Project Report on Ratio Analysis : Vijai Electricals Ltd

Description
Transformer is an electrical device in which energy is transformed from one circuit to another circuit without change in frequency by mutual induction.

CERTIFICATE
It is certified that this report entitled “Ratio Analysis Of Vijai
Electricals Ltd ”,Hyderabad, has been submitted by , is a
bonafide !or" done under my #uidance$
DECLARATION
I hereby declare that this project Report entitled “RATIO ANALYSIS IN VIJAI
ELECTRICALS LIMITED”, Hyderabad, is the ori#inal !or" done by me and it has not
been submitted for any %iploma or %e#ree of any other uni&ersity$
C O N T E N T S
CHAPTER – I
I'(RO%)*(IO'
O+,E*(IVE O- (HE .()%/
0E(HO%OLO1/ O- .()%/
-RA0E 2OR3 O- (HE .()%/
LI0I(A(IO'. O- (HE .()%/
CHAPTER-II
VI,AI ELE*(RI*AL. L(%4*O05A'/ 5RO-ILE
%E.*RI5(IO' O- *OR5ORA(E O--I*E A'% 0A')-A*()RI'1 )'I(.
5RO%)*( RA'1E
%O0E.(I* A'% I'(ER'A(IO'AL *).(O0ER.
CHAPTER -III
HI.(OR/ O- VI,AI ELE*(RI*AL. L(%$
0A')-A*()RI'1 5RO*E.. O- .I'1LE45HA.E (RA'.-OR0ER.
0A')-A*()RI'1 5RO*E.. O- (HREE45HA.E (RA'.-OR0ER.
OR1A'I.A(IO' *HAR(
CHAPTER –IV
-I'A'*IAL 0A'A1E0E'( I(. ROLE I' *OR5ORA(E 0A'A1E0E'(
0EA'I'1, I05OR(A'*E A'% .I1'I-I*A'*E O- RA(IO A'AL/.I.
LI0I(A(IO' O- RA(IO.
CHAPTER –V
LI6)I%I(/ RA(IO.
LEVERA1E RA(IO.
A*(IVI(/ RA(IO.
5RO-I(A+ILI(/ RA(IO.
CHAPTER –VI
.)00AR/
-I'%I'1. 7 .)11E.(IO'.
+I+LIO1RA5H/
C H A P T E R – I
I'(RO%)*(IO'
O+,E*(IVE. O- (HE .()%/
0E(HO%OLO1/ O- (HE .()%/
-RA0E 2OR3 O- (HE .()%/
LI0I(A(IO'. O- (HE .()%/
I N T R O D U C T I O N
(ransformer is an electrical de&ice in !hich ener#y is transformed from one circuit to
another circuit !ithout chan#e in fre8uency by mutual induction$
(ransformers are classified into broad cate#ories and classification accordin# to Ratin#,
*ore, *oolin#, Volta#e class$ -or our understandin#, !e consider only t!o types of
transformers$
9: .tep4up (ransformer and
;: .tep4do!n (ransformer
.tep4up (ransformer< If the secondary &olta#e is more than the primary &olta#e, it is
called step4up (ransformer$
.tep4do!n (ransformer< If the secondary &olta#e is less than the primary &olta#e, it is
called step4do!n transformer$
(ransformers are amon# the most efficient machines =>? efficiency bein# common in
lo!er capacity ran#es, !hile an efficiency of the order of ==?is achie&able in hi#h
capacity@ transport constraints, handlin# facilities, etc$ bein# the limitin# factors$ (he
lo!er limit is #o&erned by the allo!able no4load loss$

OBJECTIVES OF THE STUDY
(he study is based on the follo!in# objecti&es<
9$ (o study the #ro!th and de&elopment of the transformer manufacturin# industry in
#eneral$
;$ (o study the profile of the Vijai Electricals Ltd$
A$ (o e&aluate the financial performance of the Vijai Electricals Ltd$, by calculatin#
Li8uidity Ratio, Le&era#e Ratios, (urno&er Ratios 7 5rofitability Ratios$
METHODOLOGY OF THE STUDY
(he %ata is collected from the follo!in# t!o sources<
9$ Primary Sour!"#
0ost of the information is collected from<
45ersonal obser&ation by &isitin# %ifferent departments$
45ersonal Inter&ie!$
;$ S!o$%ary Sour!"#
9$ 5ublished material about VE Ltd$, such as the annual reports of the last fi&e years$
;$ .ur&ey of (ransformer Industry published in &arious 0anuals and journals$
A$ Internal records and files of V$E$ Ltd$ includin# information reports$
B$ Ad&ertisements published in &arious ma#aCines and &arious rented boo"s$
FRAME &OR' OF THE STUDY
(he total study is printed in D chapters<
C(a)*!r + +riefly re&ie!s Introduction, objecti&es of the study, 0ethodolo#y of the
study and Limitations o the study$
C(a)*!r , %eals !ith *ompany 5rofile, 5roduct Ran#e and List of orders eEecuted
for the year ;FF;4;FFA$
C(a)*!r - %eals !ith History of the V$E$ Ltd$, Or#aniCation setup, and manufacturin#
process of transformer in V$E$ Ltd$
C(a)*!r . Has been de&oted for an eEtensi&e co&era#e of -inancial 0ana#ement its
role in corporate mana#ement, meanin#, importance and si#nificance of
ratio Analysis, Limitations of the Ratio Analysis and (ypes of Ratios$
C(a)*!r / Out lines of o&erall financial analysis of V$E$ Ltd$ by calculations &arious
ratios li"e Li8uidity Ratios, Le&era#e Ratios, Acti&ity Ratios and
5rofitability Ratios$
C(a)*!r 0 *oncludes the study !ith su##ested measures for better financial system in
V$E$ Ltd$
LIMITATIONS OF THE STUDY
(he study has been conducted in a systematic and comprehensi&e !ay so as to ma"e the
project !or" an en&iable one$ Ho!e&er, the topic under study may not be free from
limitations due to the facts$
(he major limitation of the project under study !as time$ .ince it !as to be completed
!ithin a short period of time$ 2hich is not sufficient to underta"e a comprehensi&e study$
'on4a&ailability of complete information is also a limit$
C H A P T E R – II

