it is extremely important to ensure that the targeted growth of the entire

electrical equipment industry is aligned with the 12th and 13th Five Year Plans. Vision 2022 for



the Indian electrical equipment industry is to make India the country of choice for the production

of electrical equipment and reach an output of US $100 billion by balancing exports and imports.

The Indian Electrical Equipment Industry Mission Plan 2012-2022 has been evolved through an

elaborate exercise involving all stakeholders. Five critical areas that need to be addressed by the

industry, with support from the government, are industry competitiveness, technology up

gradation, skill development, exports and conversion of latent demand to actual demand.

Industry Competitiveness

While the performance of the domestic electrical industry has been strong over the last

decade, it is important to maintain sustained high rate of growth if it has to meet the demand

arising out of the targeted generation capacity addition meet the growth of other sectors of

economy and also become globally competitive and increase exports. Therefore it is important to

provide a level playing field in the country to domestic EE manufacturers vis-a vis foreign

manufacturers who are enjoying support from their respective governments with respect to

subsidies on raw materials incentives for exports, low cost of funds, better infrastructure etc.

Indian Industry can be supported by buying higher import duty on electrical equipment,

allowing import of cold rolled grain oriented (CRGO) electrical steel at zero customs duty,

replacing the L1 criteria of procurement by power utilities in India with two part bidding,

augmenting domestic testing facilities to cover the type testing of all equipment mandating type

testing of imported equipment in Indian labs, supporting SMEs in technology up gradation and

testing, standardisation of product ratings and specifications, keeping a provision for type testing

of small equipment picked up from site etc.

The government also needs to support industry by providing funds at globally

competitive rates of interest and help industry to establish clusters of electrical and component

manufacturers and provide them funds for technology up gradation. Foreign suppliers of heavy

equipment should also be insisted upon the set up phased manufacturing facilities in India.



Technology Up gradation

The generating and switchgear equipment being manufactured in India can complete with

the best in the world. However, Indian industry as a whole does not give much importance to

R&D and spends less than 1 % of their sales on R&D. Large companies in other countries spend

5 to 6 % of sales on R&D. 90 % of T&D equipment manufacturers in India are in the small and

medium enterprises (SME) sector, and are generally unable to upgrade technology and improve

their products.

R&D in the BTG and T&D sectors takes place at the individual company level in public

sector enterprises (PSEs) and in some private companies, but there is no coordinated and

collaborative effort by industries and utilities. Therefore, results are generally not forthcoming

and the country’s dependence on the import of technology is very high.

Bharat Heavy Electricals Ltd. (BHEL) has developed a demonstration model based on

Integrated Gasification Combined Cycle (IGCC) and advanced ultra-supercritical technology.

BHEL should be supported by the government to build high capacity commercial units in a time-

bound manner. This technology, which is not available in the world for Indian coal, should be

made available to other manufacturers. For any R&D project, the user organisation or main

beneficiary should be supported by the government for leading the research in a planned and

committed manner. In the transmission sector, the Power Grid Corporation of India Ltd.

(PGCIL) has developed an experimental 1200 kilovolt (kv) station at Bina (Madhya Pradesh)

with the involvement of domestic electrical equipment manufacturers, EPC (Engineering,

Procurement & Construction) contractors and a foreign expert. This is an model of public -

private partnership (PPP) for fast development of new technology / systems and should be

replicated in other areas. To increase the capacity of existing transmission lines, stress should be

laid on areas such as high surge impedance loading lines and development of high temperature

low sag carbon core conductors. As experimental models of transformers, motors, cables etc

have already been developed in the world, focused attention should be given to research on

superconducting under the leadership of PGCIL.



Skill Development

The electrical equipment industry plays a very important role not only in GDP but also in

providing employment in the country. It is estimated that this industry requires almost 80000 to

90000 skilled workers every year. A large number of skilled workers coming out of technical

institutes do not possess the required skills and are not employable. The industry has to spend

time and money on their training. In the case of engineers and supervisors, the situation is quite

alarming. The quality of knowledge possessed by graduates and diploma-holders coming out of

most private institutes is very poor. This is one of the major reasons for the low productivity of

manpower in India as compared to other economics. It has been observed that most existing

technical training institutes run by the government and private sector do not have proper training

facilities, their curriculum is not updated, the system of providing proper practical training to the

students is nearly non existent and does not meet the needs of the industry either. Forming a

Sector Skill Council (SSC) for the electrical equipment industry with support from the National

Skill Development Corporation (NSDC)has been proposed to improve the quality of training

being provided in the existing institutes. The SSC will consolidate data regarding the number of

skilled workers required in different regions of the country. It will have regional offices that will

interact with industry to provide training to the workers and also train the teachers, propose

changes in curriculum etc. It will arrange for accreditation of the institutes and certification of

the students. In accordance to their requirement and with the help of NSDC, the IPPs and PSEs

are to take over and upgrade training facilities of the local institutes wherever they set up power

and other infrastructure projects.

To meet the growing demand of information and communications technology (ICT)

sector in 1980s the Government of India gave a mandate to the All India Council for Technical

Education (AICTE) to encourage private and voluntary organisations to set up technical and

management institutes in India. As a result of these initiatives, the number of engineering

colleges increased from less than 450 in 2002 to more than 3000 in 2010. Intake of students has

increased from 0.84 million in 2008 to more than 1.30 million in 2010. In the process, the norms



got diluted and quality of education suffered. Most of the graduates coming out of private

engineering colleges do not possess the basic knowledge of their branch. Every year industry

experts visit these private colleges for campus interviews. Their feedback can be utilized by

AICTE to review the accreditation of these colleges and initiate action for improving the

standard of education. The industry should be involved in the periodic review of the curriculum,

summer training of students and for guest lectures of the industry experts.

