Description
This is about the financial marketing report of NIRMA.
Company Profile
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N
irma - An Overview
Nirma is one of the few names - which is instantly recognized as a true Indian brand, which took on mighty multinationals and rewrote the Marketing rules to win the heart of the consumer. Nirma, the proverbial ‘Rags to Riches’ saga of Dr. Karsanbhai Patel, is a classic example of the success of Indian entrepreneurship in the face of stiff competition. Starting as a one-man operation in 1969, today, it has about 14, 000 employee-base and annual turnover is above Rs. 25, 00 Crores. India is a one of the largest consumer economy, with burgeoning middle class pie. In such a widespread, diverse Marketplace, Nirma aptly concentrated all its efforts towards creating and building a strong consumer preference towards its ‘value-for-money’ products. It was way back in ‘60s and ‘70s, where the domestic detergent Market had only premium segment, with very few players and was dominated by MNCs. It was 1969, when Karsanbhai Patel started door-to-door selling his (Nirma) detergent powder, priced at an astonishing Rs. 3 per kg, when the available cheapest brand in the Market was Rs. 13/- per kg. It was really an innovative, quality product – with indigenous process, packaging and lowprofiled Marketing, which changed the habit of Indian housewives’ for
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washing their clothes.
In a short span, Nirma created an entirely new Market segment in domestic Marketplace, which is, eventually the largest consumer pocket and quickly emerged as dominating Market player – a position it has never since relinquished. Rewriting the Marketing rules, Nirma became a one of the widely discussed success stories between the four-walls of the B-school classrooms across the world.
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BOARD OF DIRECTORS
? Dr. K. K. Patel, Chairman ? Shri Rakesh K. Patel, Vice Chairman ? Shri Shrenikbhai K. Lalbhai ? Shri Pankaj R. Patel ? Shri Rajendra D. Shah ? Shri A. P. Sarwan ? Shri Chinubhai R. Shah ? Shri Kaushikbhai N. Patel ? Shri Kalpesh A. Patel, Executive Director ? Shri Hiren K. Patel, Managing Director
AUDITORS
?
COMPANY SECRETARY
Shri Paresh Sheth
Hemanshu Shah & Co., Chartered Accountants, Ahmedabad
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REGISTERED OFFICE
Nirma House, Ashram Road, Ahmedabad – 380 009
SUBSIDIARY COMPANY
Nirma Consumer Care Limited,
Nirma House, Ashram Road, Ahmedabad – 380 009
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Corporate Social Responsibility
Nirma's vision visualises itself as a vibrant, pro-active and widely admired, ethical corporate citizen. Nirma believes that exemplary achievements on the Business points are not enough in the making of a good corporate citizen. In fulfilment of this role as a responsible part of the society and environment in which one operates, Nirma has undertaken a host of activities in the educational and social development areas.
Realising the significant role of education - especially technical and managerial in socio-economic development of the nation, Nirma played a vital role by establishing the Nirma Education & Research Foundation (NERF) in 1994.Recently, this Foundation has been awarded University status. This status gives way to shape up and expand into a body providing education in other courses like medicine, nursing, biotechnology, etc.
Along with the existing courses under a single roof of Nirma University. Today, this state-of-the art academic infrastructure runs various institution bodies such as Institute of Technology, Institute of Management, Institute of Pharmaceutical Sciences and Institute of Deploma Engineering. These
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all institutions are located in a disciplined, serene and pleasant environment. The campus blends beautifully with the green landscaping, aesthetic elegance of arches and the vibrant pursuit of knowledge by the young aspirants. The environment gives full scope for group activities, which are plenty, as also to individual pursuits for development on preferred tracks.
Awards
The man behind the success of Nirma phenomenon – Dr. Karsanbhai Patel is a recipient of various awards and accolades. He has been bestowed with various awards like…
•
Udyog Ratna by Federation of Association of Small-Scale Industries of Gujarat, New Delhi. Outstanding Industrialist of Eighties by Gujarat Chamber of Commerce and Industry, Ahmedabad (in 1990). Gujarat Businessman Award in 1998 by Gujarat Chamber of Commerce and Industry, Ahmedabad. Excellence in Corporate Governance Award by Rotary International District 2000.
•
•
•
• A&M Hall of Fame Shri Karsanbhai has been awarded an Honorary Doctorate by Florida Atlantic University, Florida, USA in the year 2001 in recognition of his exceptional accomplishments as a philanthropist and Businessman.
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Dividends
?
2005-2006
During the year for the Company announced dividend at 6 % on Preference shares i.e. Rs.6/- per share on 2,79,285 Redeemable NonCumulative Non-Convertible Preference shares of Rs.100/- each absorbing Rs.0.19 crore including tax on dividend. For Equity shares the Company announced dividend at 75 % i.e. Rs.7.50/per share on the 7,93,84,684 equity shares of Rs.10/- each absorbing Rs.67.89 Crores including tax on dividend. During the year under review, your Company achieved Gross Sales of Rs.2244.11 crore against Rs.2149.21 crore for the previous year, registering growth of about 4.46 %.
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2006-2007
In this year Company recommend the dividend on Preference shares at 6 % i.e. Rs.6/- per share on 279285 Redeemable Non Cumulative Non
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Convertible Preference shares of Rs.100/- each absorbing Rs.0.19 Crores including tax on dividend. The Board has not recommended any further dividend on equity shares for the year ended 31st March, 2007 keeping in view the Company’s need to reserve the internal accruals, to finance the future objectives and considered the interim dividend paid, as final dividend on equity shares for the financial year 2006-07. The Company paid interim dividend at 80 % on subdivided Equity shares of Rs.5/- each during the year i.e. Rs.4/- per equity share.
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2007-2008
On Preference shares the Company announced dividend at 6 % i.e. Rs.6/per share on 279285 Redeemable Non cumulative Non convertible Preference shares of Rs.100/- each absorbing Rs.0.20 Crores including tax On Equity shares the Company announced dividend at 80 % i.e. Rs.4/- per share of Rs.5/- each absorbing Rs.74.48 Crores including tax, for the financial year 2007-08. The Turnover during the year on standalone basis has marginally increased from Rs.2541.05 Crores to Rs.2650.78 Crores showing increase by Rs.109.73 Crores. On consolidated basis, the turnover is Rs.3003.03 Crores during the year. The operating profit before interest, depreciation and tax is Rs.390.26 Crores
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during the year compared to Rs.379.38 Crores of the previous year. The net profit has gone up to Rs.229.73 Crores during the year under review.
Cash flow Statements
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Cash flow statement for the year ended 31st March, 2008
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Cash flow statement for the year ended 31st March, 2007
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Cash flow statement for the year ended 31st March, 2006
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Notes:
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• Profit
Before Tax of the Company for the Financial year 2007-08 is 226.58 Crores & has Flow of Cash 386.96 Crores, which is Operating Profit before Working Capital changes. It is increase as compare to Net Profit Before Tax. Because of the Company provides depreciation or writes off the Debt.
• The
Company has Net Cash Flow from Operating Activity of Rs. 219.93 Crores. Here the Trade Receivables are increasing and because of Payment of Interest & Direct Taxes, The Company has Net Cash Flow from Operating Activities is decreasing.
• The
Company purchases Fixed Assets worth Rs. 311.44 Crores for the Financial year 2007-08 and also purchases Investments of Rs.40.76 Crores. The Company receives Interest of Rs.15.39 Crores.
• Because
of all the above Transactions, the Company has decreasing Net Cash used in Investing Activities of Rs.113.55 Crores.
• The
Company has Borrowings of Rs.382.88 Crores and it also Repays the Borrowings of Rs.2.61 Crores. Due to the Payment and Borrowings, the Company has Net Cash used in Financial Activities is of Rs.123.42 Crores.