+1 VIJAI ELECTRICALS LTD-COMPANY PROFILE
,1 DESCRIPTION OF CORPORATE OFFICE AND MANUFACTURING UNITS
-1 PRODUCT RANGE
.1 DOMESTIC AND INTERNATIONAL CUSTOMERS
Com)a$y Pro2i3!#
(he *ompany !as established in the year 9=GA for the desi#n and manufacture of
%istribution and 5o!er (ransformers$ *aterin# to the needs of Electricity +oards and
5ri&ate Enterprises !ithin the country, the company became &ery soon one of the leadin#
manufacturers of (ransformers in the country$ Its !orld class desi#n supplemented by
.tate4of4the4art technolo#y, established and mana#ed professionally !ith robust 8uality
systems and modern manufacturin# and testin# facilities, the company embar"ed on
&entures of eEport to forei#n countries and today the or#aniCation eEports DF? of its
turno&er to many countries$
In its manifold sta#es of #ro!th, the early brea"throu#h !as made !hen the company
ba##ed a massi&e order for the supply of %istribution (ransformers from Andhra 5radesh
.tate Electricity +oard$ -ollo!in# this, ne!er approaches to achie&e hi#her standards of
5roduct 6uality, enhanced 5roducti&ity !ere adopted in 8uic" succession !ith bri#ht
prospects for hi#her #ro!th and pro#ress$ 0ost modern additional facilities !ere added
for desi#n and manufacture, supported by !ell4established systems and Hi4tech practices
in all the functions across the entire or#anisation, and the performance reached ne!er
hei#hts$
(he *ompany embar"ed on a ne! &enture to manufacture .in#le 5hase 2ound
*ore (ransformers and today the company has admirably credited itself !ith bein# the
sole manufacturer in the country, car&in# out a niche for itself in the desi#n and
manufacture of .in#le 5hase 2ound *ore (ransformers in the !orld$
At this juncture, the company !itnessed a climate of hi#hly moti&ated and
empo!ered !or" force !illin# to #i&e the further impetus to the #ro!th and this tri##ered
off a major eEpansion, culminatin# in the establishment of the eEclusi&e Amorphous
0etal (ransformers 5lant comprisin# of most modern inte#rated manufacturin# facilities$
(he subse8uent phase !itnessed the be#innin# of a era of eEport !ith the
company eEecutin# the first4e&er eEport order !hich rapidly enhanced culminatin# in a
ne!er hei#ht !ith a !hoppin# eEport turno&er of ). H ;= million durin# the year 9==D4
=G$ Efforts to au#ment this share in the !orld mar"et are topmost in the a#enda of the
*ompanyIs +usiness 5lan$
(oday the or#aniCation dra!s its stren#th from the hi#hly moti&ated !or"force
!hich consists of 8ualified, trained and eEperienced 0ana#ers, En#ineers, .uper&isors
and 2or"men, e&er !illin# to meet the eEactin# and chan#in# demands of the
enli#htened customers, and !holly committed to !or"in# to!ards the companyIs &ision
of leadership in the (ransformer Industry$
2hile the 2or"men and .uper&isors under#o the induction trainin#, the 1raduate
En#ineers under#o a &i#orous one year trainin# pro#ramme to #ain s"ill, "no!led#e and
competence, in order that they can measure upto the challen#in# tas"s and assume hi#her
responsibilities$
-or achie&in# 0ana#erial eEcellence, indi&iduals identified for ta"in# up &ital
0ana#erial position under#o lon# term trainin# in the reputed 5remier 0ana#ement
Institutes of the country$
Employees at &arious le&els and from di&erse functions are eEposed to &arious
(echnical and +eha&ioral trainin# pro#rammes based on the identified needs for self4
de&elopment and for the enhancement of or#anisational effecti&eness$
4UALITY
(he *ompany has !ell4established 6uality systems to ensure 8uality at all sta#es
and in all functions in a climate of (otal 6uality 2or" *ulture, !here participation by
e&eryone rei#ns supreme$ 6uality is a !atch!ord across the entire or#anisation and has
pro&ed to be a corner stone for the *ompanyIs sustained #ro!th and success$
(he three major 5lants of the *ompany ha&e their independent I.O =FF9
certification and ha&e been successfully passin# throu#h the certification of .ur&eillance
and rene!al audits since the year 9==B$ Achie&in# *ustomer .atisfaction is the 8uality
policy of the company and to this end the company has been adoptin# pro#ressi&e
measures &isualisin# 8uality as a "ey strate#y to stay competiti&e in the business$
CORPORATE OFFICE AND MANUFACTURING UNITS #
U$i* –I
(he first plant of Vijai Electricals Ltd$ ha&in# the re8uisite outfit to cater not only to the
manufacture of %istribution and 5o!er (ransformers of &arious ratin#s, but also to
underta"e ser&icin#$
(otal +uilt4)p Area< D,D9G$9> s8$mts$
U$i*- II
It has !ide ran#in# facilities across the &arious disciplines !ith capacity to meet the e&er
#ro!in# needs of the customers in terms of their eEact desi#n specifications and strin#ent
8uality re8uirements$ 2hile the major portions of operations, center round the
%istribution and 5o!er (ransformers of &arious ratin#s upto 9F 0VA, the plant also has
the facility to manufacture *ast Resin %ry (ype (ransformers, a product bein# produced
by only a fe! reno!ned manufacturers in the country$
(otal +uilt4)p Area < 9D,999$DJ s8$mts$
List Of 5roducts 0anufactured in )nit4II <
S35 No5 Ty)!
Vo3*
C3a"" 67V1 Ra$8! R!3!9a$* S*a$%ar%"
9
A 5hase Oil -illed
5o!er
(ransformers
CRGO Silicon
steel
DD
)pto 9FFFF
"VA
I., IE*, A'.I, ,I.,
%I', +. etc$
;
A 5hase Oil filled )pto BFFF
4 do 4
%ist$
(ransformers K
CRGO Silicon
steel
AD
"VA
A
1 Phase Oil
filled Dist.
Transformers
CRGO Silicon
steel &
Amorphous
Metal
9;
)pto 9DG
"VA
4 do 4
B
9 5hase Oil filled
5o!er
(ransformers
CRGO Silicon
steel
AD )pto AAAA
"VA
4 do 4
>
*.5 transformers
L*ompletely .elf
5rotected:
9; )pto A9>
"VA
4 do 4
D
*ast Resin
(ransformers
CRGO Silicon
steel
AD
)pto JFFF
"VA
4 do 4
G
5ad 0ounted
(ransformers
CRGO Silicon
steel
AD
)pto ;>FF
"VA
4 do 4
U$i* –III
An eEclusi&e unit for the manufacture of .in#le 5hase and (hree 5hase Ener#y Efficient
Amorphous 0etal %istribution (ransformers of *on&entional and *ompletely .elf
5rotected L*.5: types$ It stands out as a distin#uishable manufacturin# plant employin#
the most modern e8uipment and practices$ (he plant, en#a#ed in !orld class
manufacturin# practices is the only one of its "ind in the country and in the !orld outside
the ).A$
(otal +uilt4)p Area < B,B>D .8$mts$
List Of 5roducts 0anufactured in )nit4III <
S35
No
5
Ty)!
Vo3*
C3a""
67V1
Ra$8! R!3!9a$*
S*a$%ar%"
9$
1 Phase Oil filled
Dist. Transformers
CRGO Silicon steel &
Amorphous Metal
9;
)pto 9DG "VA
4 do 4
;$
A 5hase Oil filled %ist$
(ransformers
(Amorphous metal) AD
)pto 9FFF
"VA
4 do 4
UNIT- IV
(he conductor plant di&ision !as established in 9==G to meet the hi#h 8uality demands of
ma#net !ires by the customers, and to cater to the needs of all units of the company for
all types of Enamel coated, 5aper co&ered and -ibre #lass co&ered *opper and
Aluminium 2ires as per I., IE*, +., 'E0A and ,I. standards$
(he plant is e8uipped !ith state4of4the4art technolo#y 2ire dra!in#, In4line enamellin#,
(ransposin# and other machinery of reno!ned machine suppliers$ (he 6uality
(estin# lab has the latest e8uipments for conductin# all routine and type tests to
confirm 8uality of !ires as per 'ational and International standards and customer
satisfaction$ (he total plant is pro&ided !ith a dust free en&ironment$ (he follo!in#
is a list of products of the *onductor 5lant$
S35
No
Pro%u* I$%ia$ S*a$%ar% I$*!r$a*io$a3 S*a$%ar%
9 Enamelled Round *opper 2ires
L(erebec 9F9$AD:
I. 9AGAF 5art F4.ec 9
7 5art AB
IE* DFA9G4F49 7 DFA9G4AB
; Enamelled Rectan#ular *opper 2ires
L(erebec -n:
I. 9AGAF 5art F4.ec ;
7 5art 9D
IE* DFA9G4F4; 7 DFA9G49D
A 5VA Enamelled Rectan#ular *opper
2ires4*lass 9F> L-orm&ar 9>AF:
I. 9AGAF 5art F4.ec ;
7 5art 9G
IE* DFA9G4F4; 7 DFA9G49G
B 5VA Enamelled Rectan#ular *opper
2ires4*lass 9;F L.i&aform 9;FM;;+:
I. 9AGAF 5art F4.ec;
7 5art 9J
IE* DFA9G4F4; 7 DFA9G49J
> 5aper *o&ered Round *opper 2ires I. GBFB 5art 9 4
D 5aper *o&ered Rectan#ular *opper
2ires
I. 9AGAF45art ;G IE* DFA9G4;G
G 1lass -ibre *o&ered &arnish +onded
+are Round *opper 2ires
I. BDJ>45art 9 4
J 1lass -ibre *o&ered Varnish +onded
+are Rectan#ular *opper 2ires
I. 9AGAF45art F4.ec
B
IE* DFA9G4F4B
= 1lass -ibre *o&ered Varnish +onded
Enamelled Round *opper 2ires
I. 999JB 4
9F 1lass -ibre *o&ered Varnish +onded
Enamelled Rectan#ular *opper 2ires
I. 9AGAF 5art F4.ec B
7 5art 9D
IE* DFA9G49D
99 5aper *o&ered Round Aluminium
2ires
I. D9D; 5art 9 4
9; 5aper *o&ered Rectan#ular
Aluminium 2ires
I. D9D; 5art ; 4
9A Enamelled Round Aluminium 2ires
L-orm&ar 99A9A*:
I. 9AGAF 5art F4.ec A
7 5art D
'E0A 02 9FFF, 9>M9J
9B Enamelled Rectan#ular Aluminium 4 'E0A 02 9FFF, 9>M9J
2ires L-orm&ar 99A9A*:
9>
*ontinuously (ransposed *onductor
*able L'o of .trands > to A>:
I. AJ>>, I. ;D>B, I.
=AA>, I. ;FD=, I.
BD>B
IE* DF;DB, IE* DFA9G, IE* DF>>B,
IE* DFJ>9
9D (inned *opper -use 2ire I. ==;D M I. J9AF 4
PRODUCT RANGE #
Pro%u* Ra$8!
S35 No5 Ty)!
Vo3*
C3a""
67V1
Ra$8! R!3!9a$* S*a$%ar%"
9
A 5hase Oil -illed
5o!er
(ransformers
CRGO Silicon steel
DD
)pto 9FFFF
"VA
I., IE*, A'.I, ,I., %I',
+. etc$
;
A 5hase Oil filled
%ist$ (ransformers AD
)pto BFFF "VA
4 do 4
K CRGO Silicon
steel
A
1 Phase Oil filled
Dist.
Transformers
CRGO Silicon steel
& Amorphous
Metal
9;
)pto 9DG "VA
4 do 4
B
9 5hase Oil filled
5o!er
(ransformers
CRGO Silicon steel
AD )pto AAAA "VA
4 do 4
>
A 5hase Oil filled
%ist$ (ransformers
(Amorphous
metal)
AD )pto 9FFF "VA
4 do 4
D
*.5 transformers
L*ompletely .elf
5rotected:
9;
)pto A9> "VA 4 do 4
G
*ast Resin
(ransformers
CRGO Silicon steel AD
)pto JFFF "VA
4 do 4
J
5ad 0ounted
(ransformers
CRGO Silicon steel AD
)pto ;>FF "VA
4 do 4
=
*ontinuously
(ransposed
*onductors
L *(* :

)pto A>
parallel
4 do 4
9F
2indin# 2ires
L*opperMAluminiu
m:
Enameled M 0ulti
5aper *o&eredM
-iber 1lass
*o&ered etc$