Exports

Exports of electrical equipment in 2011-12 were US $ 4.6 billion, which is about 3.2 %

of total imports were US $ 15.7 billion, which is about 3.2 % of total imports. During the last

five years, exports of electrical equipment have increased at a CAGR of 9.7 % whereas imports

have increased at a CAGR of 27.2 %. Clearly, there is an urgent need for reducing the increasing

trade deficit. Some countries provide very effective support to their domestic manufacturers of

electrical equipment, which results in them being more competitive vis-a-vis Indian

manufacturers in the global market. Indian industry is also unable to compete because of the

industry’s lack of focus on quality of the products, delivery commitments, high cost of shipment,

lack of infrastructure, non recognition of testing facilities by some countries high cost of

production, high cost finance, lack of interaction of the industry with missions and trade

commissions etc.

A study of the emerging markets in Africa, Latin America and Central Asian Countries

should be conducted to identify the countries and the equipment that have good scope for exports

from India.

The Foreign Trade Policy should provide specific incentives for exports of electrical

equipment. The Export-Import Bank of India (EXIM Bank) should provide project specific lines

of credit to other countries with an emphasis on acceptance of equipment / material only from

India for such projects. The government should provide loans to underdeveloped countries for

power plants, transmission and distribution projects or barter for oil and gas and other material.

In order to reduce the shipping cost and the time taken for clearance of documents and actual



shipment of consignment, all the recommendations of the Task Force on Transaction Cost, set up

by the Department of Commerce should be implemented at the earliest. The Central Power

Research Institute (CPRI) should initiate action to see that its certification is accepted in all

foreign countries. The participation of foreign buyers in specialised trade fairs of electrical

equipment in India should be encouraged. Likewise, Indian manufacturers of electrical

equipment should be encouraged to take part in specialised trade fairs abroad. A larger number

of business delegations of Indian electrical equipment manufacturers should be organised to

target foreign markets.

To carry forward the recommendations arising out of the Mission Plan, an Inter-

Ministerial Committee comprising of representatives of the Department of Heavy Industry (DHI)

and other Ministries / Departments, IEEMA, Industry and other stakeholders should be

constituted for monitoring the implementation of the recommendations and for periodic follow

up of its status.



1.2 COMPANY PROFILE

Havells India Limited is a $ 1.3 Billion leading Fast Moving Electrical Goods (FMEG) company

and a major power distribution equipment manufacturer with a strong global footprint. Havells

enjoys enviable market dominance across a wide spectrum of products, including Industrial &

Domestic circuit protection Devices, Cables & Wires, Motors, Fans, Modular Switches, Home

Appliances, Electronic Water Heaters, Power Capacitors, CFL Lamps, Luminaires for Domestic,

commercial and Industrial Applications.

Havells in 2007 created history by acquiring world’s renowned lighting company

Sylvania thus registering itself amongst top 5 lighting companies in the world. Today, Havells

own some of the most prestigious global brands like Havells, Crabtree, Sylvania, Concord,

Luminance and standard. Its global network constitutes of 7000 professionals across 91

branches and representative offices in over 50 countries. Its fourteen state of the art

manufacturng plants in India located at Haridwar, Baddi, Noida, Sahibabad, Faridabad, Alwar,

Neemrana and seven world class manufacturing plants located in Europe, Latin America and

Africa are manufacturing globally acclaimed products, synonymous with excellence and

precision in the electrical industry.

A 20000 strong global distribution network continuously strives to set new bench marks

in prompt delivery and service to customers - powering their smiles like none other electrical

brand in the country. Further to this the company pioneered the concept of exclusive brand

showroom in the electrical industry with ‘Havells Galaxy’. Today over 160 Havells Galaxies

across the country are helping customers both domestic and commercial to choose from a wide

variety of products for different applications. Havells became the first FMEC company to offer

door step service via its initiative ‘Havells connect’. Thanks to the quality of products and

quicker service, it has minimum complaints and highest customer satisfaction.

Today, Havells along with its brands, have earned the distinction of being the preferred

choice of electrical products for discerning individuals and industrial consumers both in India



and abroad. Havells offers same quality products for both Indian and International markets.

Havells products and processes have acquired a number of International quality certifications

like BASFC, CSA, KEMA, CB, CE, ASTA, CPA, SEMKO, SIRIUM (Malaysia), SPRIING

(Singapore) TSE (Turkey) SNI (Indonesia) and EDD (Bahrain)- thus complying stringent quality

norms at even the most testing market worldwide. It is committed to keep powering the world

with its state of the art innovations and energy - efficient solutions. Currently 70% of its product

offering is energy efficient.

Social and environmental responsibility has been at the forefront of Havells operating

philosophy and as a result the company consistently contributes to socially responsible activities.

For instance, the company is providing midday meal in government schools in Alwar district,

covering 30000 students per day. Besides this company has acquired land for constructing a

larger kitchen with all the modern facilities to serve freshly cooked food to 50000 students in the

area. The group company, QRG Healthcare runs a 120 bed hospital in Faridabad and will soon

launch another 400 bed hospital in Faridabad by end of the year. In the part, the company has

generously contributed to the society during various national calamities like the Bihar flood,

Tsunami and Kargil National Relief Fund etc. The essence of Havells success lies in the

expertise of its fine team of professionals, strong relationships with associates and the ability to

adapt quickly and efficiently, coupled with the vision to always think ahead.

Some of the ‘Firsts’ from Havells

* Sets up India’s first New Generation CMH Lamp plant at Neemrana in the year 2010

* Launched India’s Ist HPF CFL in the year 2009

* Havells launched India’s Ist BEE 5 * Rated Fan in the year 2009

* First Indian CFL manufactures to have adopted ROHS, European norms on Restriction of

Hazardous substances in CFLs in the year 2008

* First company to get the ISI certification for complete range of CFLs in the year 2006.

* Awarded the KEMA certification by the Dutch council for Accreditation, making QRG the

only group to attain the certification in the year 2005.



Vision

“To be a globally recognized corporation that provides best electrical and lighting

solutions delivered by best in class people.”

Mission

To achieve our vision through fairness, business ethics, global reach, technological

expertise, building long term relationships with all our associates, customers, partners and

employees.

Values

Customer Delight - A commitment to surpassing our customer expectation.

Leadership by example - A commitment to set standards in our business and transactions

based on mutual trust.

Integrity and Transparency - A commitment to be ethical sincere and open in our dealings.

Pursuit of excellence : A commitment to strive relentlessly to constantly improve

ourselves, our teams, our services and products, our teams, our services and products so as

to become the best in class.

