Arun Report
Arun Report
Arun Report
PROJECT REPORT ON
ACKNOWLEDGEMENT
I would like to give special acknowledgement to Mr. Sonu Sharma for his
consistent support and motivation.
I am grateful to Dr. Sudhanshu Joshi, Associate professor in finance,
DOON UNIVERSITY for his technical expertise, advice and excellent
guidance. He not only gave my project a scrupulous critical reading, but
added many examples and ideas to improve it.
I thank Mr. S.K Dadar for giving me opportunity to work at CMRPL, as
a FINANCE TRAINEE.
I am indebted to my other faculty members who gave time and again
reviewed portions of this project and provide many valuable comments.
I would like to express my appreciation towards my friends for their
encouragement and support throughout this project.
I take this opportunity to thank all those who have been of help to me in
the completion of this project.
CONTENTS
CHAPTER I
INTRODUCTION
OBJECTIVE OF THE STUDY
METHODOLOGY OF STUDY
FRAME WORK OF THE STUDY
LIMITATIONS OF THE STUDY
CHAPTER-II
CENTURY METAL RECYCLING PVT LTD-COMPANY PROFILE
DESCRIPTION OF CORPORATE OFFICE AND MANUFACTURING UNITS
PRODUCT RANGE
DOMESTIC AND INTERNATIONAL CUSTOMERS
CHAPTER -III
HISTORY OF CENTURY METAL RECYCLING PVT. LTD.
CHAPTER IV
CHAPTER V
LIQUIDITY RATIOS
LEVERAGE RATIOS
ACTIVITY RATIOS
PROFITABILITY RATIOS
CHAPTER VI
SUMMARY
FINDINGS & SUGGESTIONS
BIBLIOGRAPHY
EXECUTIVE SUMMARY
CMRPL since establishment in the year 2006 has made leaps and bounds and today
has grown into one of the most sophisticated and quality conscious companies in the
field of metal recycling in India as well as Asia. Today it has well integrated facilities
for the metal recycling. The companys enviable achievement in terms of sales,
profitability and market is due to its steadfast commitment to quality even during tough
times. The company has fully integrated facilities due to the backward integration
projects undertaken by the company during the last year.
Due to the integration projects the company could cut down on costs without
compromising on quality. The Gross Profit margin of nearly 10% is one of the visible
parameters of this achievement.
C H APT E R I
INTRODUCTION
OBJECTIVES OF THE STUDY
METHODOLOGY OF THE STUDY
FRAME WORK OF THE STUDY
LIMITATIONS OF THE STUDY
INTRODUCTION
1. Introduction
Ratio analysis is a powerful tool of financial analysis. A ratio is defined as the
indicated quotient of two mathematical expressions and the relationship between two or
more things. In financial analysis, a ratio is used as a benchmark for evaluation the
financial position and performance of a firm. The absolute accounting figures reported in
the financial statements do not provide a meaningful understanding of the performance
and financial position of a firm. An accounting figure conveys meaning when it is related
to some other relevant information. For example, an Rs.5 core net profit may look
impressive, but the firms performance can be said to be good or bad only when the net
profit figure is related to the firms Investment.
The relationship between two accounting figures expressed mathematically, is
known as a financial ratio (or simply as a ratio).
quantities of financial data and to make qualitative judgment about the firms financial
performance. For example, consider current ratio. It is calculated by dividing current
assets by current liabilities; the ratio indicates a relationship- a quantified relationship
between current assets and current liabilities. This relationship is an index or yardstick,
which permits a quantitative judgment to be formed about the firms liquidity and vice
versa. The point to note is that a ratio reflecting a quantitative relationship helps to form
a qualitative judgment. Such is the nature of all financial ratios.
1. Primary Sources:
Personal Interview.
2. Secondary Sources:
Published material about CMRPL such as the annual reports of the last five years.
Chapter 1
Chapter 2
Deals with Company Profile, Product Range and List of orders executed
for the year 2011-2012.
Chapter 3
Chapter 4
Chapter 5
Chapter 6
Concludes the study with suggested measures for better financial system in
CMRPL.
The study has been conducted in a systematic and comprehensive way so as to make the
project work an enviable one. However, the topic under study may not be free from
limitations due to the facts.