As Re8d$ 4 do 4
99 (ransformer Oil

As Re8d$ 4 do 4
DOMESTIC AND INTERNATIONAL CUSTOMERS
Dom!"*i Cu"*om!r" #
• Andhra 5radesh .tate Electricity +oard
• Ahmedabad Electricity *ompany Ltd$
• Assam .tate Electricity +oard
• +ombay .uburban Electric .upply Limited, 0umbai
• +ombay Electric .upply and (ransport )nderta"in#, 0umbai
• +ihar .tate Electricity +oard
• %elhi Vidyut +oard
• %epartment of Atomic Ener#y, 0umbai
• 1ridco, +hubanesh!ar
• 1o&t$ of ,ammu and 3ashmir
• 1ujarat Electricity +oard
• Haryana .tate Electricity +oard
• Himachal 5radesh .tate Electricity +oard
• Indian Rail!ays
• 3arnata"a Electricity +oard
• 3erala .tate Electricity +oard
• Larsen 7 (oubro Ltd$
• 0adhya 5radesh Electricity +oard
• 0aharashtra .tate Electricity +oard
• 'uclear 5o!er *orporation
• 5unjab .tate Electricity +oard
• Rajasthan .tate Electricity +oard
• .iemens Ltd$
• .in#areni *olleries *o$Ltd$
• (amil 'adu Electricity +oard
• )ttar 5radesh .tate Electricity +oard
G3o:a3 Cu"*om!r"
• %ubai Electricity and 2ater Authority, %ubai
• Electricity Authority, *yprus
• Electricity *orporation of 1hana, 1hana
• Eletropaulo4 Eletricidade de .ao 5aulo .$A$, +raCil
• -asons 0etal Industries, +an#ladesh
• Ho *hi 0inh *ity 5o!er *orporation, Vietnam
• 3u!ait Oil *ompany, 3u!ait
• 0inistry of Electricity and 2ater, Oman
• 'ational Electrification Administration, 5hilippines
• 'epal Electricity Authority, 'epal
• Rural Electrification +oard, +an#ladesh
• .ena 3al&an .an#stha, +an#ladesh
• 2ater and Electricity %epartment, Al Ain, )AE
• 2escosa, .audi Arabia
• Nimbab!e Electricity .upply Authority, Nimbab!e
C H A P T E R – III
A1 HISTORY OF VIJAI ELECTRICALS LTD5
B1 MANUFACTURING PROCESS OF TRANSFORMERS5
C1 ORGANISATION CHART
A1 HISTORY OF VIJAI ELECTRICALS LTD5
Vijai Electricals Limited LVEL: !as promoted by .hri %$,$Ramesh, *hairman 7
0ana#in# %irector, a first #eneration technocrat in 9=GA, as a small4scale unit to
manufacture transformers, immediately after completion of his 0aster of (echnolo#y in
(ransformer %esi#n$ (he unit !as started as a proprietary concern under the technocrat
scheme of .tate +an" of India !ith an initial capital in&estment of Rs 9$AF lacs$ It !as
con&erted into a company form of or#anisation as a 5ri&ate Limited *ompany in 9=JF
and subse8uently became a public company in 9==;$
In its sa#a of AF years, it has crossed se&eral mile stones and introduced se&eral ne!
technolo#ies to the 5o!er %istribution .ystems in the country and in the process of its
pioneerin# efforts, it has established itIs presence felt in the form of *ompletely .elf4
5rotected L*.5: (ransformers, .in#le 5hase (ransformers, *ast Resin (ransformers,
Amorphous *ore (ransformers, etc$ Its ener#y efficient Amorphous *ore (ransformer is
a class by itself as it sa&es G>? of “'o4Load Losses” in a transformer !hich constitute a
major factor in the distribution losses and this is !hat is desired by the 1o&ernments at
*entral and .tate le&els$ -or its contribution in the field, 8uality of the products and
re&enues to the eEche8uer it has been besto!ed !ith se&eral a!ards at the .tate and
'ational le&els, the details of !hich are #i&en in an AnneEure$
In line !ith its technolo#ical ad&ancements, its sales ha&e also #ro!n at a steady pace in
the last t!o decades$ (he net turno&er as on A9$A$;FFA is Rs$9GB crores and the estimates
for the financial year ;FFA4FB are Rs$AF9 crore$
as well as the Quick ratio
TECHNICAL COLLABORATION 6PAST1 #
.in#le 5hase 2ound *ore %istribution
(ransformers
4 0Ms$ 2estin#house *orporation, ).A
*LR +rea"ers$ 4 0Ms$ 2estin#house *orporation, ).A
Amorphous 0etal *ore %istribution
(ransformers
4 0Ms$ %aihen *orporation, ,apan

MANUFACTURING PROCESS OF TRANSFORMERS #
MANUFACTURING PROCESS FOR SINGLE PHASE
TRANSFORMERS
9 *ORE .LI((I'1 *ores are made out of Hi#h 1rade 1rain Oriented .ilicon .teel recei&ed in coil
form, the core is slit to re8uired !idth$
; *ORE 2I'%I'1 .lit core is automatically !ound on core !rapper, !hich cuts each tone !ith a
controlled #ap and o&erlap$ At the conclusion of a #i&en number of turns a short
turn is cut to o&erlay the joint made by the first cut in the core$ .tep lap joints
help to reduce core losses$
A *ORE -OR0I'1 (he circular core coils are bein# positioned on the centerin# tables of core
formin# machines to form its periphery !ith pre4determined dimensions$
B *ORE *OIL
A''EALI'1
-ormed !ound cores fitted !ith toolin# frame and !ed#es are bein# annealed in a
+ell type batch4annealin# furnace$ (he annealin# temperature is J9F %e#$* per
9F %e#$ *$ (his ensured that the core retains its specific loss &alues$
> *OIL 2I'%I'1 (he lo! and hi#h &olta#e !indin#s are of insulated *opper *onductors$ (hese
are !ound on &ariable speed machines$
D *ORE *OIL
A..E0+L/
(he annealied core, !ith toolin# frame and !ed#es remo&ed, !ill be ready for
assemblin# on coil$ *ore !ill be assembled on coil in batches ensurin# that e&ery
lamination occupies its ori#inal position$ (!o sets of cores !ill be assembled on
to one coil in shell type core construction$ (he assembled core and coil !ill then
be clamped !ith core clamps placed at top end bottom of the assembly$ (he core
clamps !ill be strapped and ti#htened properly !ith suitable tensioners and
crimpin# tools$
G VA*))0
%R/I'1
(he core coil assembly is treated under a controlled heatin# and &acuum dryin#
process to ensure remo&al of the complete moisture$
J (A'3
-A+RI*A(IO'
(an"s are fabricated from mild steel frames of ade8uate thic"ness by shearin#,
formin# and slittin# process$ *oolin# radiators of re8uired surface area are
manufactured from *R*A sheets !hich also form part of the eEternal fittin#s$
(he !elded tan" is subjected to rust and #rease remo&al process and then an
undercoat paint applied to the same$
= (A'3I'1 7 OIL
-ILLI'1
(he inside of the tan" is thorou#hly cleaned and dried$ (hen the core coil
assembly is lo!ered into the tan"$ (here after de#asses oil is filled into the
transformer$ (an"in# is done immediately after the core coil assembly is ta"en out
of the &acuum dryin# o&en$
9F -I'I.HI'1 7
(E.(I'1
After &acuum fillin#, the eEternal fittin#s are assembled on to the transformer and
final coat of paint of ade8uate thic"ness is applied$ (hen the transformer is
subjected to all the test as specified by the rele&ant standards and customer
re8uirements$ (he tests are !itness by the customer M customerIs representati&e$
After the inspection is completed, the transformer is pac"ed into !ooden cases
and then shipped to the destination$
; ; ;
MANUFACTURING PROCESS OF ALL THREE PHASE
OIL FILLED TRANSFORMERS
9
*ORE
L.littin#, *uttin# 7
Annealin#:
(he core is manufactured from Hi#h 1rade *old Rolled 1rain Oriented .ilicon
.teel laminations$ (he core material recei&ed in reels of =9B mm !idth are slit
into the re8uired siCes$ (hese slits are then cut into the re8uired len#ths and then
subjected to an annealin# process at about JFF %e#$ * for relie&in# the
mechanical stresses$
; 2I'%I'1 2indin#s are manufactured from paper co&ered Electrical 6uality *opper M
Aluminium *onductors$ (he copper conductors of the re8uired cross sections are
!ound on &ariable speed !indin# machines usin# suitable mandrels as per the
desi#n specifications$ (he tappin#s re8uired for &olta#e &ariation are also ta"en
out durin# the !indin# process$
A *ORE
A..E0+L/
(he annealed core laminations are stac"ed to form the core assembly on suitable
clampin# frames$
B *ORE *OIL
A..E0+L/
(he assembled core !ill be erected into a &ertical position and the top yo"e !ill
be remo&ed$ (he !indin#s are then inserted on to the core limbs and then the top
yo"e is re4assembled$ (he core coil assembly !ith all the lead !ires and internal
components are then transferred to a &acuum dryin# process for remo&in#
moisture$
> (A'3
-A+RI*A(IO'
(an"s are fabricated from mild steel frames of ade8uate thic"ness by shearin#,
formin# and slittin# process$ *oolin# radiators of re8uired surface area are
manufactured from *R*A sheets, !hich also form part of the eEternal fittin#s$
(he !elded tan" is subjected to rust and #rease remo&al process and then an
undercoat paint applied to the same$
D (A'3I'1 7 OIL
-ILLI'1
(he inside of the tan" is thorou#hly cleaned and dried$ (hen the core coil
assembly is lo!ered into the tan"$ (here after de#assed oil is filled into the
transformer$ (an"in# is done immediately after the core coil assembly is ta"en out
of the &acuum dryin# o&en$
G -I'I.HI'1 7
(E.(I'1
After &acuum fillin#, all the eEternal fittin#s are assembled on to the transformer
and final coat of paint of ade8uate thic"ness is applied$ (hen the transformer is
subjected to all the tests as specified by the rele&ant standards and customer
re8uirements$ (he tests are !itnessed by the Independent Inspection A#ency
appointed by the customer$
* * *
C H A P T E R – IV
A1 FINANCIAL MANAGEMENT ITS ROLE IN CORPORATE MANAGEMENT
B1 MEANING< IMPORTANCE AND SIGNIFICANCE OF RATIO ANALYSIS
C1 LIMITATION OF RATIO ANALYSIS
D1 TYPES OF RATIOS
FINANCIAL MANAGEMENT ITS ROLE IN CORPORATE MANAGEMENT
(he primary purpose of a business firm in the ultimate analysis is to achie&e the
corporate objecti&e$ In the process the or#anisation performs such business
functions as production and distribution of #oods and ser&ices and finance$ (he
modern approach to -inancial 0ana#ement calls the mana#ement to ma"e atleast
fundamental decisions &iC<
9$2here to inset the funds and in !hat amountO
;$ Ho! much to pay in di&idends O and,
A$-rom !here to raise and in !hat amountO
(hus the financial 0ana#ement is in&ested !ith the objecti&e of P0aEimisation of
o!ners economic !elfareI throu#h !ealth maEimiCation rather than throu#h profit
maEimiCation by an aptional combination of the three decisions also "no!n
respecti&ely as the In&estment decision, %i&idend decision, and -inancin#
decision$ (hese three in turn are inter4related$
5roduction and distribution re8uire an in&estment of both fiEed and !or"in#
capital in order to produce a flo! of funds i$e$, cash is in&ested in ra! materials
that are processed by the fiEed assets into finished #oods or ser&ice that in turn are
sold and ultimately con&erted by bac" into cash$ It is this flo! of funds that &itally
concerns financial mana#ement, because if the flo! is slo!ed do!n for any
reason the profit position of the firm !ill be broadly classified as financial
plannin#, *o4ordination, control and plannin#$
-inancial plannin# is the act of decidin# in ad&ance the financial acti&ities that are
necessary if firm is to achie&e its primary #oal co4ordination re8uires that each
function and sub4function be formed at the proper time throu#h proper
or#anisation by creatin# a system$ -inancial control consists of t!o steps
de&elopin# standards$ Re4plannin# should be resol&ed to !hen it is re&ealed that
char#es are needed to "eep pace !ith the chan#in# en&ironment under !hich firm
is operatin#$
In corporations, the shareholders dele#ates much of their authority to the board of
directors and to mana#ers of the corporation$ Althou#h they authorise the board to
act for them in most cases, custom, and la! re8uires that shareholders personally
perform certain financial functions such as$
a$ Amount and "ind of capital stoc" as !ell as its par or stated &alue$
b$ 5re4empti&e ri#ht of the shareholders$
c$ Rules #o&ernin# the issue and transfer of stoc"$
d$ 5ro&isions #rantin# directors the ri#ht to declare di&idend$
e$ Appro&al of the sale of any substantial portion$
f$ Appro&al of recapitalisation plans$
#$ Appro&al of &oluntary plans for li8uidation, plans for consolidation and
mer#ers and
h$ Amendments to the memorandum and articles of association$
(he +oard of the %irectors dele#ate detailed plannin# and if the financial
mana#ement to the corporation -inance 0ana#er$ (he plethora of the functions of
finance mana#er are as #i&en in the follo!in#$
FUNCTIONS OF THE TREASURER#
+5 FINANCIAL PLANNING#

