Working Capital

A STUDY ON WORKING CAPITAL MANAGEMENT IN NERO AIR FILTER
CORPORTATION LIMITED AT COIMBA
INTRODUCTION:
Working capital management is concerned with the problems arise in attempting to manage the current
assets, the current liabilities and the inter relationship that exist between them. The term current assets refers
to those assets which in ordinary course of business can be, or, will be, turned in to cash within one year
without undergoing a diminution in value and without disrupting the operation of the firm. The major
current assets are cash, marketable securities, account receivable and inventory. Current liabilities ware
those liabilities which intended at their inception to be paid in ordinary course of business, within a year, out
of the current assets or earnings of the concern. The basic current liabilities are account payable, bill
payable, bank over-draft, and outstanding expenses.
The goal of working capital management is to manage the firm’s current assets and current liabilities in such
way that the satisfactory level of working capital is mentioned. The current should be large enough to cover
its current liabilities in order to ensure a reasonable margin of the safety.
A managerial accounting strategy focusing on maintaining efficient levels of both components of working
capital, current assets and current liabilities, in respect to each other. Working capital management ensures a
company has sufficient cash flow in order to meet its short-term debt obligations and operating expenses.
Definition:
According to Guttmann & Dougall-
“Excess of current assets over current liabilities”.
According to Park & Gladson-

“The excess of current assets of a business (i.e. cash, accounts receivables, inventories) over current items
owned to employees and others (such as salaries & wages payable, accounts payable, taxes owned to
government)”.
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NEED OF WORKING CAPITAL MANAGEMENT
The need for working capital gross or current assets cannot be over emphasized. As already observed, the
objective of financial decision making is to maximize the shareholders wealth. To achieve this, it is
necessary to generate sufficient profits can be earned will naturally depend upon the magnitude of the sales
among other things but sales can not convert into cash. There is a need for working capital in the form of
current assets to deal with the problem arising out of lack of immediate realization of cash against goods
sold. Therefore sufficient working capital is necessary to sustain sales activity. Technically this is refers to
operating or cash cycle. If the company has certain amount of cash, it will be required for purchasing the
raw material may be available on credit basis. Then the company has to spend some amount for labour and
factory overhead to convert the raw material in work in progress, and ultimately finished goods. These
finished goods convert in to sales on credit basis in the form of sundry debtors. Sundry debtors are
converting into cash after expiry of credit period.
Thus, some amount of cash is blocked in raw materials, WIP, finished goods, and sundry debtors and day to
day cash requirements. However some part of current assets may be financed by the current liabilities also.
The amount required to be invested in this current assets is always higher than the funds available from
current liabilities. This is the precise reason why the needs for working capital arise.
CONCEPT OF WORKING CAPITAL MANAGEMENT
There are two concepts of working capital management

1. Gross working capital
According to this concept, the total assets are termed as the gross working capital. It is also known as
quantitative or circulating capital. Total current assets include, cash, marketable securities, account
receivables, inventory, prepaid expense, advance payment of tax, etc. To quote Weston and Brigham, “Gross
working capital refers to firm’s investment in short term assets such as cash, short term securities, accounts
receivable and inventories.” This concept helps in making optimum investment in current assets and their
financing. According to Walker, “Use of this concept is helpful in providing for the current amount of
working capital at the right time so that the firms are able to realize the greatest return on investment.
2. Net working capital
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Net working capital refers to the difference between current assets and current liabilities. Current liabilities
are those claims of outsiders which are expected to mature for payment within an accounting year and
include creditors, bills payable and outstanding expenses. Net working capital can be positive or negative
Efficient working capital management requires that firms should operate with some amount of net working
capital, the exact amount varying from firm to firm and depending, among other things; on the nature of
industries.net working capital is necessary because the cash outflows and inflows do not coincide. The cash
outflows resulting from payment of current liabilities are relatively predictable. The cash inflow are however
difficult to predict. The more predictable the cash inflows are, the less net working capital will be required.
The concept of working capital was, first evolved by Karl Marx. Marx used the term ‘variable capital’
means outlays for payrolls advanced to workers before the completion of work. He compared this with
‘constant capital’ which according to him is nothing but ‘dead labour’. This ‘variable capital’ is nothing
wage fund which remains blocked in terms of financial management, in work-in- process along with other
operating expenses until it is released through sale of finished goods. Although Marx did not mentioned that
workers also gave credit to the firm by accepting periodical payment of wages which funded a portioned of
W.I.P, the concept of working capital, as we understand today was embedded in his ‘variable capital’.
TYPES OF WORKING CAPITAL
The operating cycle creates the need for current assets (working capital). However the need does not come
to an end after the cycle is completed to explain this continuing need of current assets a destination should
be drawn between permanent and temporary working capital.
Working Capital
Permanent Working Variable Working

Capital Capital
Initial Regular Seasonal Special

W.C. W.C. W.C. W.C.
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1. Permanent working capital
The permanent working capital refers to that part of the working capital which is necessary for maintaining
stock of raw material and finished goods at their normal level and for paying wages and salaries regularly. It
is minimum amount of current assets which is needed for the smooth running of business. In other words,
permanent working capital is that which is permanently locked up in current assets. Permanent working
capital is off two kinds: A. Initial working capital and B. Regular working capital
A. Initial working capital

In the initial period of its operation, a company must have enough money to pay certain expenses. This
amount will have to be supplied the owners themselves, because in the initial years, credit facilities may not
be available from creditors, bank do not grant loans or overdrafts and credit-sales will have to be made.
B. Regular working capital

It is the working capital required to continue the regular business operations. It is required for maintaining
regular stock of finished goods to meet the customers demands, to pay regular business expenses etc.
Regular working capital is the excess of current assets over current liabilities. This part of the working
capital needed for smooth operations of the business.
Temporary W.C.
W.C
.
Permanent W.C.
Time
2. Temporary working capital
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It is the part of the working capital which is needed to meet the seasonal demands and special needs. This is
called variable working capital because its amount varies according to the extent of extra demand. Variable
working capital is of two types A. Seasonal working capital and B. Special working capital.
A. Seasonal working capital

Some business enterprises require a larger amount of current assets during a particular season. For instance
sugar mills have to purchase sugarcane and employ more people to process it during a particular season.
B. Special working capital
In any business enterprise some unforeseen events take place when extra funds are needed to meet with the
situation. E.g. during depression prices and sales decline considerably which necessitates extra working
funds. During inflationary conditions, prices of raw material and finished goods up, hence extra money is
needed to maintain the same level of stock. Unforeseen contingencies like strikes and lockouts fire and
looting, etc. also force the management to provide for extra funds.
IMPORTANCE OF WORKING CAPITAL MANAGEMENT
Working capital is considered as central nervous system of a firm. The importance of working capital
management is reflected in the time most spent by financial managers in managing current assets and current
liabilities. Maintenance of adequate working capital is necessary in order to discharge day to day liabilities
and protect the business from adverse effects in times of emergencies. It aims at protecting the purchasing
power of assets and maximizes the return on investment.
The goal of working capital management is to minimize the cost of working capital while maximizing a
firm’s profit. The working capital management is concerned with determination of relevant levels of current
assets and their efficient use as well as the choice of financial mix. The efficiency of a firm to earn profits
depends largely on its ability to manage working capital. In other words, working capital management
policies have a crucial effect on firm’s liquidity and profitability. Hence, working capital has to be
effectively planned, systematically controlled and optimally utilized.
DETERMINATION OF WORKING CAPITAL
1. Nature of business
Some businesses are such, due to their very nature, that their requirement of fixed capital is more rather than
working capital. These businesses sell services and not the commodities and that too on cash basis. As such,
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no founds are blocked in piling inventories and also no funds are blocked in receivables. E.g. public utility
services like railways, infrastructure oriented project etc. there requirement of working capital is less. On the
other hand, there are some businesses like trading activity, where requirement of fixed capital is less but
more money is blocked in inventories and debtors.
2. Length of production cycle

In some business like machine tools industry, the time gap between the acquisition of raw material till the
end of final production of finished products itself is quit high. As such amount may be blocked either in raw
material or work in progress or finished goods or even in debtors. Naturally there need of working capital is
high.
3. Size and growth of business
In very small company the working capital requirement is quit high due to high overhead, higher buying and
selling cost etc. as such medium size business positively has edge over the small companies. But if the
business start growing after certain limit, the working capital requirements may adversely affect by the
increasing size.
4. Business/ Trade cycle
If the company is the operating in the time of boom, the working capital requirement may be more as the
company may like to buy more raw material, may increase the production and sales to take the benefit of
favorable market, due to increase in the sales, there may more and more amount of funds blocked in stock
and debtors etc. similarly in the case of depressions also, working capital may be high as the sales terms of
value and quantity may be reducing, there may be unnecessary piling up of stack without getting sold, the
receivable may not be recovered in time etc.
5. Terms of purchase and sales

Some time due to competition or custom, it may be necessary for the company to extend more and more
credit to customers, as result which more and more amount is locked up in debtors or bills receivables which
increase the working capital requirement. On the other hand, in the case of purchase, if the credit is offered
by suppliers of goods and services, a part of working capital requirement may be financed by them, but it is
necessary to purchase on cash basis, the working capital requirement will be higher.
6. Stock Turnover
By turnover is meant the ratio of sales to average stock held in business. The greater the turnover, the larger
the volume of business that can be conducted with a given working capital. In other words, if the turnover is
rapid, burden of working capital is not heavy.
7. Profitability
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The profitability of the business may be vary in each and every individual case, which is in turn its depend
on numerous factors, but high profitability will positively reduce the strain on working capital requirement
of the company, because the profits to the extend that they earned in cash may be used to meet the working
capital requirement of the company.
8. Attitude of Management
If the attitude of the management is aggressive and they are primarily risk-takers, the need for working
capital is reduced.
9. Operating efficiency
If the business is carried on more efficiently, it can operate in profits which may reduce the strain on
working capital; it may ensure proper utilization of existing resources by eliminating the waste and
improved coordination etc.
SOURCES OF WORKING CAPITAL
The main sources of working capital are as under:
1. Shares and Debentures