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Comparative Statements
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Comparative Profit & Loss A/c
Particulars
Schedule Income: Sales Less:Excise Duty Net Sales Other Income Increase In Stock (1) Total Income Expenditure: Consumption of Raw Material Purchase Of Finished Goods Payment to & Pro. for Employee Mfg, Admin & Sales Exps. Interest & Charges (2) Total Expenditure Profit Before Dep. & Tax (1-2) Less
ro. For Depreciation Addro. For Expenditure Profit Before Tax Lessro. For Tax - Current Tax - Fringe Benefit Tax - Deferred Tax Net Profit (16) (17) (18) (15) (13) (14) 2244.11 325.31 1918.80 24.01 6.98 1949.80 906.18 -43.8 506.13 (6.73) 1449.36 500.44 158.42 -344.02 106.5 0.44 (4.30) 241.30.44 2541.05 295.01 2246.04 26.23 67.52 2339.79 1091.62 0.07 65.10 803.62 (6.52) 1953.89 385.90 207.51 -178.39 20 0.50 (48.77) 109.12 2650.78 318.57 2332.21 19.65 25.96 2371.82 1084.06 1.15 81.65 814.70 7.92 1989.42 382.34 226.65 70.89 226.58 26 0.40 (29.55) 229.73
2005-06
2006-07
2007-08
From the above Statement, we can conclude that …
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1.
The Sales of the company is continuously increasing, which is Rs. 2244.11 Crores in the Financial Year 2005-06 and Rs.2650.78 Crores in the Financial Year 2007-08 rise by Rs.406.67 Crores. There is no provision for the Expenditure in the Previous Years, but company Introduce a Provision for Expenditure in the Year 2007-08 worth Rs. 70.89 Crores. As compare to the Previous Year, The Net Profit of the Company also increased by Rs. 120.60 Crores.
2.
3.
Comparative Balance Sheet
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Particulars
Schedules
2006
2007
2008
SOURCES OF FUNDS Shareholders’ Funds Share capital Reserves and surplus Loan Funds Secured loans Unsecured loans
(1) (2)
82.16 1965.81 2047.99 344.30 3.79 348.09 2396.08
82.36 2347.42 2429.78 239.15 85.70 324.85 2754.63
82.36 2502.62 2584.98 182.54 261.40 443.94 3028.92
(3) (4)
APPLICATION OF FUNDS Fixed Assets Gross block Less : Depreciation Net block Add : Capital work-in-progress Investments Current Assets, Loans & Advances Inventories Sundry debtors Cash and bank balances Loans and advances (6) (7) (8) (9) (10) (5)
2733.48 983.35 1750.13 40.78 1790.91 7.49 308.14 221.52 271.17 319.98 1120.81 3649.80 1404.99 2044.81 113.23 21588.04 6.70 486.01 233.39 62.77 550.50 1332.67 3738.92 1826.96 1911.96 259.61 2171.57 45.85 635.16 216.37 72.65 500.86 1425.04
Less : Current Liabilities and Provisions (11) Current liabilities Provisions Net Current Assets
91.77 77.18 168.95 951.86 214.60 125.23 339.83 992.84 195.46 129.68 325.14 1099.90
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Deferred tax liabilities
(12)
354.18 597.68 2396.08
402.95 589.89 2754.63
288.40 811.50 3028.92
From the above Balance sheet of the Company for three Years, we can conclude below given matters: 1. The Reserves & Surpluses of the company are continuously increasing from Rs. 1965.80 Crores in the Year 2005-06 to Rs. 2502.62 in 2007-08.
2.
In addition, the Investments are going on rising from only Rs.7.49 Crores on The Year 2005-06 to Rs.45.85 Crores in the Year 2007-08 Difference of Rs.38.36. Simultaneously the Current Assets of the Company are increase by Rs. 148.04 Crores as Compare to the Year 2005-06.
3.
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Ratio Analysis
Ratio:
A Ratio is only comparison of numerator with denominator. The term Ratio refers to the numerical or quantitative relationship between two figures
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and obtained by the letter Ratios are designed to show, How one number is related to another?
Advantages of Ratio Analysis
The use of Ratio was started by banks for ascertaining the liquidity and profitability of companies Business for the purpose of advancing loans to them profitably. The Ratio analysis provides useful data to the Management, which would keep them in taking important policy decisions. Diverse group of people make use of Ratio to determining a particular aspect of the financial position of the Company in which they are interested. •Profitability:Useful information about the trend of profitability is available from profitability Ratios. The Gross Profit Ratio, the Net Profit Ratio & Ratio of Return on Investment, give good ideas of the Profitability of Business. On the basis of these Ratios, investors get ideas about the overall efficiency of Business. The Management gets an idea about the efficiency of managers & banks as well as other creditors draw useful conclusion about repaying capacity of borrowers.
• Liquidity:In fact, the use of Ratios made initially Business. The current Ratio, liquid Ratio & acid test Ratio will be able to meet its current liability as &
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when the nature bank & others leaders will be able to conclude from these Ratios whether the firm will be able to pay regularly the interest & loan interest. • Efficiency:The turnover Ratios are excellent guides to measures the efficiency of managers, i.e. the stock turnover will indicate how efficiently the sale is being made the debtor’s turnover will indicate the efficiency of collection department and assets turnover shows the efficiency with which the assets are used in Business. All such Ratios related to sales present a good picture on the success or otherwise of the Business. • Inter-Firm Comparison:The absolute Ratios of firm are not much use, unless they are compared with similar Ratio of the other firm belonging to same industry. This is interfirm comparisons, which shows the strength and weakness of the firm as compare to other firm and will indicate corrective measures.
• Use for budgetary Control:-
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Regular budgetary reports are prepaid in a Business where the system of budgetary control is in use. If various Ratios are presented in these reports it will give a fairly good idea about various aspects of financial position. • Useful for Decision Making:Ratios guide the Management in making some of the important decision. Suppose, the liquidity Ratio shows an unsatisfactory position, the Management may decide to get addition liquid funds. Even for capital expenditure decision, the Ratio of return on investment will guide the Management. The efficiency of various departments can be judged on the Business of their profitability Ratio and efficiency of each department can thus be determined.
Disadvantages of Ratio Analysis
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• Single Year’s Ratio has Limited Liquidity:The utility of Ratios computed from the financial statement of one year only is obviously limited. They must be compared with the past results of the Company as above with the result of other Business firms in the same industry. • Other factors must be Considered:While computed Ratios of different firms, it must be remembered that different accountancy plans & policies. For example, some may use a straightline method of depreciation, while others may make use of diminishing balance method. Hence, great care has to be exercised before any conclusions are drawn from such comparison. • Limiting Utility of Historical Ratios:While comparing Ratios of past several years it should be remember that charges in price level might render such comparison useless. An assets purchase some ten years before may be sales are expressed in current Market value.
Importance of Ratio
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The inter relationship that exists among the different items appeared in the financial statements are related by A/C Ratio. Ratio analysis of affirm is financial statement of it interest to a number of parties mainly, share holder, creditors, financial executives etc. shareholders are interested with earning capacity of the firm. • Liquidity Position:With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of affirm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. A firm can be say to have the ability to meet its short-term liabilities if it has sufficient liquid fund to pay the interest on its short maturing debt usually within a year as to repay the principles. • Long Term Solvency:Ratio analysis is equally useful for assessing the long-term finance liability of a firm. This aspect of the financial position of a bollowel is of concern to long-term creditor’s Security analysis of the present & position owners of Business. The long term, solvency is measured by the leverage, capital & profitability Ratio that focus on earning power & operating efficiency Ratio analysis the strengths and weakness of firm in this aspect. • Operating Efficiency:-
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Yet another dimension of the usefulness if the Ratio analysis, relevant from the viewpoint of Management is that it throws light on the degree of efficiency in the Management & utilization of its assets. The various activities Ratios measure this kind of operational efficiency. • Overall Profitability:On like the outside parties which are interested in one aspect of the financial position of a firm, the Management is constantly concerned about the ability of the firm to meet its short term as well as long term obligation to its creditors to ensure a reasonable return to its owners and secured optimum utilization of the assets of the firm. • Inter- Firm Comparison:Ratio analysis not only throws light on the financial position of a firm but also serves as a stepping-stone to remedial measures. This is made possible due to inter firm comparison & comparison with industry averages. A single figure of a particular Ratio is meaningless unless it is related to some standards, more Ratios as a firm with the industry average. It should be reasonably accepted that the performance of the firm should be broad uniformity with that of the industry to which it belongs.