a$ Reportin# the financial results to the board of directors$
b$ 5lannin# the borro!in# re8uirements$
c$ 5lannin# the borro!in# re8uirements$
d$ -orecastin# the cash receipts and
e$ Ad&ice and di&idend payments$
,5 CASH MANAGEMENT#
a$ Openin# of accounts and depositin# funds in ban"s$
b$ 0ana#ement of *ash and +an" balance$
c$ 5ayment of company obli#ations throu#h proper disbursment procedurs,and
d$ 0aintain of records of cash transactions$
-5 CREDIT MANAGEMENT#
a$ %etermination of *ustomers *redit Ris"s$
b$ Orderly handlin# of collections$
c$ Handlin# cash discounts and terms of sale of #oods and ser&ices for prompt ,
and
d$ *ollections$
.5 SECURITY FLOTATIONS#
a$ Recommendin# the type of securities most delerabel for company borro!in#s
re8uirements and collection of these !ith companyIs lon# term liability to pay$
b$ 'e#otiations !ith in&estment ban"ers$
c$ 5ro&ision for trustee , re#istration for transfer a#ent$
d$ *ompliance !ith 1o&ernment re#ulations$
e$ Retirement of bonds and stoc", and
f$ .toc"holders relations, disbursements of di&idends etc$
/5 SINGING OF CHE4UES < contracts, a#reements of leases , notes, bonds
and stoc" certificate mort#a#es, deeds and other corporate documents,
endorsement for deposit collections of che8ues$
05 CUSTODY OF FUNDS AND SECURITIES5
FUNCTIONS OF THE CONTROLER#
9$5ro&idin# basic information for mana#erial control throu#h formulation of
accountin# and costin# policies, standards and procedures preparations of
financial statements and maintenance of boo"s of account direction of internal
audit and cost controls$
;$ +ud#etin# control of corporationIs results$
A$ .pecific control acti&ities$
MEANING< IMPORTANCE AND SIGNIFICANCE OF RATIO ANALYSIS
INTRODUCTION#
(he focus of financial analysis is on "ey fi#ures contained in the financial statements
and hi#h li#hts the si#nificant relationship that eEists bet!een them$ Analysin#
financial statements is a process of e&aluatin# relationship bet!een parts of -inancial
.tatements to obtain a better understandin# of a firm position and performance$ (he
purpose of e&aluation of financial statement differs amon# &arious #roups interested
in the result and relationships, reported in the financial statements$
-or eEample, short term creditors are primarily interested in jud#in# the firmIs ability
to pay its currently maturity obli#ation $ (he rele&ant information for this is the
composition of short term Lcurrent: Assets and short term Lcurrent: liabilities$ (he
debenture shareholder of financial institutions #rantin# lon# term loans !ould be
concerned !ith eEaminin# the capital structure past and project !ell as potential
in&estors !ould naturally be interested in the earnin#s per share and di&idend payout
ratio, !hich are li"ely to ha&e a si#nificant bearin# on mar"et price of the shares$
(he outside elements are thus lar#ely interested in the information that is rele&ant
from their point of &ie!$ (he mana#ement of the form, in contrast, loo"s to the
financial statements from se&eral an#les$ (hese statements are re8uired for
mana#ements o!n e&aluation and decision ma"in#$ 0oreo&er it is responsible for the
o&erall performance of the firm4maintainin# its sol&ency so as to be able to meet short
term and lon# term and lon# term obli#ations to the creditors and at the same time
ensurin# an ade8uate rate of return, consistent !ith safely of funds to its o!ners$
MEANING AND RATIONALE#
A !idely4used tool of financial analysis is ratio analysis$ QQ(he term ratio refers to the
numerical or 8uantitati&e relationship bet!een t!o itemsM&ariablesII$
Each of their measures of eEpressin# related &ariables describes the relationship
bet!een net profiles and sales of the firm$ It should be noted that computin# the ratio
does not add any information not already inherent in the fi#ures of profit and income
#eneration$ 2hat the ratio does is that it is re&eals the relationship in a more
meanin#ful !ay so as to dra! conclusions from them$ (he rationale of ratio analysis
lies in the fact that it ma"es related information comparable$ A sin#le fi#ure by itself
has not meanin# but !hen eEpressed in terms of a related fi#ure it yield si#nificant
inferences$ (he ratio analysis con&erts fi#ures into meanin#ful comparable forms and
remo&es the difficulty of dra!in# inferences on the basis of absolute fi#ures$ As a
8uantitati&e ans!er to 8uestions such as<
L9: Are the net profits ade8uate, L;: Are the assets bein# used efficiently, LA: Is the
firm sol&ent, LB: *an the firm meet its current obli#ations and so on$
SIGNIFICANCE OF RATIO ANALYSIS#
-inancial tools are of immense use to the financial mana#er in as much as they help
him in carryin# out his plannin#s and controllin# function$ 2hile preparin# financial
plan for the decision on financial condition and profitability of the business enterprise$
(he tool of financial analysis ser&es as hand4made to the mana#ement indeterminin#
the impact of his decision$ (hese tools are e8ually useful in in the sphere of financial
control in as much as they enable the financial mana#er to underta"e constant re&ie!
of the actual financial operations of the company a#ainst the proforma balance sheet
and profit and loss statement and to analyse the uses of major de&iations as to ta"e
correcti&e action before it is too late$ (hus !ith the help of financial tools the financial
mana#er can rationalise his decision and reach the business #oal easily$
(he utility of the financial tools is not limited to the -inancial 0ana#er$ (hey are
e8ually helpful to top mana#ement , creditors, in&estors and labourers$ +y analysin#
and interpretin# the financial statements the top mana#ement can measure the success
or other!ise of the companyIs processes and products , appraise the indi&idualIs
performance and e&aluate the system of internal control$
NATURE OF RATIO ANALYSIS#
A ratio is defined as Qthe indicated 8uotient of t!o mathematical eEpressions and as
the relationship but t!o or more thin#s$ In financial analysis, a ratio is used as an
indeE or yardstic" for e&aluation the financial analysis, a ratio is used as an indeE or
firm$ (he absolute accountin# fi#ures reported in the financial statements do not
pro&ide meanin#ful understandin# of the performance and financial position of a firm$
An accountin# fi#ure con&eys meanin# !hen it is related to some other rele&ant
information$ (he relationship bet!een t!o accountin# fi#ures eEpressed
mathematically, is "no!n as a financial ratio$ A ratio helps to ma"e 8ualitati&e
jud#ement about the firmIs financial it is calculated by di&idin# current assets by
current liabilities$ (his relationship is anj indeE or yardstic" !hich permits a
8ualitati&e jud#ement to be formed about the firmIs li8uidity and &ice &ersa $ (he
point to note is that this ration indicates a 8uantitati&e relationship, !hich can be, in
turn used to ma"e a 8ualitati&e jud#ement to be formed about the firmIs li8uidity$ (he
#reater the ratio, the #reater the firmIs li8uidity and &ice &ersa$ (he point to note is
that this ration indicates a 8uantitati&e relationship !hich can be, in turn, used to
ma"e a 8ualitati&e jud#ement$ .uch is the nature of financial ratios$

STANDARDS OF COMPARISON#
(he ratio analysis in&ol&es comparison for a useful interpretation of the financial
statement$ A sin#le ration in itself does not indicate fa&ourable or unfa&ourable
condition$ It should be compared !ith some standared$ .tandards of comparison may
consist of<
9$Ratios calculated from the past financial statements of the same firm$
;$Ratio de&eloped usin# the projected or proforma financial statement of the same f
firm, at the same point in time$
A$Ratios of the industry to !hich the firm belon#s$
(he easiest !ay to e&aluate the past ratios$ 2hen financial ratios o&er a period of
times are compared, it #i&es an indication of the direction of chan#e and reflects
!hether the firmIs financial constant o&er time$