The major limitation of the project under study was time. Since it was to be completed
within a short period of time. Which is not sufficient to undertake a comprehensive study.
Non-availability of complete information is also a limit.
C H A P T E R II
1. COMPANY PROFILE
CMR is the largest producer of Alunminium Alloys & leading producer of Zinc Alloys in India.CMR
has the most advanced plants in the country located at Palval, Gurgaon and Bhiwadi. CMR is
delivering Aluminium Alloys in conventional ingot form as well as recently evolved hot liquid form.
FIRSTS in India by CMR
Setup Mechanized Cold Refining with Eddy Current Separator, Shredder, Mobile Spectro,
Gravimetric Separation,etc.
Vision
To be a Globally Admired Company in Non Ferrous Metal Recycling, Delivering Sustainable Values to all
Stakeholders.
Mission
CMR will, over the Next Five Years, Expand its Operations Pan-India to Achieve Increase in Turnover and Profits by
500% and 1000%, Respectively, Retaining the Status of the Largest Aluminium Producer in the Country. CMR will be
Among the Most Preferred Employers in the Country and will Adopt Green Technology to Save One Million Tons of
CO2 Emission.
- Liquid metal supply eliminates the entire process of ingot melting by die-caster
- Ingot melting would otherwise lead to fuel burning and loss of metal (melt loss)
- Supply of 1T of liquid Aluminium saves appx. 1T of CO2 emission
Thus, Through Exceptional Service and Added Value, build CMR to be the most
dependable business 'partner' in the Asia Pacific Region.
QUALITY
Quality Policy
We the team members at CMRPL, will continuously endeavour to meet the expectation of our
customer and sustain our reputation of a customer oriented organisation.
We will achieve this by :
Ensuring timely delivery of our products as per customer specification at minimal cost.
CMR has a Well Equipped Quality Lab. An Expert Quality Team Works Day
and Night to Ensure Quality of:
Finished Products
Test
Equipment
Spectrometer
Ultimate Tensile
Grain Structure
Mobile Spectro
Analysis
Tensile Strength
Testing
Microscopic Analysis
Vacuum Testing
K-Mould Testing
- of Alloys
Production Capacity
Aluminum Alloy
UNIT 1 ( PALWAL)
UNIT 2 ( HARIDWAR)
UNIT 3 ( GURGAON)
UNIT 4 ( BHIWADI)
Zinc Alloy
UNIT 1 ( PALWAL)
UNIT 2 ( HARIDWAR)
Overlook of Plants
Capacity (MT)
120000
50000
30000
24000
16000
15000
10000
5000
Palwal Plant
Haridwar Plant
Gurgaon Plant
Bhiwadi Plant
EQUIPMENT AND
TECHNOLOGY
Hammer Mill
Eddy Current
Separator
Shredder
Bailing Machine
Jaw Crusher
Scrap Decoater
Hydraulic Nibbler
Machine
Furnace
Century Metal
Recycling Private
Limited
Sorting Process
Addres :
s
Melting Vortex
Formation
Phone :
+91
9254355877 /
78 / 79
Fax
E-mail :
century@centur
y.in
Websit :
e
www.cmr.co.in
PRODUCT RANGE :
1. Aluminum Alloys
2. Zink Alloys
3. Hot Liquid Metal
USA Office
E-mail :
cmr.america@c
entury.in
Unit 1 -
Palwal
Unit 2 -
Phone No. -
+9192543558
Phone No. 80
Email ID -
palwal@cent
Email ID ury.in
Gurga
on
+91-1243225738
Unit 4 -
Harid
war
+91-1334239541
haridwar@c
entury.in
Bhiwa
di
+91-1493512120
bhiwadi@ce
ntury.in
CMR produces most of the Aluminum Alloys meeting the relevant international / national standards.
CMR supplies Aluminum Alloys in not only conventional ingot form but also hot liquid metal form.