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Spread Sheet
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PARTICULARS Equity Share Capital (Paid Up) Reserves & Surpluses Preference Share Capital Secured Loans Long Term Loans Short Term Loans Fixed Assets(Excluding Depreciation) + Capital ( Work – In – Progress) Total Fixed Assets Current Assets Inventory Sundry Creditors Loans & Advances Cash & Bank Total Current assets Current liabilities & Provisions Income Sales - Excise Duty Net sales Other Income Increase In stock Expenditure Sales - Gross Profit Cost Of Goods Sold Cost of Material Consumed + Salary, Wages & Bonus + Current Manufacturing Exps. Profit Before Tax(PBT) Provision For Tax Profit After Tax (PAT) Or Net Profit
AS ON 31-03-08 79.57 2502.62 5.00 -182.54 1911.96 259.61 2171.57 635.16 216.37 500.86 72.65 1425.04 325.14 2650.78 318.57 2332.21 13.65 25.96 2650.78 876.34 1774.44 1084.06 7211 814.70 226.58 55.95 229.73
AS ON 31-03-07 79.39 2347.42 5.00 239.15 2044.81 113.32 2158.04 486.01 233.39 550.50 62.77 1332.67 339.83 2541.05 295.0 2244.28 26.23 67.52 2541.05 766.6 1772.69 1091.62 57.6 803.62 178.39 69.27 109.12
AS ON 31-03-06 79.39 1965.81 10.00 295.82 48.48 1750.13 40.78 1790.91 308.14 221.52 319.98 277.14 1120.81 168.95 2244.11 325.31 1918.80 24.02 6.98 2244.11 710.13 1533.98 906.16 3.06 506.13 344.02 111.24 241.38
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C
alculation & Interpretation of Ratio
1.
Gross Profit Ratio:-
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It is Ratio expresses the relationship between gross profits earned to net sale. It is also known as ‘Gross Margin’. It is basic measurement of profitability of Business. Gross Profit Ratio= Gross Profit * 100 Sales
Particular GROSS PROFIT NET SALES GROSS PROFIT RATIO 2005-06 710.13 1918.8 37.01% 2006-07 766.6 2244.28 34.16% 2007-08 876.34 2332.28 37.57%
Gross Profit Ratio
38.00% 37.00% 36.00% Ratio 35.00% 34.00% 33.00% 32.00% 2005-06 2006-07 Year 2007-08 37.01% 34.16% 37.57%
Interpretation:-
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We can observe from the above Ratio that the profitability of the industry is fluctuating. In the year 2005-06 the Ratio is 37.01%. In the year 2006-07 it decreased by 34.16% and in the year 2007-08 it increased by 37.57%.
2.
Stock Turnover Ratio:32
This Ratio shows the number of times the average stock is turn over during the year. This Ratio signifies the efficiency of sales. It is computed by dividing the cost of goods sold by the average stock of the year. Stock Turnover Ratio= Cost of Goods Sold Average Stock
2005-06 2244.11 710.13 1533.98 73.86 80.94 77.45 19.81 2006-07 2539.29 766.6 1772.69 80.94 148.46 114.7 18.30 2007-08 2650.78 876.34 1774.44 148.46 174.42 161.44 10.99
Particular Sales Gross Profit Cost of Goods Sold OP. Stock CL. Stock Average Stock STOCK TURN OVER RATIO
Stock Turnover Ratio
20 15 19.81 Ratio 10 5 0 18.3 10.99
2005-06
2006-07 Year
2007-08
Interpretation:- We can see that in the year 2005-06 No. of times the average stock is turned over to 19.81 times, in the year 2006-07 it decreased by 18.30 times and in the year 2007-08 it increased by 10.99 tomes.
3.
Current Ratio:-
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This is most widely used Ratio shows the proportion of current assets to current liabilities. it attempts to measure the ability of the firm to meet its current obligation or in other words Company’s assets are to pay all liability. Current Ratio= Current Assets Current Liability
Particular
Inventories Sundry Debtors Cash & Bank Loans & Advances
2005-06
308.14 221.52 271.17 319.98
2006-07
486.01 233.39 62.77 550.50
2007-08
635.16 216.37 72.65 500.86
TOTAL CURRENT ASSETS
Current Liabilities Provisions
1120.81
91.77 71.18
1332.67
214.60 125.23
1425.04
195.46 129.68
TOTAL CURRENT LIABILITY
168.95
339.83
325.14
CURRENT RATIO
Current Ratio
6.63:1
3.92:1
4.38:1
7 6 5 4 Ratio 3 2 1 0
6.63:1 3.92:1 4.38:1
2005-06
2006-07 Year
2007-08
Interpretation:- We can observe from above chart that the current Ratio is not satisfactory; in year 2005-06 it was 6.63, in the year 2006-07 it was decreased to 3.92 and in the year 2007-08 it just increased to 4.38. 4. Return on Capital Employed:-
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It is on index on profitability of Business and it is obtained by comparing net profit with capital employed. The term capital employed includes share capital. Return on Capital Employed = Net Profit before Interest & Tax * 100 Capital Employed
Particular
Profit before Tax Interest
2005-06
344.02 6.73
2006- 07
178.39 6.52
2007- 08
226.58 7.92
Net Profit before Interest & Tax
Share Capital Reserve& Surplus Secured loan
350.75
82.18 1965.81 344.30
184.91
82.36 2347.42 239.15
234.5
82.36 2502.62 182.54
Capital Employed
2392.29
2668.93
2767.52
RETURN ON CAPITAL EMPLOYED RATIO
Return on Capital Em ployed
14.66%
6.93%
8.47%
15.00% 10.00% Ratio 5.00% 0.00% 2005-06 2006-07 Year 2007-08 6.93% 14.66% 8.47%
Interpretation:-
We can observe from above chart that return on capital employed is 14.66% in the year 2005-06 and it went up to 6.93% in the year 2006-07. Again, it reaches at the level of 8.47% in the year 2007-08. 5. Return on Share Holder’s Fund:35
In order to judge the efficiency with which the proprietor’s funds are employed in Business. This Ratio is ascertained proprietor’s equity funds included Share Capital & Reserves. This Ratio shows what amount of dividend is likely to be received on shares. Return on Share Holder’s Fund = Net Profit before Interest & Tax * 100 Share Holder’s fund
Particular
Profit After Tax (-)Interest
2005-06
241.38 6.73
2006- 07
109.12 6.52
2007- 08
229.73 7.92 82.36 2502.62 126.97
Net Profit After Interest & Tax
Share Capital (+)Reserve& Surplus (-) Differed Tax Assets Share Holder's Fund
234.69
82.18 1965.81 2.66
102.6
82.36 2347.42 49.46
Share Holder’s Fund
2045.33
2380.32
2458.01
RETURN ON SHARE HOLDER'S FUND RATIO
11.47%
4.31%
9.02%
Return on Share Holder’s Fund
12.00% 10.00% 8.00% Ratio 6.00% 4.00% 2.00% 0.00% 2005-06 11.47% 9.02% 4.31%
2006-07 Year
2007-08
Interpretation:-
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We can observe from above chart that Return on Share Holder’s fund is 11.47% in the year 2005-06 and it went up to 4.31% in the year 2006-07. Again it reaches at the level of 9.02% in the year 2007-08.
6. Return on Equity Share Capital:37
Return on Equity Share Capital Ratio shows the relationship between net profit and shareholder’s Funds. Return on Equity Share Capital = Net Profit – Preference Dividend * 100 Equity Share Capital
Particular
Profit After Tax (-) Interest
2005-06
241.38 6.73
2006- 07
109.12 6.52
2007- 08
229.73 7.92
Net Profit After Interest & Tax
Preference Share Dividend NPAIT - Preference Dividend
234.69
0.17 234.48
102.6
0.17 102.43
221.81
0.17 221.64
(÷)Equity Share Capital
RETURN ON EQUITY SHARE CAPITAL RATIO
79.40
79.40
79.59
2.95%
1.29%
2.78%
Return on Equity Share Capital
3.00% 2.50% 2.00% Ratio 1.50% 1.00% 0.50% 0.00% 2005-06 2006-07 Year 2007-08 2.95% 1.29% 2.78%
Interpretation:-
Return on Equity Share Capital Ratio indicates fluctuation in this the Ratio was 2.95% in 2005-06 then it decreased to 1.29% in 2006-07 and it further increased to 2.78% in 2007-08.
7.