.ome times future ratios are used as the standard of comparison$ -uture ratios can be
de&eloped from the projected or proforma financial statements$ (he comparison of the
past ratios !ith future sho!s the firmIs relati&e stren#ths and !ea"ness in the past and
the future$ If the future ratios indicated !ea" financial position, correcti&e action
should be initiated$
Another !ay of comparison os to computer the ratios of one firm !ith some selected
firms in the same industry at the same point in time$ In most of cases, it is more useful
to compare the firmIs ratio !ith the ratio of a fe! carefully selected competitions !ho
ha&e similar operations$ (his "ind performance of the firm$ A firn the published
financial statements of the similar firms$
(o determine the financial condition and performance of a firmits ratio may be
compared !ith a&era#e ratios are important standards in &ie! of the fact that each
industry has its characteristics !hich influence the financial and operatin#
relationships$ +ut there is some practical difficulties in the industry ratio$
-irst it is difficult to #et a&era#e for industry$
.econdly, e&en if industry ratios are a&ailable they are a&era#e of the ratios of stron#
and !ea" firms$ .ometimes the spread may be so !ide that the a&era#e may be little
utility$
(hirdly the a&era#e !ill be meanin#less and the comparison futile, if the firms !ithin
same industry !idely differ in their accountin# policies and practices$ If it is possible
to standardise the accountin# data for the companies in the industry and eliminate
eEtremely stron# and eEtremely !ea" firms, the industry ratio !ill pro&e to be &ery
useful in e&aluatin# the financial condition and performance of firm$
SIGNIFICANCE#
LIMITATIONS OF RATIO ANALYSIS#
(he ratio analysis is !idely used techni8ue to a&ailable the financial position and
performance of business but it has the limitations$ (he limitations are as follo! <
9$ It is difficult to decide on the proper basis for comparison$
;$ (he comparison is rendered difficult because of difference in situation of t!o
companies or of one company o&er years$
A$ (he price le&el chan#es ma"e the interpretatioon of ratio in&alid$
B$ (he differences in the definition of items in the balance sheet and the income
statement ma"e the interpretation of ratio difficult$
>$ (he ratios calculated at a point of time are less informati&ej and defecti&e as they
suffer from short term chan#es$
D$ (he ratios are #enerally calculated from past financial statements and thus are no
indicators of future$
NOTE# Reference +oo" < -inancial 0ana#ement by 0$/$3han, 5$3$,ain and
.ri&asta&a$
TYPES OF RATIOS
.e&eral Ratios, calculated from the accountin# data, can be #rouped on the basis
financial analysis are short term and lon# term creditors, o!ners and mana#ement$
.hort term sol&ency of the firm$ Lon# term creditors, on the other hand are more
interest in the lon# term sol&ency and profitability of the firm$ .imilarly, o!ners
concentrate on firmIs profitability and the analysis e&aluatin# e&ery aspect of the
performance$ (hey ha&e to protect the interests of all parties and see that the firm
#ro!s profitability$ In&ie! of re8uirements of the &arious users of ratios, !e may
classify them into the follo!in# four important cate#ories$
9$ Li8uidity ratios ;$ Le&era#e ratios
A$ Acti&ity ratios B$ 5rofitability ratios
Li8uidity ratios measure the firmIs ability to mmeet current obli#ations@ Le&era#e
ratios sho! the proportions of debt and e8uity in financin# the utilisin# in assets,
and profitability ratios are measure the o&erall performance and effecti&eness of the
firm each of these ratios are discussed belo!$
LI4UIDITY RATIOS#
It is eEtremely essential for a firm to be able to its obli#ations as they become due$
Li8uidity ratios measure the ability of the firm to meet its current obli#ations$
Infact, analysis of li8uidity needs the preparation of cash and other current assets to
current obli#ations, pro&ide a 8uic" measure of li8uidity$ A firm should ensure that
it does not too much hi#h in li8uid$ (he failure jof a company to meet its
obli#ations, due to lac" of sufficient li8uidity, !ill result in bad credit ima#e, loss of
creditors confidence$ A &ery hi#h de#ree of li8uidity is also bad@ idle assets earn
nothin#$ (he firmIs funds !ill be unnecessarily tied up in current assets$
,5 LEVERAGE RATIOS#
(he short4term creditors, li"e ban"ers and suppliers of ra! materials, are more
concerned !ith the firmIs current debt payin# ability$ On the other hand, lon#4term
creditors, li"e debenture holders, financial institutions etc$, are more concerned !ith
the firmIs lon# term financial stren#th$ (o jud#e the lon# term financial position of the
firm, financial le&era#e, or capital structure, ratios are calculated$ (he manner in !hich
assets are financed has a number of implications$
-irst, bet!een debt and 8uality , debt is more ris"y from the firmIs point of &ie!$ (he
firm has a le#al obli#ation to pay interest to debt holders, irrespecti&e of the "profit
made or losses incurred by the firm$

.econd, employment of debt is ad&anta#eous for share holders in t!o !ays< La: they
can retain control of the firm !ith a limited sta"e and Lb: their earnin#s !ill be
ma#nified !hen the firm earns a rate of return on the total borro!ed funds$
(hird, a hi#hly debt4burdend firm !ill find difficulty in raisin# funds from creditors
and o!nerIs e8uity is treated as a mar#in of safety by creditors$
-5 ACTIVITY RATIOS#

(he funds of creditors and o!ners are in&ested in &arious assets to #enerate sales and
profits$ (he better the mana#ement of assets, the lar#er the amount of sales$ Acti&ity
ratios are employed to e&aluate the efficiency !ith !hich the firm mana#er and utilises
its assets$ (hese ratios are called “(urn O&er Ratios” because they indicate the speed
!ith !hich assets are bein# con&erted or turned o&er into sales$ Acti&ity ratios, thus,
in&ol&e a relationship bet!een sales and assets$ A proper balance bet!een sales and
assets #enerally reflects that assets are mana#ed !ell$ .e&eral acti&ity ratios can be
calculated to jud#e the effecti&eness of assets utilisation$
.5PROFITABILITY RATIOS#
A should earn profits to sur&i&e and #ro! o&er a lon# period of time$ 5rofits are
essential, but it !ould be !ron# to assume that e&ery action initiated by mana#ement
of a company should be aimed at maEimisin# profits, irrespecti&e of social
conse8uences$
5rofit is the difference bet!een re&enues and eEpenses o&er a period of time$ 5rofit is
the ultimate output of a company, and it !ill ha&e no future if it fails to ma"e sufficient
profits$
1enerally t!o major types of profitability ratios are calculated$
9$ 5rofitability in relation to sales$
;$ 5rofitability in relation to in&estment$
C H A P T E R – V
+5 LI4UIDITY RATIOS
,5 LEVERAGE RATIOS
-5 ACTIVITY RATIOS
.5 PROFITABILITY RATIOS
RATIO ANALYSIS OF VIJAI ELECTRICALS LIMITED#
LI4UIDITY RATIOS#
CURRENT RATIO#
(he *urrent Ratio represents a Pmar#in of safetyI that is a caution of protection
creditors$ Ho!e&er, the current ratio is a test of 8uantity only, not 8uality, liabilities are
not subject to any fail in &alue because of the presence of slo! payin# debtors$ (hus
too much reliance should not be placed on the current ratio$ (he current ratio is a crude
and 8uic" measures of the companyIs li8uidity$
It indicates the a&ailability of current assets in rupee for e&ery one rupee current
liability$ A ratio of #reater than one rupee means that the firm has more current assets
than current claims a#ainst them, as a con&entional rule, a ratio of ; to 9 L*urrent
Assets t!ice of *urrent Liabilities: or more is considered to be satisfactory$
*urrent Ratio < *urrent Assets
*urrent Liabilities
In the year 9==J4== the current ratio is A$FJ
(he remainin# years the current ratio position is sho!n in table 9$
TABLE – +
*)RRE'( RA(IO< L/ear 2ise:
LRs$ In La"hs:
/ear *urrent *urrent Ratio
Assets Liabilities
RRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRRR
9==J49=== >J>B$=F 9=F9$GB A$FJ
9===4;FFF >>>9$AJ ;D;J$;B ;$99
;FFF4;FF9 B=>D$9A 9DFD$JG A$FJ
;FF94;FF; J>9A$;> AG;>$G; ;$;J
;FF;4;FFA J9AA$FG ;JDB$9J ;$JB
ANALYSIS#
(his ratio #i&es ho! efficiently the current assets and liabilities are mana#ed$ -or
!or"in# capital limits analysis this is the most important ratio$ +an"s normally recast
current assets and liabilities by treatin# some current assets beyond co&er period as
other non4current assets and some liabilities !ithin the neEt 9; months from the date of
balance sheet as current liabilities$ After recastin#, the *urrent ratio is calculated and
ban"s consider a ratio of 9$AA as benchmar"$ +ut a ratio of less than this doesnIt
al!ays indicate a poor mana#ement of assets 7 liabilities$ 'ormally a ratio abo&e 9
can be considered #ood in case of most manufacturin# concerns$ On the other hand too
hi#h a ratio indicates Lsay abo&e 9$> as per ban" method of calculation: that lot of
assets are held up as in&entory or recei&ables !hich is also not a &ery #ood si#n$ In the
case of VEL the ratio is &ery hi#h at A$FJ durin# 9==J4==, but the company is in losses
durin# that year$ (his indicates that the company has lot of held up in&entory and
recei&ables$ Hence optimum mana#ement of current assets and liabilities is al!ays
stressed upon for healthy balance sheets and for !or"in# capital purposes$
4UIC' RATIO#

6uic" or acid test ratio is a more refined the measure of the firms li8uidity$ (his ratio
establishes a relationship bet!een 8uic" or li8uid assets and current liabilities$ .toc"
and prepaid eEpenses are considered to be less li8uid$

(he other assets !hich are considered to be relati&ely li8uid and included in the 8uic"
assets are boo" debts and mar"etable securities L(emporary in&estments, stoc"
Lin&entory: and prepaid eEpenses are considered to be less li8uid$

1enerally, a 8uic" ratio of to 9 is considered to represent a satisfactory current
financial condition$

