Description
A close association exists between industrial growth and general economic growth. The speedy industrialization can be achieved only if the basic industries are suitably planned started. The Indian paper industry plays a key role in national economic by generating substantial revenue for the state and central government. The industry is highly fragmented with a number of players of global standard. In term of quantity, productivity and efficiency standard, it competes with foreign industries.
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
10
FINANCIAL PERFORMANCE ANALYSIS – A CASE STUDY
(With special reference to large scale private sector paper unit in Tamilnadu- Seshasayee
Paper and Boards Limited)
Dr. G. SUBRAMANIAN
1
& K. VENKATACHALAM
2
.
1
Associate Professor, Research Department of Commerce, Kandaswami Kandar's College, Namakkal.
2
Ph.D, Research Scholar, Research Department of Commerce, Kandaswami Kandar's College, Namakkal.
Abstract
The Indian paper industry plays a key role in national economic by generating
substantial revenue for the state and central government. Financial performance analysis is the
process of determining the operating and financial characteristics of a firm from accounting and
financial statements. The analyst attempts to measure the firm’s liquidity and profitability
position of Seshasayee Paper and Boards Limited is a leading and large scale private sector
paper mill in Tamilnadu. The study is primarily based on the secondary data taken from the
CMIE, Annual Reports and other relevant publications of SPBL. A moderate period of seven
years from 2005-06 to 2011-12 is adopted to draw the meaningful inferences. Financial position
of the SPBL is satisfactory, but there is a need for improvement in certain factors. A lot of funds
invested in inventory and receivables can be released for alternative uses.
Key Words: Financial Characteristics, Inventory, Liquidity, private Sector, Profitability,
Receivables.
INTRODUCTION
A close association exists between
industrial growth and general economic
growth. The speedy industrialization can be
achieved only if the basic industries are
suitably planned started. The Indian paper
industry plays a key role in national
economic by generating substantial revenue
for the state and central government. The
industry is highly fragmented with a number
of players of global standard. In term of
quantity, productivity and efficiency
standard, it competes with foreign
industries. Several attributes of paper,
including its pedagogic and packaging value
makes Pulp and Paper industry (P&P)
uniquely positioned among the
manufacturing industries. Paper, is thus,
recognized almost as a touchstone of socio-
economic development. This traditional
Indian P&P sector had leverage and played a
pivotal role in laying the foundation for
economic growth. It is also one of the 35
high priority industries of Government of
India. It contributes around Rs. 2500 crores
per annum to the national exchequer. The
sector has witnessed a sea change in the
structure during the last three decades
especially after liberalization.
Financial performance analysis is the
process of determining the operating and
financial characteristics of a firm from
accounting and financial statements. The
goal of such analysis is to determine the
STAR
Research Journal
Available online at www.starresearchjournal.com (Star International Journal)
COMMERCE
Star. Commerce 2 (2014)
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
11
efficiency and performance of firm’s
management, as reflected in the financial
records and reports. It gives an outcome
regarding workings and performance of a
company during a specific period. It relates
to the earning capacity and utilization of
available resources. The analyst attempts to
measure the firm’s profitability and liquidity
position of Seshasayee Paper and Boards
Limited is a leading and large scale private
sector paper mill in Tamilnadu.
Profile of the Seshasayee Paper and
boards Limited
Seshasayee Paper and Boards
Limited (SPB), the flagship company
belonging to 'ESVIN GROUP', operates an
integrated pulp, paper and paper board Mill
at Pallipalayam, Namakkal District,
Tamilnadu, India. SPB, incorporated in June
1960, was promoted by Seshasayee Brothers
(Pvt) Limited. SPB commenced commercial
production in December 1962, on
commissioning a 20000 tpa integrated
facility, comprising a Pulp Mill and two
Paper Machines (PM-1 and PM-2), capable
of producing, writing, printing, kraft and
poster varieties of paper. The company's
paper plant was originally designed for
using bagasse, as the primary raw material
mixed with 20 per cent bamboo fibre.
Bagasse was being obtained from nearby
sugar mill on substitution basis using oil
fired boilers. SPB's exports are nearly 20 per
cent of its production and are a significant
exporter in the Indian Paper Industry.
REVIEW OF LITERATURE
Rathore G.S. and Pinki Roi, (2007)
in their study entitled “financial
performance of Air India” have analyzed
pointed out capital structure, working
capital, profitability position, operating
performance and over all financial
performance. It is concluded that Air India
shows better performance of capital
structure and improves the capital structure
in the study period.
Amalendu Bhunia, (2010) has
undertaken an analysis of financial
performance of pharmaceutical companies
to understand how management of finance
plays a crucial role in the growth. The
present study covers to public sector drug &
pharmaceutical enterprises listed on Bombay
Stock Exchange (BSE). In order to analysis
financial performance in terms of liquidity,
solvency, profitability and financial
efficiency, various accounting ratios have
been used.