Homogenous Alloying
Fine Filtered
Fine Microstructure
Alloy
Si
Mg
Zn
Fe
Mn
Ni
Sn
Pb
Ti
ADC1
1.0 max
11.0 to 13.0
0.3 max
0.5 max
1.3 max
0.3 max
Cr
0.5 max
0.1 max
0.20 max
0.30 max
ADC3
0.6 MAX
9.0 to 11.0
0.4 to 0.6
0.5 max
1.3 max
0.3 max
0.5 max
0.1 max
0.15 max
0.30 max
ADC5
0.2 max
0.3 max
4.0 to 8.5
0.1 max
1.8 max
0.3 max
0.1 max
0.1 max
0.1 max
0.20 max
ADC6
0.1 max
1.0 max
2.5 to 4.0
0.4 max
0.8 max
0.4 to 0.6
0.1 max
0.1 max
0.1 max
0.20 max
ADC10
2.0 to 4.0
7.5 to 9.5
0.3 max
1.0 max
1.3 max
0.5 max
0.5 max
0.2 max
0.20 max
0.30 max
ADC10Z
2.0 to 4.0
7.5 to 9.5
0.3 max
3.0 max
1.3 max
0.5 max
0.5 max
0.2 max
0.20 max
0.30 max
ADC12
1.5 to 3.5
9.6 to 12.0
0.3 max
1.0 max
1.3 max
0.5 max
0.5 max
0.2 max
0.20 max
0.30 max
ADC12Z
1.5 to 3.5
9.6 to 12.0
0.3 max
3.0 max
1.3 max
0.5 max
0.5 max
0.2 max
0.20 max
0.30 max
0.3 max
0.3 max
ADC14
1.5 max
1.3 max
0.5 max
0.20 max
0.30 max
AC4B
2.0 to 4.0
0.5 max
1.0 max
0.8 max
0.5 max
0.20 max
AC2B
2.0 to 4.0
5.0 to 7.0
0.5 max
1.0 max
0.8 max
0.5 max
0.20 max
AlSi9Mg
0.03 max
9.0 to 10.0
0.10 max
7.0 to 10.0
0.45 max
0.15 max
AlSi10Mg
0.08 max
9.0 to 11.0
AlSi9Cu1Mg
0.8 to 1.3
8.3 to 9.7
0.7 max
0.15 to 0.55
0.15 max
AlSi9Cu3(Fe)
2.0 to 4.0
8.0 to 11.0
0.05 to 0.55
3.0 max
1.3 max
0.55 max
0.25 max
AlSi12Cu1(Fe)
0.35 max
0.55 max
1.3 max
0.55 max
0.20 max
BS Standard :
Si
Mg
Zn
Fe
Mn
LM6
0.1 max
10.0 to 13.0
0.1 max
0.1 max
0.1 max
0.5 max
Cr Ni
LM10
0.1 max
0.25 max
9.5 to 11.0
0.1 max
LM4
2.0 to 4.0
4.0 to 6.0
0.15 max
0.20 to 0.60
LM24
3.0 to 4.0
7.5 to 9.5
0.30 max
LM-26
2.0 to 4.0
8.5 to 10.5
LM13
0.70 to 1.50
10.2 to 12.0
LM2
0.70 to 2.50
LM25
0.1 max
Pb
Ti
0.1 max
0.20 max
0.1 max
0.1 max
0.20 max
0.5 max
0.3 max
0.20 max
0.5 max
0.5 max
1.5 max
0.1 max
0.1 max
0.20 max
9.0 to 11.5
0.30 max
0.5 max
0.3 max
0.20 max
6.5 to 7.5
0.20 to 0.45
0.1 max
0.3 max
0.1 max
0.20 max
0.5 max
0.3 max
Sn
CMR produces most of the Zinc Alloys meeting the relevant international / national standards
IS Standard :
Cu%
Mg%
Fe%
Sn%
Pb%
Ni%
Cd%
Al%
Tl% +
In%
Cr%
Zn%
Z-3
0.1
0.03-0.06
0.100
0.002
0.005
0.006
0.005
3.8-4.3
0.0015
0.02
Remainder
ZDC-2
0.15-0.20
0.045-.055
0.020
0.001
0.003
0.002
0.002
3.65-3.90
N/S
N/S
Remainder
Z-5
0.75-1.25
0.03-0.06
0.100
0.002
0.005
0.006
0.005
3.8-4.30
0.0015
0.02
Remainder
Al Zn10
0.005
0.000
0.015
0.005
0.000
0.005
9.0-11.0
N/S
N/S
Remainder
ZN-2
2.50-3.00
0.02-0.05
0.100
0.003
0.005
0.000
0.004
3.50-4.30
N/S
N/S
Remainder
ZD-2
0.25
0.03-0.06
0.020
0.001
0.003
0.000
0.002
3.5-4.3
0.0015
0.02
Remainder
ZA-12
0.5-1.20
0.015-0.030
0.075
0.003
0.006
0.006
10.5-11.5
N/S
N/S
Remainder
ZA27C2
2.0-2.50
0.01-0.02
0.100
0.002
0.004
0.000
0.003
24.0-25.50
N/S
N/S
Remainder
ZA-8
0.90-1.30
0.02-0.03
0.035
0.002
0.005
0.000
0.005
8.20-8.80
N/S
N/S
Remainder
CMR has pioneered in delivering ready to use hot liquid Aluminum alloy directly at customers
production line. Supply of hot liquid metal at customers' end has proven to be a path-breaking concept
as it has multi-faceted advantages :
Aurangabad Ele.Ltd.