Debtor Ratio:-
38
This Ratio shows the number of days taken to collect the dues of credit sales. It shows the efficiency and policy for collection of debt. Debtor Ratio= Debtors + Bills Receivables *365 Credit Sales
Particular
Debtors Bills Receivable Total Credit Sales
2005-06
221.52 0 221.52 1918.8
2006- 07
233.39 0 233.39 2244.38
2007- 08
216.37 0 216.37 2332.21
DEBTOR'S RATIO
Debtors Ratio (In Days)
42days
38days
34days
50 40 Ratio 30 20 10 0 2005-06 2006-07 Year 2007-08 42
38
34
Interpretation:-
Debtor’s Ratio show average collection period of the industry. In 200506 the Ratio was 42 days which decreased to 38 days in 2006-07 and further more decreased to 34 days in 2007-08 which showing good efficiency.
8. Debtor’s Turnover Ratio:-
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The debtor’s turnover Ratio suggests the number of times the amount credit sale collected during the year. Debtor’s Turnover Ratio = Credit Sales Average Debtors
Particular
Average Debtors Credit Sales
2005-06
221.52 1918.8
2006- 07
233.39 2244.38
2007- 08
216.37 2332.21
DEBTOR'S TURNOVER RATIO
9 times
10 times
11 times
Debtor's Turnover Ratio
12 10 8 Ratio 6 4 2 0 2005-06 2006-07 Year 2007-08 9 Times 10 Times 11 Times
Interpretation:
Debtor’s turnover Ratio was 9 times in 2005-06. In 2006-07, it was increased to 10 times and in 2007-08, it increases to 11 times.
9.
Fixed Assets Ratio:40
The Ratio shows the relationship between fixed assets and turnover means sales. Fixed assets compute the Ratio dividing the amount of sale. Fixed Assets Ratio = Total Sales Fixed Assets
Particular
Sales Fixed Assets
2005-06
1918.8 1750.13
2006- 07
2244.38 2044.81
2007- 08
2332.21 1911.96
FIXED ASSETS RATIO
Fixed Assets Ratio
1.1
1.1
1.22
1.25 1.2 Ratio 1.15 1.1 1.05 1 1.1 1.1 1.22
2005-06
2006-07 Year
2007-08
Interpretation:
This Ratio compared fixed capital with fixed assets. How much times fixed assets is more than capital. Here it is constantly increase but it is balanced. Therefore, it is good for Company.
10. Total
Assets Turnover Ratio:41
To find out relationship between total assets and sales this Ratio is used. The amount or funds used in Business are employed in both fixed asserts and current assets and profit is earned with the help of both. Total Assets Turnover Ratio = Total Sales Total Assets
Particular
Sales
Fixed Assets Current Assets
2005-06
2244.11
1790.91 1120.81
2006- 07
2539.29
2158.04 1332.67
2007- 08
2332.21
1911.96 1425.04
Total Assets
2911.72
3490.71
3337
TOTAL ASSETS TURNOVER RATIO
T otal Assets T urnov Ratio er
0.66
0.64
0.70
0.7 0.68 Ratio 0.66 0.64 0.62 0.6 2005-06 0.66 0.64 0.70
2006-07 Y ear
2007-08
Interpretation:
Higher the Ratio is better for the Company. Here from above three Ratios, we can see that, it is decreased in 2006-’07 & then increased in 2007-’08, which is good for Company. Company should maintain the Ratio for better result.
11. Liquid Ratio:42
A variant of current Ratio or quick Ratio which is design to show the amount at cash available, to meet immediate payments. Liquid assets obtain by liquid liability. Liquid Ratio = Liquid Assets Liquid Liability
Particular
Sundry Debtors Cash & Bank Loans & Advances
2005-06
221.52 271.17 319.98
2006-07
233.39 62.77 550.5
2007-08
216.37 72.65 500.86
TOTAL LIQUID ASSETS
Current Liabilities Provisions
812.67
91.77 71.18
846.66
214.6 125.23
789.88
195.46 129.68
TOTAL LQUID LIABILITY
168.95
339.83
325.14
LIQUIDTY RATIO
Liquidity R atio
4.81:1
2.49:1
2.43:1
5 4 R atio 3 2 1 0 2005-06 2006-07 Y ear 2007-08 4.81:1 2.49:1 2.43:1
Interpretation:
Standard liquid Ratio is 1: 1. Liquid Ratio shows the
amount of cash available to meet immediate payment. If liquid assets are equal to or more than liquid liabilities, it is considered as satisfactory. Here, in 2005-’06, Company has more liquid assets compared with liabilities but it’s constant decreased in last two years. 12. Proprietary Ratio:43
The Ratio shows the proportion of proprietor’s funds to the total assets employed in the Business.
Proprietary Ratio = Proprietor’s Fund *100
Total Assets
Particular
Proprietor's Fund
Fixed Assets Current Assets
2005-06
2047.99
1750.13 1120.81
2006-07
2429.78
2044.81 1332.67
2007-08
2584.98
1911.96 1425.04
Total Assets
2870.98
3377.48
3337
PROPRIETORY RATIO
71.33%
71.94%
77.46%
Proprietory Ratio
78.00% 76.00% Ratio 74.00% 72.00% 70.00% 68.00% 71.33% 2005-06 71.94% 77.46%
2006-07 Year
2007-08
Interpretation:
Higher the Ratio better will be the financial position of the Company. The Ratio 40% to 60% is considering balance Ratio. Company has got good proprietor Ratio in last three years. Therefore, Company’s financial position is very good. 13. Debt Equity Ratio:44
This Ratio shows the proportion of long-term external equities and internal equities. In this proportion of funds provided by long-term creditors and that provided by shareholders. Debt Equity Ratio = Long Term Liability *100 Share Holder’s Fund
Particular
Long-term Liability Share Holder's Fund
2005-06
324.85 2047.99
15.86%
2006-07
324.85 2429.78
13.37%
2007-08
443.94 2584.98
17.17%
DEBT EQUITY RATIO
Debt Equity Ratio
20.00% 15.00% Ratio 10.00% 5.00% 0.00% 2005-06 2006-07 Year 2007-08 15.86% 13.37% 17.17%
Interpretation:
Higher the Ratio, it is good for Company. The last three years Ratio shows that in the year 2006-’07 the Ratio is high. Therefore, it is good for Company’s growth.
14.
Operating Ratio:-
45
It is the Ratio shows relationship between cost of goods sold and operating expenses to net sales. It shows the efficiency of the Management, the higher the Ratio the less will be the margin available to the proprietors. Operating Ratio = Cost of Goods Sold + Operating Expenses *100 Net Profit
Particular
Sales Gross Profit
2005-06
2244.11 710.13
2006-07
2539.29 766.66
2007-08
2332.21 876.27
Cost of Goods Sold
Payment to Provision for Employees. Interest & Charges Consumption Of Stores and Spars Power And Fuel Expenses Processing Charges
1533.98
43.8 6.73 45.74 225.86 23.93
1772.63
0.07 6.52 47.9 256.27 14.83
1455.94
1.15 7.92 51.04 278.53 16.35
Total Expenses Net Sales
346.06 1918.8
325.59 2244.28
354.99 2332.21
OPERATING RATIO
Operating Ratio
0.98
0.9349
0.78
1 0.8 Ratio 0.6 0.4 0.2 0 2005-06 2006-07 Yaer 2007-08 0.98 0.93 0.78
Interpretation: In the year 2005-06 the Ratio was 0.98% and it was decreased
by 0.93% in the year 2006-07, again it is decreased to 0.78% in 2007-08.
15.
Net Profit Ratio:-
46
This Ratio valuable for the purpose of ascertaining overall profitability of Business and shows the efficiency. It is the reserve of the operating Ratio. Net Profit Ratio = Net Profit after Interest & Tax *100 Net Sales
Particular
Profit After Tax (-) Interest
2005-06
241.38 6.73
2006-07
109.12 6.52
2007-08
229.73 7.92
Net Profit After Interest & Tax
234.69
102.6
221.81
Net Sales NET PROFIT
Net Profit
1918.8 12.23%
2244.28 4.28%
2332.28 9.51%
14.00% 12.00% 10.00% 8.00% Ratio 6.00% 4.00% 2.00% 0.00%
12.23% 4.28% 2005-06 2006-07 Year
9.51%
2007-08
Interpretation: This Ratio Indicates Proportion of sales revenue left to the Company after all operating expenses are meeting. Higher the Ratio better will be the profitability. In the year 2005-06, the Ratio is highest, but in 2006-07, it has decreased & in 2007-08, it has increased.
47
doc_409430619.pdf
This is about the financial marketing report of NIRMA.