Chander and Chandel, (2010)
analyzed the financial efficiency and
viability of HARCO Bank and found the
poor performance of the bank on capital
adequacy, liquidity, earning equity and the
management efficiency parameters.
Mistry, (2011) in his study,
“Performance Appraisal of Indian
Automotive Industry through Production
Trend Analysis”. The study showed that the
mean value of production is the highest in
two-wheeler segment. Coefficient of
variation suggested higher fluctuations in
commercial vehicle and passenger vehicle
segments as compared to two wheelers and
three wheelers segments.
STATEMENT OF THE PROBLEM
Profitability is the ability to make
profit from all the business activities of an
organization, company, firm, or an
enterprise. It shows how efficiently the
management can make profit by using all
the resources available in the market.
Liquidity is a vital factor in business. It
measures the relationship between cash and
other current assets to current obligations.
Financial analysis reveals where a company
stands in respect to profitability, liquidity
and an effective use of assets. The financial
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
12
reports provide the frame work in which the
business planning take place. Hence an
attempt has been made to study the
“Financial Performance Analysis of
Seshasayee Paper and Boards Limited”.
OBJECTIVES OF THE STUDY
The present study aims at endeavoring to
evaluate the financial performance of
Seshasayee Paper and Boards Limited for
the period from 2005-06 to 2011-12. The
main objective of the study is to analyze the
financial performance of Seshasayee Paper
and Boards Limited.
1. To evaluate the short term financial position
of SPBL
2. To analyze the profitability position of
SPBL
3. To assess the operational efficiency of SPBL
RESEARCH DESIGN
Methodology of the study
Present study covers only leading &
large scale private sector enterprises which
is engaged in the business of Paper and
Paper Board in Tamilnadu and listed in
BSE. . The sample of company has been
selected on a convenient basis.
The study is primarily based on the
secondary data taken from the CMIE,
Annual Reports and other relevant
publications of SPBL. A moderate period of
seven years from 2005-06 to 2011-12 is
adopted to draw the meaningful inferences.
Data of last seven years are sufficient to
have an idea about the financial performance
of SPBL. The methodology used under this
study in order to evaluate the financial
performance of SPBL used different types of
ratios like liquidity ratio, profitability ratio
and activity ratios.
ANALYSIS AND INTERPRETATION
Table No. 1
Liquidity Ratios of SPBL (in times)
Year CR LR WCTR
2005-06 1.41 1.03 8.61
2006-07 1.41 1.02 9.00
2007-08 1.54 1.14 6.72
2008-09 1.42 0.99 7.93
2009-10 1.8 1.22 5.95
2010-11 2.15 1.69 4.36
2011-12 3.33 2.92 2.32
Source: Computed
Where: CR= Current Ratio, LR= Liquid Ratio, WCTR= Working Capital Turnover Ratio
The table indicates that the current
ratio of the company has fluctuating trend
during the study periods. It is to be highest
level of 3.33 in the year 2011-12, and its
lowest level of 1.14 in the years 2005-06
and 2006-07. Current ratio of the company
is below the standard norm 2:1 during the
study periods except 2010-11 and 2011-12.
The analysis of liquidity position of SPBL
through liquid ratio and the results are
presented in the above table. The ratio has
been bound at its highest level of 2.92
during the year 2011-12, and its lowest level
of 0.99 in the year 2008-09. From the
analysis, it is evident that the liquid ratio of
the SPBL is very sound which indicates that
the company can meet the short term
obligations. Working capital turnover ratio
shows the proportion of working capital as
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
13
current as current liabilities and it was fluctuating during the study period.
Figure No.1
Figure No. 1 displays the graph of the
liquidity ratios of SPBL from 2005-06 to
2011-12. The figure shows the actual
position of current ratio, liquid ratio and
working capital turnover ratio of SPBL.
The following table represents
statistical description of liquidity position of
SPBL. Under this mean, standard deviation,
variance, minimum, maximum, skewness
and kurtosis have been calculated. Statistical
description is made in order to find out
whether the data shows normality or not.
Table No.2
Statistical Description of Liquidity Position of SPBL.
Statistics N Range
Mini
mum
Maxi
mum Mean
Std.
Deviation Variance Skewness Kurtosis
CR 7 1.92 1.14 3.33 1.89 0.70 0.50 1.93 3.75
LR 7 1.93 0.99 2.92 1.43 0.69 0.49 2.09 4.40
WCTR 7 6.69 2.32 9.00 6.41 2.42 5.85 -0.75 -0.75
Source: Computed
The above table showed the statistical
description of liquidity ratios of SPBL.