2. Retained Earnings
3. Commercial Banks
a. Loans
b. Bank Overdraft
c. Cash Credit
4. Commercial Paper
5. Certificate of Deposit
6. Commercial Bills Market
7. Factoring
8. Trade Creditor or Trade Creditors
9. Public Deposits
10. Indigenous Bankers and Money Lenders
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WORKING CAPITAL COMPONENTS
Mainly three components of working capital management
1. Receivables Management
2. Inventory Management
3. Cash Management
Above three has equal importance to manage or handle working capital of any firm. Now we discuss detail
of above three components.
OBJECTIVES OF THE STUDY
 To find whether the company maintains minimum investment in inventory organized the
profitability.
 To know whether the company maintain a large size of inventory for efficient and smooth
production and sales operations.
 To know how the company maintains its credit policy.
 To point out how well the company manage its cash.
 To find whether there is proper match between current assets and current liabilities.
 To know the ways and means of financing working capital Management
 Suggestions for the working capital management.
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SCOPE OF THE STUDY
The scope of the present study on composes within its fold a theoretical frame work of working
capital management. In general, analysis of working capital trends, relationship of working capital to
sales, liquidity of working capital, analysis of management of components of working capital and the
management of working capital finance in the select unit. The period covered by the study in five years
from 2011-2016
LIMITATIONS OF THE STUDY
 The study conducted and done is analytical, subject to the following limitations
 The study is mainly carried out based on the secondary data provided in the financial statements
 This study is based on the historical data and information provided in the annual reports
therefore it may not be a future indicator
 There may be some fractional differences in the calculated ratios
 As the study was for short span of 3 weeks and due to lack of time other areas could not be well
focused
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CHAPTER SCHEME
Chapter 1: Introduction
Chapter 2: Review Of Literature
Chapter 3: Research Methodology
Chapter 4: Data Analysis and Interpretations
Chapter 5: Findings, Suggestion, Conclusions
Chapter 6: Bibliography
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RESEARCH METHODOLOGY
The study will be based on the QUANTATIVE and QUALITATIVE approach of the
working capital management model at SIDHICK PLATE INDUSTRY needs a thorough study.
With the help of RATIO ANALYSIS & TREND ANALYSIS the result of the control
mechanism can be summarised which will help in identifying the effectiveness of the system
under the preview. The data for the companies under analysis has been taken from their
respective websites of the companies. `MICROSOFT EXCEL has been used as a tool for
different calculation purposes and developing the charts.
COLLECTION OF DATA:
The data has been collected from the primary and secondary sources:
i) Primary data
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(1) Department visit- discussion with the concerned person and interviewing officers
in accounts and finance sector.
(2) Observation method.
ii) Secondary data
(1) Annual reports

(2) Journals and magazines
(3) Study of files and office documents
(4) Websites of SIDHICK PLATE INDUSTRY and other PAPER PLATE
companies.
CHAPTER.3
WORKING CAPITAL MANAGEMENT
WHAT IS WORKING CAPITAL???
Working capital is the cash needed to pay for the day to day operation of the business.
Working capital is a financial metric which represents operating liquidity available to a
business, organization or other entity, including governmental entity. Along with fixed assets
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such as plant and equipment, working capital is considered a part of operating capital. Net
working capital is calculated as current assets minus current liabilities.. It is a derivation of
working capital, that is commonly used in valuation techniques such as DCFs (Discounted cash
flows). If current assets are less than current liabilities, an entity has a working capital
deficiency, also called a working capital deficit.
A company can be endowed with assets and profitabilitybut short of liquidity if its assets
cannot readily be converted into cash. Positive working capital is required to ensure that a firm
is able to continue its operations and that it has sufficient funds to satisfy both maturing short-
term debt and upcoming operational expenses. The management of working capital involves
managing inventories, accounts receivable and payable, and cash.
Working capital management is a very important component of corporate finance because

it directly affects the liquidity and profitability of the company. It involves the decision of the
amount and composition of current assets and the financing of these assets. Efficient working
capital management involves planning and controlling current assets and current liabilities in a
manner that eliminates the risk of inability to meet due short term obligations on the one hand
and avoid excessive investment in these assets on the other hand.
“Working capital” means that part of the total assets of the business that change from one
form to another form in the ordinary course of business operations.” Also known as revolving
or circulating capital or short-term financial management it is nothing but the difference
between current assets and current liabilities. The word “working capital” is made of two
words- Working & Capital. The word „working‟ means day to day operation of the business,
whereas the word „capital‟ means monetary value of all assets of the business. Working capital
is of major importance to internal and external analysis because of its close relationship with
the current day-today operations of a business.
Every business needs funds for two purposes.

 Long term funds are required to create production facilities through purchase of
fixed assets such as plants, machineries, lands, building, etc.
 Short term funds are required for the purchase of raw materials, payment of
wages, and other day-to-day expenses.
Working capital management deals with the management of these short term funds.
The constituents of current assets & current liabilities is as follows-
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CURRENT
CURRENT ASSETS
LIABILITIES
1. INVENTORY 1. SUNDRY CREDITORS
a) RAW MATERIAL 2. TRADE ADVANCES
3. BORROWINGS (short
b)WORK-IN-PROGRESS
term)
a) COMMERCIAL
c) FINISHED GOODS
BANKS
d) OTHERS b) OTHERS
2. TRADE CREDITORS 4. PROVISIONS
3. LOANS AND
ADVANCES
4.CASH AND BANK
BALANCE
WORKING CAPITAL COMPRISES OF THE FOLLOWING:-
1. Cash and cash equivalents: - This most liquid form of working capital requires
constant supervision. A good cash budgeting and forecasting system provides answers to key
questions such as:
 Is the cash level adequate to meet current expenses as they come due?
 What is the timing relationship between cash inflow and outflow?
 When would cash need occur?
 When and how much bank borrowing will be needed to meet any cash shortfalls?
 When will repayment be expected and will the cash flow cover it?
2. Accounts receivables: - Many businesses extend credit to their customers.
 If you do, is the amount of accounts receivable reasonable relative to sales?

 How rapidly are receivables being collected?
 Which customers are slow to pay and what should be done about them?
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3. Inventory: - Inventory is often as much as 50 percent of a firm's current assets,
so naturally it requires continual scrutiny.
 Is the inventory level reasonable compared with sales and the nature of your
business?
 What's the rate of inventory turnover compared with other companies in your type
of business?
4. Accounts payable: - Financing by suppliers is common in small business; it is

one of the major sources of funds for entrepreneurs.
 Is the amount of money owed suppliers reasonable relative to what you purchase?
 What is your firm's payment policy doing to enhance or detract from your credit
rating?
5. Accrued expenses and taxes payable: - These are obligations of your company
at any given time and represent a future outflow of cash.
THERE ARE TWO DIFFERENT CONCEPTS OF WORKING CAPITAL:-
1. Balance sheet or Traditional concept - It shows the position of the firm at certain point
of time. It is calculated in the basis of balance sheet prepared at a specific date. In this method
there are two types of working capital:-
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a) Gross working capital - It refers to the firm’s investment in current assets. The sum of
the current assets is the working capital of the business. The sum of the current assets is a
quantitative aspect of working capital. Which emphasizes more on quantity than its quality, but
it fails to reveal the true financial position of the firm because every increase in current
liabilities will decrease the gross working capital.
b) Net working capital - It is the difference between current assets and current liabilities
or the excess of total current assets over total current liabilities. It is also can defined as that
part of a firm’s current assets which is financed with long term funds. It may be either positive
or negative. When the current assets exceed the current liability, the working capital is positive
and vice versa.
2. Operating cycle concept - The duration or time required to complete the sequence of
events right from purchase of raw material for cash to the realization of sales in cash is called
the operating cycle or working capital cycle
Raw
material
Work-in-
Cash
progress
Operating
cycle
Debtors
Finished
and bills
goods
recievable
Sales
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The investment in working capital is influenced by four key events in the production &
sales cycle of the firm:
 Purchase of raw materials.

 Payment of raw materials.
 Sale of finished goods.
 Collection of cash for sales.
The firm begins with the purchase of raw materials which are paid after a delay which
represents the “accounts payable period”. The raw materials are then converted into finished
goods which are then sold. The time lag between the purchase of raw materials and the sale of
finished goods is called the “inventory period”. The time lag between the date of sales & the
date of collection of receivables is the “accounts receivable period”. The time lag between
purchase of raw materials & the collection of cash for sales is referred to as “operating cycle.”
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The time lag between payment for raw material purchases & the collection of cash for sales is
referred to as “cash cycle”.
IMPORTANCE OF WORKING CAPITAL
The advantages of working capital or adequate working capital may be enumerated as

below: -
1. Cash Discount:
If a proper cash balance is maintained, the business can avail the advantage of cash
discount by paying cash for the purchase of raw materials and merchandise. It will result in
reducing the cost of production.
2. It creates a Feeling of Security and Confidence:

The proprietor or officials or management of a concern are quite carefree, if they have
proper working capital arrangements because they need not worry for the payment of business
expenditure or creditors. Adequate working capital creates a sense of security, confidence and
loyalty, not only throughout the business itself, but also among its customers, creditors and
business associates.
3. ‘Must’ for Maintaining Solvency and Continuing Production:

In order to maintain the solvency of the business, it is but essential that the sufficient
amount t of fund is available to make all the payments in time as and when they are due.
Without ample working capital, production will suffer, particularly in the era of cut throat
competition, and a business can never flourish in the absence of adequate working capital.
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4. Sound Goodwill and Debt Capacity:
It is common experience of all prudent businessmen that promptness of payment in
business creates goodwill and increases the debt of the capacity of the business. A firm can
raise funds from the market, purchase goods on credit and borrow short-term funds from bank,
etc. If the investor and borrowers are confident that they will get their due interest and
payment of principal in time.
5. Easy Loans from the Banks:

An adequate working capital i.e. excess of current assets over current liabilities helps the
company to borrow unsecured loans from the bank because the excess provides a good security
to the unsecured loans, Banks favour in granting seasonal loans, if business has a good credit
standing and trade reputation.
6. Distribution of Dividend:
If company is short of working capital, it cannot distribute the good dividend to its
shareholders in spite of sufficient profits. Profits are to be retained in the business to make up
the deficiency of working capital. On the other contrary, if working capital is sufficient, ample
dividend can be declared and distributed. It increases the market value of shares.
7. Exploitation of Good Opportunity:

In case of adequacy of capital in a concern, good opportunities can be exploited e.g.,
company may make off-season purchases resulting in substantial savings or it can fetch big
supply orders resulting in good profits.
8. Meeting Unseen Contingency:

Depression shoots the demand of working capital because sock piling of finished goods
become necessary. Certain other unseen contingencies e.g., financial crisis due to heavy losses,
business oscillations, etc. can easily be overcome, if company maintains adequate working
capital.
9. High Morale:
The provision of adequate working capital improves the morale of the executive because
they have an environment of certainty, security and confidence, which is a great psychological,
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factor in improving the overall efficiency of the business and of the person who is at the hell of
fairs in the company.
10. Increased Production Efficiency:

A continuous supply of raw material, research programme, innovations and technical
development and expansion programmes can successfully be carried out if adequate working
capital is maintained in the business. It will increase the production efficiency, which will, in
turn increases the efficiency and morale of the employees and lower costs and create image
among the community.
DISADVANTAGES OF EXCESSIVE WORKING CAPITAL
Every business concern should have adequate working capital to run i

t s business operations. It should have neither redundant or excessive working capital
nor inadequate nor shortage of working capital. Both excessive as well as short
working capital positions are bad for any business.
1. Excessive working capital means idle funds which earn no profits for the business and
hence the business cannot earn a proper rate of return on its investments.
2. When there is redundant working capital, it may lead to unnecessary purchasing and
accumulation of inventories causing more chances of theftwaste and losses.
3. Excessive working capital implies excessive debtors and defective credit Policy which
may cause higher incidence of bad debts.
4. It may result into overall inefficiency in the organization.
5. When there is an excessive working capital relation with the banks and other financial
institutions may not be maintained.
6. Due to low rate of return on investments the value of shares may also fall
DISADVANTAGES OF INADEQUATE WORKING CAPITAL
1) A concern, which has inadequate working capital, cannot pay its short-term
liabilities in time. Thus it will loose its reputation and shall not be able to get good credit
facilities.
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2) The firm cannot pay day-to-day expenses of its operations and it
c r e a t e s inefficiencies, increases costs and reduces the profits of the business.
3) It becomes impossible to utilize efficiently the fixed asset

s d u e t o n o n - availability of liquid funds.
4) The rate of return on investments also falls with the

s h o r t a g e o f w o r k i n g capital.
NET WORKING CAPITAL
CURRENT 2014- 2015- 2012- 2013- 2014-

ASSETS 2015 2012 2013 2014 2015
STORES AND 505.44 557.67 612.19 623.76 716.18
SPARE PARTS
STOCK-IN- 1827.54 2047.31 2868.28 2453.99 3237.58
TRADE
SUNDRY 631.63 543.48 635.98 434.83 428.03
DEBTORS
INTREST 0.20 0.20 0.00 0.29 0.00
ACCRUED AND
INVESTMENTS
CASH AND 455.41 465.04 1590.60 3234.14 4141.54
BANK
LOANS AND 3055.73 2452.78 4330.43 3628.28 9553.19
ADVANCES
TOTAL(A) 6475.95 6066.28 10037.48 10375.29 18076.52
CURRENT 2014- 2015- 2012- 2013- 2014-2015

LIABILITIES 2015 2012 2013 2014
SUNDRY 3145.99 3243.42 3842.78 4086.65 4721.07
CREDITORS
SUBSIDIARY 102.61 115.74 1358.12 1514.30 1711.07
COMPANIES
INTEREST 47.11 231.05 506.68 676.66 679.31
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ACCRUED BUT
NOT DUE
ADVANCE 198.28 226.03 297.37 334.99 293.84
RECEIVED FROM
THE CUSTOMER
UNCLAIMED 0.00 0.02 0.01 0.00 0.00
MATURED
DEPOSITS(DUE)
INTEREST 0.03 0.08 0.07 0.00 0.00
ACCRUED ON
UNPAID
DIVIDENDS AND
UNCLAIMED
MATURED
DIVIDENDS(DUE)
UNPAID 23.37 29.33 33.08 39.44 41.26
DIVIDENDS
APPLICATION 0.01 5.65 0.24 0.14 0.61
MONEY PENDING
REFUND
UNPAID 0.00 0.00 0.00 0.73 0.54
MATURED
DIVIDENDS
UNPAID 2.59 1.73 1.03 0.00 0.00
MATURED
DEPOSITS
UNPAID 1.76 1.79 0.14 0.00 0.00
MATURED
DEBENTURES
INTEREST 1.45 0.42 0.34 0.18 0.13
ACCRUED ON
UNPAID
DIVIDENDS AND
MATURED
DIVIDENDS
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PROVISION FOR 49.31 0.00 0.00 0.00 0.00
RETIRING
GRATUITIES
PROVISION FOR 70.19 848.54 1143.08 1127.50 1601.75
EMPLOYEE
BENEFITS
PROVISION FOR 448.68 854.74 493.59 507.13 791.29
TAXATION
PROVISION FOR 18.37 19.12 19.12 2.12 3.88
FRINGE
BENEFITS
PROPOSED 943.91 1278.40 1278.40 709.77 1151.06
DIVIDEND
TOTAL(B) 5453.66 6768.78 8974.05 8999.61 10995.81
NET WORKING 1022.29 (702.5) 1063.43 1375.68 7080.71

CAPITAL
PERCENTAGE CHANGE IN NET WORKING CAPITAL
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CURRENT ASSETS 2014-2015 2015- 2012- 2013- 2014-
2012 2013 2014 2015
STORES AND 14.18 10.33 9.78 1.89 14.81
SPARE PARTS
STOCK-IN-TRADE 5.51 12.03 40.10 -14.44 31.93
SUNDRY 17.10 -13.96 17.02 -31.63 -1.56
DEBTORS
CASH AND BANK 57.91 2.11 242.04 103.33 28.06
LOANS AND 147.46 -19.73 76.55 -16.21 163.30
ADVANCES
TOTAL(A) 242.16 -9.22 385.49 42.98 236.54
CURRENT 2014- 2015- 2012- 2013- 2014-

LIABILITIES 2015 2012 2013 2014 2015
SUNDRY 24.15 3.10 18.48 6.35 15.52
CREDITORS
SUBSIDIARY 64.52 12.80 1073.42 11.50 12.99
COMPANIES
INTEREST 93.95 390.45 119.29 33.55 0.39
ACCRUED BUT
NOT DUE
ADVANCE 7.14 14.00 31.56 12.65 -12.28
RECEIVED
FROM THE
CUSTOMER
PROVISION FOR 5987.65 0.00 0.00 0.00 0.00

RETIRING
GRATUITIES
PROVISION FOR 0.00 63.34 34.71 0.014 42.06
EMPLOYEE
BENEFITS
PROVISION FOR 79.44 90.50 -42.25 2.74 56.03
TAXATION
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PROVISION FOR 675.11 4.08 0.00 -88.91 83.01
FRINGE
BENEFITS
PROPOSED 31.19 6.19 7.33 -44.48 62.17
DIVIDEND
TOTAL(B) 6959.78 638.04 1232.01 -50.61 264.96
PERCENTAG -6717.62 -647.26 -846.52 93.59 -28.42
E CHANGE
OF NET
WORKING
CAPITAL
(A-B)
FINANCIAL RATIOS
1. WORKING CAPITAL TURNOVER RATIO
It is a ratio that reflects the amount of working capital needed to maintain a given level of
sales. A high ratio indicates the firm is in a good liquidity position and vice-versa.
FORMULA = NET SALES

NET WORKING CAPITAL
PARTICULARS 2014-2015 2015- 2012- 2013- 2014-

2012 2013 2014 2015
NET SALES 17551.09 19693.28 24315.77 25021.98 29396.35

NET WORKING 1022.29 (702.5) 1063.43 1375.68 7080.71
CAPITAL
WORKING 17.17 -28.03 22.87 18.19 4.15
CAPITAL
TUNRNOVER
25
RATIO
CHART
40
working capital turnover ratio
20 22.87
17.17 18.19
4.15
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-20
-28.03
-40
INTERPRETATION:
The net working capital of SIDHICK PLATE INDUSTRY Ltd. has been fluctuating over
the years. A sharp decrease in the working capital in the year 2015-2012, where the working
capital was negative was mainly because of a decrease in current assets.
As compared to the year 2013-2014 where the working capital ratio was 18.19, the ratio
this year has fallen down to 4.15. The reason for decrease can be accredited to the increase in
the current assets such as inventory, cash & bank balances and loans and advances that has
increased tremendously this year. There has been an increase in the sales and the production
capacity this year. The raw materials consumption has also increased by 13.64%.
2. CURRENT RATIO
The current ratio is used to evaluate a company’s overall short – term liquidity position. It
tells us whether a company is in a position to meet its obligations.
FORMULA = CURRENT ASSETS

26
CURRENT LIABILITIES
PARTICULARS 2014-2015 2015-2012 2012-2013 2013-2014 2014-2015

CURRENT 6475.95 6066.28 10037.48 10375.29 18076.52
ASSESTS
CURRENT 5453.66 6768.78 8974.05 8999.61 10995.81
LIABILITIES
CURRENT 1.19 0.90 1.12 1.15 1.64
RATIO
CHART
current ratio
1.8
1.6 1.64
1.4
1.2 1.19 1.15
1.12
1
0.9
0.8 current ratio
0.6
0.4
0.2
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
The ideal current ratio is considered to be 2:1. The current ratio has been increasing
steadily over the years. As compared to the previous year in 2013-2014 the ratio has increased
to 1.64 in the year 2014-2015. The reason for increase might be continuous investments in the
current assets over the years.
3. QUICK RATIO
27
Quick ratio / Liquid ratio is an indicator of a company’s short – term solvency or liquidity
position. It is the relationship between liquid assets and liabilities. An asset is said to be liquid
if it can be converted into cash within a short period without loss of value.
FORMULA = CURRENT ASSETS – INVENTORY