The group’s phenomenal success over the year has been due to Mr. Qimat Rai Gupta’s

mantra of “growth through quality, innovation and market consolidation”. His focus an

research and development has enabled the group to develop products for consumers that

offer great value for money. His constant emphasis on prompting energy conservation and

environmental preservation coupled with his philanthropic service to the economically

weaker reaction of the society is his way of giving back in return to the society that has

helped this organisation realize its true potential.



Mr. Gupta has held various responsible positions in Trade and commercial responsible

positions in Trade and commercial associations of the Industry from time to time. He has,

in his past served as the President of Federation of All India Electrical and Trade

Association. Mr. Qimat Rai Gupta has been recognised by various sections of the industry

for his path breaking work in this segment. Amongst the acknowledgements bestowed

upon him, Mr. Gupta received the self-made Entrepreneur Award “Udyog Patra” in 1989,

Distinguished Entrepreneurship Award 2004, from the PHD Chamber of commerce and

Industry in 2004, Udyog Vibhushan from the Institute of Trade and Industrial

Development, Delhi in 2005 and Udyog Ratna from PHD Chamber of commerce and

Industry for Economic contribution to Uttaranchal State in 2005.

Research and Development

Innovation is the hallmark of every vital development at QRG Group. New ideas, inventions

deepen scientific knowledge and give its work force a new impetus towards technical progress

QRG’s technological strengths and its endeavor towards continuous research and development

have allowed it to fulfill its responsibilities towards its customers. The responsibility of

providing its customers the best products and zero defect services to enable them to be

comfortable and secure in usage of electricity. Havells has recently invested 50 crores in the

QRG centre for Research and Innovation set-up at the company’s Head Office premises in Noida

U. P.

The objective of this centre is to provide the theoretical and experimental foundation for

all segments of electrical engineering. The centre closely cooperate with the various departments

so as to provide the best and the latest in terms of technology and design.

Quality Control

The essence of quality is closely wrapped in the way we think, plan and work. It finds its true

expression when we extend beyond ourselves to exceed our customer’s expectation. To deliver



products those are safer, faster and simply bitter. Each time, every time. Building customer

confidence through teamwork is a top priority to provide a wide variety of products and service.

Realising and respecting the basic needs of customers to feel more secure we’ve committed

ourselves to make our products better, safer and smarter than what he or she is looking for.

That’s a passion that began 30 years age and that’s how it continues to be even today. Our

customers ready on us and it is our responsibility to give them the very best. All our products are

as per IEC standards. QRG has a simple rule on quality. If it doesn’t exceed customer

expectation, it’s not quality performance.

PRODUCTS UNDER HAVELLS INDIA LTD.

Industrial switchgear

Switch to precision

Havells a leader in the field of circuit protection, power distribution and Industrial controls

have two state of the art manufacturing plants in Sahibabad and Faridabad. Havells

manufactures Air circuit Breakers, MCCBs, contractors, Relays, Multipurpose/ Multi-range

change over switches, switch fuse units, HRC fuses, caters to the industry, Building and

Infrastrucure sectors with custom built LT Panels in drawout, semi-drawout and fixed

configurations. The factory infrastructure includes a full fledged Tool Room, Press shop, CNC

Machine, Conveyorised powder coating plant and an enviable chemical, Mechanical and

Electrical Testing Laboratories. These facilities are coupled with latest version design software

to enhance performance, quality and fault diagnostics.



Domestic switch gear

For a shockproof life

An integral part of the Havells umbrella, Havells switchgear is a leading name in circuit

protection devices in India. Catering to the needs of discerning customers, the company is the

largest manufacturer of MCBs in the country and amongst the top 10 in the world. With fully

automated manufacturing unit in Baddi, Himachal equipped with state of the art machinery its

products are acclaimed all over the world. The wide range of products under Domestic

switchgear include MCB, RCCB, RCBO, ACCL and Distribution boards.

Motors

Havells Motors, Ensuring profits

In 2009 Havells commissioned a 3-phase LV Motor plant at Neemrand, Rajasthan, covering

20000 sq. meters over 42 acres of land. The motors are manufactured in technical collaboration

with LAFERT (one of the largest motor manufacturer in Europe) and are now the owners of

AEG Electric Motors. Havells is one of the few leading motor manufacturers in the country to

have a complete range of motors which meets/exceeds the minimum efficiency stated in

1512615 both for EFF1 / EFF2. The plant is equipped to produce over 2,50,000 energy

efficiency motors per annum covering entire range from 0.12 HP to 500HP in frames 56-35.

Cables

Wires that don’t catch fire.

Carrying forward the winning course with Havells cables securing the industry for more

than a decade now. Based in Alwar, Rajasthan, the ISO 9001:2000 certified and BASE C

approved Havells cable plant is one of the largest cable manufacturing unit in India. Its huge

infrastructure set up combines the latest technology sourced from around the world with modern

machines for manufacturing LT and HT Flame Retardant and Flame Retarant low smoke (FLRS)

Cables, power and central cables and Insulated cables upto 66 KV.



Fans

Havells fans. Fans forever

Havells entered the fan business in mid 2003 and soon with its constant quest for innovation and

customer satisfaction, became an enviable competitor and a player, revered for capturing strong

market through its wide range of pioneering designs. From premium fans in exquisite antique

finishes to fans specially designed for kids to dual colour fans and super speed fans, Havells

today offers a complete range to meet varied individual needs. Further it won industry

accolades. on the launch of India’s first energy efficient fan ES - 50 which was indigenously

designed by Havells R & D, consuming only 50H of electricity. Today this model is amongst

the largest selling energy saving fans in the country. Havells twin fan plant at Haridwar is one of

the finest and most automated plants in the country.

Lighting

Lighting up your world.

Lighting business is an important part of Havells product portfolio. Combining innovative

products with inspired solutions, we help lighting professionals creative design turn into reality.