Average current of the SPBL was 1.92 times
during the study period. From the analysis, it
is evident that the current ratio of SPBL is
not equal to the standard norm which
indicates that the SPBL cannot meet its short
term obligations within time and does not
have a sufficient amount of working capital
for the smooth running of the business
activities. The mean value of liquid ratio is
more than its standard norm (1:1). The
skewness and kurtosis of current ratio, liquid
ratio and working capital turnover ratio are
shown in above table which represents that
the observed data is perfectly normally
distributed. The skewness value of current
ratio and liquid ratio are indicating the
positively skewed while the skewness value
of working capital turnover ratio negative.
Kurtosis value of working capital turnover
ratio is flatter than the normal curve so that
they are platykurtic.
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
14
Table No.3
Profitability Ratios (in percent)
YEAR OPR NPR RON ROCE
2005-06
8.00 1.52 7.34 14.49
2006-07
12.00 3.80 17.11 23.60
2007-08
14.00 8.21 29.35 17.92
2008-09
17.00 8.36 25.13 17.31
2009-10
14.00 2.67 7.80 13.55
2010-11
23.00 7.54 17.77 22.13
2011-12
20.00 11.02 22.96 17.15
Source: Computed
Whereas: OPR= Operating Profit Ratio, NPR= Net Profit Ratio, RON= Return on Networth,
ROCE= Return on Capital Employed.
The above table reveals that the
fluctuating and increasing trend in operating
profit ratio of SPBL since 2005-06. It
increased continuously from 8.00 per cent in
2005-06 to 20.00 percent in 2011-12.Net
profit ratio of SPBL shows increasing trend
all the years except 2009-10 due to increase
in cost of production. Return on networth
represents the company’s to the ordinary
shareholder investment. A return of at least
ten per cent will be necessary to ensure that
shareholders hold on to their shares. Return
on networth of SPBL was 7.34 per cent in
2005-06 which increase over the years and
reach at its highest level of 22.96 per cent.
Return on Capital Employed indicates the
profit generated by the company considering
the total capital invested. A constant return
of ten percent or above would be considered
a healthy trend. The return on capital
employed of the company was 14.49 per
cent in 2005-06. It was reached at a level of
22.13 per cent in 2010-11.
Table No.4
Statistical Description of Profitability Position of SPBL.
Ratio N Range
Mini
mum
Maxi
mum Mean
Std.
Deviation Variance Skewness Kurtosis
OPR 7.00 15.00 8.00 23.00 15.42 5.03 25.28 0.14 -0.35
NPR 7.00 9.50 1.52 11.02 6.16 3.51 12.31 -0.10 -1.56
RON 7.00 22.01 7.34 29.35 18.21 8.39 70.41 -0.23 -1.26
ROCE 7.00 10.05 13.55 23.60 18.02 3.69 13.62 0.50 -0.85
Source: Computed
The above table indicates the description
statistics of profitability ratios of SPBL for
the period from 2005-06 to 2011-12. In this
table mean, standard deviation, variance,
minimum, maximum, skewness and kurtosis
have been calculated which reveals the
important statistical aspects related to
profitability ratios of SPBL. The mean value
of Return on capital employed is higher as
compared to other profitability ratios and
mean value of net profit ratio is very low.
The skewness value of operating profit ratio
and return on capital employed ratio are
reveal the positively skewed while the
skewness value of net profit ratio and return
on networth are negative. Kurtosis values of
OPR, NPR, RON and ROCE are flatter than
the normal curve so that they are platykurtic.
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
15
Figure No.2
Figure 2 shows the graphical presentation of profitability position of SPBL from 2005-06
to 2011-13 which consist operating profit ratio, net profit ratio, return on networth and return on
capital employed.
Table No.5
Activity Ratios of SPBL (in times)
YEAR STR DTOR FATR TATR
2005-06 9.20 10.47 2.00 1.82
2006-07 9.39 9.90 2.20 2.05
2007-08 9.16 10.96 2.12 1.31
2008-09 7.75 11.45 2.14 1.05
2009-10 8.19 11.76 1.06 1.00
2010-11 11.06 11.28 1.06 0.96
2011-12 13.14 6.38 1.24 0.87
Source: Computed
Whereas: STR= Stock Turnover Ratio, DTOR= Debtors Turnover Ratio, FATR= Fixed Assets
Turnover Ratio, TATR= Total Assets Turnover Ratio.