CURRENT LIABILITIES
PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
CURRENT 6475.95 6066.28 10037.48 10375.29 18076.52
ASSETS
INVENTORY 1827.54 2047.31 2868.28 2453.99 3237.58
CURRENT 4648.41 4018.97 7169.2 7921.3 14838.94
ASSETS-
INVENTORY
CURRENT 5453.66 6768.78 8957.05 8999.61 10995.81
LIABILTY
QUICK RATIO 0.85 0.59 0.80 0.88 1.34
CHART
28
QUICK RATIO
1.6
1.4 1.34
1.2
1
0.8 0.85 0.8 0.88
0.6 0.59
0.4 QUICK RATIO
0.2
0
INTERPRETATION:
The ideal standard in case of quick ratio is 1:1. And if it is more it is considered to be better.
The idea behind this is that for every rupee of current liabilities, there should be at least one
rupee of liquid asset.
Quick ratio is thus a rigorous test of liquidity and gives a better picture of short term
financial position of the firm. As shown in the graph above, we can see that after a steep fall in
the quick ratio from the year 2014-2015 to 2015-2012 there has been a steady increase in the
quick ratio and for the year 2014-2015 the ratio is 1.34 which signifies that the liquidity
position of the firm has improved and this is because of increase in the cash that is lying with
the firm.
4. DEBTORS TURNOVER RATIO
Debtors Turnover Ratio or Receivables Turnover Ratio indicates the relationship between
net sales and average debtors. It shows the rate at which cash is generated by the turnover of
debtors.
FORMULA = AVERAGE DEBTORS

NET SALES
AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2
PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
AVERAGE 585.515 587.55 589.73 535.40 431.43
DEBTORS
29
NET SALES 17551.09 19693.28 24315.77 25021.98 29396.35
DEBTORS 29.98 33.52 41.23 46.73 68.13
TURNOVER
RATIO
CHART
DEBTORS TURNOVER RATIO

80
70 68.13
60
50 46.73
40 41.23
30 29.98 33.52
DEBTORS TURNOVER
20 RATIO
10
0
INTERPRETATION:
Debtors’ turnover ratio indicates the speed with which the amount is being collected from the debtors.
The higher the ratio the better it is, since it indicates the amount from the debtors is being collected more
quickly. The more quickly the debtors pay, the less risk from bad debts, and so lower is the expenses of
collection and increase in the liquidity of the firm. By comparing the debtors’ turnover ratio of the
current year with the previous year, it may be assessed whether the sales policy of the management is
efficient or not.
As shown in the graph above, there has been an increase in the ratio from 2014-2015 to
2014-2015from 29.98 to 68.13 which shows that the sales management of the firm is quite
efficient.
5. DEBT COLLECTION PERIOD
Days Sales Outstanding is a short – term (operating) Activity ratio which tells us about the
debtors holding time. The more the holding period the more risky it becomes for the company.
A high debt collection period indicates that the company is taking time to collect cash from its
debtors. The cash is not being collected on time which is not a good sign for the company, it is
a red flag.
30
FORMULA = 365/ DEBTORS TURNOVER RATIO
PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
DEBTORS 29.98 33.52 41.23 46.73 68.13
TURNOVER
RATIO
NO. OF DAYS 365 365 365 365 365
DEBT 12 11 9 8 5
COLLECTION
PERIOD
CHART
DEBT COLLECTION PERIOD

12
10
8
6 12 11
9 8
4 DEBT COLLECTION PERIOD
5
2
0
INTERPRETATION:
Debt collection period means the average number of days that the debtors take to get
converted to cash. In other words, credit sales are locked up in debtors for the number of days.
31
As we can see here, the debt collection period has come down from 12 days to 5 days
which means that the debtors get converted to cash in 5 days. An increase in the ratio indicates
excessive blockage of funds with the debtors which increases the chances of bad debts. In this
case as we can see that there is a decrease in the average collection period which indicates
prompt payment by debtors which reduces the chances of bad debts.
Therefore, from the above data it can be concluded that the company is in a better
position and is improving as compared to its previous years.
6. STOCK TURNOVER RATIO
The Inventory Turnover Ratio measures the efficiency of the firm’s inventory
management. A higher ratio indicates that inventory does not remain in warehouses or on the
shelves but rather turns over rapidly from the time of acquisition to sales. A lower inventory
turnover ratio means accumulation of inventories, over investment in inventory or unsalable
goods.
FORMULA = COST OF GOODS SOLD

AVERAGE STOCK
AVERAGE STOCK= (OPENING STOCK+CLOSING STOCK)/2
PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
COST OF 10174.97 11155.5 14928.65 15730.67 17471.83
GOODS SOLD
AVERAGE 1779.82 1937.43 2457.8 2661.14 2845.78
STOCK
STOCK 5.72 5.76 6.07 5.91 6.13
TURNOVER
RATIO
.
CHART
32
STOCK TURNOVER RATIO
6.2
6.13
6.1
6.07
6
5.9 5.91
5.8 STOCK TURNOVER RATIO

5.76
5.7 5.72
5.6
5.5
2010-20112011-20122012-20132013-20142014-2015
INTERPRETATION:
This ratio indicates the relationship between the cost of goods sold during the year and
average stock kept during that year. The ratio indicates whether the stock has been efficiently
used or not. It shows the speed with which the stock is turned into sales during the year.
The graph above shows that after an increase in the ratio from the year 2015-2012 to 2012-
2013 (5.76-6.07) there in the year 2013-2014(5.91) after which again a rise in the ratio in the
year 2014-2015(6.13). A high ratio is indicative that the stock is selling quickly.
7. PAYABLES TURNOVER RATIO
Although accounts payable are liabilities rather than assets, their trend is significant as they
represent an important source of financing for operating activities. The creditors turnover ratio
is an important tool of analysis as a firm can reduce its requirement of current assets by relying
on supplier’s credit. This shows the relationship between credit purchases and average
accounts payable. Higher ratio shows that accounts are to be settled rapidly whereas, low ratio
reflects liberal credit terms granted by suppliers.
FORMULA- NET CREDIT PURCHASE

AVERAGE CREDITORS
AVERAGE CREDITORS=(OPENING CREDITORS+CLOSING CREDITORS)/2
33
PARTICULARS 2014- 2015- 2012- 2013- 2014-
2015 2012 2013 2014 2015
NET CREDIT 2263.01 2353.80 6241.61 5215.42 6853.95
PURCHASE
AVERAGE 2840.01 3194.70 3543.10 3964.72 4383.86
CREDITORS
PAYABLES 0.79 0.73 1.76 1.31 1.56
TURNOVER
RATIO
CHART
PAYABLES TURNOVER RATIO

2 1.76
1.31 1.56
1.5
0.79 0.73
1
0.5 PAYABLES
0 TURNOVER RATIO
INTERPRETATION:
The ratio indicates the speed with which the amount is being paid to the creditors. A higher
ratio is better since it would indicate that the creditors are being paid more quickly and this
increases the credit worthiness of the firm.
Here, the graph above shows a steep fall in the ratio from the year 2012-2013(1.76) to
2013-2014(1.31) and then again a rise to the year 2014-2015(1.56). The reason for the fall can
be attributed to a decrease in the net credit purchases in the year 2013-2014.
34
1. WORKING CAPITAL RATIO
It is a ratio that reflects the amount of working capital needed to maintain a given level of
sales. A high ratio indicates the firm is in a good liquidity position and vice-versa.
FORMULA = NET SALES

NET WORKING CAPITAL
PARTICULARS 2014- 2015-2012 2012- 2013- 2014-

2015 2013 2014 201
SIDHICK 17.17 -28.03 22.87 18.19 4.15
PLATE
INDUSTRY
Paper 3.63 3.01 2.48 1.85 2.06
Plates 42.79 -10.49 -4.78 -8.82 187.34
CHART
200
150
100 Various design

materials
50 Plates
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-50
INTERPRETATION:
35
The working capital ratio of SIDHICK PLATE INDUSTRY has been fluctuating over the years. The
reason for negative working capital for the year 2015-2012 can be attributed to the decrease in current
assets whereas a sharp decrease in working capital for the year 2014-2015 is because of the increase in
current assets such as cash and bank balances, loans and advances and also because of an increase in the
raw material consumption.
The working capital ratio of PAPER Ltd. has been falling constantly from the year 2014-2015 to the
year 2013-2014 after which there was an increase in the ratio.
The working capital of PLATES has shown a sharp decrease from the year 2014-2015 to 2015-2012
where the working capital ratio remained constantly negative for three consecutive years and after that
there was an increase in the ratio. The reason for the increase in the ratio is an increase in the current
assets, loans and advances.
2. CURRENT RATIO
The current ratio is used to evaluate a company’s overall short – term liquidity position. It
tells us whether a company is in a position to meet its obligations.
FORMULA = CURRENT ASSETS
CURRENT LIABILITIES
PARTICULARS 2014- 2015- 2012- 2013- 2014-

2015 2012 2013 2014 2015
SIDHICK PLATE 1.19 0.90 1.12 1.15 1.64
INDUSTRY
PAPER 1.86 1.99 2.02 1.78 1.84
PLATES 1.08 0.74 0.61 0.73 1.01
CHART
36
2.5
2 1.99 2.02
1.78 1.84
1.64 1.64
1.5 Paper Leaf's
1.19 1.12 1.15 Paper
1 1.08 1.01
0.9 Plates
0.74 0.73
0.61
0.5
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
The current ratio of SIDHICK PLATE INDUSTRYhas been rising from the year 2015-
2012and it has shown a positive graph. The reason for the constantly rising graph since 2015-
2012 has been investment in the current assets, i.e. inventories, debtors, loans and advances
and the liquid cash and bank balances.
PAPER has a fluctuating current ratio over the years with various rises and falls over the time.
The reason for the fall in the ratio from the year 2012-2013 to the year 2013-2014was the
decrease in the current assets.
PLATES had witnessed a steep downfall till the year 2012-2013 after which there was a rise in
the ratio till 2014-2015. The reason for decrease in the ratio from the year 2015-2012 to the
year 2012-2013 was because of the increase in current liabilities and again a rise in the year
2013-2014 was because of the increase in the current assets.
Current ratio should therefore be maintained around its ideal standard and for achieving
this the company’s should therefore maintain its current assets and current liabilities in the
right proportion.
3. QUICK RATIO
Quick ratio OR Liquid ratio is an indicator of a company’s short – term solvency or

liquidity position. It is the relationship between liquid assets and liabilities. An asset is said to
be liquid if it can be converted into cash within a short period without loss of value.
FORMULA = CURRENT ASSETS – INVENTORY