Company Profile
1
N
irma - An Overview
Nirma is one of the few names - which is instantly recognized as a true Indian brand, which took on mighty multinationals and rewrote the Marketing rules to win the heart of the consumer. Nirma, the proverbial ‘Rags to Riches’ saga of Dr. Karsanbhai Patel, is a classic example of the success of Indian entrepreneurship in the face of stiff competition. Starting as a one-man operation in 1969, today, it has about 14, 000 employee-base and annual turnover is above Rs. 25, 00 Crores. India is a one of the largest consumer economy, with burgeoning middle class pie. In such a widespread, diverse Marketplace, Nirma aptly concentrated all its efforts towards creating and building a strong consumer preference towards its ‘value-for-money’ products. It was way back in ‘60s and ‘70s, where the domestic detergent Market had only premium segment, with very few players and was dominated by MNCs. It was 1969, when Karsanbhai Patel started door-to-door selling his (Nirma) detergent powder, priced at an astonishing Rs. 3 per kg, when the available cheapest brand in the Market was Rs. 13/- per kg. It was really an innovative, quality product – with indigenous process, packaging and lowprofiled Marketing, which changed the habit of Indian housewives’ for
2
washing their clothes.
In a short span, Nirma created an entirely new Market segment in domestic Marketplace, which is, eventually the largest consumer pocket and quickly emerged as dominating Market player – a position it has never since relinquished. Rewriting the Marketing rules, Nirma became a one of the widely discussed success stories between the four-walls of the B-school classrooms across the world.
3
BOARD OF DIRECTORS
? Dr. K. K. Patel, Chairman ? Shri Rakesh K. Patel, Vice Chairman ? Shri Shrenikbhai K. Lalbhai ? Shri Pankaj R. Patel ? Shri Rajendra D. Shah ? Shri A. P. Sarwan ? Shri Chinubhai R. Shah ? Shri Kaushikbhai N. Patel ? Shri Kalpesh A. Patel, Executive Director ? Shri Hiren K. Patel, Managing Director
AUDITORS
?
COMPANY SECRETARY
Shri Paresh Sheth
Hemanshu Shah & Co., Chartered Accountants, Ahmedabad
4
REGISTERED OFFICE
Nirma House, Ashram Road, Ahmedabad – 380 009
SUBSIDIARY COMPANY
Nirma Consumer Care Limited,
Nirma House, Ashram Road, Ahmedabad – 380 009
5
Corporate Social Responsibility
Nirma's vision visualises itself as a vibrant, pro-active and widely admired, ethical corporate citizen. Nirma believes that exemplary achievements on the Business points are not enough in the making of a good corporate citizen. In fulfilment of this role as a responsible part of the society and environment in which one operates, Nirma has undertaken a host of activities in the educational and social development areas.
Realising the significant role of education - especially technical and managerial in socio-economic development of the nation, Nirma played a vital role by establishing the Nirma Education & Research Foundation (NERF) in 1994.Recently, this Foundation has been awarded University status. This status gives way to shape up and expand into a body providing education in other courses like medicine, nursing, biotechnology, etc.
Along with the existing courses under a single roof of Nirma University. Today, this state-of-the art academic infrastructure runs various institution bodies such as Institute of Technology, Institute of Management, Institute of Pharmaceutical Sciences and Institute of Deploma Engineering. These
6
all institutions are located in a disciplined, serene and pleasant environment. The campus blends beautifully with the green landscaping, aesthetic elegance of arches and the vibrant pursuit of knowledge by the young aspirants. The environment gives full scope for group activities, which are plenty, as also to individual pursuits for development on preferred tracks.
Awards
The man behind the success of Nirma phenomenon – Dr. Karsanbhai Patel is a recipient of various awards and accolades. He has been bestowed with various awards like…
•
Udyog Ratna by Federation of Association of Small-Scale Industries of Gujarat, New Delhi. Outstanding Industrialist of Eighties by Gujarat Chamber of Commerce and Industry, Ahmedabad (in 1990). Gujarat Businessman Award in 1998 by Gujarat Chamber of Commerce and Industry, Ahmedabad. Excellence in Corporate Governance Award by Rotary International District 2000.
•
•
•
• A&M Hall of Fame Shri Karsanbhai has been awarded an Honorary Doctorate by Florida Atlantic University, Florida, USA in the year 2001 in recognition of his exceptional accomplishments as a philanthropist and Businessman.
7
Dividends
?
2005-2006
During the year for the Company announced dividend at 6 % on Preference shares i.e. Rs.6/- per share on 2,79,285 Redeemable NonCumulative Non-Convertible Preference shares of Rs.100/- each absorbing Rs.0.19 crore including tax on dividend. For Equity shares the Company announced dividend at 75 % i.e. Rs.7.50/per share on the 7,93,84,684 equity shares of Rs.10/- each absorbing Rs.67.89 Crores including tax on dividend. During the year under review, your Company achieved Gross Sales of Rs.2244.11 crore against Rs.2149.21 crore for the previous year, registering growth of about 4.46 %.
?
2006-2007
In this year Company recommend the dividend on Preference shares at 6 % i.e. Rs.6/- per share on 279285 Redeemable Non Cumulative Non
8
Convertible Preference shares of Rs.100/- each absorbing Rs.0.19 Crores including tax on dividend. The Board has not recommended any further dividend on equity shares for the year ended 31st March, 2007 keeping in view the Company’s need to reserve the internal accruals, to finance the future objectives and considered the interim dividend paid, as final dividend on equity shares for the financial year 2006-07. The Company paid interim dividend at 80 % on subdivided Equity shares of Rs.5/- each during the year i.e. Rs.4/- per equity share.
?
2007-2008
On Preference shares the Company announced dividend at 6 % i.e. Rs.6/per share on 279285 Redeemable Non cumulative Non convertible Preference shares of Rs.100/- each absorbing Rs.0.20 Crores including tax On Equity shares the Company announced dividend at 80 % i.e. Rs.4/- per share of Rs.5/- each absorbing Rs.74.48 Crores including tax, for the financial year 2007-08. The Turnover during the year on standalone basis has marginally increased from Rs.2541.05 Crores to Rs.2650.78 Crores showing increase by Rs.109.73 Crores. On consolidated basis, the turnover is Rs.3003.03 Crores during the year. The operating profit before interest, depreciation and tax is Rs.390.26 Crores
9
during the year compared to Rs.379.38 Crores of the previous year. The net profit has gone up to Rs.229.73 Crores during the year under review.
Cash flow Statements
10
Cash flow statement for the year ended 31st March, 2008
11
Cash flow statement for the year ended 31st March, 2007
12
Cash flow statement for the year ended 31st March, 2006
13
Notes:
14
• Profit
Before Tax of the Company for the Financial year 2007-08 is 226.58 Crores & has Flow of Cash 386.96 Crores, which is Operating Profit before Working Capital changes. It is increase as compare to Net Profit Before Tax. Because of the Company provides depreciation or writes off the Debt.
• The
Company has Net Cash Flow from Operating Activity of Rs. 219.93 Crores. Here the Trade Receivables are increasing and because of Payment of Interest & Direct Taxes, The Company has Net Cash Flow from Operating Activities is decreasing.
• The
Company purchases Fixed Assets worth Rs. 311.44 Crores for the Financial year 2007-08 and also purchases Investments of Rs.40.76 Crores. The Company receives Interest of Rs.15.39 Crores.
• Because
of all the above Transactions, the Company has decreasing Net Cash used in Investing Activities of Rs.113.55 Crores.
• The
Company has Borrowings of Rs.382.88 Crores and it also Repays the Borrowings of Rs.2.61 Crores. Due to the Payment and Borrowings, the Company has Net Cash used in Financial Activities is of Rs.123.42 Crores.
15
Comparative Statements
16
Comparative Profit & Loss A/c
Particulars
Schedule Income: Sales Less:Excise Duty Net Sales Other Income Increase In Stock (1) Total Income Expenditure: Consumption of Raw Material Purchase Of Finished Goods Payment to & Pro. for Employee Mfg, Admin & Sales Exps. Interest & Charges (2) Total Expenditure Profit Before Dep. & Tax (1-2) Less
ro. For Depreciation Addro. For Expenditure Profit Before Tax Lessro. For Tax - Current Tax - Fringe Benefit Tax - Deferred Tax Net Profit (16) (17) (18) (15) (13) (14) 2244.11 325.31 1918.80 24.01 6.98 1949.80 906.18 -43.8 506.13 (6.73) 1449.36 500.44 158.42 -344.02 106.5 0.44 (4.30) 241.30.44 2541.05 295.01 2246.04 26.23 67.52 2339.79 1091.62 0.07 65.10 803.62 (6.52) 1953.89 385.90 207.51 -178.39 20 0.50 (48.77) 109.12 2650.78 318.57 2332.21 19.65 25.96 2371.82 1084.06 1.15 81.65 814.70 7.92 1989.42 382.34 226.65 70.89 226.58 26 0.40 (29.55) 229.732005-06
2006-07
2007-08
From the above Statement, we can conclude that …
17
1.