Activity ratios measure how effectively a
firm is using its assets. These ratios help us
gauge how effectively the company is at
putting its investment to work. Inventory
turnover ratio measure how quickly
inventory is sold. A should neither have a
high ratio nor a low ratio. STR of SPBL was
9.20 times in 2005-06 which was fluctuating
among the years and it was reached on its
lowest at 7.75 times on 2008-09. DTOR
indicates how quickly current assets i.e.,
receivable or debtors are converted to cash.
Should neither have a high ratio nor a low
ratio. Debtor’s turnover ratio of SPBL was
10.47 times in 2005-06 which was
fluctuating trend during the study period and
finally it reached on 6.38 times in 2011-12.
Fixed assets turnover ratio and Total assets
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
16
turnover ratio measures the efficiency of a
firm in managing and utilizing its long term
assets. Higher the ratio, more efficient is the
firm in utilizing its assets. As per results
show the assets turnover ratio is very low it
may be stated company is using the long
term assets in very low quantity.
Table No.6
Statistical Descriptions of Activity Ratios of SPBL
Ratio N Range
Mini
mum
Maxi
mum Mean
Std.
Deviation Variance Skewness Kurtosis
STR 7.00 5.39 7.75 13.14 10.00 1.84 3.40 1.20 1.20
DTOR 7.00 5.38 6.38 11.76 10.31 1.84 3.40 -2.06 4.55
FATR 7.00 1.14 1.06 2.20 1.70 0.54 0.30 -0.40 -2.60
TATR 7.00 1.18 0.87 2.05 1.30 0.46 0.21 1.00 -0.74
Source: Computed
It is observed from the above table that
the statistical description of activity ratios of
SPBL from 2005-2012. The average,
standard deviation, variance, minimum,
maximum, skewness and kurtosis of activity
ratio have been calculated in this table
which showed the important statistical
aspects related to activity ratios of SPBL.
The mean value of STR, DTOR, FATR and
TATR is 10.00, 10.31, 1.06 and1.18 times
respectively. The standard deviation of STR
and DTOR are high among the ratios which
mean it implies the more viability.
Figure No.3
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
17
Figure presents the activity ratios of SPBL
during the study period including the stock
turnover ratio, debtors’ turnover ratio, fixed
assets turnover ratio and total assets turnover
ratio. Debtors turnover ratio is very high
during the study period except 2011-12 as
compared to other activity ratios. Total
assets turnover indicates the lowest turnover
ratio during the study period. Stock turnover
ratio shows the trading on the company.
MAJOR FINDINGS OF THE STUDY
AND CONCLUSION
1. Current ratio of the company is
below the standard norm 2:1 during
the study periods except 2010-11 and
2011-12
2. Liquid ratio of the company is very
sound which indicates that the
company can meet the short term
obligations.
3. The skewness value of current ratio
and liquid ratio are indicating the
positively skewed while the
skewness value of working capital
turnover ratio negative.
4. Net profit ratio of SPBL shows
increasing trend all the years except
2009-10.
5. The mean value of Return on capital
employed is higher as compared to
other profitability ratios and mean
value of net profit ratio is very low.
6. Total assets turnover ratio is very
low it may be stated company is
using the long term assets in very
low quantity.
CONCLUSION
Financial performance analysis is
vital for the success of an enterprise.
Financial performance analysis is an
appraisal of the feasibility, solidity and
fertility of a business, sub-business or
mission. The present study point out that the
overall position of the SPBL is satisfactory,
but there is a need for improvement in
certain factors. A lot of funds invested in
inventory and receivables can be released
for alternative uses. Finally liquidity and
profitability of the concern will be
promoted. The Indian paper industry will
witness an increase in the market share. The
sector is poised not only to take new
challenge but to sustain the growth
momentum of the past decade.
References
1. Amalendu Bhunia, “Financial
Performance of Indian
Pharmaceutical Industry – A case
study”. Asian Journal of
Management Research Online Open
Access Publishing Platform for
Management Research, ISSN 2229 –
3795.
2. Chander Ramesh and Chandel Jai
Krishna, “Financial Viability of an
Apex Cooperative Credit Institution
– A Case Study of the HARCO
Bank”, Asia-Pacific Business
Review, Volume. VI, No.2, Aprial-
June2010, pp 61-70.
3. Gopinathan, T, “Financial Ratio
Analysis for Performance Check:
Financial Statement Analysis with
Ratios Can Reveal Problem Areas”.
Journal of financial ratio analysis for
performance evaluation, 2009.
4. Dr. Gupta. S.P, (33 rd Revised
Edition 2004), “Statistical Methods”,
New Delhi,Sultan&Sons.
5. Khan&Jain, Financial Management,
Tata McGraw-Hill(2007)
6. Kothari,C,(1995),“ResearchMethodo
logy” , New Delhi, Wishswa
Prakashan.