SUBROS
Lifelong India Ltd.
FEDRAL MOGUL
ENDURANCE
Minda Corporation Limited
HONDA
Sandhar Automotive
ESCORTS
RSK
U.P Telelink Ltd
HERO
KIRAN UDYOG
YAMAHA
C H A P T E R III
A) HISTORY OF CENTURY METAL RECYCLING PVT. LTD.
Established in 2006 by Mr GS Agarwala along with his son Mr Mohan Agarwala
have rich experience in line.They have grown from a small plant of only 500 Tons
annual capacity in 1986 to the largest recycling plant in India in 2006 with 60000
Tons
annual
capacity.
Another plant with 30,000 tons annual capacity is being commissioned in 2nd half of
2008 for supply of Liquid Metal to its customers.
Most
Largest
advanced
manufacturer
plus
technology
of
market
plants
Aluminum
share
&
45%
in
the
Zinc
Alloys
in
Northern
country.
in
India
India.
CMR is the largest producer of Aluminium based Die Cast Alloys in India. CMR is also the
leading producer of Zinc Alloys in the Country. CMR has annual production capacity of
1,20,000 MT for Aluminium Alloys and 15,000 MT for Zinc Alloys.
CMR has been promoted by Mr. G. S. Agarwala and his son Mr. Mohan Agarwal. The
promoters have a rich experience of 25 years in the industry. The promoters made a humble
beginning in the industry in 1986 when they set up a small plant with a production capacity of
500 MT per annum. Since then the promoters have travelled a long journey to become the
largest producer of Aluminium Alloys in India.
CMR commenced its business in 2006, when it put up a state-of-the-art technology plant at
Tatarpur, near New Delhi. The plant was imported from Europe and is the first and the only
aluminium recycling plant in India to deploy many high-end technical features such as
Shredder, Eddy Current Separator, De-coater, Metal Circulation Pumps, high capacity
Melting Furnaces etc.
CMR started its second plant at Haridwar in 2008, pioneering in India the concept of
delivering
liquid metal directly in the manufacturing process line of its customer. CMR
extended this path breaking concept by starting another two plants at Gurgaon & Bhiwadi in 2009
& 2011, respectively. Today, CMR is the biggest supplier of Hot Liquid Metal in India.CMR has
witnessed rapid growth and has registered a CAGR of 50% since its inception .C H A P T E R
IV
a. Amount and kind of capital stock as well as its par or stated value.
b. Pre-emptive right of the shareholders.
c. Rules governing the issue and transfer of stock.
d. Provisions granting directors the right to declare dividend.
e. Approval of the sale of any substantial portion.
f. Approval of recapitalisation plans.
g. Approval of voluntary plans for liquidation, plans for consolidation and
mergers and
h. Amendments to the memorandum and articles of association.
The Board of the Directors delegate detailed planning and if the financial
management to the corporation Finance Manager. The plethora of the functions of
finance manager are as given in the following.
documents,
The utility of the financial tools is not limited to the Financial Manager. They are
equally helpful to top management, creditors, investors and laborers. By analyzing and
interpreting the financial statements the top management can measure the success or
otherwise of the companys processes and products , appraise the individuals
performance and evaluate the system of internal control.