Building on our global expertise in lamps fixtures, we strive to create positive, energy efficient

work and leisure environments for people all over the world. With energy efficiency being a

common consumer concern one at Havells are focused on developing state of the art lighting

products like LEDS, Lighting controls CFLs etc. Havells became the first company to launch

HPF (high power factor) CFL lamps for Indian domestic market and ROHS compliant green

CFLs. With strong brands like Sylvania, Concord, Havells, Lumiance in the lighting space is

sitto light up the world.



CFL

Save more, Grow more

Havells Neemrance plant is a Global Manufacturing hub with a capacity of producing Li million

CFL per month. This plant boasts of an automated assembly line that ensures production of

world-class quantity. The plant uses PDT (Pill Dozing Technology) boasts of an ROHS

certificates and practices 100% testing of each CFL. The CFLs manufactured here adhere to

international standards.

Switches

Switches - blending aesthetics with perfection

Modern living in all about safety, security, durability and the aesthetic appeal. Havells, Crabtree

of standard modular switches are crafted keeping these sensitivities of the consumers in mind.

The stringent teats ensures the life of switches over 1 lac operations. Manufactured at the state

of the art plant at Baddi, Himachal Pradesh is one of the most modern plants in the country and is

known for its stringent quality norms. Havells, Crabtree and Standard modular switches are

today known for their steadfast quality and aesthetic appeal.

Domestic Appliances

Have Fresh, Live Fresh

Havells Domestic Appliances will help you discover the joys of eating fresh and living healthy.

Every appliance has been especially designed to enhance the customer’s overall experience in

modern kitchens and homes. Havells kitchen range will make you want to cook fresh food all the

time. Havells irons will help you live fresh with unique self-cleaning and fabric friendly features.



With best-in-class features, Havells ensures that you get the best out of these appliances. Each

appliance is designed to add ease to your fabric care, food processing and preparation needs.

Adding comfort to your seasonal needs Domestic Appliances also provides you wide range of

water heaters.



Management - Havells India

Name Designation

Qimat Rai Gupta Chairman and Managing Director

Surjit Gupta Director

S.B. Mathur Director

A.P. Gandhi Director

V.K. Chopra Director

Name Designation

Anil Gupta Joint Managing Director

Rajesh Gupta Director

S.K. Titeja Director

Niten Mathan Director

Adarsh Kishore Director



CHAPTER 3

THEORETICAL FRAMEWORK



THEORETICAL FRAMEWORK

Ratio analysis is the analysis of financial statements with the help of ratios. It includes

comparison and interpretation of these ratios and their use for future projection. Ratio analysis

does not provide an end in itself, but only a means to understand the financial position and

performance of business concerned.

A ratio may be expressed in any way of the following forms:

1. Quotient or Pure Ratio (which is arrived at by the simple division of one number by another.)

2. Percentage (which is a special type of ratio expressing the relationship in hundred. It is arrived

at by multiplying the quotient by 100.)

3. Rates (which is the ratio between the two numerical facts over a period of time.)

3.1 Objectives of Ratio Analysis

Cost controlling

Different expenses ratios help to reduce and control cost elements.

Trend analysis

The trend of the movement of items can be studied with the help of ratios.

To test Profitability

The profitability of a concern can be measured with the help of the ratio such as gross

profit ratio, net profit ratio, operating profit ratio etc.

To test solvency position

The solvency of a concern can be measured with the help of different ratio computed

from Balance sheet items.



Financial Forecasting

With the help of ratios of various preceding years, projections can be made for the future.

3.2 Importance

* It makes it easy to grasp the relationship between various items and helps in understanding the

financial statements.

* Ratios indicate trends in important items and thus helps in forecasting.

* Inter-firm comparisons can be made with the help of ratios which may help management in

evolving future market strategies.

* Ratios can be effectively ‘communicate’ what has happened between two accounting dates.

* It helps in a simple assessment of liquidity, profitability solvency and efficiency of the firm.

Limitations

* Ratio analysis only a good basis for quantitative analysis of financial problems. But it suffers

from qualitative aspects.

* Ratios are computed from historical accounting records. So they also posses those limitations

of financial accounting.

* It is not possible to calculate exact and well accepted absolute standard for comparison.

* In ratio analysis arithmetical window dressing is possible and firms may be successful in

concealing the real position.

* Ratios are only means of financial analysis but not an end in themselves.



Classification of Ratios

Ratios may be classified in a number of ways depending upon one or the other similarity.

Some important classifications are given below.

1. Statement wise Classification

This classification is based on the statement from which items are taken.

a) Balance sheet Ratios

These ratios deal with relationships between two items or groups of items which are both

in the Balance sheet. Example; Current Ratio, acid test ratio, debt-equity ratio etc.

b) Income Statement ratios

These ratios focus on the relationship between the two items or group of items all of

which are drawn from the revenue statement. These ratios are also known as operating ratios.

Example; Gross profit ratio, Stock turnover ratio, net profit ratio etc.

c) Combined ratios

These ratios depict the relationship between two items one of which is drawn from the

Balance Sheet and the other from the revenue statement. Example; Debtors turnover ratio, assets

turnover ratio, return on capital employed etc.

2. Classification according to importance

It is evident that some ratios are more important than others. This classification has been

recommended by the British Institute of Management.

a) Primary Ratio



As the success of any business undertaking is measured by the quantum of profit earned

by it, the ratio which relates the profit to capital employed is termed as primary ratio.

b) Secondary Ratio

This classification is effected to facilitate interfirm comparison and to focus on some

factors responsible for the success of the unit. When such factors are isolated by means of ratios,

they are called secondary ratios.

3. Classification according to nature

This mode of classification includes in its fold four different types of accounting ratios

which are as follows.

a) Liquidity ratios

These ratios portray the capacity of the business unit to meet its short term obligations

out of its short term resources. Examples; Current ratio, acid test ratio etc.

b) Leverage Ratios

These ratios are also called efficiency ratios. These ratios measure the owner’s stake in

the business Vis-a-Vis that of outsiders. The long term solvency of the business can be examined

by using leverage ratio. Example; Debt equity ratio, Proprietary ratio etc.

c) Profitability Ratios

The Profitability of a business concern can be measured by the profitability ratios. These

ratios highlight the end result of business activities by which alone the overall efficiency of a

business unit can be judged. Example; Return on capital employed, gross profit ratio, net profit

ratio etc.

d) Activity ratios

These ratios evaluate the use of the total resources of the business concern along with the

use of the components of total assets. More precisely they are intended to measure the

effectiveness of the asset management. The efficiency with which the assets are used would be



reflected in the speed and rapidity with which the assets are converted into sales. The greater the

rate of turnover, the more efficient the management would be. Example; Stock turnover ratio,

fixed assets turnover ratio.