7. Mistry, D. S., “Performance
Appraisal of Indian Automotive
Industry through Production Trend
Analysis”. Invertis Journal of
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
18
Management. Volume. 3,No. 1,
2011, pp. 33-46.
8. Rathore G.S. and Pinki Roi,
“Financial Performance of Air
India”. Yojana. Volume 42, no.11,
November 2007, pp. 36-42
9. I.M. Pandey, Financial Management,
Vikas Publishing House Pvt
ltd.,(2009)
10. Rathore G.S. and Pinki Roi,
“Financial Performance of Air
India”. Yojana. Volume 42, no.11,
November 2007, pp. 36-42
11. Singh, P. K, “Financial Appraisal of
IDBI Bank Ltd. Through Financial
Indicators”. The Management
Accountant, Vol. 38, No. 6, 2003,
pp. 425-433
12. Venkataramana, M. N., &
Ramakrishnaiah, K, “Profitability
and Financial Performance: A Study
on Selected Cement Companies in
India, International Journal of
Business and Management
Tomorrow”, Volume. 2, No.5, 2012.
doc_214660615.pdf
A close association exists between industrial growth and general economic growth. The speedy industrialization can be achieved only if the basic industries are suitably planned started. The Indian paper industry plays a key role in national economic by generating substantial revenue for the state and central government. The industry is highly fragmented with a number of players of global standard. In term of quantity, productivity and efficiency standard, it competes with foreign industries.
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
10
FINANCIAL PERFORMANCE ANALYSIS – A CASE STUDY
(With special reference to large scale private sector paper unit in Tamilnadu- Seshasayee
Paper and Boards Limited)
Dr. G. SUBRAMANIAN
1
& K. VENKATACHALAM
2
.
1
Associate Professor, Research Department of Commerce, Kandaswami Kandar's College, Namakkal.
2
Ph.D, Research Scholar, Research Department of Commerce, Kandaswami Kandar's College, Namakkal.
Abstract
The Indian paper industry plays a key role in national economic by generating
substantial revenue for the state and central government. Financial performance analysis is the
process of determining the operating and financial characteristics of a firm from accounting and
financial statements. The analyst attempts to measure the firm’s liquidity and profitability
position of Seshasayee Paper and Boards Limited is a leading and large scale private sector
paper mill in Tamilnadu. The study is primarily based on the secondary data taken from the
CMIE, Annual Reports and other relevant publications of SPBL. A moderate period of seven
years from 2005-06 to 2011-12 is adopted to draw the meaningful inferences. Financial position
of the SPBL is satisfactory, but there is a need for improvement in certain factors. A lot of funds
invested in inventory and receivables can be released for alternative uses.
Key Words: Financial Characteristics, Inventory, Liquidity, private Sector, Profitability,
Receivables.
INTRODUCTION
A close association exists between
industrial growth and general economic
growth. The speedy industrialization can be
achieved only if the basic industries are
suitably planned started. The Indian paper
industry plays a key role in national
economic by generating substantial revenue
for the state and central government. The
industry is highly fragmented with a number
of players of global standard. In term of
quantity, productivity and efficiency
standard, it competes with foreign
industries. Several attributes of paper,
including its pedagogic and packaging value
makes Pulp and Paper industry (P&P)
uniquely positioned among the
manufacturing industries. Paper, is thus,
recognized almost as a touchstone of socio-
economic development. This traditional
Indian P&P sector had leverage and played a
pivotal role in laying the foundation for
economic growth. It is also one of the 35
high priority industries of Government of
India. It contributes around Rs. 2500 crores
per annum to the national exchequer. The
sector has witnessed a sea change in the
structure during the last three decades
especially after liberalization.
Financial performance analysis is the
process of determining the operating and
financial characteristics of a firm from
accounting and financial statements. The
goal of such analysis is to determine the
STAR
Research Journal
Available online at www.starresearchjournal.com (Star International Journal)
COMMERCE
Star. Commerce 2 (2014)
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
11
efficiency and performance of firm’s
management, as reflected in the financial
records and reports. It gives an outcome
regarding workings and performance of a
company during a specific period. It relates
to the earning capacity and utilization of
available resources. The analyst attempts to
measure the firm’s profitability and liquidity
position of Seshasayee Paper and Boards
Limited is a leading and large scale private
sector paper mill in Tamilnadu.
Profile of the Seshasayee Paper and
boards Limited
Seshasayee Paper and Boards
Limited (SPB), the flagship company
belonging to 'ESVIN GROUP', operates an
integrated pulp, paper and paper board Mill
at Pallipalayam, Namakkal District,
Tamilnadu, India. SPB, incorporated in June
1960, was promoted by Seshasayee Brothers
(Pvt) Limited. SPB commenced commercial
production in December 1962, on
commissioning a 20000 tpa integrated
facility, comprising a Pulp Mill and two
Paper Machines (PM-1 and PM-2), capable
of producing, writing, printing, kraft and
poster varieties of paper. The company's
paper plant was originally designed for
using bagasse, as the primary raw material
mixed with 20 per cent bamboo fibre.