NATURE OF RATIO ANALYSIS:
A ratio is defined as `the indicated quotient of two mathematical expressions and as
the relationship but two or more things. In financial analysis, a ratio is used as an
index or yardstick for evaluation the financial analysis, a ratio is used as an index or
firm. The absolute accounting figures reported in the financial statements do not
provide meaningful understanding of the performance and financial position of a firm.
An accounting figure conveys meaning when it is related to some other relevant
information.
The
relationship
between
two
accounting
figures
expressed
2. Ratio developed using the projected or proforma financial statement of the same
firm, at the same point in time.
3. Ratios of the industry to which the firm belongs.
The easiest way to evaluate the past ratios. When financial ratios over a period of
times are compared, it gives an indication of the direction of change and reflects
whether the firms financial constant over time.
Some times future ratios are used as the standard of comparison. Future ratios can be
developed from the projected or proforma financial statements. The comparison of the
past ratios with future shows the firms relative strengths and weakness in the past and
the future. If the future ratios indicated weak financial position, corrective action
should be initiated.
Another way of comparison os to computer the ratios of one firm with some selected
firms in the same industry at the same point in time. In most of cases, it is more useful
to compare the firms ratio with the ratio of a few carefully selected competitions that
have similar operations. This kind performance of the firm. A firm the published
financial statements of the similar firms.
To determine the financial condition and performance of a firm its ratio may be
compared with average ratios are important standards in view of the fact that each
industry has its characteristics which influence the financial and operating
relationships. But there are some practical difficulties in the industry ratio.
First it is difficult to get average for industry.
Secondly, even if industry ratios are available they are average of the ratios of strong
and weak firms. Sometimes the spread may be so wide that the average may be little
utility.
Thirdly the average will be meaningless and the comparison futile, if the firms within
same industry widely differ in their accounting policies and practices. If it is possible
to standardize the accounting data for the companies in the industry and eliminate
extremely strong and extremely weak firms, the industry ratio will prove to be very
useful in evaluating the financial condition and performance of firm.
SIGNIFICANCE:
LIMITATIONS OF RATIO ANALYSIS:
The ratio analysis is widely used technique to available the financial position and
Performance of business but it has the limitations. The limitations are as follow:
1. It is difficult to decide on the proper basis for comparison.
2. The comparison is rendered difficult because of difference in situation of two
companies or of one company over years.
3. The price level changes make the interpretation of ratio invalid.
4. The differences in the definition of items in the balance sheet and the income
statement make the interpretation of ratio difficult.
5. The ratios calculated at a point of time are less informative and defective as they
suffer from short term changes.
6. The ratios are generally calculated from past financial statements and thus are no
indicators of future.
NOTE: Reference Book: Financial Management by M.Y.Khan, P.K.Jain and
Srivastava.
TYPES OF RATIOS
Several Ratios, calculated from the accounting data, can be grouped on the basis
financial analysis are short term and long term creditors, owners and management.
Short term solvency of the firm. Long term creditors, on the other hand are more
interest in the long term solvency and profitability of the firm. Similarly, owners
concentrate on firms profitability and the analysis evaluating every aspect of the
performance. They have to protect the interests of all parties and see that the firm
grows profitability. Inview of requirements of the various users of ratios, we may
classify them into the following four important categories.
1. Liquidity ratios
2. Leverage ratios
3. Activity ratios
4. Profitability ratios
Liquidity ratios measure the firms ability to meet current obligations; Leverage
ratios show the proportions of debt and equity in financing the utilizing in assets,
and profitability ratios are measure the overall performance and effectiveness of the
firm each of these ratios are discussed below.
LIQUIDITY RATIOS:
It is extremely essential for a firm to be able to its obligations as they become due.
Liquidity ratios measure the ability of the firm to meet its current obligations.
Infact, analysis of liquidity needs the preparation of cash and other current assets to
current obligations provide a quick measure of liquidity. A firm should ensure that it
does not too much high in liquid. The failure of a company to meet its obligations,
due to lack of sufficient liquidity, will result in bad credit image, loss of creditors
confidence. A very high degree of liquidity is also bad; idle assets earn nothing. The
firms funds will be unnecessarily tied up in current assets.