The Sales of the company is continuously increasing, which is Rs. 2244.11 Crores in the Financial Year 2005-06 and Rs.2650.78 Crores in the Financial Year 2007-08 rise by Rs.406.67 Crores. There is no provision for the Expenditure in the Previous Years, but company Introduce a Provision for Expenditure in the Year 2007-08 worth Rs. 70.89 Crores. As compare to the Previous Year, The Net Profit of the Company also increased by Rs. 120.60 Crores.
2.
3.
Comparative Balance Sheet
18
Particulars
Schedules
2006
2007
2008
SOURCES OF FUNDS Shareholders’ Funds Share capital Reserves and surplus Loan Funds Secured loans Unsecured loans
(1) (2)
82.16 1965.81 2047.99 344.30 3.79 348.09 2396.08
82.36 2347.42 2429.78 239.15 85.70 324.85 2754.63
82.36 2502.62 2584.98 182.54 261.40 443.94 3028.92
(3) (4)
APPLICATION OF FUNDS Fixed Assets Gross block Less : Depreciation Net block Add : Capital work-in-progress Investments Current Assets, Loans & Advances Inventories Sundry debtors Cash and bank balances Loans and advances (6) (7) (8) (9) (10) (5)
2733.48 983.35 1750.13 40.78 1790.91 7.49 308.14 221.52 271.17 319.98 1120.81 3649.80 1404.99 2044.81 113.23 21588.04 6.70 486.01 233.39 62.77 550.50 1332.67 3738.92 1826.96 1911.96 259.61 2171.57 45.85 635.16 216.37 72.65 500.86 1425.04
Less : Current Liabilities and Provisions (11) Current liabilities Provisions Net Current Assets
91.77 77.18 168.95 951.86 214.60 125.23 339.83 992.84 195.46 129.68 325.14 1099.90
19
Deferred tax liabilities
(12)
354.18 597.68 2396.08
402.95 589.89 2754.63
288.40 811.50 3028.92
From the above Balance sheet of the Company for three Years, we can conclude below given matters: 1. The Reserves & Surpluses of the company are continuously increasing from Rs. 1965.80 Crores in the Year 2005-06 to Rs. 2502.62 in 2007-08.
2.
In addition, the Investments are going on rising from only Rs.7.49 Crores on The Year 2005-06 to Rs.45.85 Crores in the Year 2007-08 Difference of Rs.38.36. Simultaneously the Current Assets of the Company are increase by Rs. 148.04 Crores as Compare to the Year 2005-06.
3.
20
Ratio Analysis
Ratio:
A Ratio is only comparison of numerator with denominator. The term Ratio refers to the numerical or quantitative relationship between two figures
21
and obtained by the letter Ratios are designed to show, How one number is related to another?
Advantages of Ratio Analysis
The use of Ratio was started by banks for ascertaining the liquidity and profitability of companies Business for the purpose of advancing loans to them profitably. The Ratio analysis provides useful data to the Management, which would keep them in taking important policy decisions. Diverse group of people make use of Ratio to determining a particular aspect of the financial position of the Company in which they are interested. •Profitability:Useful information about the trend of profitability is available from profitability Ratios. The Gross Profit Ratio, the Net Profit Ratio & Ratio of Return on Investment, give good ideas of the Profitability of Business. On the basis of these Ratios, investors get ideas about the overall efficiency of Business. The Management gets an idea about the efficiency of managers & banks as well as other creditors draw useful conclusion about repaying capacity of borrowers.
• Liquidity:In fact, the use of Ratios made initially Business. The current Ratio, liquid Ratio & acid test Ratio will be able to meet its current liability as &
22
when the nature bank & others leaders will be able to conclude from these Ratios whether the firm will be able to pay regularly the interest & loan interest. • Efficiency:The turnover Ratios are excellent guides to measures the efficiency of managers, i.e. the stock turnover will indicate how efficiently the sale is being made the debtor’s turnover will indicate the efficiency of collection department and assets turnover shows the efficiency with which the assets are used in Business. All such Ratios related to sales present a good picture on the success or otherwise of the Business. • Inter-Firm Comparison:The absolute Ratios of firm are not much use, unless they are compared with similar Ratio of the other firm belonging to same industry. This is interfirm comparisons, which shows the strength and weakness of the firm as compare to other firm and will indicate corrective measures.
• Use for budgetary Control:-
23
Regular budgetary reports are prepaid in a Business where the system of budgetary control is in use. If various Ratios are presented in these reports it will give a fairly good idea about various aspects of financial position. • Useful for Decision Making:Ratios guide the Management in making some of the important decision. Suppose, the liquidity Ratio shows an unsatisfactory position, the Management may decide to get addition liquid funds. Even for capital expenditure decision, the Ratio of return on investment will guide the Management. The efficiency of various departments can be judged on the Business of their profitability Ratio and efficiency of each department can thus be determined.
Disadvantages of Ratio Analysis
24
• Single Year’s Ratio has Limited Liquidity:The utility of Ratios computed from the financial statement of one year only is obviously limited. They must be compared with the past results of the Company as above with the result of other Business firms in the same industry. • Other factors must be Considered:While computed Ratios of different firms, it must be remembered that different accountancy plans & policies. For example, some may use a straightline method of depreciation, while others may make use of diminishing balance method. Hence, great care has to be exercised before any conclusions are drawn from such comparison. • Limiting Utility of Historical Ratios:While comparing Ratios of past several years it should be remember that charges in price level might render such comparison useless. An assets purchase some ten years before may be sales are expressed in current Market value.
Importance of Ratio
25
The inter relationship that exists among the different items appeared in the financial statements are related by A/C Ratio. Ratio analysis of affirm is financial statement of it interest to a number of parties mainly, share holder, creditors, financial executives etc. shareholders are interested with earning capacity of the firm. • Liquidity Position:With the help of Ratio analysis conclusion can be drawn regarding the liquidity position of affirm. The liquidity position of a firm would be satisfactory if it is able to meet its current obligations when they become due. A firm can be say to have the ability to meet its short-term liabilities if it has sufficient liquid fund to pay the interest on its short maturing debt usually within a year as to repay the principles. • Long Term Solvency:Ratio analysis is equally useful for assessing the long-term finance liability of a firm. This aspect of the financial position of a bollowel is of concern to long-term creditor’s Security analysis of the present & position owners of Business. The long term, solvency is measured by the leverage, capital & profitability Ratio that focus on earning power & operating efficiency Ratio analysis the strengths and weakness of firm in this aspect. • Operating Efficiency:-
26
Yet another dimension of the usefulness if the Ratio analysis, relevant from the viewpoint of Management is that it throws light on the degree of efficiency in the Management & utilization of its assets. The various activities Ratios measure this kind of operational efficiency. • Overall Profitability:On like the outside parties which are interested in one aspect of the financial position of a firm, the Management is constantly concerned about the ability of the firm to meet its short term as well as long term obligation to its creditors to ensure a reasonable return to its owners and secured optimum utilization of the assets of the firm. • Inter- Firm Comparison:Ratio analysis not only throws light on the financial position of a firm but also serves as a stepping-stone to remedial measures. This is made possible due to inter firm comparison & comparison with industry averages. A single figure of a particular Ratio is meaningless unless it is related to some standards, more Ratios as a firm with the industry average. It should be reasonably accepted that the performance of the firm should be broad uniformity with that of the industry to which it belongs.