Bagasse was being obtained from nearby
sugar mill on substitution basis using oil
fired boilers. SPB's exports are nearly 20 per
cent of its production and are a significant
exporter in the Indian Paper Industry.
REVIEW OF LITERATURE
Rathore G.S. and Pinki Roi, (2007)
in their study entitled “financial
performance of Air India” have analyzed
pointed out capital structure, working
capital, profitability position, operating
performance and over all financial
performance. It is concluded that Air India
shows better performance of capital
structure and improves the capital structure
in the study period.
Amalendu Bhunia, (2010) has
undertaken an analysis of financial
performance of pharmaceutical companies
to understand how management of finance
plays a crucial role in the growth. The
present study covers to public sector drug &
pharmaceutical enterprises listed on Bombay
Stock Exchange (BSE). In order to analysis
financial performance in terms of liquidity,
solvency, profitability and financial
efficiency, various accounting ratios have
been used.
Chander and Chandel, (2010)
analyzed the financial efficiency and
viability of HARCO Bank and found the
poor performance of the bank on capital
adequacy, liquidity, earning equity and the
management efficiency parameters.
Mistry, (2011) in his study,
“Performance Appraisal of Indian
Automotive Industry through Production
Trend Analysis”. The study showed that the
mean value of production is the highest in
two-wheeler segment. Coefficient of
variation suggested higher fluctuations in
commercial vehicle and passenger vehicle
segments as compared to two wheelers and
three wheelers segments.
STATEMENT OF THE PROBLEM
Profitability is the ability to make
profit from all the business activities of an
organization, company, firm, or an
enterprise. It shows how efficiently the
management can make profit by using all
the resources available in the market.
Liquidity is a vital factor in business. It
measures the relationship between cash and
other current assets to current obligations.
Financial analysis reveals where a company
stands in respect to profitability, liquidity
and an effective use of assets. The financial
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
12
reports provide the frame work in which the
business planning take place. Hence an
attempt has been made to study the
“Financial Performance Analysis of
Seshasayee Paper and Boards Limited”.
OBJECTIVES OF THE STUDY
The present study aims at endeavoring to
evaluate the financial performance of
Seshasayee Paper and Boards Limited for
the period from 2005-06 to 2011-12. The
main objective of the study is to analyze the
financial performance of Seshasayee Paper
and Boards Limited.
1. To evaluate the short term financial position
of SPBL
2. To analyze the profitability position of
SPBL
3. To assess the operational efficiency of SPBL
RESEARCH DESIGN
Methodology of the study
Present study covers only leading &
large scale private sector enterprises which
is engaged in the business of Paper and
Paper Board in Tamilnadu and listed in
BSE. . The sample of company has been
selected on a convenient basis.
The study is primarily based on the
secondary data taken from the CMIE,
Annual Reports and other relevant
publications of SPBL. A moderate period of
seven years from 2005-06 to 2011-12 is
adopted to draw the meaningful inferences.
Data of last seven years are sufficient to
have an idea about the financial performance
of SPBL. The methodology used under this
study in order to evaluate the financial
performance of SPBL used different types of
ratios like liquidity ratio, profitability ratio
and activity ratios.
ANALYSIS AND INTERPRETATION
Table No. 1
Liquidity Ratios of SPBL (in times)
Year CR LR WCTR
2005-06 1.41 1.03 8.61
2006-07 1.41 1.02 9.00
2007-08 1.54 1.14 6.72
2008-09 1.42 0.99 7.93
2009-10 1.8 1.22 5.95
2010-11 2.15 1.69 4.36
2011-12 3.33 2.92 2.32
Source: Computed
Where: CR= Current Ratio, LR= Liquid Ratio, WCTR= Working Capital Turnover Ratio
The table indicates that the current
ratio of the company has fluctuating trend
during the study periods. It is to be highest
level of 3.33 in the year 2011-12, and its
lowest level of 1.14 in the years 2005-06
and 2006-07. Current ratio of the company
is below the standard norm 2:1 during the
study periods except 2010-11 and 2011-12.
The analysis of liquidity position of SPBL
through liquid ratio and the results are
presented in the above table. The ratio has
been bound at its highest level of 2.92
during the year 2011-12, and its lowest level
of 0.99 in the year 2008-09. From the
analysis, it is evident that the liquid ratio of
the SPBL is very sound which indicates that
the company can meet the short term
obligations. Working capital turnover ratio
shows the proportion of working capital as
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
13
current as current liabilities and it was fluctuating during the study period.