2. LEVERAGE RATIOS:
The short-term creditors, like bankers and suppliers of raw materials, are more
concerned with the firms current debt paying ability. On the other hand, long-term
creditors, like debenture holders, financial institutions etc., are more concerned with
the firms long term financial strength. To judge the long term financial position of the
firm, financial leverage, or capital structure, ratios are calculated. The manner in which
assets are financed has a number of implications.
First, between debt and quality, debt is more risky from the firms point of view. The
firm has a legal obligation to pay interest to debt holders, irrespective of the profit
made or losses incurred by the firm.
Second, employment of debt is advantageous for share holders in two ways: (a) they
can retain control of the firm with a limited stake and (b) their earnings will be
magnified when the firm earns a rate of return on the total borrowed funds.
Third, a highly debt-burdened firm will find difficulty in raising funds from creditors
and owners equity is treated as a margin of safety by creditors.
3.
ACTIVITY RATIOS:
The funds of creditors and owners are invested in various assets to generate sales and
profits. The better the management of assets, the larger the amount of sales. Activity
ratios are employed to evaluate the efficiency with which the firm manager and utilizes
its assets. These ratios are called Turn over Ratios because they indicate the speed
with which assets are being converted or turned over into sales. Activity ratios, thus,
involve a relationship between sales and assets. A proper balance between sales and
assets generally reflects that assets are managed well. Several activity ratios can be
calculated to judge the effectiveness of assets utilisation.
4. PROFITABILITY RATIOS:
A should earn profits to survive and grow over a long period of time. Profits are
essential, but it would be wrong to assume that every action initiated by management
of a company should be aimed at maximizing profits, irrespective of social
consequences.
Profit is the difference between revenues and expenses over a period of time. Profit is
the ultimate output of a company, and it will have no future if it fails to make sufficient
profits.
Generally two major types of profitability ratios are calculated.
1.
2.
C H APT E R V
1.
LIQUIDITY RATIOS
2.
LEVERAGE RATIOS
3.
ACTIVITY RATIOS
4.
PROFITABILITY RATIOS
Current Assets
Current Liabilities
TABLE 1
CURRENT RATIO: (Year Wise)
Year
Ratio
____________________________________________________________________
2008-2009
0.96
2009-2010
1.71
2010-2011
2011-2012
3.78
ANALYSIS:
This ratio gives how efficiently the current assets and liabilities are managed. For
working capital limits analysis this is the most important ratio. Banks normally recast
current assets and liabilities by treating some current assets beyond cover period as
other non-current assets and some liabilities within the next 12 months from the date of
balance sheet as current liabilities. After recasting, the Current ratio is calculated and
banks consider a ratio of 1.33 as benchmark. But a ratio of less than this doesnt
always indicate a poor management of assets & liabilities. Normally a ratio above 1
can be considered good in case of most manufacturing concerns. On the other hand too
high a ratio indicates (say above 1.5 as per bank method of calculation) that lot of
assets is held up as inventory or receivables which is also not a very good sign. In the
case of CMR the ratio is very high at 3.78 during 2011-12, but the company is in profit
during that year. This indicates that the company has lot of held up inventory and
receivables. Hence optimum management of current assets and liabilities is always
stressed upon for healthy balance sheets and for working capital purposes.
QUICK RATIO:
Quick or acid test ratio is a more refined the measure of the firms liquidity. This ratio
establishes a relationship between quick or liquid assets and current liabilities. Stock
and prepaid expenses are considered to be less liquid.
The other assets which are considered to be relatively liquid and included in the quick
assets are book debts and marketable securities (Temporary investments, stock
(inventory) and prepaid expenses are considered to be less liquid.
Generally, a quick ratio of to 1 is considered to represent a satisfactory current
financial condition.
However, this ratio also has got its own limitations. Quick ratio of 1 to 1 needed not
necessarily imply sound liquidity. Similarly, a quick ratio does not necessarily imply
sound liquidity and bad liquidity position. It should be remembered that all the book
debts may not be liquid and cash be immediately required to operating expenses and
that the inventories are not absolutely non-liquid. Thus a company with high quick
ratio can be found it has slow paying doubtful debts on the other hand. Company with
low liquid ratio may really are prospering and paying into current obligation in time.