Ho!e&er, this ratio also has #ot its o!n limitations$ 6uic" ratio of 9 to 9 needed not
necessarily imply sound li8uidity$ .imilarly, a 8uic" ratio does not necessarily imply
sound li8uidity and bad li8uidity position$ It should be remembered that all the boo"
debts may not be li8uid and cash be immediately re8uired to operatin# eEpenses and
that the in&entories are not absolutely non4li8uid$ (hus a company !ith hi#h 8uic"
ratio can be found it has slo! payin# doubtful debts on the other hand$ *ompany !ith
lo! li8uid ratio may really are proaperin# and payin# into current obli#ation in time$
(he li8uid ratio both current and 8uic" ratios ha&e #ot their utility, if used properly in
the financial analysis "eepin# in &ie! their limitations, that they are lnly tests of
8uantity not toj 8uality etc$
6uic" Ratio can be measured by<
6uic" Ratio< *urrent Assets K In&entories
*urrent Liabilities
In the year 9==J4== the 8uic" ratio is ;$A9$
Remainin# years the 8uic" ratio position is sho!n in table ;$
TABLE – ,
6)I*3 RA(IO<
/ear 6uic" Assets 6uic" Liabilities Ratio
9==J49=== BA==$J; 9=F9$GB ;$A9
9===4;FFF B9;;$GB ;D;J$;B 9$>G
;FFF4;FF9 A;JA$>G DFD$JG ;$FB
;FF94;FF; D>FF$== AG;>$G; 9$GB
;FF;4;FFA >D=F$9F ;JDB$9J 9$==
4UIC' RATIO ANALYSIS#
(he most appropriate measure of short term sol&ency is 8uic" Ratio$ (he ratio is
ascertained by di&idin# the li8uidity assets L*urrent Assets K In&entory:$ In&entory is
eEcluded because its ta"e time to sell finished #oods and con&ert into ra! materials
and !or"4in4pro#ress into finished #oods$
(his ratio indicates the a&ailability if most li8uid assets to meet current obli#ations$ A
8uic" ratio 9 is considered to be the bench mar"$ Ho!e&er, li"e current ratio, the
standard should not be relied upon blindly$ (he hi#her the ratio, the more the li8uidity
and lesser the profitability$
Here, the 8uic" ratio is sho!in# different nature in different years$ 1enerally it is
around ;$ +ut in Vijai Electricals due to hi#h recei&ables this ratio is rather hi#h$
&OR'ING CAPITAL AS A MEASURE OF LI4UIDITY#
2or"in# *apital is formed out by deductin# current liabilities from current assets$ (he
amount of !or"in# capital some times used as a measure of the firmIs li8uidity$ It is
considered that bet!een the t!o companies the one ha&in# the lar#e amount of
!or"in# capital has the #reater ability to meet its current obli#ations$ (his is not
necessarily so the measure of li8uidity is the relationship rather than the difference
bet!een current assets and current liabilities$
&OR'ING CAPITAL#
(he difference bet!een current assets and current liabilities is called 'et !or"in#
capital$
'E( 2OR3I'1 *A5I(AL S *)RRE'( A..E(. K *)RRE'( LIA+ILI(IE.$
In the year 9==J4== (he L'$2$*: S Rs$A=>A$9D lacs
Remainin# years the !or"in# capital is sho!n in (able<A$
'E( 2OR3I'1 *A5I(AL O- VI,AI ELE*(RI*AL. LI0I(E% %)RI'1 (HE
/EAR. -RO0 9==J4== (O ;FF; K;FFA<
Rs$Lacs
/ear *urrent *urrent 'et 2or"in#
Assets Liabilities *apital
9=JJ49=== >J>B$=F 9=F9$GB A=>A$9D
9===4;FFF >>>9$AJ ;D;J$;B ;=;A$9>
;FFF4;FF9 B=>D$9A 9DFD$JG AAB=$;>
;FF94;FF; J>9A$;> AG;>$G; BGJG$>A
;FF;4;FFA J9AA$FG ;JDB$9J >;DJ$J=
ANALYSIS# (his indicates the *urrent assets o&er and abo&e the current liabilities in
absolute fi#ures$ +an"s rely hea&ily on this measure for arri&in# !or"in# capital limits
by ta"in# into account the !or"in# capital #ap L*A K *L other than +an" borro!in#s:
and the difference bet!een the minimum stipulated net !or"in# capita L!hich is a#ain
;>? of !or"in# capital #ap:$ In case of VEL the !or"in# capital re8uirement is
Rs$;>$;= crore for the year ;FF;4FA based on the abo&e method$
LEVERAGE RATIO#
LEVERA1E RA(IO. ARE (2O (/5E.<
A: (hese calculated from +alance .heet items to determine the proportion of debt in
total financin#$
+: (hose calculated profit and loss account to determine the eEtent to !hich
operatin# profit are sufficient to co&er the fiEed char#es$
+oth these types indicate the eEtent to !hich the company has relied on debt funds in
financin# assets$
FINANCIAL LEVERAGE RATIOS#
Li8uidity ratios deals !ith short4term financial position, on the other hand, le&era#e
ratios operate !ith the lon#4term obli#ations of the firm$ (hese ratios indicates the
funds pro&ided by o!ners and creditors$ As a #eneral rule these should be an
Pappropriate miEI of debt and o!ners e8uity in financin# the firm assets$ In fact, the
aspect has a number of implications$

a$ +et!een debt and e8uity, debt is more ris"y from the companies point of &ie!, as
it has #ot the le#al obli#ation to pay in&estment on debt irrespecti&e of the
performance of the firm$
b$ Employment of debt is ad&anta#eous to shareholders in t!o !ays$
9$ (hey can retain control the company !ith the limited stoc"$
;$ (heir earnin#s !ill be ma#nified, !hen the firm earns a rate hi#her than the
interest rate on the in&ested fund$
DEBT E4UITY RATIO#
(he e8uity ratio is the measure the relati&e claims of creditors and o!ners a#ainst the
firmIs assets$ (his ratio is calculated by di&idin# the lon#4term by shareholders e8uity$
%ebt4 E8uity ratio S Lon# term debts
.hareholders e8uity
In the year 9==J4== debt e8uity ratio A$A9
Remainin# years the debt K e8uity ratio position is sho!n in table B$
A hi#hly debt financed company suffers #reat strains$ It can sufficient profits e&en to
pay the interest char#es of creditors$ (o meet their !or"in# capital needs, also the
funds difficulty to #et credit$ It may ha&e to borro! on hi#hly unfa&ourable terms$
A lo! debt e8uity ratio implies a #reater claim of o!ners than creditors, from the point
of &ie! creditors, it represents a satisfactory capital structure durin# the periods of
lo! profits, the debt ser&icin# !ill pro&e to be less burden some for a company !ith
lo! debt4e8uity ratio$ (hus there is a need to stri"e proper balance bet!een the uses of
debt and e8uity $ (he most appropriate debt e8uity combination !ould in&ol&e a trade4
off return and ris"$

TABLE# .
%E+( E6)I(/ RA(IO OR %E+( (O 'E( 2OR(H O- VI,AI ELE*(RI*AL.
LI0I(E%
LRs$ In La"hs:
/ear (otal .hare holders Ratio
%ebts fund
9==J49=== AAJD$A= 9F;;$JB A$A9
9===4;FFF AB;G$>; 9F9J$BD A$AG
;FFF4;FF9 >FD=$FD 9;AD$>J B$9F
;FF94;FF9 B9A;$>; ;;;J$FJ 9$J>
;FF;4;FFA ;>DA$DA A>JF$G= F$G;
ANALYSIS#
(his ratio #i&es the details of ho! much debt is employed by a firm in relation to its
'et !orth$ (his is also "no!n as le&era#e$ 'ormally a ratio of ;<9 is considered
acceptable$ +ut in capital intensi&e industries it may #o to as hi#h as B<9$ (he financial
ris" of a firm depends on this ratio to a lar#e eEtent$ .ince debt and interest on debt
ha&e to be ser&iced irrespecti&e of the firmIs profitability, the ris" is fiEed$ On the other
hand !hen the firm is doin# #ood, on account of only fiEed outflo! for ser&icin#
interest the profits can be distributed as per the eEpectations of the shareholders$ In the
case of VEL this ratio has come do!n to F$G; in ;FF;4FA from A$A9 in 9==J4==$ It has
increased in the year ;FFF4F9 durin# !hich the company has sou#ht additional
financin#$ (he present ratio indicates an eEcellent debt to net !orth ratio, indicatin#
that the company has been re#ular in ser&icin# its debt$
TOTAL DEBT TO TOTAL ASSETS RATIO#
(he ratio of total assets, #enerally called the P%ebt ratioI measures the percenta#e total
funds pro&ide by creditors$ %ebt includes current liabilities and all creditors prefer
moderate debt ratios since the lo!er the ratios, the #reater the cushion a#ainst creditors
losses inj the e&ent of li8uidation$ In contrast to the creditors preference for lo! debt
ratios, the o!ners may see" hi#h le&era#e either 9,to ma#nify earnin#s or ;, because
raisin# ne! e8uity means #i&in# up some de#ree of control$ It the debt ratio is too
hi#h, there is a de#ree of encoura#in# irresponsibility on the part of the o!ners$ (he
sta"e of the o!ners can become so small that speculati&e acti&ity, if it is successful,
!ill yield substantial return to the o!ners$ If the &enture is unsuccessful, ho!e&er,
only a concrete loss is incurred by the o!ners because their in&estment is small$
%ebt ratio can be measured by<

(otal debt to total assets ratio S (otal %ebt
(otal Assets
In the year 9==J4== the debt ratio is< F$=A
Remainin# years the debt ratio is sho!n in table >$
TABLE /#
DEBT RATIO OF VIJAI ELECTRICALS LIMITED
LRs$ In la"hs:
/ear (otal %ebt (otal Assets Ratio
9==J49=== JB>=$9G =F>;$JD F$=A
9===4;FFF GG;;$;9 JF>B$GG F$=D
;FFF4;FF9 GG>D$B> JGDD$=9 F$JJ
;FF94;FF; JFGF$JG =9GJ$D= F$JJ
;FF;4;FFA D=;>$>A =>AA$AB F$GA
ANALYSIS#
(his ratio is a measure of total debt to total assets of a firm$ -or calculation of the
abo&e ratio, total debt includes all the lon# term and short term creditors and total
assets includes fiEed and current assets and in&estments$ In the case of VEL this ratio
is al!ays less than 9$ (his indicates that the total assets of VEL are al!ays more than
the total debt, !hich is a #ood si#n$
INTEREST COVERAGE RATIO#
(he Interest *o&era#e Ratio or the times4interest4earned is one of the most
con&entional co&era#e ratios used to test the firmIs debt4ser&icin# capacity$ (he
Interest *o&era#e ratio sho!s the 'o$ of times the interest char#es are co&ered by
funds that are ordinarily a&ailable for their payment$ .ince taEes are computed after
interest, interest co&era#e is calculated in relation to before taE earnin#s$
It should be noted that this ratio uses the concept of net profit before times, because
interest is taE K deductible, so that as is calculated after payin# interest on lon# Kterm
loan$ (his ratio, as the name su##ests sho!s ho! many times the interest char#es are
co&ered by the E+I( out of !hich they !ill be paid$
(he Interest *o&era#e Ratio is compurted by di&idin# earnin#s before taEes and
interest LE+I by interest char#es<