37
CURRENT LIABILITIES
PARTICULARS 2010- 2011-2012 2012- 2013- 2014-

2011 2013 2014 2015
SIDHICK PLATE 0.85 0.59 0.80 0.88 1.34
INDUSTRY
PAPER 1.25 1.47 1.42 1.37 1.29
PLATES 0.64 0.36 0.34 0.39 0.60
CHART
2.5
2.4
2 SIDHICK PLATE
INDUSTRY
1.5 1.47 1.42 PAPER
1.37 1.29
1.34
1
0.85 0.8 0.88 PLATES
0.64 0.59 0.6
0.5
0.36 0.34 0.39
0
2010-2011 2011-2012 2012-2013 2013-2014
INTERPRETATION:
The quick ratio of SIDHICK PLATE INDUSTRY has been rising since 2015-2012 and the
investments should be made enough in the current assets so as to maintain the ratio of current
assets and current liabilities as 1:1.
The quick ratio of PAPER had declined from 2014-2015(2.4) to 2015-2012(1.47) and
thereafter the ratio has been declining throughout but the company has maintained the ratio
above the ideal standard.
The ratio of PLATES had fallen from the year 2015-2012(0.36) to 2012-2013(0.34)
negligibly and thereafter it rose to 0.39 in 2012-2013 and finally to 0.60 in 2014-2015. The
38
reason for the increase in the ratio in 2014-2015 was increase in the cash and bank balances
maintained with the company.
4. DEBTORS TURNOVER RATIO
Debtors Turnover Ratio or Receivables Turnover Ratio indicates the relationship between
net sales and average debtors. It shows the rate at which cash is generated by the turnover of
debtors
FORMULA = AVERAGE DEBTORS

NET SALES
AVERAGE DEBTORS= (OPENING DEBTORS + CLOSING DEBTORS) / 2
PARTICULARS 2010- 2011- 2012- 2013- 2014-

2011 2012 2013 2014 2015
SIDHICK 29.98 33.52 41.23 46.73 68.13
PLATE
INDUSTRY
PAPER 16.31 14.73 14.21 12.44 11.16
PLATES - 33.83 38.07 37.87 33.05
CHART
80
70 68.13
60
50 SIDHICK PLATE
46.73 INDUSTRY
40 41.23
30 29.98 33.52
38.07 PAPER
20 33.8 33.05
16.31 14.73 14.21 12.44
10 11.16
0 PLATES
7.87
INTERPRETATION:
39
The debtors turnover ratio has shown a positive rising graph throughout which is very good
for the company since it shows the speed with which the money is being recovered from the
debtors. And rising graph throughout shows that the sales management is quite efficient in
recovering the money from the debtors.
PAPER has a declining graph throughout which is not a good sign and therefore it means
that credit sales have been made to the debtors who do not deserve so much of credit and
therefore the company must revise its sales policy.
PLATES has a fluctuating graph and after a steep fall in the year 2013-2014 the ratio rose
to 33.5 in the year 2014-2015. The debtors and the sales figures have risen for the year 2014-
2015 and the reason for the rise in the ratio can be efficient sales management and a sound
sales policy.
5. DEBT COLLECTION PERIOD
Days Sales Outstanding is a short – term (operating) Activity ratio which tells us about the
debtors holding time. The more the holding period the more risky it becomes for the company.
A high debt collection period indicates that the company is taking time to collect cash from its
debtors. The cash is not being collected on time which is not a good sign for the company, it is
a red flag.
FORMULA = 365/ DEBTORS TURNOVER RATIO
PARTICULARS 2010- 2011-2012 2012- 2013- 2014-

2011 2013 2014 2015
SIDHICK PLATE 12 11 9 8 5
INDUSTRY
PAPER 22 24 26 29 33
PLA 10 9 9 11
TES
CHART
40
35
30
25 SIDHICK PLATE
20 INDUSTRY
15 PAPER
10
5
Textiles
0
INTERPRETATION:
The lower the debt collection period the lesser the chances of bad debts and thus is better
for the firm. SIDHICK PLATE INDUSTRY has a sound sale policy and the average collection
period has been decreasing over the years and finally the debtors are converted to cash in 5
days as in the year 2014-2015 and lesser is the collection period shorter is the operating cycle.
PAPER’s average collection period has been increasing in the number of days which means
that they have a liberal sales policy and the credit period is thus extended for the debtors. A
higher debt collection period generally increases the chances of bad debts and reduces the
chances of recovery of money from the debtors.
PLATES has maintained its collection period at more or less a constant platform. The
debtors are converted to cash in 11 days(2014-2015). Here we can conclude that SIDHICK
PLATE INDUSTRY is in a better position as compared to the other two firms. PAPER should
make some serious efforts to reduce its debt collection period
6. STOCK TURNOVER RATIO
The Inventory Turnover Ratio measures the efficiency of the firm’s inventory management.
A higher ratio indicates that inventory does not remain in warehouses or on the shelves but
rather turns over rapidly from the time of acquisition to sales. A lower inventory turnover ratio
means accumulation of inventories, over investment in inventory or unsalable goods.
FORMULA = COST OF GOODS SOLD

AVERAGE STOCK
AVERAGE STOCK= (OPENING STOCK+CLOSING STOCK)/2
41
PARTICULARS 2014- 2015-2012 2012- 2013- 2014-
2015 2013 2014 2015
SIDHICK PLATE 5.72 5.76 6.07 5.91 6.13
INDUSTRY
PAPER 4.22 4.68 4.68 3.62 4.09
PLATES 5.87 5.89 5.74 5.29
CHART
7 6.07 6.13
5.72 5.76 5.91
6
5.87 5.89 SIDHICK PLATE
5 5.74
4.68 4.68 5.29 INDUSTRY
4 4.22 4.09
3.62 PAPER
3
2 PLATES
1
0
2010-20112011-20122012-20132013-20142014-2015
INTERPRETATION:
The stock turnover ratio of SIDHICK PLATE INDUSTRY has been rising throughout and the cost of
goods sold has also been rising with a rise in the average stock maintained with the company. A higher
stock ratio turnover is indicative that the stock is selling quickly, that is reflected with the higher sales.
PAPERhas fluctuating ratio throughout.
PLATES has a declining ratio, though the cost of goods sold and the average debtors has been rising but
certain items which have to be excluded from the cost of goods sold have been rising over the time.
7. PAYABLES TURNOVER RATIO
Although accounts payable are liabilities rather than assets, their trend is significant as they represent an
important source of financing for operating activities. The creditors turnover ratio is an important tool of
analysis as a firm can reduce its requirement of current assets by relying on supplier’s credit. This shows
42
the relationship between credit purchases and average accounts payable. Higher ratio shows that
accounts are to be settled rapidly whereas, low ratio reflects liberal credit terms granted by suppliers.
FORMULA- NET CREDIT PURCHASE

AVERAGE CREDITORS
AVERAGE CREDITORS= (OPENING CREDITORS+CLOSING CREDITORS)/2
PARTICULARS 2010- 2011-2012 2012- 2013- 2014-

2011 2013 2014 2015
SIDHICK PLATE 0.79 0.73 1.76 1.31 1.56
INDUSTRY
PAPER 5.46 5.21 6.14 3.13 3.82
PLATES 7.17 6.28 6.51 8.57
CHART
9 8.57
8 7.17
7 6.28 6.51
6 6.14
5.46 5.21
5 SIDHICK PLATE INDUSTRY
4 PAPER
3.82
3 3.13 PLATES
2
1.76 1.56
1.31
1 0.79 0.73
0
2010-20112011-20122012-20132013-20142014-2015
INTERPRETATION:
The payables turnover ratio means the speed with which the creditors are being paid. SIDHICK PLATE
INDUSTRY has a rising graph which indicates that the creditors of the firm are being paid on time and
quite frequently and this helps in increasing the credit worthiness of the firm.
PAPER has had a fall in the ratio drastically from the year 2012-2013 to the year 2013-2014.
PLATES is quite efficient in paying off its creditors. A ratio of 8.57 times mans that the speed with
which the company pays to its creditors is quite high.
43
RATIO ANALYSIS
WHAT IS RATIO ANALYSIS???
A tool used by individuals to conduct a quantitative analysis of information in a company's

financial statements. Ratios are calculated from current year numbers and are then compared to
previous years, other companies, the industry, or even the economy to judge the performance
of the company. Ratio analysis is predominately used by proponents of fundamental analysis.
Single most important technique of financial analysis in which quantities are converted into
ratios for meaningful comparisons, with past ratios and ratios of other firms in the same or
different industries. Ratio analysis determines trends and exposes strengthsor weaknesses of a
firm.
Ratios can be found out by dividing one number by another number. Ratios show how one
number is related to another. It may be expressed in the form of co-efficient, percentage,
proportion, or rate. For example the current assets and current liabilities of a business on a
particular date are $200,000 and $100,000 respectively. The ratio of current assets and current
liabilities could be expressed as 2 (i.e. 200,000 / 100,000) or 200 percent or it can be expressed
as 2:1 i.e., the current assets are two times the current liabilities. Ratio sometimes is expressed
in the form of rate. For instance, the ratio between two numerical facts, usually over a period of
time, e.g. stock turnover is three times a year.
Classification of Accounting Ratios:
Ratios may be classified in a number of ways to suit any particular purpose. Different kinds
of ratios are selected for different types of situations. Mostly, the purpose for which the ratios
are used and the kind of data available determine the nature of analysis. The various
accounting ratios can be classified as follows:
Classification of Accounting Ratios / Financial Ratios