The liquid ratio both current and quick ratios have got their utility, if used properly in
the financial analysis keeping in view their limitations, that they are lnly tests of
quantity not to quality etc.
Quick Ratio can be measured by:
Quick Ratio:
TABLE 2
QUICK RATIO:
Year
Ratio
2008-2009
0.85
2009-2010
1.05
2010-2011
1.92
2011-2012
2.89
Net Working
Capital
2008-2009
7878273.87
2009-2010
7,10,01,829.51
2010-2011
26,30,99,982.17
2011-2012
25,00,83,781.97
ANALYSIS: This indicates the Current assets over and above the current liabilities in
absolute figures. Banks rely heavily on this measure for arriving working capital limits
by taking into account the working capital gap (CA CL other than Bank borrowings)
and the difference between the minimum stipulated net working capital.
LEVERAGE RATIO:
LEVERAGE RATIOS ARE TWO TYPES:
A)
These calculated from Balance Sheet items to determine the proportion of debt in
total financing.
B)
Those calculated profit and loss account to determine the extent to which
operating profit are sufficient to cover the fixed charges.
Both these types indicate the extent to which the company has relied on debt funds in
financing assets.
FINANCIAL LEVERAGE RATIOS:
Liquidity ratios deals with short-term financial position, on the other hand, leverage
ratios operate with the long-term obligations of the firm. These ratios indicate the
funds provided by owners and creditors. As a general rule these should be an
appropriate mix of debt and owners equity in financing the firm assets. In fact, the
aspect has a number of implications.
a.
Between debt and equity, debt is more risky from the companies point of view, as
it has got the legal obligation to pay investment on debt irrespective of the
performance of the firm.
b.
1.
They can retain control the company with the limited stock.
2.
Their earnings will be magnified, when the firm earns a rate higher than the
interest rate on the invested fund.
Year
Ratio
2008-2009
235.71
2009-2010
1.08
2010-2011
0.29
2011-2012
0.19
ANALYSIS:
This ratio gives the details of how much debt is employed by a firm in relation to its
Net worth. This is also known as leverage. Normally a ratio of 2:1 is considered
acceptable. But in capital intensive industries it may go to as high as 4:1. The financial
risk of a firm depends on this ratio to a large extent. Since debt and interest on debt
have to be serviced irrespective of the firms profitability, the risk is fixed. On the other
hand when the firm is doing good, on account of only fixed outflow for servicing
interest the profits can be distributed as per the expectations of the shareholders. In the
case of CMRPL this ratio has come down to 0.19 in 2011-12 from 235.71 in 2008-09.
It has increased in the year 2008-09 during which the company has sought additional
financing. The present ratio indicates an excellent debt to net worth ratio, indicating
that the company has been regular in servicing its debt.
ACTIVITY RATIO:
The funds of owners and creditors are invests in various kind of assets to generate
operating income and profits. Activity Ratio are employed to evaluate the efficiency
with company manages and utilises its assets. These ratios are also called turnover
ratios, because they indicates the speed with which assets are being converted to
turnover into operational income (Sales), Activity Ratios, thus, involve a relationship
between operating income and assets generally reflects that assets are managed well.
Several activity ratios can be calculated to judge the effectiveness of asset utilisation.
INVENTORY (STOCK) TURNOVER RATIO:
Inventory turnover ratio indicates the efficiency of the firm in selling its product. This
ratio, it may be recalled, indicates the No. of times inventory is replaced during the
year. It measure the relationship between the cost of goods sold and the inventory
level. The ratio can computed in two ways.
First, it is calculated by dividing the cost of goods sold by the average inventory
(stock).
Symbolically,
Inventory Turnover Ratio
Average Inventory
Ratio
2008-2009
18.09
2009-2010
23.49
2010-2011
13.66
2011-2012
41.43
ANALYSIS:
In general, a higher inventory turnover ratio is better than a low ratio. A high implies
good inventory management. Yet a very high ratio calls for a careful analysis. It is
indicative of under investment in, or very low level of inventory.
Similarly, a very low inventory turnover ratio is dangerous. Low level of inventory has
serious implications. It will adversely affect the ability of a firm to meet customer
demand as it may not cope with its requirements.