Interest *o&era#e S E+I(
Interest
In the year 9==J4== Interest co&era#e of Vijai Electricals !as< 4F$9>
Remainin# years are sho!s in table$
INTEREST COVERAGE RATIO#
TABLE# 0
Rs$ Lacs
/ear E+I( Interest Ratio
9==J49=== 49GB9$;9 99AD$FD 4F$9>
9===4;FFF 4GG;;$;9 =9J$FA F$G=
;FFF4;FF9 9;GD$9; J9G$9G 9$>D
;FF94;FF; ;;A;$>A JF9$;A ;$G=
;FF;4;FFA B$BG
ANALYSIS#
(he co&era#e Ratio is calculated to "no! the firmIs debt ser&icin# capacity$ (his ratio
is also co&ered as time interest earned$
(his ratio indicates the eEtent to !hich the earnin#s may fall !ithout causin# any
default !ith re#ard to the payment of the interest char#es$ A hi#h ratio is desirable but
too hi#h ratio indicates that the firm is &ery conser&ati&e in usin# debt, and that it is
not usin# credit to the best ad&anta#e of shareholders$ A lo!er ratio indicates eEcessi&e
use of debt, or inefficient operations$
One of the limitations of the interest co&era#e ratio is that it does not consider
repayment of loan$
In the case of VEL this ratio has increased from a 4F$9> in 9==J4== to B$BG in ;FF;4FA,
!hich indicates a #reat impro&ement in the financial condition of the company$
ACTIVITY RATIO#
(he funds of o!ners and creditors are in&ests in &arious "ind of assets to #enerate
operatin# income and profits$ Acti&ity Ratio are employed to e&aluate the efficiency
!ith company mana#es and utilises its assets$ (hese ratios are also called turno&er
ratios, because they indicates the speed !ith !hich assets are bein# con&erted to
turno&er into operational income L.ales:, Acti&ity Ratios, thus, in&ol&e a relationship
bet!een operatin# income and assets #enerally reflects that assets are mana#ed !ell$
.e&eral acti&ity ratios can be calculated to jud#e the effecti&eness of asset utilisation$
INVENTORY 6STOC'1 TURNOVER RATIO#
In&entory turno&er ratio indicates the efficiency of the firm in sellin# its product$ (his
ratio, it may be recalled, indicates the 'o$ of times in&entory is replaced durin# the
year$ It measure the relationship bet!een the cost of #oods sold and the in&entory
le&el$ (he ratio can computed in t!o !ays$
-irst, it is calculated by di&idin# the cost of #oods sold by the a&era#e in&entory
Lstoc":$
.ymbolically,
I$9!$*ory Tur$o9!r Ra*io = Co"* o2 8oo%" "o3%
A9!ra8! I$9!$*ory
Co"* o2 8oo%" "o3% = Sa3!" – Gro"" Pro2i*
A9!ra8! I$9!$*ory = O)!$i$8 "*o7 > C3o"i$8 S*o7
,
In the year 9==J4== In&entory turno&er Ratio of Vijai Electricals !as
Remainin# years are sho!n in table
.econd approach to the computation of in&entory turn o&er ratio is based on the
relationship bet!een sales and closin# in&entory, i$e,$ in&entory at the end of the year$
(hus alternati&ely,

I$9!$*ory *ur$o9!r ra*io = "a3!"?3o"i$8 I$9!$*ory

In theory, this approach is not a satisfactory basis at it is not lo#ical$ -or one thin#, the
numerator L.ales: and the denominator Lin&entory: are not strictly comparable as based
on cost$ .econdly, the in&entory fi#ures are li"ely to be under K estimates as firms
traditionally ha&e lo!er in&entory at the end of the year$ (he net effect !ill be that the
ratio #i&en by this approach !ill be hi#her than the are #i&en by the first approach$
In brief, of the t!o approaches to calculatin# the in&entory ratio, the first !hich relates
the cost of #oods sold to the a&era#e in&entory is theoretically superior as it is lo#ically
consistent$ (he merit of the second approach is that it is free from practical problem of
computation$
INVENTORY TURNOVER RATIO#
TABLE @
Rs$ Lacs
/ears *ost of A&era#e Ratio
1oods sold In&entory
9==J49=== 4JGJ$;9 ;9BA$>F 4F$B9
9===4;FFF =>A$>A 9BB9$J> F$FG
;FFF4;FF9 DJ9$9= 9>>F$DF F$BB
;FF94;FF; 9GB;$BA 9FJ=$G> F$=>
;FF;4;FFA BDJ9$GG ;;;G$D9 ;$9F
ANALYSIS#
In #eneral, a hi#her in&entory turno&er ratio is better than a lo! ratio$ A hi#h implies
#ood in&entory mana#ement$ /et a &ery hi#h ratio calls for a careful analysis$ It is
indicati&e of under K in&estment in, or &ery lo! le&el of in&entory$
.imilarly, a &ery lo! in&entory turno&er ratio is dan#erous$ Lo! le&el of in&entory has
serious implications$ It !ill ad&ersely affect the ability of a firm to meet customer
demand as it may not cope !ith its re8uirements$
-or VEL, this ratio has impro&ed si#nificantly durin# the last fi&e years$
DEBTORS TURNOVER RATIO#
A firm contracts !ith customers on credit and cash basis$ 2hen the firm eEtends
creditors its customer, boo" debts are created in the firms accounts$ %ebtors are
eEpected to be con&erted into cash o&er a short period and therefore, are included in
current assets$ (he li8uidity position of the firm depends on the 8uality of debtors to a
#reat eEtent$ -inancial analysis employ t!o ratios to jud#e the 8uality or li8uidity
debtors$

%ebtors turno&er S *redit .ales
A&era#e debtors
1enerally, the hi#her &alue of debtors turno&er, the more efficient is the mana#ement is
the mana#ement of assets$
.ome times information about *redit .ales and openin# and closin# balances of
debtors may not be a&ailable and in the ser&ice or#anisation all contracts are happened
on the credit only$ .o that, that the debtors turno&er can be calculated utilisin# total
sales and endin# balance of debtors$
%ebtors turno&er S (otal operatin# income
%ebtors
In the year 9==J4== %ebtors turno&er ratio !as ;$>;
Remainin# years the debtors turno&er ratio positions is sho!n in table$

DEBTOR TURNOVER RATIO
TABLE # A
Rs$ Lacs
/ear .ales %ebtors Ratio
9==J49=== DDAG$9F ;DAD$>> ;$>;
9===4;FFF G9JG$>D ;AB;$DD A$FG
;FFF4;FF9 9FA>F$G9 ;9J>$AA B$GB
;FF94;FF; 9;JGF$J= >D=A$=9 ;$;D
;FF;4;FFA 9=FG=$9; AA=9$=9 >$D;
ANALYSIS#
(he hi#her the %ebtors (urno&er Ratio is the better the trade credit mana#ement and
the better the li8uidity of debtors$ Hi#her %ebtor (urno&er Ratio implies prompt
payment on the part of debtors$ On the other hand, lo! turno&er ratio reflects that
payments by debtors are delayed$
In #eneral, therefore hi#h turno&er ratio is preferable$ In the year 9==J4== %ebtors
turno&er ratio !as ;$>; times, !hich has impro&ed to>$D; in ;FF;4FA$
AVERAGE COLLECTION PERIOD RATIO#
It brin#s out the nature of the firmIs credit policy and the 8uality of debtors more
clearly$ (his ratio calculated as follo!s<
A&era#e collection period S 0onths in year
%ebtors turno&er
In the year 9==J4== a&era#e collection period !as 9BB$== days$
Remainin# years the a&era#e collection period is sho!n in table<
(he a&era#e collection period presents the a&era#e 'o$ of months for !hich the firm
must !ait after ma"in# a contractor before collectin# cash from the customer$ (he
a&era#e collection period should be compared a#ainst the firms credit terms and policy
to jud#e its credit and collection performance on the other hand too la! a collection
period indicates a &ery restricti&e and collection policy$
AVERAGE COLLECTION PERIOD OF VIJAI ELECTRICALS LIMITED
TABLE # B
Rs$ Lacs
/ear %ays in %ebtors Ratio
/ear (urno&er L%ays:
9==J49=== AD> ;$>; 9BB$==
9===4;FFF AD> A$FG 99J$=G
;FFF4;FF9 AD> B$GB GG$FD
;FF94;FF; AD> ;$;D 9D9$BG
;FF;4;FFA AD> >$D; DB$J=
ANALYSIS#

A&era#e *ollection 5eriod implies ho! many days that a company has to !ait for cash
after ma"in# a contract$
(he hi#her debtor turno&er ratio and the shorter the a&era#e collection period, the
better the trade credit mana#ement, the better the li8uidity of debtors, as short
collection period and hi#h debtor turno&er ratio imply prompt payment on the part of
debtors$ On the other hand lo! debtor turno&er ratio and lon# collection period
reflects that payments by debtors are delayed$ In #eneral, short collection period
reflects that payments by debtors are delayed$ In #eneral, short collection period
Lhi#her turno&er ratio: is preferable$
In the years 9==J4== and ;FF94F; this is &ery hi#h at 9B> and 9D9 days respecti&ely$ It
has come do!n to D> days in the year ;FF;4FA$
FICED ASSETS TURNOVER RATIO#
(he fiEed assets turno&er ratio measure the efficiency !ith !hich the firm is utilisin#
its in&estment in fiEed assets$
-iEed Assets (urno&er Ratio S RRRRR.alesRRRR
'et -iEed Assets
In the year 9==J4== the -iEed Assets (urno&er !as 9$A9
Remainin# years the fiEed assets turno&er ratio is sho!n in table$
(he firm fiEed assets turno&er ratio is sho!n in table$ 2ith past and future ratios and
also ratios of similar firms and the industries a&era#e, #enerally a hi#her -$A$( Ratio,
the more efficient utilisation of -iEed Assets$
FICED ASSETS TURNOVER RATIO
TABLE +D
Rs$ Lacs
/ear .ales -iEed Assets Ratio
9==J49=== DDAG$9F >FDJ$AD 9$A9
9===4;FFF G9JG$>D >99F$F= 9$B9
;FFF4;FF9 9FA>F$G9 >BFD$9A 9$=9
;FF94;FF; 9;JGF$J= >>FB$J9 ;$AB
;FF;4;FFA 9=FG=$9; >J=B$A> A$;B
ANALYSIS#
(his ratio indicates the relationship bet!een sales and fiEed assets$ A hi#her ratio
normally indicates better utilisation of assets$ In the case of VEL this ratio has been
steadily impro&in# from the year 9==J4== on!ards and it has impro&ed from 9$A9 to
A$;B$
In operational terms, it implies that the firm can eEpand its acti&ity le&el Lin terms of
production and sales: !ithout increasin# capital in&estments$ (he company is utiliCin#
the fiEed assets in an optimal manner$
TOTAL ASSETS TURNOVER RATIO #
Althou#h fiEed assets are directly concerned !ith the #eneration of operatin# income,
but other assets also constitute to the production and ser&ices Lsales: acti&ity of the
firm$ (he firm must mana#e is total assets efficiently and should #enerate maEimum
sales throu#h their proper utilisation $
(otal Assets Ratio is computed by<