(B)
(A) (C)
Functional
Traditional Significance Ratios
Classification or
Classification or or Ratios According
Classification
Statement Ratios to Importance
According to Tests
44
 Profit and loss  Profitability  Primary ratios
account ratios or ratios  Secondary
revenue/income  Liquidity ratios
statement ratios ratios
 Balance  Activity ratios
sheet ratios or position  Leverage
statement ratios ratios or long term
 Composite/mixed solvency ratios
ratios or inter statement
ratios
Advantages of Ratios Analysis:
Ratio analysis is an important and age-old technique of financial analysis. The following
are some of the advantages / Benefits of ratio analysis:
1. Simplifies financial statements: It simplifies the comprehension of financial

statements. Ratios tell the whole story of changes in the financial condition of the business
2. Facilitates inter-firm comparison: It provides data for inter-firm comparison.
Ratios highlight the factors associated with successful and unsuccessful firm. They also reveal
strong firms and weak firms, overvalued and undervalued firms.
3. Helps in planning: It helps in planning and forecasting. Ratios can assist
management, in its basic functions of forecasting. Planning, co-ordination, control and
communications.
4. Makes inter-firm comparison possible: Ratios analysis also makes possible
comparison of the performance of different divisions of the firm. The ratios are helpful in
deciding about their efficiency or otherwise in the past and likely performance in the future.
5. Help in investment decisions: It helps in investment decisions in the case of
investors and lending decisions in the case of bankers etc.
Limitations of Ratios Analysis:
The ratios analysis is one of the most powerful tools of financial management. Though
ratios are simple to calculate and easy to understand, they suffer from serious limitations.
45
1. Ratios are based only on the information which has been recorded in the financial
statements. Financial statements themselves are subject to several limitations. Thus ratios
derived, there from, are also subject to those limitations. For example, non-financial changes
though important for the business are not relevant by the financial statements. Financial
statements are affected to a very great extent by accounting conventions and concepts.
Personaljudgment plays a great part in determining the figures for financial statements.
2. Comparative study required: Ratios are useful in judging the efficiency of the
business only when they are compared with past results of the business. However, such a
comparison only provide glimpse of the past performance and forecasts for future may not
prove correct since several other factors like market conditions, management policies, etc. may
affect the future operations.
3. Ratios alone are not adequate: Ratios are only indicators, they cannot be taken as
final regarding good or bad financial position of the business. Other things have also to be
seen.
4. Problems of price level changes: A change in price level can affect the validity of
ratios calculated for different time periods. In such a case the ratio analysis may not clearly
indicate the trend in solvency and profitability of the company. The financial statements,
therefore, be adjusted keeping in view the price level changes if a meaningful comparison is to
be made through accounting ratios.
5. Lack of adequate standard: No fixed standard can be laid down for ideal ratios.
There are no well accepted standards or rule of thumb for all ratios which can be accepted as
norm. It renders interpretation of the ratios difficult.
6. Limited use of single ratios: A single ratio, usually, does not convey much of a
sense. To make a better interpretation, a number of ratios have to be calculated which is likely
to confuse the analyst than help him in making any good decision.
7. Personal bias: Ratios are only means of financial analysis and not an end in itself.
Ratios have to interpreted and different people may interpret the same ratio in different way.
8. Incomparable: Not only industries differ in their nature, but also the firms of the
similar business widely differ in their size and accounting procedures etc. It makes comparison
of ratios difficult and misleading.
FINANCIAL RATIOS
1. NET DEBT TO EQUITY

Debt is the borrowed funds and Equity is the owned funds of an organization. This ratio is
calculated to measure the extent to which debt financing has been used in a business. A ratio of
1:1 is considered to be satisfactory. This ratio is also known as External-Internal ratio as it
46
indicates the relationship between the external equities or the outsider’s funds and the internal
equities or the shareholders funds.
FORMULA = NET DEBT

SHAREHOLDER’S FUND
NET DEBT= SECURED LOANS+ UNSECURED LOANS- CASH AND BANK BALANCE-
CURRENT INVESTMENTS
EQUITY= SHAREHOLDER’S FUND- MISCELLANOUS EXPENSES
FINANCIAL YEAR 2010-2011
COMPANY NETDEBT SHAREHOLDER’S DEBT-

FUND EQUITY
RATIO
SIDHICK (1728.55) 15108.68 (0.12)
PLATE
INDUSTRY
PAPER (5454.57) 17184 (0.32)
PLATES 3642.29 5788.92 0.63
COMPANY NET DEBT SHAREHOLDER’S DEBT- EQUITY

FUND RATIO
SIDHICK 16519.85 27455.84 0.61
PLATE
INDUSTRY
PAPER (10737.77) 23004.09 (0.47)
PLATES 6283.78 7677.25 0.82
47
COMPANY NET DEBT SHAREHOLDER’S DEBT-EQUITY
FUND RATIO
SIDHICK 22086.25 30281.33 0.73

PLATE
INDUSTRY
PAPER (10714.20) 0.79841 (0.38)
PLATES 9602.56 7959.25 1.21
COMPANY NET DEBT SHAREHOLDER’S DEBT- EQUITY

FUND RATIO
SIDHICK 20285.83 36961.80 0.55
PLATE
INDUSTRY
PAPER (5925.12) 33316.70 (0.18)
PLATES 9529.64 9706.34 0.98
COMPANY NET DEBT SHAREHOLDER’S DEBT-EQUITY

FUND RATIO
SIDHICK 21159.81 46944.63 0.45
PLATE
INDUSTRY
PAPER 2638.56 37069.47 0.07
PLATES 5965.65 17225.27 0.35
CHART
48
1.4
1.21
1.2
0.98
1
0.82
0.8 0.73
0.63 0.61
0.55
0.6 0.45
0.35 SIDHICK
0.4 PLATE
0.2 0.07 INDUSTRY
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-0.2 -0.12
-0.18
-0.4 -0.32
-0.38
-0.6 -0.47
INTERPRETATION:
The debt-equity ratio is calculated to assess the firm’s ability to meet its long term liabilities. Generally,
a ratio of 2:1 is considered to be safe for the long term lenders and a ratio below 2:1 provides sufficient
protection to the long term lenders and thus they are more secure and a higher ratio thus would indicate
a more risky financial position of the firm.
The debt- equity ratio for all the year and of all the three companies has been less than 2:1 and this is
indicative of a sound financial position of the firm.
SHAREHOLDER’S EQUITY RATIO
This ratio helps to determine how much shareholders would receive in the event of a company-
wide liquidation. It represents the amount of assets on which shareholders have a residual claim. The
higher the ratio the more shareholders may receive and vice-versa.
FORMULA= SHAREHOLDRE’S EQUITY
TOTAL ASSETS
COMPANY SHAREHOLDER’S TOTAL SHAREHOLDER’S

EQUITY ASSETS(TANGIBLE) EQUITY RATIO
SIDHICK 580.67 25597.50 0.023
49
PLATE
INDUSTRY
PAPER 4130.40 22906.33 0.18
PLATES 525.80 10779.74 0.049
COMPANY SHAREHOLDE TOTAL SHAREHOLDER’

R’S EQUITY ASSETS(TANGIBLE S EQUITY RATIO
)
SIDHICK 6203.30 47075.52 0.132
PLATE
INDUSTR
Y
PAPER 4130.40 27677.41 0.15
PLATES 537.01 16475.62 0.032

SIDHICK 6203.45 58741.77 0.11
PLATE
INDUSTRY
PAPER 4130.40 36855.04 0.11
PLATES 537.01 20653.04 0.03
50
COMAPNY SHAREHOLDER’S TOTAL SHAREHOLDER’S

EQUITY ASSETS(TANGIBL EQUITY RATIO
E)
SIDHICK 887.41 64232.78 0.014
PLATE
INDUSTRY
PAPER 4130.40 51242.87 0.08
PLATES 527.11 23256.39 0.023

SIDHICK 959.41 78555.91 0.012
PLATE
INDUSTRY
PAPER 4130.40 58726.03 0.07
PLATES 563.18 31493.65 0.018
CHART
51
0.2
0.18
0.18
0.16 0.15
0.14 0.132
0.12 0.11
0.11
SIDHICK PLATE INDUSTRY
0.1
PAPER
0.08
0.08 0.07 PLATES
0.06 0.049
0.04 0.032 0.03

0.023 0.023
0.018
0.02 0.014 0.012
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
A ratio used to help determine how much shareholders would receive in the event of a company-wide
liquidation. The ratio is calculated by dividing total shareholders' equity by total assets of the firm, and it
represents the amount of assets on which shareholders have a residual claim.
If we consider as in the case of SIDHICK PLATE INDUSTRY, the ratio for the year 2010-2011 is
0.023 so this means that the shareholders would have a claim of 2.3% on the assets in the event of the
wind up of the company.
The lower the ratio, the better it is for the company since the company would be then able to pay off to
its shareholders in case of liquidation without any burden.
SIDHICK PLATE INDUSTRY has made efforts to lower the ratio and finally succeeded to do so. If we
consider the ratios for the year 2014-2015, we can see that SIDHICK PALTE INDUSTRY is in a better
position than the other two companies.
52
1. DEBT TO NET WORTH RATIO -The net debt to net worth ratio has
significance to lenders, analysts and business managers. If affects the ability of a company to
borrow money and to finance its growth. A business owner needs to know the optimal debt to
net worth ratio for the benefit of its company. The net debt should never be higher than the net
worth; it is a bad sign for the company.
FORMULA = LONG TERM DEBT

NET WORTH
LONG TERM DEBT = SECURED LOANS + UNSECURED LOANS – CASH & BANK –
CURRENT INVESTMENTS
NET WORTH= EQUITY SHARE CAPITAL + PREFERENCE SHARE CAPITAL+

RESERVES & SURPLUS – MISCELLANOUS EXPENSES TO THE EXTENT NOT
WRITTEN OFF.
COMPANY LONG TERM NET WORTH DEBT- NET

DEBT WORTH
RATIO
SIDHICK (1728.55) 13893.62 (0.125)
PLATE
INDUSTRY
PAPER (5454.57) 17184 (0.32)
PLATES 3642.29 5399.18 0.67

DEBT WORTH
RATIO
SIDHICK 16519.85 27145.62 0.61
PLATE
INDUSTRY
PAPER (10737.77) 23004.09 (0.47)
PLATES 6283.78 7677.25 0.82
53

DEBT WORTH
RATIO
SIDHICK 22086.25 30071.19 0.73
PLATE
INDUSTRY
PAPER (10714.20) 27984.10 (0.38)
PLATES 9602.56 7959.25 1.21

DEBT WORTH
RATIO
SIDHICK 20285.83 36961.80 0.55
PLATE
INDUSTRY
PAPER (5925.12) 33316.70 (0.18)
PLATES 9529.64 9706.34 0.98