LEVERAGE RATIOS

Financial Analysis are interested in the relative use of debt and equity in the firm. These ratios

measure the long term solvency position of the firm.

Debt Equity Ratio

The relationship between borrowed funds and owner’s capital is a popular measure of the long

term financial solvency of a firm. This relationship is shown by the debt-equity ratio. This ratio

indicates the relative proportion of debt and equity in financing the assets of a firm. This ratio is

computed by dividing the total debt of the firm by its net worth.

Debt - Equity Ratio = DebtEquity

Or

Debt - Equity Ratio = Outside r ' sfundShareholders fund

The term ‘debt’ refers to the total outside liabilities. It includes all current liabilities and

other outside liabilities like loan, debentures etc. The term equity refers to net worth or

shareholder’s fund.

Equity of shareholder’s fund = Share capital (Equity + Preference)

+

Reserves and surplus - Fictitious assets.

Significance

An acceptable norm for this ratio is considered to be 2:1. A high ratio shows that the claims of

creditors are greater than those of owners. A very high ratio is unfavorable for the firm. High



debt companies are able to borrow funds on very restrictive term and conditions. A low debt-

equity ratio implies a greater claim of owners, it represents a satisfactory capital structure of the

business.

Proprietary Ratio

Proprietary ratio rebates to the shareholders fund to total assets. This ratio shows the long term

solvency of the firm /business. It is calculated by dividing shareholder’s funds by the total

assets.

Proprietary Ratio = Shareholder ’ s funds

Totalassets

Total assets includes all assets including goodwill (excluding fictitious assets). The

acceptable norm of the ratio is 1:33 (i.e. 0.33)

Significance

The ratio shows the financial strength of the company. It helps the creditors to find out the

proportion of shareholders fund in the total assets. Higher ratio indicates a secured position to

creditors and a low ratio indicates greater risk to creditors. It indicates the long term solvency of

the firm.

Solvency Ratio

Solvency ratio indicates the relationship between total outside liabilities to total assets. Total

assets does not include fictitious assets

Solvency Ratio = Total liabilities ¿outsiders¿

Total assets

Significance



Generally, lower the ratio of total liabilities to total assets, more satisfactory or stable is the long

term solvency position of a firm.

PROFITABILITY RATIOS

A business firm is basically a profit earning organisation. The income statement of the firm

shows the profit earned by the firm during the accounting period. Profitability is an indication of

the efficiency with which the operations of the business are carried on. Power operational

performance may indicate poor sales and hence poor profits. The profit figure has, however

different meanings to different parties interested in financial analysis.

Gross profit Ratio

The gross profit ratio plays an important role in two management areas. In the area of financial

management, the ratio serves as a valuable indicator of the firm’s ability to utilise effectively

outside sources of fund. Secondly, this ratio also serves as important tool in shaping the pricing

policy of the firm. This ratio expresses the relationship between gross profit and sales. This

ratio is calculated by dividing gross profit by net sales.

Gross Profit Ratio = Gross profitNet sales

X100

Significance

This ratio helps in ascertaining whether the average percentage of profit on the goods is

maintained or not. An increase in the gross profit ratio may be due to an increase in the selling

price without a corresponding increase in the cost of goods sold or due to a decrease in the

selling price of gods. Similarly, a decrease in the gross profit ratio may be due to a decrease in

the selling price without a corresponding decrease in cost of goods sold or due to an increase in

the cost of goods without a corresponding increase in the selling price of the goods sold.



Net Profit Ratio

This ratio is also called as the net profit to sales or net profit margin ratio. It is determined by

dividing the net income after tax to the net sales for the period and measures the profit per rupee

of sales.

Net profit ratio = Netprof ¿Net sales

X100¿

In this context, the term net profit means net profit after interest and tax but before dividend.

Significance

This ratio is used to measure the overall profitability and hence it is very useful to proprietors. It

is an index of efficiency and profitability of the business. Higher the ratio, better is the

operational efficiency of the concern.

OBJECTIVES OF RATIO ANALYSIS

Ratio analysis is indispensable part of interpretation of results revealed by the financial

statements. It provides users with crucial financial information and points out th areas which

require investigation. Ratio analysis is a technique which involves regrouping of data by

application of arithmetical relationships through its interpretation is a complex matter. It requires

a fine understanding of the way and rules used for preparing financial statements. Once done

effectively it provides a wealth of information which helps the analyst.

* To understand the areas of the business which need more attention.

* To know about the potential areas this can be improved with the effort in the desired direction.

* To provide a deeper analysis of the profitability, liquidity, solvency and efficiency levels in the

business.



* To provide information foe making cross sectional analysis by comparing the performance

with the best industry standards.

* To provide information derived from financial statements useful for making projections and

estimates for the future.

3.3 ADVANTAGES OF RATIO ANALYSIS

The ratio analysis if properly done improves the user’s understanding of the efficiency

with which the business is being conducted. If properly analyzed, the ratios make as understand

various problems areas as well as bright spots of the business. The knowledge of problem areas

help management takes care of them in future. The knowledge of areas which are working better

helps you improve the situation further. It must be emphasized that ratios are means to an end

rather than the end in them. Their role is essentially indicative and that of a whistle blower.

There are many advantages derived from the ratio analysis.

Helps understand efficiency of decisions

The ratio analysis helps you understand whether the business firm has taken the right

kind of operating, investing and financing decisions. It indicates how far they have helped in

improving the performance.

Simplify complex figures and establish relationships

Ratios help in simplifying the complex accounting figures and bring out their

relationships. They help summarise the financial information effectively and assess the

managerial efficiency, firm’s credit worthiness, earning capacity etc.