Figure No.1
Figure No. 1 displays the graph of the
liquidity ratios of SPBL from 2005-06 to
2011-12. The figure shows the actual
position of current ratio, liquid ratio and
working capital turnover ratio of SPBL.
The following table represents
statistical description of liquidity position of
SPBL. Under this mean, standard deviation,
variance, minimum, maximum, skewness
and kurtosis have been calculated. Statistical
description is made in order to find out
whether the data shows normality or not.
Table No.2
Statistical Description of Liquidity Position of SPBL.
Statistics N Range
Mini
mum
Maxi
mum Mean
Std.
Deviation Variance Skewness Kurtosis
CR 7 1.92 1.14 3.33 1.89 0.70 0.50 1.93 3.75
LR 7 1.93 0.99 2.92 1.43 0.69 0.49 2.09 4.40
WCTR 7 6.69 2.32 9.00 6.41 2.42 5.85 -0.75 -0.75
Source: Computed
The above table showed the statistical
description of liquidity ratios of SPBL.
Average current of the SPBL was 1.92 times
during the study period. From the analysis, it
is evident that the current ratio of SPBL is
not equal to the standard norm which
indicates that the SPBL cannot meet its short
term obligations within time and does not
have a sufficient amount of working capital
for the smooth running of the business
activities. The mean value of liquid ratio is
more than its standard norm (1:1). The
skewness and kurtosis of current ratio, liquid
ratio and working capital turnover ratio are
shown in above table which represents that
the observed data is perfectly normally
distributed. The skewness value of current
ratio and liquid ratio are indicating the
positively skewed while the skewness value
of working capital turnover ratio negative.
Kurtosis value of working capital turnover
ratio is flatter than the normal curve so that
they are platykurtic.
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14
Table No.3
Profitability Ratios (in percent)
YEAR OPR NPR RON ROCE
2005-06
8.00 1.52 7.34 14.49
2006-07
12.00 3.80 17.11 23.60
2007-08
14.00 8.21 29.35 17.92
2008-09
17.00 8.36 25.13 17.31
2009-10
14.00 2.67 7.80 13.55
2010-11
23.00 7.54 17.77 22.13
2011-12
20.00 11.02 22.96 17.15
Source: Computed
Whereas: OPR= Operating Profit Ratio, NPR= Net Profit Ratio, RON= Return on Networth,
ROCE= Return on Capital Employed.
The above table reveals that the
fluctuating and increasing trend in operating
profit ratio of SPBL since 2005-06. It
increased continuously from 8.00 per cent in
2005-06 to 20.00 percent in 2011-12.Net
profit ratio of SPBL shows increasing trend
all the years except 2009-10 due to increase
in cost of production. Return on networth
represents the company’s to the ordinary
shareholder investment. A return of at least
ten per cent will be necessary to ensure that
shareholders hold on to their shares. Return
on networth of SPBL was 7.34 per cent in
2005-06 which increase over the years and
reach at its highest level of 22.96 per cent.
Return on Capital Employed indicates the
profit generated by the company considering
the total capital invested. A constant return
of ten percent or above would be considered
a healthy trend. The return on capital
employed of the company was 14.49 per
cent in 2005-06. It was reached at a level of
22.13 per cent in 2010-11.
Table No.4
Statistical Description of Profitability Position of SPBL.
Ratio N Range
Mini
mum
Maxi
mum Mean
Std.
Deviation Variance Skewness Kurtosis
OPR 7.00 15.00 8.00 23.00 15.42 5.03 25.28 0.14 -0.35
NPR 7.00 9.50 1.52 11.02 6.16 3.51 12.31 -0.10 -1.56
RON 7.00 22.01 7.34 29.35 18.21 8.39 70.41 -0.23 -1.26
ROCE 7.00 10.05 13.55 23.60 18.02 3.69 13.62 0.50 -0.85
Source: Computed
The above table indicates the description
statistics of profitability ratios of SPBL for
the period from 2005-06 to 2011-12. In this
table mean, standard deviation, variance,
minimum, maximum, skewness and kurtosis
have been calculated which reveals the
important statistical aspects related to
profitability ratios of SPBL. The mean value
of Return on capital employed is higher as
compared to other profitability ratios and
mean value of net profit ratio is very low.
The skewness value of operating profit ratio
and return on capital employed ratio are
reveal the positively skewed while the
skewness value of net profit ratio and return
on networth are negative. Kurtosis values of
OPR, NPR, RON and ROCE are flatter than
the normal curve so that they are platykurtic.