27
Spread Sheet
28
PARTICULARS Equity Share Capital (Paid Up) Reserves & Surpluses Preference Share Capital Secured Loans Long Term Loans Short Term Loans Fixed Assets(Excluding Depreciation) + Capital ( Work – In – Progress) Total Fixed Assets Current Assets Inventory Sundry Creditors Loans & Advances Cash & Bank Total Current assets Current liabilities & Provisions Income Sales - Excise Duty Net sales Other Income Increase In stock Expenditure Sales - Gross Profit Cost Of Goods Sold Cost of Material Consumed + Salary, Wages & Bonus + Current Manufacturing Exps. Profit Before Tax(PBT) Provision For Tax Profit After Tax (PAT) Or Net Profit
AS ON 31-03-08 79.57 2502.62 5.00 -182.54 1911.96 259.61 2171.57 635.16 216.37 500.86 72.65 1425.04 325.14 2650.78 318.57 2332.21 13.65 25.96 2650.78 876.34 1774.44 1084.06 7211 814.70 226.58 55.95 229.73
AS ON 31-03-07 79.39 2347.42 5.00 239.15 2044.81 113.32 2158.04 486.01 233.39 550.50 62.77 1332.67 339.83 2541.05 295.0 2244.28 26.23 67.52 2541.05 766.6 1772.69 1091.62 57.6 803.62 178.39 69.27 109.12
AS ON 31-03-06 79.39 1965.81 10.00 295.82 48.48 1750.13 40.78 1790.91 308.14 221.52 319.98 277.14 1120.81 168.95 2244.11 325.31 1918.80 24.02 6.98 2244.11 710.13 1533.98 906.16 3.06 506.13 344.02 111.24 241.38
29
C
alculation & Interpretation of Ratio
1.
Gross Profit Ratio:-
30
It is Ratio expresses the relationship between gross profits earned to net sale. It is also known as ‘Gross Margin’. It is basic measurement of profitability of Business. Gross Profit Ratio= Gross Profit * 100 Sales
Particular GROSS PROFIT NET SALES GROSS PROFIT RATIO 2005-06 710.13 1918.8 37.01% 2006-07 766.6 2244.28 34.16% 2007-08 876.34 2332.28 37.57%
Gross Profit Ratio
38.00% 37.00% 36.00% Ratio 35.00% 34.00% 33.00% 32.00% 2005-06 2006-07 Year 2007-08 37.01% 34.16% 37.57%
Interpretation:-
31
We can observe from the above Ratio that the profitability of the industry is fluctuating. In the year 2005-06 the Ratio is 37.01%. In the year 2006-07 it decreased by 34.16% and in the year 2007-08 it increased by 37.57%.
2.
Stock Turnover Ratio:32
This Ratio shows the number of times the average stock is turn over during the year. This Ratio signifies the efficiency of sales. It is computed by dividing the cost of goods sold by the average stock of the year. Stock Turnover Ratio= Cost of Goods Sold Average Stock
2005-06 2244.11 710.13 1533.98 73.86 80.94 77.45 19.81 2006-07 2539.29 766.6 1772.69 80.94 148.46 114.7 18.30 2007-08 2650.78 876.34 1774.44 148.46 174.42 161.44 10.99
Particular Sales Gross Profit Cost of Goods Sold OP. Stock CL. Stock Average Stock STOCK TURN OVER RATIO
Stock Turnover Ratio
20 15 19.81 Ratio 10 5 0 18.3 10.99
2005-06
2006-07 Year
2007-08
Interpretation:- We can see that in the year 2005-06 No. of times the average stock is turned over to 19.81 times, in the year 2006-07 it decreased by 18.30 times and in the year 2007-08 it increased by 10.99 tomes.
3.
Current Ratio:-
33
This is most widely used Ratio shows the proportion of current assets to current liabilities. it attempts to measure the ability of the firm to meet its current obligation or in other words Company’s assets are to pay all liability. Current Ratio= Current Assets Current Liability
Particular
Inventories Sundry Debtors Cash & Bank Loans & Advances
2005-06
308.14 221.52 271.17 319.98
2006-07
486.01 233.39 62.77 550.50
2007-08
635.16 216.37 72.65 500.86
TOTAL CURRENT ASSETS
Current Liabilities Provisions
1120.81
91.77 71.18
1332.67
214.60 125.23
1425.04
195.46 129.68
TOTAL CURRENT LIABILITY
168.95
339.83
325.14
CURRENT RATIO
Current Ratio
6.63:1
3.92:1
4.38:1
7 6 5 4 Ratio 3 2 1 0
6.63:1 3.92:1 4.38:1
2005-06
2006-07 Year
2007-08
Interpretation:- We can observe from above chart that the current Ratio is not satisfactory; in year 2005-06 it was 6.63, in the year 2006-07 it was decreased to 3.92 and in the year 2007-08 it just increased to 4.38. 4. Return on Capital Employed:-
34
It is on index on profitability of Business and it is obtained by comparing net profit with capital employed. The term capital employed includes share capital. Return on Capital Employed = Net Profit before Interest & Tax * 100 Capital Employed
Particular
Profit before Tax Interest
2005-06
344.02 6.73
2006- 07
178.39 6.52
2007- 08
226.58 7.92
Net Profit before Interest & Tax
Share Capital Reserve& Surplus Secured loan
350.75
82.18 1965.81 344.30
184.91
82.36 2347.42 239.15
234.5
82.36 2502.62 182.54
Capital Employed
2392.29
2668.93
2767.52
RETURN ON CAPITAL EMPLOYED RATIO
Return on Capital Em ployed
14.66%
6.93%
8.47%
15.00% 10.00% Ratio 5.00% 0.00% 2005-06 2006-07 Year 2007-08 6.93% 14.66% 8.47%
Interpretation:-
We can observe from above chart that return on capital employed is 14.66% in the year 2005-06 and it went up to 6.93% in the year 2006-07. Again, it reaches at the level of 8.47% in the year 2007-08. 5. Return on Share Holder’s Fund:35
In order to judge the efficiency with which the proprietor’s funds are employed in Business. This Ratio is ascertained proprietor’s equity funds included Share Capital & Reserves. This Ratio shows what amount of dividend is likely to be received on shares. Return on Share Holder’s Fund = Net Profit before Interest & Tax * 100 Share Holder’s fund
Particular
Profit After Tax (-)Interest
2005-06
241.38 6.73
2006- 07
109.12 6.52
2007- 08
229.73 7.92 82.36 2502.62 126.97
Net Profit After Interest & Tax
Share Capital (+)Reserve& Surplus (-) Differed Tax Assets Share Holder's Fund
234.69
82.18 1965.81 2.66
102.6
82.36 2347.42 49.46
Share Holder’s Fund
2045.33
2380.32
2458.01
RETURN ON SHARE HOLDER'S FUND RATIO
11.47%
4.31%
9.02%
Return on Share Holder’s Fund
12.00% 10.00% 8.00% Ratio 6.00% 4.00% 2.00% 0.00% 2005-06 11.47% 9.02% 4.31%
2006-07 Year
2007-08
Interpretation:-
36
We can observe from above chart that Return on Share Holder’s fund is 11.47% in the year 2005-06 and it went up to 4.31% in the year 2006-07. Again it reaches at the level of 9.02% in the year 2007-08.
6. Return on Equity Share Capital:37
Return on Equity Share Capital Ratio shows the relationship between net profit and shareholder’s Funds. Return on Equity Share Capital = Net Profit – Preference Dividend * 100 Equity Share Capital
Particular
Profit After Tax (-) Interest
2005-06
241.38 6.73
2006- 07
109.12 6.52
2007- 08
229.73 7.92
Net Profit After Interest & Tax
Preference Share Dividend NPAIT - Preference Dividend
234.69
0.17 234.48
102.6
0.17 102.43
221.81
0.17 221.64
(÷)Equity Share Capital
RETURN ON EQUITY SHARE CAPITAL RATIO
79.40
79.40
79.59
2.95%
1.29%
2.78%
Return on Equity Share Capital
3.00% 2.50% 2.00% Ratio 1.50% 1.00% 0.50% 0.00% 2005-06 2006-07 Year 2007-08 2.95% 1.29% 2.78%
Interpretation:-
Return on Equity Share Capital Ratio indicates fluctuation in this the Ratio was 2.95% in 2005-06 then it decreased to 1.29% in 2006-07 and it further increased to 2.78% in 2007-08.
7.