Helpful in comparative analysis

The ratios are not calculated for one year only. When many year figures are kept side by

side, they help a great deal in exploring the trends visible in the business. The knowledge of

trend helps in making projections about the business which is a very useful feature.



Identification of problem areas

Ratios help business in identifying the problem areas as well as the bright areas of the business.

Problem areas would need more attention and bright areas will need polishing to have still better

results.

Enables SWOT analysis

Ratios help a great deal in explaining the changes occuring in the business. The

information of change helps the management a great deal in understanding the current threats

and opportunities and allows business to do its own SWOT (Strength Weakness Opportunity

Threat) analysis.

Various comparisons

Ratios help comparisons with certain bench marks to assess as to whether firm,

performance in better or otherwise. For this purpose the profitability, liquidity, solvency etc. of a

business may be compared over a number of accounting periods with itself, with other business

enterprises, with standard set for that firm / industry.

3.4 LIMITATIONS OF RATIO ANALYSIS

Since the ratios are derived from the financial statements, any weakness in the original

financial statements will also creep in the derived analysis in the form of ratio analysis.) Thus the

limitations of financial statements also form the limitations of the ratio analysis. Hence to

interpret the ratios, the user should be aware of the rules followed in the preparation of financial

statements and also their nature and limitations. The limitations of ratio analysis, which arise

primarily from the nature of financial statements, are as under.



Limitations of Accounting Data

Accounting data give an unwarranted impression of precision and finality. In fact

accounting data reflect a combination of recorded facts, accounting conventions and personal

judgements and the judgements and conventions applied affect them materially.

Ignores Price-level changes

The financial accounting is based on stable money measurement principle. It implicitly

assume that price level changes are either non existent or minimal. But the truth is otherwise. We

are living in inflationary economics where the power of money declines constantly. A change in

the price level makes analysis of financial statement of different accounting years meaningless

because accounting record ignores changes in value of money.

Ignore Qualitative or Non-monetary Aspects.

Accounting provides information about quantitative aspects of business. The ratios also

reflect the monetary aspects, ignoring completely the non monetary factors.

Variations in Accounting Practices

There are differing accounting policies for valuation of stock, calculation of depreciation,

treatment of intangibles, definition of certain financial variables etc. available for various aspects

of business transactions. These variations leave a big question mark on the cross sectional

analysis. As there are variations in accounting practices followed by different business

enterprises, a valid comparison of their financial statements is not possible.

Forecasting

Forecasting of future trends based only on historical analysis is not feasible. Proper

forecasting requires consideration of non-financial factors as well.



Ratios should be used with due consciousness of their limitations while evaluating the

performance of an organisation and planning the future strategies for its improvement.

WHO USES THESE ANALYSIS?

Financial statements are used and analyzed by a different group of parties, these groups consists

of people both inside and outside a business. Generally, these users are:

A. Internal Users: are owners, managers, employees and other parties who are directly

connected with a company:

1. Owners and managers require financial statements to make important business decisions

that affect its continued operations. Financial analysis is then performed on these

statements to provide management with more detailed information. These statements are

also used as part of management’s report to its stockholders, and it form part of the Annual

Report of the company.

2. Employees also need these reports in making collective bargaining agreements with the

management, in the case of labour unions or for individuals in discussing their

compensation, promotion and rankings.

B. External Users: are potential investors, banks, government agencies and other parties

who are outside the business but need financial information about the business for

numbers of reasons.

1. Prospective investors make use of financial statements to assess the viability of investing in

a business.

Financial analyses are often used by investors and is prepared by professionals (financial

analysts), thus providing them with the basis in making investment decisions.

2. Financial institutions (banks and other lending companies) use them to decide whether to

give a company with fresh loans or extend debt securities (such as a long- term bank loan ).



3. Government entities (tax authorities) need financial statements to ascertain the propriety

and accuracy of taxes and duties paid by a company.

4. Media and the general public are also interested in financial statements of some companies

for a variety of reasons.

CHAPTER 4

RESEARCH METHODOLOGY



4.1 RESEARCH

Research is defined as human activity based on intellectual application in the

investigation of matter. The primary aim for applied research is discovering, interpreting and the

development of methods and systems for the advancement of human knowledge on a wide

variety of scientific matters of our world and the universe. It refers to the systematic method

consisting of enunciating the problem, formulating a hypothesis, collecting the facts of data,

analysing the facts and reaching certain conclusions either in the form of solutions towards the

concerned problem or in certain generalisation for some theoretical information.

The main objectives of research are

To gain familiarity with a phenomenon as to achieve new insights into it.

To portray accurately the characteristics of a particular individual, situation or a group.

To determine the frequency with which something occurs.

To test hypothesis of a casual relationship between variables.

Research methodology is a way to systematically solve the research problem. According

to Clifford Woody, “Research comprises defining and redefining problem, formulating

hypothesis or suggested solutions; collecting, organising and evaluating data, making deductions

and reaching conclusions; and at last carefully testing the conclusions to determine whether they

fit in formulating hypothesis. The chapter here deals with the procedure adopted by the

investigator in the present study.



4.2 Research Design

Research design can be considered as the structure of research. It is the glue that holds all of the

elements in a research project. The research can be exploratory and descriptive of casual in

nature.

The purpose of exploratory research studies is that of formulating a problem for more

precise investigation or of developing the working hypothesis from an operational paint of view.

Descriptive research studies are those studies, which are concerned with describing the

characteristics of a particular individual or of a group. Causal research aims at finding the cause

and effort relationship of variables. This project has made are of exploratory and casual

research.

4.3 Research Approach

The type of research adopted by the investigator is primary as well as secondary research.

Primary research involves studying the facts and figures that has been collected by the researcher

himself; exclusively for the purpose of a particular study. Secondary research involves the usage

of data and facts and figures that has been collected by someone else. This type of research

though debated for it’s objectively is very useful if it is carried out carefully and the reports are

presented without any bias.

Methodology

The data source refers to the sources from which the data are collected for conducting the study

Data are of two types



Primary research is original data collected for the problem at hand, usually at a significant

cost. Typical examples are sampling and focus groups.

Secondary data is collecting and possibly processing data by people other than the recorder

in question. The secondary data includes company brochures and prospects and previous

project reports.