(otal Assets (urno&er Ratio S RRRRR.alesRRRR
(otal Assets
In the year 9==J4== it !as F$GF
TOTAL ASSETS TURNOVER RATIO#
TABLE ++#
Rs$ Lacs
/ear .ales (otal Assets Ratio
9==J49=== DDAG$9F =BJ;$F; F$GF
9===4;FFF G9JG$>G JGBF$DJ F$J;
;FFF4;FF9 9FA>F$G9 J==A$FB 9$9>
;FF94;FF; 9;JGF$J= 9F;=J$=G 9$;B
;FF;4;FFA 9=FG=$9; 9F>FD$A; 9$J;
TOTAL ASSETS TURNOVER RATIO ANALYSIS#
(he main understandin# in calculatin# this ratio is current assets !ill also contribute
alon# !ith fiEed assets for profitability of the company$ (he hi#her total assets
turno&er ratio is the most efficient measure in terms of utilisation of assets$ Lo! total
assets turno&er ratio indicates the presence of idle capacity$ In the case of VEL this
ratio has been impro&in# steadily and it has mo&ed from F$GF to 9$J;$
PROFITABILITY RATIOS#
A company should earn profits to sur&ice and #ro! o&er a lon# period of time$ 5rofits
are essential, but it !ould be !ron# to assure that e&ery action initiated by
mana#ement of a company should be aimed at maEimisin# profits irrespecti&e of
social conse8uences$ It is unfortunate that the !ord Pprofit is loo"ed upon as a term of
nabuse since some firms al!ays !ant to maEimise profits at the cost of employees,
customers and society$
5rofit is the difference bet!een re&enues and eEpences o&er a period of time$ (he
profitability ratios are calculated to measure the operatin# efficiency of the company$
+esides mana#ement of the company, creditors and o!ners are also interest and
repayment of principal re#ularly$ O!ners !ant to #et a reasonable return on their
in&estment$ (his is possible !hen the company earn enou#h profits$

1enerally, t!o major types of profitability ratios are calculated$
9$ 5rofitability in relation to sales$
;$ 5rofitability in relation to in&estment$
MEASURE OF PROFIT#
5rofit can be measure in &arious !ays$ 1ross 5rofit L1$5: is the difference bet!een
sales and the manufacturin# cost of #oods sold$ (he most common measure of profit is
profit after taEes L5A or net income L'I: !hich is result of the impact of all factors
on the firmIs earnin#s$ (aEes are not controllable by mana#ement$
GROSS PROFIT MARGIN#
(he firmIs profitability ratio in relation to sales iis the #ross profit mar#in$ Lor simply
#ross mar#in:$ It is calculated by di&idin# the #ross profit by sales$
1ross 5rofit 0ar#in S .ales K *ost of #oods< T 9FF
.ales
S 1ross 5rofit T9FF
.ales
In the year 9==J4== the #ross ratio !as< KF$FB
Remainin# years ratios are should in the table <
(he 1ross 5rofit 0ar#in reflects the efficiency !ith !hich mana#ement produces each
unit of product$ (his ratio indicates the a&era#e spread bet!een the cost off #oods sold
and sales re&enue$ 2hen !e substract the #ross profit mar#in from 9FF? !e obtain
the ratio of cost of #oods sold to sales$ +oth these ratios sho! profits relati&e to sales
after the deduction of production costs and sellin# price$
GROSS PROFITRATIOS#
TABLE +,#
Rs$ Lacs
/ear 1ross 5rofit .ales Ratio
9==J49=== 4JGJ$;9 DDAG$9F 4F$9A
9===4;FFF =>$9> G9JG$>D F$F9
;FFF4;FF9 DJ9$9= 9FA>F$G9 F$FG
;FF94;FF; 9GB;$BA 9;JGF$J= F$9B
;FF;4;FFA BDJ9$GG 9=FG=$9; F$;>
GROSS PROFIT RATIO ANALYSIS#
A hi#h #ross profit mar#in ratio is a si#n of #ood mana#ement$ A #ross profit mar#in
ratio may increase due to any of the follo!in# factors<
9$ Hi#her .ales price, cost of #oods sold remainin# contrast$
;$ Lo!er cost of #oods sold, sales price remainin# constant$
A$ A combination of &ariations in sales prices and cost, the mar#in !idenin# and
B$ And increase in the proportionate &olume of hi#her mar#in items$ (he analysis
of these factors !ill re&eal to the mana#ement ho! a depressed #ross profit
mar#in can be impro&ed$
A lo! #ross profit mar#in may reflects hi#hest cost of #oods sold due to the firmIs
inability to purchase at fa&ourable items, inefficient utilisation of plant and machinery ,
resultin# in hi#her cost of production$
(he financial mana#er must be able to detect the causes of fallin# #ross mar#in and
initiate action to impro&e the situation$
VI,AI ELE*(RI*AL. LI0I(E% Ldurin# the > years: has sho!n a &ery #ood
impro&ement in this aspect$ (his ratio has chan#ed from a ne#ati&e of KF$9> to ;>?
!hich sho!s an outstandin# impro&ement$
NET PROFIT MARGIN#
'et profit mar#in ratio establishes a relationship bet!een jthe net profit and sales$ It is
indicates mana#ement efficiency in manufacturin# administratin# and sellin# the
products$ (his ratio is the o&erall measure of the firmIs to turn each rupee sales into net
profit$ If the net profit is inade8uate, the firm !ill fail to achie&e satisfactory return on
o!nerIs e8uity$
(he ratio also indicates the firmIs capacity to !ithstand ad&erse economic conditions$

'et profit is obtained !hen operatin# eEpenses, interest and taEes are subtracted from
the #ross profit$
(he net profit mar#in is measured by di&idin# profit after taE by sales$

'et 5rofit 0ar#in S 5rofit after taE T9FF
.ales
In the year 9==J4== 'et 5rofit 0ar#in !as< 49=$GB
Remainin# years are sho!n in the table<
NET PROFIT RATIO#
(A+LE 9A
Rs$ in Lacs
/ear 'et 5rofit .ales Ratio
9==J49=== 49A9F$9J DDAG$9F 49=$GB
9===4;FFF 4B9B$>F G9JG$>D 4F$FD
;FFF4;FF9 BBG$=> 9F>DA$>F F$FB
;FF94;FF; 9ABG$=9 9;JGF$J= 9F$BG
;FF;4;FFA ;9=J$;J 9=FG=$9; 99$>;
NET PROFIT MARGIN RATIO ANALYSIS#
A firm !ith a hi#h net mar#in ratio !ould be in an ad&anta#eous position to sur&i&e in
the face of fallin# sales price, risin# costs of production or declinin# demand for the
production$ It !ould really be difficult for a lo! net mar#in firm to !ithstand these
ad&ersities$ .imilarly, a firm !ith hi#h net mar#in can ma"e better use of fa&ourable
conditions such as demand for the production$ .uch a firm !ill be able to accelerate its
profits at a faster rate than a firm !ith a lo! net profit mar#in$
In V$E Ldurin# the > years: this ratio has chan#ed from KF$9= to 99$>;$ Alon# !ith 15
0ar#in the '5 0ar#in of the company has also sho!n si#nificant impro&ement$
CHAPTER –VI
A1 SUMMARY
B1 FINDINGS E SUGGESTIONS
BIBLIOGRAPHY
SUMMARY
(ransformer industry has been in eEistence in India for the past one century$ (he
public sector #aint +HEL used has been a leadin# player in the industry in post
independence era$ .ince 9=GFs the pri&ate sector industries ha&e made #reat strides and
made their presence felt$
VEL since establishment in the year 9=GA has made leaps and bounds and today has
#ro!n into one of the most sophisticated and 8uality conscious companies in the field
of transformer manufacturin# in India as !ell as Asia$ (oday it has !ell inte#rated
facilities for the manufacture of transformers from >"&a ratin# to 9FFFF 0VA$ (he
companyIs en&iable achie&ement in terms of sales, profitability and mar"et is due to its
steadfast commitment to 8uality e&en durin# tou#h times$ (he company has fully
inte#rated facilities due to the bac"!ard inte#ration projects underta"en by the
company durin# the last one decade$
%ue to the inte#ration projects the company could cut do!n on costs !ithout
compromisin# on 8uality$ (he 1ross 5rofit mar#in of nearly ;>? is one of the &isible
parameters of this achie&ement$
FINDINGS
9$ (he performance of the company has been &ery #ood since
the past three years$ It
has turned the corner from bein# a loss ma"in# unit for three years to a hi#hly
profit ma"in# concern$
;$ (he *urrent Ratio of the company is &ery hi#h due to hi#h recei&ables and
in&entory, !hich is due to the nature of business$ (he 6uic" ratio is !ell abo&e the
9<9 le&el due to hi#h recei&ables$
A$ (he 'et 2or"in# *apital has also been increasin# steadily and it reached a le&el o
of Rs$>A crore$
B$ (he debt e8uity ratio has been decreasin# steadily eEcept for the year ;FFF4F9
durin# !hich it has procured additional loans$ (he present le&el of F$G; is &ery
#ood for this type of industry$
>$ (he Interest co&era#e ratio has also impro&ed steadily and itIs B$BG !hich
indicates a &ery comfortable position$
D$ In&entory turno&er ratio !hich indicates the efficient utilisation of in&entory has
increased steadily o&er the past fi&e years$
G$ (he %ebtors (urno&er Ratio and the a&era#e collection period ratio ha&e sho!n
steady impro&ement indicatin# an impro&ed cashflo! position$
J$ (he fiEed assets turno&er ratio has also sho!n #ood impro&ement o&er the past
fi&e years$ (he current le&el of A$;B is &ery #ood #i&en the le&el of assets of the
company$
=$ (he 1ross 5rofit and 'et 5rofit mar#in ha&e increased si#nificantly durin# the last
three years #i&en the losses durin# the years 9=== 7 ;FFF$ .ince ;FF9 the
impro&ement has been &ery #ood$
BIBLIOGRAPHY
Nam! o2 *(! Boo7 Au*(or
9$ -I'A'*IAL 0A'A1E0E'( I$0$5A'%E/
;$ -I'A'*IAL 0A'A1E0E'( 5RA.A''A *HA'%RA
A$ -I'A'*IAL 0A'A1E0E'( 0$/$3HA' 7 5$3$,AI'
B$ +).I'E..< (HE )L(I0A(E RE.O)R*E +LOO0.+)R/
5)+LI*A(IO'

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