DEBT WORTH
RATIO
SIDHICK 21159.81 46944.63 0.45
PLATE
INDUSTRY
PAPER 2638.56 37069.47 0.07
PLATES 5965.65 16695.89 0.36
54
1.4
1.21
1.2
0.98
1
0.82
0.8 0.73
0.67
0.61
0.6 0.55
0.45 SIDHICK PLATE INDUSTRY
0.36
0.4 PAPER
PLATES
0.2
0.07
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
-0.2 -0.125
-0.18
-0.4 -0.32
-0.38
-0.47
-0.6
INTERPRETATION:
This ratio is used in the analysis of financial statements to show the amount of protection
available to creditors. A high ratio usually indicates that the business has a lot of risk because it
must meet principal and interest on its obligations.
SIDHICK PLATE INDUSTRY has a fluctuating ratio throughout the five years. But
anyhow it has tried to maintain its position by reducing the debts and increasing the net worth
of the company.
PAPER has a negative ratio but in the year 2014-2015 it has finally achieved a positive
ratio.
PLATES has a fluctuating graph throughout the five years but in the year 2014-2015, it has
been able to lower the ratio and thus reduce the risk involved in the business.
55
2. FIXED ASSETS TO LONG TERM RATIO - This ratio indicates the
proportion of long-term funds deployed in fixed assets. The higher the ratio, the safer will be
the funds available in case of liquidation. It also indicates the proportion of funds that is
invested in working capital.
It indicates the level of fixed assets owned by a company in relation to the long-term debts
of the company. The higher the ratio the better it is for a company and the assets which are
debt free and fully owned by the company.
FORMULA = FIXED ASSETS
LONG TERM LOANS

FIXED ASSETS = GROSS FIXED ASSETS – DEPRICIATION
LONG TERM LOANS = SHARE CAPITAL+ RESERVES+ LONG TERM LOANS
COMPANY FIXED ASSETS LONG TERM FIXED ASSTES

FUNDS TO LONG TERM
RATIO
SIDHICK PLATE 11040.56 23594.42 0.47
INDUSTRY
PAPER 11597.71 21493.67 0.54
PLATES 8189.10 9767.08 0.84

FUNDS TO LONG
TERM RATIO
SIDHICK 12623.56 45322.42 0.28
PLATE
INDUSTRY
56
PAPER 11571.31 26108.81 0.44
PLATES 10955.49 15223.78 0.72

FUNDS TO LONG
TERM RATIO
SIDHICK 14482.22 57122.44 0.25
PLATE
INDUSTRY
PAPER 12268.83 35522.89 0.35
PLATES 13086.44 19231.88 0.68

FUNDS TO LONG
TERM RATIO
SIDHICK 16006.03 62201 0.26
PLATE
INDUSTRY
PAPER 13615.28 49827.95 0.27
PLATES 16866.14 21291.44 0.79
57
FUNDS TO LONG
TERM RATIO
SIDHICK 18774.48 75067.57 0.25
PLATE
INDUSTRY
PAPER 15082.66 57234.96 0.26
PLATES 21102.15 28647.23 0.74
CHART
0.9 0.84
0.79
0.8 0.74
0.72
0.68
0.7
0.6 0.54
0.5 0.47 SIDHICK PLATE INDUSTRY

0.44
0.4
PAPER
0.35
0.28 0.27
PLATES
0.3 0.25 0.26 0.25 0.26
0.2
0.1
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
This is a difficult set of ratios to interpret as asset values are based on the historical cost.
An increase in the fixed asset figure may result from the replacement of an asset at an
increased price or the purchase of an additional asset intended to increase the production
capacity.
58
A latter transaction might be expected to result in increased sales.
3. PROPERITARY RATIO- This ratio indicates the proportion of long-term funds deployed in fixed
assets. The higher the ratio, the safer will be the funds available in case of liquidation. It also
indicates the proportion of funds that is invested in working capital.
It indicates the level of fixed assets owned by a company in relation to the long-term debts of the
company. The higher the ratio the better it is for a company and the assets which are debt free and fully
owned by the company.
FORMULA = NET WORTH

TOTAL ASSETS
NET WORTH = EQUITY SHARE CAPITAL + PREFERENCE SHARE CAPITAL+ RESERVES &
SURPLUS – MISCELLANOUS EXPENSES TO THE EXTENT NOT WRITTEN OFF.
TOTAL ASSETS = FIXED ASSETS + CURRENT ASSETS FINANCIAL

YEAR 2010-2011
COMPANY NET WORTH TOTAL PROPERITARY

ASSETS RATIO
SIDHICK 13893.62 25597.50 0.54
PLATE
INDUSTRY
PAPER 17184 22906.33 0.75
PLATES 539 10779.74 0.50
9.18

ASSETS RATIO
SIDHICK 27145.62 47075.52 0.57
PLATE
INDUSTRY
PAPER 23004.09 27677.41 0.83
PLATES 767 16475.62 0.47
7.25
59
ASSETS RATIO
SIDHICK 30071.19 58741.77 0.52
PLATE
INDUSTRY
PAPER 27984.10 36855.04 0.76
PLATES 7959.25 20653.04 0.39

ASSETS RATIO
SIDHICK 36961.80 64232.78 0.58
PLATE
INDUSTRY
PAPER 33316.70 51242.87 0.65
PLATES 9706.34 23256.39 0.42
FIANANCIAL YEAR 2014-2015

ASSETS RATIO
SIDHICK 46944.63 78555.91 0.60
PLATE
INDUSTRY
PAPER 37069.47 58726.03 0.63
PLATES 17225.27 31493.65 0.55
60
CHART
0.9
0.83
0.8 0.75 0.76
0.7 0.65
0.63
0.6
0.57 0.58
0.6 0.54 0.55
0.52
0.5
0.5 0.47 SIDHICK PLATE INDUSTRY
0.42
0.39 PAPER
0.4
PLATES
0.3
0.2
0.1
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
Proprietary ratio indicates the proportion of total assets funded by owners or shareholders.
A higher proprietary ratio is an indicator of sound financial position from the long term point
of view because it means a large proportion of total assets are provided by equity and hence the
firm is thus less dependent on the external sources of finance. A lower proprietary ratio is a
danger signal for l.ong term lenders as it indicates a lower margin of safety available to them.
SIDHICK PLATE INDUSTRY has maintained an overall consistent ratio throughout as in the
five year time.
The proprietary ratio of PAPER has been declining since the year 2011-2012.The
proprietary ratio of PLATES has been increasing since 2012-2013.
SIDHICK PLATE INDUSTRY has been improving over the years and though PAPER has
a declining ratio throughout but anyhow it is in a better position than the other companies.
61
4. INTEREST COVER -This ratio is also known as “time – interest - earned ratio”.
It measures the firm’s ability to make contractual interest payments. This ratio measures the
debt servicing capacity of a firm insofar as fixed interest on long term loan is concerned. It
indicates the extent to which a fall in EBIT is tolerable in that the ability of the firm to service
its interest payments would not be adversely affected. For instance, coverage of five times
would indicate that a fall in operating earnings only to up to one-fifth level can be tolerated.
The higher the ratio the greater is the ability of the firm to handle fixed charge liabilities
and the more assured is the payment of interest to them. However, too high a ratio would imply
unused debt capacity. A low ratio is danger signal that the firm is using excessive debt and
does not have the ability to offer assured payment of interest to the lenders.
FORMULA = PBIT
INTEREST
COMPANY PBIT INTEREST INTEREST

COVER
SIDHICK 6435.55 173.90 37.01
PLATE
INDUSTRY
PAPER 9754.75 332.13 29.37
PLATES 2314.72 399.54 5.79

COVER
SIDHICK 7945.06 878.70 9.04
PLATE
INDUSTRY
PAPER 11719.67 250.94 46.70
62
PLATES 2924.56 440.44 6.64

COVER
SIDHICK 8468.30 1152.69 7.35
PLATE
INDUSTRY
PAPER 9656.69 253.24 38.13
PLATES 1474.88 797.25 1.85

COVER
SIDHICK 8722.70 1508.40 5.78
PLATE
INDUSTRY
PAPER 10534.04 402.01 26.20
PLATES 3678.57 858.92 4.28

COVER
SIDHICK 11077.34 1300.49 8.52
PLATE
INDUSTRY
PAPER 7669.26 474.95 16.15
PLATES 3477.46 695.18 5.00
CHART
63
50 46.7
45
37.01 38.13
40
35
29.37
30 26.2 SIDHICK PLATE INDUSTRY
25 PAPER
20 16.15 PLATES
15
9.04 8.52
10 5.79 6.64 7.35 5.78 5
4.28
5 1.85
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
The interest cover ratio is used to determine how easily a company can be relieved of its
burden to pay interest expenses on outstanding debt. The lower the ratio, the more the company
is burdened by debt expense. When a company's interest coverage ratio is only 1.5 or lower, its
ability to meet interest expenses may be questionable.
SIDHICK PLATE INDUSTRY has had a steep fall in the ratio from the year 2010-
2011(37.01) to the year 2011-2012(9.04) and this was mainly because the interest expenses had
risen by leaps and bounds. And thereafter the interest expenses continued to rise.
PAPER has a fluctuating ratio. The rise in the ratio was because of the reduction in the
interest expenses and a sudden fall was when the interest expenses were high.
PLATES has witnessed a ratio of 1.85 for the year 2012-2013 because this year the profit
before interest and tax was 1474.88 which was quite less as compared to the previous year and
the interest expenses were 797.25 which had risen by 1.8 times as compared to the previous
year.
5. DIVIDEND COVER RATIO -It measures the ability of a firm to pay dividend on preference
shares which carry a stated rate of return. This ratio is the ratio of net profits after taxes (EAT) and
the amount of preference dividend. The higher the coverage the better it is and vice versa
FORMULA = NET PROFIT AFTER TAX

DIVIDEND
64
COMPANY PROFIT AFTER DIVIDEND DIVIDEND
TAX COVER
SIDHICK 4222.15 1104.33 3.82
PLATE
INDUSTRY
PAPER 6202.29 1478.40 4.20
PLATES 1292 199.39 6.48