4.4 Statistical Analysis

Accounting Ratios are calculated by taking data from financial statements but classification of

ratios on the basis of financial statement is rarely used in practice. It must be recalled that basic

purpose of accounting performance and financial position as well as changes occur in financial

position.

As such, the alternative classification based on the purpose for which a ratio is computed is

the most commonly used classification is as follows.

Liquidity Ratio

To meet its commitments, business needs liquid funds. The ability of the business to pay the

amount due to stakeholders and when it is due is known as liquidity and the ratios calculated to

measure it are known as ‘Liquidity Ratios’. They are essentially short term in nature.

Solvency Ratios

Solvency of business is determined by its ability to meet its contractual obligations towards stake

holders, particularly to measure solvency position are known as solvency Ratios. They are

essentially long-term in nature

Activity / Turnover Ratio

This refers to the ratios that are calculated for measuring the efficiency of operation of business

based on effective utilisation of resources. Hence these are also known as efficiency ratios.

Profitability Ratios



It refers to the analysis of profits in relation to sales as funds employed in the business and the

ratios calculated to meet this objective are known as ‘Profitability Ratios’.

4.5 METHODS OF DATA COLLECTION

The study was done based on the collection of primary data and secondary data.

Primary Data

Primary research is original data collected for the problem at hand, usually at a significant cost.

Typical examples are sampling and focus groups.

Secondary Data

Secondary data is collecting and possible processing data by people other than the researcher in

question. The secondary data was collected from books, websites, company brochures and

prospectus, and previous project reports.



4.6 TOOLS FOR ANALYSIS

The tools used for analysing the collected data are : -

* Percentage Analysis

It is used to find out the percentage of respondents from the total number of respondents,

responded to each question.

Percentage = No .of respondents

Totalno .of respondentsX100

* Bar Diagrams / Charts

A bar graph is a chart that uses either horizontal or vertical bars to show comparisons

among categories. One axis of the chart shows the specific categories being compared, and the

other axis represents a discrete value.

4.7 PERIOD OF STUDY

The study was conducted during the time period of one month from February 11-

March 15, 2013



CHAPTER 5

DATA ANALYSIS AND

INTERPRETATION



1. DEBT EQUITY = DebtEquity

TABLE 5.1: Showing the Debt and Equity ratio

Year Debt ( in Crs.) Equity(in Crs.) Ratio

2012 1027.05 955.61 1.07

2011 1117.31 653.74 1.70

2010 1066.36 400.21 2.66

Figure 1 : Debt equity ratio

1 2 3

Series1 1.07 1.7 2.66

0.25

0.75

1.25

1.75

2.25

2.75

Debt Equity Ratio

Ratio

Poi

nts

Here, 1=2012; 2=2011; 3=2013

Inference (Debt Equity Ratio)



The acceptable norm for a debt equity is considered to be 2:1. A high ratio shows that

the claims of creditors are greater than those of owners. In the year 2010, the debt equity ratio

was very high i.e. 2. 66 but it gradually decreased from 1.70 in 2011 to 1.07 in 2012. Therefore,

implying a greater claim of owners than creditors.

2. PROPRIETARY RATIO = Shareholders fundTotal asset

Table5.2: Showing the proprietary ratio.

Years Shareholders fund ( in

Crs.)

Total asset ( in Crs.) Ratio

2012 955.61 2300.15 0.41

2011 653.74 2056.19 0.31

2010 400.21 1466.77 0.27

Figure2: Proprietary ratio

1 2 3

Series1 0.41 0.310000000000001 0.27

0.025

0.075

0.125

0.175

0.225

0.275

0.325

0.375

0.425

Proprietary Ratio

RATI

O P

ON

TS

Here, 1=2012; 2= 2011; 3=2010

Inference (Proprietary Ratio)



This ratio shows the financial strength of the company. Higher ratio indicates a secured

position to creditors and a low ratio indicates greater risk to creditors. The year 2010 had a very

low ratio i.e. 0.27 but it increased in 2011 (0.31) and again increased in 2012 (0.41) indicating a

long term solvency by giving secured position to creditors.

3. SOLVENCY RATIO =Net profit after tax+Depriciation

Total liabilities

Table5.3: Showing the solvency ratio

Year NPAT + Depreciation

( In Crs.)

Total liabilities ( in

Crs.)

Ratio

2012 376.47 2300.15 0.16

2011 306.16 2056.19 0.15

2010 75.57 1466.77 0.05

Figure3: Solvency ratio

1 2 3

Series1 0.16 0.15 0.05

0.01

0.03

0.05

0.07

0.09

0.11

0.13

0.15

0.17

Solvency Ratio

Ratio

Poi

nts

Here, 1=2012; 2=2011; 3=2010



Inference (Solvency Ratio)

Lower the ratio of the solvency ratio more satisfactory or stable is the long term solvency of the

firm. The ratio has significantly increased over the years from 0.05 in 2010 to 0.16 in 2012.

4. GROSS PROFIT RATIO = Gross profitNet sales

X10 0

Table5.4: Showing the gross profit margin

Year Gross profit( in Crs.) Net sales ( in Crs.) Ratio

2012 570.58 6873.04 8.30%

2011 487.46 5901.67 8.26%

2010 246.42 5426.56 4.54%

Figure4: Gross profit ratio

1 2 3

Series1 0.0830000000000001

0.0826 0.0454

0.50%1.50%2.50%3.50%4.50%5.50%6.50%7.50%8.50%

Gross Profit Ratio

Ratio

Poi

nts

Here,1=2012; 2=2011; 3=2010

Inference (Gross profit Ratio)



Gross profit ratio helps in ascertaining whether the average percentage of profit on the

goods is maintained or not. The year 2012 shows a gross profit margin of 8.30% as compared to

4.54% gross profit margin 2010 signifying an increase in the selling price without a

corresponding increase in the cost of goods sold order to a decrease in the cost of goods sold

without a corresponding decrease in the selling price of goods.