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
15
Figure No.2
Figure 2 shows the graphical presentation of profitability position of SPBL from 2005-06
to 2011-13 which consist operating profit ratio, net profit ratio, return on networth and return on
capital employed.
Table No.5
Activity Ratios of SPBL (in times)
YEAR STR DTOR FATR TATR
2005-06 9.20 10.47 2.00 1.82
2006-07 9.39 9.90 2.20 2.05
2007-08 9.16 10.96 2.12 1.31
2008-09 7.75 11.45 2.14 1.05
2009-10 8.19 11.76 1.06 1.00
2010-11 11.06 11.28 1.06 0.96
2011-12 13.14 6.38 1.24 0.87
Source: Computed
Whereas: STR= Stock Turnover Ratio, DTOR= Debtors Turnover Ratio, FATR= Fixed Assets
Turnover Ratio, TATR= Total Assets Turnover Ratio.
Activity ratios measure how effectively a
firm is using its assets. These ratios help us
gauge how effectively the company is at
putting its investment to work. Inventory
turnover ratio measure how quickly
inventory is sold. A should neither have a
high ratio nor a low ratio. STR of SPBL was
9.20 times in 2005-06 which was fluctuating
among the years and it was reached on its
lowest at 7.75 times on 2008-09. DTOR
indicates how quickly current assets i.e.,
receivable or debtors are converted to cash.
Should neither have a high ratio nor a low
ratio. Debtor’s turnover ratio of SPBL was
10.47 times in 2005-06 which was
fluctuating trend during the study period and
finally it reached on 6.38 times in 2011-12.
Fixed assets turnover ratio and Total assets
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
16
turnover ratio measures the efficiency of a
firm in managing and utilizing its long term
assets. Higher the ratio, more efficient is the
firm in utilizing its assets. As per results
show the assets turnover ratio is very low it
may be stated company is using the long
term assets in very low quantity.
Table No.6
Statistical Descriptions of Activity Ratios of SPBL
Ratio N Range
Mini
mum
Maxi
mum Mean
Std.
Deviation Variance Skewness Kurtosis
STR 7.00 5.39 7.75 13.14 10.00 1.84 3.40 1.20 1.20
DTOR 7.00 5.38 6.38 11.76 10.31 1.84 3.40 -2.06 4.55
FATR 7.00 1.14 1.06 2.20 1.70 0.54 0.30 -0.40 -2.60
TATR 7.00 1.18 0.87 2.05 1.30 0.46 0.21 1.00 -0.74
Source: Computed
It is observed from the above table that
the statistical description of activity ratios of
SPBL from 2005-2012. The average,
standard deviation, variance, minimum,
maximum, skewness and kurtosis of activity
ratio have been calculated in this table
which showed the important statistical
aspects related to activity ratios of SPBL.
The mean value of STR, DTOR, FATR and
TATR is 10.00, 10.31, 1.06 and1.18 times
respectively. The standard deviation of STR
and DTOR are high among the ratios which
mean it implies the more viability.
Figure No.3
Subramanian, et.al. / Star Commerce .Vol.2 Issue 7(2), July (2014) ISSN: 2321-676X
17
Figure presents the activity ratios of SPBL
during the study period including the stock
turnover ratio, debtors’ turnover ratio, fixed
assets turnover ratio and total assets turnover
ratio. Debtors turnover ratio is very high
during the study period except 2011-12 as
compared to other activity ratios. Total
assets turnover indicates the lowest turnover
ratio during the study period. Stock turnover
ratio shows the trading on the company.
MAJOR FINDINGS OF THE STUDY
AND CONCLUSION
1. Current ratio of the company is
below the standard norm 2:1 during
the study periods except 2010-11 and
2011-12
2. Liquid ratio of the company is very
sound which indicates that the
company can meet the short term
obligations.
3. The skewness value of current ratio
and liquid ratio are indicating the
positively skewed while the
skewness value of working capital
turnover ratio negative.
4. Net profit ratio of SPBL shows
increasing trend all the years except
2009-10.
5. The mean value of Return on capital
employed is higher as compared to
other profitability ratios and mean
value of net profit ratio is very low.
6. Total assets turnover ratio is very
low it may be stated company is
using the long term assets in very
low quantity.
CONCLUSION
Financial performance analysis is
vital for the success of an enterprise.
Financial performance analysis is an
appraisal of the feasibility, solidity and
fertility of a business, sub-business or
mission. The present study point out that the
overall position of the SPBL is satisfactory,
but there is a need for improvement in
certain factors. A lot of funds invested in
inventory and receivables can be released
for alternative uses. Finally liquidity and
profitability of the concern will be
promoted. The Indian paper industry will
witness an increase in the market share. The
sector is poised not only to take new
challenge but to sustain the growth
momentum of the past decade.
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