For CMRPL, this ratio has improved significantly during the last four years.
expected to be converted into cash over a short period and therefore, are included in
current assets. The liquidity position of the firm depends on the quality of debtors to a
great extent. Financial analysis employ two ratios to judge the quality or liquidity
debtors.
Debtors turnover
Credit Sales
Average debtors
Generally, the higher value of debtors turnover, the more efficient is the management is
the management of assets.
Some times information about Credit Sales and opening and closing balances of
debtors may not be available and in the service organisation all contracts are happened
on the credit only. So that, that the debtors turnover can be calculated utilising total
sales and ending balance of debtors.
Debtors turnover
Year
Sales
Debtors
2008-2009
2.77
2009-2010
19.06
2010-2011
19.64
2011-2012
17.16
Ratio
ANALYSIS:
The higher the Debtors Turnover Ratio is the better the trade credit management and
the better the liquidity of debtors. Higher Debtor Turnover Ratio implies prompt
payment on the part of debtors. On the other hand, low turnover ratio reflects that
payments by debtors are delayed.
In general, therefore high turnover ratio is preferable. In the year 2008-09 Debtors
turnover ratio was 2.77 times, which has improved to17.16 in 2011-12.
Months in year
Debtors turnover
Year
Days in
Debtors
Ratio
Year
Turnover
(Days)
2008-2009
365
2.77
131.73
2009-2010
365
19.06
19.15
2010-2011
365
19.64
18.58
2011-2012
365
17.16
21.27
ANALYSIS:
Average Collection Period implies how many days that a company has to wait for cash
after making a contract.
The higher debtor turnover ratio and the shorter the average collection period, the
better the trade credit management, the better the liquidity of debtors, as short
collection period and high debtor turnover ratio imply prompt payment on the part of
debtors. On the other hand low debtor turnover ratio and long collection period
reflects that payments by debtors are delayed. In general, short collection period
reflects that payments by debtors are delayed. In general, short collection period
(higher turnover ratio) is preferable.
In the years 2008-09 this is very high at 131.73 days . It has come down to 21.27 days
in the year 2011-12.
PROFITABILITY RATIOS:
A company should earn profits to survice and grow over a long period of time. Profits
are essential, but it would be wrong
2.
Year
Ratio
2008-2009
5.10
2009-2010
11.52
2010-2011
13.92
2011-2012
9.30
2.
3.
A combination of variations in sales prices and cost, the margin widening and
4.
And increase in the proportionate volume of higher margin items. The analysis
of these factors will reveal to the management how a depressed gross profit
margin can be improved.
A low gross profit margin may reflects highest cost of goods sold due to the firms
inability to purchase at favourable items, inefficient utilisation of plant and machinery ,
resulting in higher cost of production.
The financial manager must be able to detect the causes of falling gross margin and
initiate action to improve the situation.
Year
Ratio
2008-2009
-0.99
2009-2010
4.58
2010-2011
5.97
2011-2012
3.32
CHAPTER VI
FINDINGS
The performance of the company has been very good since the past three years. It
has turned the corner from being a loss making unit for three years to a highly
profit making concern.
The Current Ratio of the company is very high due to high receivables and
inventory, which is due to the nature of business. The Quick ratio is well above the
1:1 level due to high receivables.
The Net Working Capital has also been increasing steadily and it reached a level
of Rs.25 crore.
The debt equity ratio has been decreasing steadily except for the year 2011-12
during which it has procured additional loans. The present level of 0.19 is very
good for this type of industry.
Inventory turnover ratio which indicates the efficient utilisation of inventory has
increased steadily over the past four years.
The Debtors Turnover Ratio and the average collection period ratio have shown
Steady improvement indicating an improved cashflow position.
The Gross Profit and Net Profit margin have increased significantly during the last
three years given the losses during the year 2008-09. Since 2009-10 the
improvement has been very good.
BIBLIOGRAPHY
Author
1. FINANCIAL MANAGEMENT
I.M.PANDEY
2. FINANCIAL MANAGEMENT
PRASANNA CHANDRA
3. FINANCIAL MANAGEMENT
BLOOMSBURY
PUBLICATION
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