5. NET PROFIT = Net profitNet sales

X 100

Table5.5: Showing net profit ratio

Year Net profit( in Crs.) Net sales ( in Crs.) Ratio

2012 369.92 6873.04 5.38%

2011 303.93 5901.67 5.14%

2010 69.60 5426.56 1.28%

Figure5: net profit ratio

1 2 3

Series1 0.0538 0.0514 0.0128

0.50%

1.50%

2.50%

3.50%

4.50%

5.50%

Net Profit Ratio

Ratio

Poi

nts



Here, 1=2012; 2=2011; 3=2010

Inference (Net Profit Ratio)

The year 2012 showed a good year of profit of 5.38% as the year 2010 was a bad year for

the firm as it had a 1.28% profit margin it significantly increased to 5.14% in 2011.

6. Table5.6: With regard to SHARE CAPITAL sequence during the period 2010-12

Years Share capital ( in Crs.)

2012 62.39

2011 62.39

2010 31.19

Figure6: Share capital

1 2 3

Series1 62.39 62.39 31.19

5

15

25

35

45

55

65

Share Capital

Shar

e Ca

pita

l(in

crs.)



Here, 1=2012; 2=2011; 3=2010

Inference The company had issued fresh amount of share capital in 2011 which is currently maintained as it is (2012). The share capital issue changed from Rs.31.19 Crores to Rs. 62.39 (in crores)

7. Table5.7: With regard to the sequence of TOTAL DEBT during the period 2010-12

Years Total debt( in crs.)

2012 1027.05

2011 1117.31

2010 1066.36

Figure7: Total debt

1 2 3

Series1 1027.05 1117.31 1066.36

990

1010

1030

1050

1070

1090

1110

Total Debt

Tota

l Deb

t(in

crs.)



Here, 1=2012; 2=2011; 3=2010

Inference

The year 2011(Rs.1117.31 crores) showcases a high usage and dependence of debt which

decreased to Rs.1027.05 crores in 2012. The year 2010 had a debt usage of Rs.1066.36 crores.

8. Table5.8: With regard to the sequence of CURRENT LIABILITIES during the

period 2010-12

Years Current liabilities(In

Crs)

2012 1819.63

2011 1451.49

2010 1587.63

Figure8: Current liabilities



2012 2011 20100

200

400

600

800

1000

1200

1400

1600

1800

20001819.63

1454.491587.63

Current liabilities

Current liabilities

Inference

In 2012 the current liabilities was Rs 1587.63 crores which decreased slightly to Rs.1451.49 crores in 2011. But in 2012 it had a tremendous increase of Rs.1819.63 crores.

9. Table5.9: With regard to sequence of CURRENT ASSETS during the period 2010-12

Years Net profit( in crs)

2012 2671.77

2011 2168.45

2010 1855.62

Figure9: Current assets



2012 2011 20100

500

1000

1500

2000

2500

30002671.77

2168.45

1855.62

Current Assets

Current Assets

Inference

The acquiring of current assets has increased tremendously from Rs. 1855.62 crores in 2010 to

Rs. 2168.45 crores in 2011 to Rs. 2671.77 crores.

10. Table5.10: With regard to sequence of GROSS PROFIT during the period 2010-

2012

Years Gross Profit

2012 570.58

2011 487.46

2010 246.42

Figure10: gross profit



2012 2011 20100

100

200

300

400

500

600 570.58

487.46

246.42

Gross Profit

Gross Profit

Inference

The sequence of gross profit has increased during the period 2010-12 [Rs. 246.42 crores→ Rs.

487.46 crores→ Rs. 570.58 crores ]

11. Table5.11: With regard to sequence of TAX during the period 2010-2012

Years Tax

2012 106.05

2011 93.20

2012 63.20

Figure11: tax



2012 2011 20100

20

40

60

80

100

120106.05

93.2

63.2

Tax (in Crs)

Tax (in Crs)

Inference

The amount of tax increased from Rs. 63.20 crores in 2010 to Rs. 106.05 crores in 2012 almost doubling during the period. The amount of tax during 2011 was Rs. 93.20 crores.

12. Table5.12: With regard to sequence of NET PROFIT during the period 2010-2012

Years Net Profit(in Crs)

2012 369.92

2011 303.93

2010 69.60

Figure12: net profit



2012 2011 20100

50

100

150

200

250

300

350

400 369.919999999999

303.929999999999

69.6

Net Profit(in Crs)

Net Profit(in Crs)

Inference

The net profit increased tremendously over the period. It increased from Rs. 69.60

crores in 2010 to Rs. 303.93 crores in 2011 and an increase of Rs.369.92 in 2012.



CHAPTER 6

FINDINGS AND SUGGESTIONS

FINDINGS

* The debt equity ratio which is acceptable as 2:1, an acceptable norm showcased and

maintained a good profile as it decreased over the years. (and should maintain as it is)

* The proprietary ratio was in fact satisfactory as it increased over due course indicating a good

rapport with creditors.



* The solvency ratio has increased but the increase is not very high but in fact stable.

* The net profit margin indicates a very tremendous growth of the firm as the profit has

increased five folds in 2012 as compared to 2010.

* The gross profit margin has doubled almost indicating an increase in the selling price.

* The share capital is the same as in 2011 and 2012 as there was no fresh issue of shares.

* The dependence on debt increase in 2011 but it decreased gradually.

* The total of current assets increased tremendously thus signify a prospect that can pay off its

current liabilities.

* The amount of gross profit was doubled itself during the period 2010 - 2012.

* The net profit after tax deductions shows and signifies great strength and solvency and

profitability position.

SUGGESTIONS

* The debt equity ratio should be maintained as it should neither increase or decrease any time

soon.

* The firm has high potential as in short notice it had increased its profitability to five fold



* Issue of shares is suggested and independence of debt is highly unthinkable. The company

should have medium interference with debt.

* The company must meet its tax provisions.

* The current liabilities should be met at short notice and the company should try to cover it as

soon as possible.



CHAPTER 7

CONCLUSION

CONCLUSION

From the analysis of the past three years of Havells India Ltd. the concern has shown an

increase in profit margin. Even though positive inference has been stated, there are chances of

negative inference in cases of usage of debt.



Thus, it can be concluded that Havells India Ltd. has been attaining a considerable

profitability and solvency position.


Documents

Ratio Analysis