Debtor Ratio:-
38
This Ratio shows the number of days taken to collect the dues of credit sales. It shows the efficiency and policy for collection of debt. Debtor Ratio= Debtors + Bills Receivables *365 Credit Sales
Particular
Debtors Bills Receivable Total Credit Sales
2005-06
221.52 0 221.52 1918.8
2006- 07
233.39 0 233.39 2244.38
2007- 08
216.37 0 216.37 2332.21
DEBTOR'S RATIO
Debtors Ratio (In Days)
42days
38days
34days
50 40 Ratio 30 20 10 0 2005-06 2006-07 Year 2007-08 42
38
34
Interpretation:-
Debtor’s Ratio show average collection period of the industry. In 200506 the Ratio was 42 days which decreased to 38 days in 2006-07 and further more decreased to 34 days in 2007-08 which showing good efficiency.
8. Debtor’s Turnover Ratio:-
39
The debtor’s turnover Ratio suggests the number of times the amount credit sale collected during the year. Debtor’s Turnover Ratio = Credit Sales Average Debtors
Particular
Average Debtors Credit Sales
2005-06
221.52 1918.8
2006- 07
233.39 2244.38
2007- 08
216.37 2332.21
DEBTOR'S TURNOVER RATIO
9 times
10 times
11 times
Debtor's Turnover Ratio
12 10 8 Ratio 6 4 2 0 2005-06 2006-07 Year 2007-08 9 Times 10 Times 11 Times
Interpretation:
Debtor’s turnover Ratio was 9 times in 2005-06. In 2006-07, it was increased to 10 times and in 2007-08, it increases to 11 times.
9.
Fixed Assets Ratio:40
The Ratio shows the relationship between fixed assets and turnover means sales. Fixed assets compute the Ratio dividing the amount of sale. Fixed Assets Ratio = Total Sales Fixed Assets
Particular
Sales Fixed Assets
2005-06
1918.8 1750.13
2006- 07
2244.38 2044.81
2007- 08
2332.21 1911.96
FIXED ASSETS RATIO
Fixed Assets Ratio
1.1
1.1
1.22
1.25 1.2 Ratio 1.15 1.1 1.05 1 1.1 1.1 1.22
2005-06
2006-07 Year
2007-08
Interpretation:
This Ratio compared fixed capital with fixed assets. How much times fixed assets is more than capital. Here it is constantly increase but it is balanced. Therefore, it is good for Company.
10. Total
Assets Turnover Ratio:41
To find out relationship between total assets and sales this Ratio is used. The amount or funds used in Business are employed in both fixed asserts and current assets and profit is earned with the help of both. Total Assets Turnover Ratio = Total Sales Total Assets
Particular
Sales
Fixed Assets Current Assets
2005-06
2244.11
1790.91 1120.81
2006- 07
2539.29
2158.04 1332.67
2007- 08
2332.21
1911.96 1425.04
Total Assets
2911.72
3490.71
3337
TOTAL ASSETS TURNOVER RATIO
T otal Assets T urnov Ratio er
0.66
0.64
0.70
0.7 0.68 Ratio 0.66 0.64 0.62 0.6 2005-06 0.66 0.64 0.70
2006-07 Y ear
2007-08
Interpretation:
Higher the Ratio is better for the Company. Here from above three Ratios, we can see that, it is decreased in 2006-’07 & then increased in 2007-’08, which is good for Company. Company should maintain the Ratio for better result.
11. Liquid Ratio:42
A variant of current Ratio or quick Ratio which is design to show the amount at cash available, to meet immediate payments. Liquid assets obtain by liquid liability. Liquid Ratio = Liquid Assets Liquid Liability
Particular
Sundry Debtors Cash & Bank Loans & Advances
2005-06
221.52 271.17 319.98
2006-07
233.39 62.77 550.5
2007-08
216.37 72.65 500.86
TOTAL LIQUID ASSETS
Current Liabilities Provisions
812.67
91.77 71.18
846.66
214.6 125.23
789.88
195.46 129.68
TOTAL LQUID LIABILITY
168.95
339.83
325.14
LIQUIDTY RATIO
Liquidity R atio
4.81:1
2.49:1
2.43:1
5 4 R atio 3 2 1 0 2005-06 2006-07 Y ear 2007-08 4.81:1 2.49:1 2.43:1
Interpretation:
Standard liquid Ratio is 1: 1. Liquid Ratio shows the
amount of cash available to meet immediate payment. If liquid assets are equal to or more than liquid liabilities, it is considered as satisfactory. Here, in 2005-’06, Company has more liquid assets compared with liabilities but it’s constant decreased in last two years. 12. Proprietary Ratio:43
The Ratio shows the proportion of proprietor’s funds to the total assets employed in the Business.
Proprietary Ratio = Proprietor’s Fund *100
Total Assets
Particular
Proprietor's Fund
Fixed Assets Current Assets
2005-06
2047.99
1750.13 1120.81
2006-07
2429.78
2044.81 1332.67
2007-08
2584.98
1911.96 1425.04
Total Assets
2870.98
3377.48
3337
PROPRIETORY RATIO
71.33%
71.94%
77.46%
Proprietory Ratio
78.00% 76.00% Ratio 74.00% 72.00% 70.00% 68.00% 71.33% 2005-06 71.94% 77.46%
2006-07 Year
2007-08
Interpretation:
Higher the Ratio better will be the financial position of the Company. The Ratio 40% to 60% is considering balance Ratio. Company has got good proprietor Ratio in last three years. Therefore, Company’s financial position is very good. 13. Debt Equity Ratio:44
This Ratio shows the proportion of long-term external equities and internal equities. In this proportion of funds provided by long-term creditors and that provided by shareholders. Debt Equity Ratio = Long Term Liability *100 Share Holder’s Fund
Particular
Long-term Liability Share Holder's Fund
2005-06
324.85 2047.99
15.86%
2006-07
324.85 2429.78
13.37%
2007-08
443.94 2584.98
17.17%
DEBT EQUITY RATIO
Debt Equity Ratio
20.00% 15.00% Ratio 10.00% 5.00% 0.00% 2005-06 2006-07 Year 2007-08 15.86% 13.37% 17.17%
Interpretation:
Higher the Ratio, it is good for Company. The last three years Ratio shows that in the year 2006-’07 the Ratio is high. Therefore, it is good for Company’s growth.
14.
Operating Ratio:-
45
It is the Ratio shows relationship between cost of goods sold and operating expenses to net sales. It shows the efficiency of the Management, the higher the Ratio the less will be the margin available to the proprietors. Operating Ratio = Cost of Goods Sold + Operating Expenses *100 Net Profit
Particular
Sales Gross Profit
2005-06
2244.11 710.13
2006-07
2539.29 766.66
2007-08
2332.21 876.27
Cost of Goods Sold
Payment to Provision for Employees. Interest & Charges Consumption Of Stores and Spars Power And Fuel Expenses Processing Charges
1533.98
43.8 6.73 45.74 225.86 23.93
1772.63
0.07 6.52 47.9 256.27 14.83
1455.94
1.15 7.92 51.04 278.53 16.35
Total Expenses Net Sales
346.06 1918.8
325.59 2244.28
354.99 2332.21
OPERATING RATIO
Operating Ratio
0.98
0.9349
0.78
1 0.8 Ratio 0.6 0.4 0.2 0 2005-06 2006-07 Yaer 2007-08 0.98 0.93 0.78
Interpretation: In the year 2005-06 the Ratio was 0.98% and it was decreased
by 0.93% in the year 2006-07, again it is decreased to 0.78% in 2007-08.
15.
Net Profit Ratio:-
46
This Ratio valuable for the purpose of ascertaining overall profitability of Business and shows the efficiency. It is the reserve of the operating Ratio. Net Profit Ratio = Net Profit after Interest & Tax *100 Net Sales
Particular
Profit After Tax (-) Interest
2005-06
241.38 6.73
2006-07
109.12 6.52
2007-08
229.73 7.92
Net Profit After Interest & Tax
234.69
102.6
221.81
Net Sales NET PROFIT
Net Profit
1918.8 12.23%
2244.28 4.28%
2332.28 9.51%
14.00% 12.00% 10.00% 8.00% Ratio 6.00% 4.00% 2.00% 0.00%
12.23% 4.28% 2005-06 2006-07 Year
9.51%
2007-08
Interpretation: This Ratio Indicates Proportion of sales revenue left to the Company after all operating expenses are meeting. Higher the Ratio better will be the profitability. In the year 2005-06, the Ratio is highest, but in 2006-07, it has decreased & in 2007-08, it has increased.
47
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