TAX COVER
SIDHICK 4687.03 1393.55 3.36
PLATE
INDUSTRY
PAPER 7536.78 1787.16 4.22
PLATES 1728.19 241.49 7.16

TAX COVER
SIDHICK 5201.74 1492.5 3.49
PLATE
INDUSTRY
PAPER 6174.81 1255.16 4.92
PLATES 958.50 55.41 17.30

TAX COVER
SIDHICK 5046.80 878.45 5.75
PLATE
65
INDUSTRY
PAPER 6754.37 1590.55 4.25
PLATES 2022.74 240.93 8.40

TAX COVER
SIDHICK 6865.69 1307.77 5.25
PLATE
INDUSTRY
PAPER 4904.74 1152.45 4.26
PLATES 2014.67 350.09 5.74
CHART
20
18 17.3
16
14
12
SIDHICKPLATE INDUSTRY
10
8.4 PAPER
8 7.16 PLATES
6.48
5.75 5.74
6 4.92 5.25
4.22 4.25 4.26
3.824.2 3.49
4 3.36
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
The dividend cover ratio means that how easily the company can be relieved of its burden
of paying the dividends to the company.
SIDHICK PLATE INDUSTRY has been paying off its dividends at a consistent rate. And
it seems that it has been following a conservative approach.
66
PLATES had paid a very high dividend for the year 2011-2012, which means that the
company had declared ala large part of its profit as dividend and thus following a liberal
approach for paying the dividends.
6. EBIDTA TO TURNOVER RATIO -This ratio is used to assess a company’s

profitability by comparing its turnover and earnings. Since EBITDA is derived from revenue
this would indicate the percentage of a company remaining after operating expenses.
Generally a higher ratio would indicate that the company is able to keep its earnings at a
good level through efficient processes that have kept certain expenses low.
FORMULA = EARNING BEFORE INTEREST, TAX ANDDEPRICIATION
TURNOVER
COMPANY EBIDTA TURNOVER EBIDTA TO

TURNOVER
RATIO
SIDHICK 7254.84 17984.76 0.40
PLATE
INDUSTRY
PAPER 10966.23 35924.07 0.31
PLATES 2812.95 8699.59 0.32

TURNOVER
RATIO
SIDHICK 8779.67 20028.28 0.44
PLATE
INDUSTRY
PAPER 12955.15 41890.91 0.31
PLATES 3611.74 11677.14 0.31
67
TURNOVER
RATIO
SIDHICK 9441.70 24624.04 0.38
PLATE
INDUSTRY
PAPER 10941.81 46248.61 0.24
PLATES 2302.54 14260.81 0.16

TURNOVER
RATIO
SIDHICK 9805.88 25875.77 0.38
PLATE
INDUSTRY
PAPER 11871.28 43319.61 0.27
PLATES 4801.98 18735.32 0.26

TURNOVER
RATIO
SIDHICK 12223.53 30187.02 0.40
PLATE
INDUSTRY
PAPER 9155.06 44918.67 0.20
PLATES 4856.17 23445.88 0.21
CHART
68
0.5
0.44
0.45
0.4 0.4
0.4 0.38 0.38
0.35
0.31 0.32 0.31 0.31
0.3 0.27
0.24
0.25
PAPER
0.2 0.21
0.2 PLATES
0.16
0.15
0.1
0.05
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
EBIDTA to turnover ratio signifies that higher the ratio the better it is. Since it means that
earnings before interest, depreciation and taxation.
SIDHICK PLATE INDUSTRY has maintained a positive rising graph throughout. And it
has a ratio better than the other two companies.
7. EARNING PER SHARE -This ratio measures the profitability on a per share
basis i.e. the amount that they can get on every share held. The higher the ratio the more
amount the equity shareholders receive.
FORMULA = PROFIT ATTRIBUTABLE TO SHAREHOLDERS
WEIGHTED AVERAGE NUMBER OF ORDINARY SHARES FOR BASIC EPS
COMPANY PROFIT O WEIGHTED EARNING PER

ATTRIBUTABLE AVERAGE NO. SHARE
SHAREHOLDERS OF ORDINARY
SHARES
SIDHICK PLATE 4222.15 646823122 73.76
INDUSTRY
PAPER 6202.29 4130400545 15.02
PLATES 1259.35 157208820 80.11
69
COMPANY PROFIT WEIGHTED EARNING PER

ATTRIBUTABLE AVEARGE NO. SHARE
TO OF ORDINARY
SHAREHOLDERS SHARES
SIDHICK PLATE 4687.03 697748601 67.17
INDUSTRY
PAPER 7536.78 4130400545 18.25
PLATES 1694.19 177855318 95.26

TO OF ORDINARY
SHAREHOLDERS SHARES
SIDHICK PLATE 5073.69 730584834 69.45
INDUSTRY
PAPER 6174.81 4130400545 14.95
PLATES 424.58 187048666 22.70

TO OF ORDINARY
SHAREHOLDERS SHARES
SIDHICK PLATE 4993.12 828550811 60.26
INDUSTRY
PAPER 6754.37 4130400545 16.35
PLATES 1989.01 187048682 106.34

70
TO OF ORDINARY
SHAREHOLDERS SHARES
SIDHICK PLATE 6861.15 907252572 75.63
INDUSTRY
PAPER 4904.74 4130400545 11.87
PLATES 1978.24 203595864 97.17
CHART
97.17
2014-2015 11.87
75.63
106.34
2013-2014 16.35
60.26
22.7 PLATES
2012-2013 14.95
69.45 PAPER
95.26
2011-2012 18.25
67.17
80.11
2010-2011 15.02
73.76
0 20 40 60 80 100 120
INTERPRETATION:
The ratio is helpful in the determination of the market price of the equity share of the
company. The ratio is also helpful in estimating the capacity of company to declare dividends
on equity shares.
Higher the EPS the better is the capital productivity. It is an important measure of the
economic performance of a corporate entity.
PLATES has the highest EPS as compared to the other two firms. And SIDHICK PLATE
INDUSTRY has been quite consistent in maintaining its ratio throughout.
8. GROSS PROFIT MARGIN -The ratio measures the margin of profit available
on sales. The higher the ratio the better it is for the company. It reflects the efficiency with
which a firm produces its products.
FORMULA = GROSS PROFIT * 100

SALES
71
COMPANY GROSS PROFIT SALES GROSS PROFIT

MARGIN
SIDHICK 6153.98 17551.09 35.06
PLATE
INDUSTRY
PAPER 8656.19 34223.92 25.29
PLATES 2169.49 8554.36 25.36

MARGIN
SIDHICK 7388.93 19693.28 37.52
PLATE
INDUSTRY
PAPER 10057.87 39508.45 25.46
PLATES 2667.42 11420.00 23.35

MARGIN
SIDHICK 8160.03 24315.77 33.55
PLATE
INDUSTRY
PAPER 8040.59 43150.08 18.63
PLATES 2005.45 14001.25 14.32

MARGIN
SIDHICK 7868.91 25021.98 31.44
PLATE
INDUSTRY
PAPER 8190.83 40551.38 20.20
72
PLATES 3149.49 18202.48 17.30

MARGIN
SIDHICK 10286.67 29396.35 34.99
PLATE
INDUSTRY
PAPER 5304.80 42718.71 12.42
PLATES 3194.82 23163.24 13.79
CHART
40 37.52
35.06 34.99
35 33.55
31.44
30
25.36
25.29 25.46
25 23.35
20 18.63
17.3 PAPER
14.32 13.79 PLATES
15 12.42
10
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
73
INTEPRETATION:
The ratio measures the margin of profit available on sales. The higher the ratio the better it
is. The ratio of SIDHICK PLATE INDUSTRY has been fluctuating but it has been on a
constant platform. The sales figures have been rising so the fluctuations in the ratio can be
attributed to the difference in the prices of the raw materials, freights and wages.
The gross profit ratio of PAPER has been falling and which is again because of the rise in
the prices of the raw materials, wages and freight which have ultimately reduced the margin of
the gross profit.
The gross profit margin of PLATES has also decreased since the selling prices have not
risen in the same proportion to the increase in the cost of the raw materials and other expenses.
SIDHICK PLATE INDUSTRY has a much favourable ratio as compared to the other two
companies. PAPER can take some measures such as procure raw materials at a cheaper price
or to increase the selling price in order to improve its gross profit margin.
9. NET PROFIT MARGIN -This ratio measures the relationship between EBIT to
sales. It indicates the efficiency of the management in manufacturing, selling, administration
and other activities of the firm. It is the overall measure of a firm’s profitability. It is
represented as a percentage.
A high net profit margin would ensure adequate returns to the owners as well as enable a
firm to withstand adverse economic conditions when selling price is declining, cost of
production is rising and demand for product id falling. A low net profit margin has the opposite
implication.
FORMULA = NET PROFIT BEFORE INTEREST AND TAX * 100

SALES
COMPANY NPBIT SALES NET PROFIT

MARGIN
SIDHICK 6435.55 17551.09 36.67
PLATE
INDUSTRY
PAPER 9754.75 34223.92 28.50
PLATES 2314.72 8554.36 27.06
74

MARGIN
SIDHICK 7945.06 19693.28 40.34
PLATE
INDUSTRY
PAPER 11719.67 39508.45 29.66
PLATES 2924.56 11420.00 25.60

MARGIN
SIDHICK 8468.30 24315.77 34.82
PLATE
INDUSTRY
PAPER 9656.69 43150.08 22.38
PLATES 1474.88 14001.25 10.53

MARGIN
SIDHICK 8722.70 25021.98 34.86
PLATE
INDUSTRY
PAPER 10534.04 40551.38 25.98
PLATES 3678.57 18202.48 20.21

MARGIN
SIDHICK 11077.34 29396.35 37.68
PLATE
INDUSTRY
PAPER 7669.26 42718.71 17.95
75
PLATES 3477.46 23163.248 15.01
CHART
45
40.34
40 37.82
36.67
34.82 34.86
35
29.66
28.5
30 25.98
27.06 25.6
SIDHICK PALTE INDUSTRY
25 22.38
20.21 PAPER
20 17.95
15.01 PLATES
15
10.53
10
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
Net profit ratio reflects the net profit margin on the total sales after deducting all the
expenses but before deducting the interest and taxation. This ratio measures the efficiency of
the operation of the company.
The trend of the graph of the net profit ratio is quite similar to that of the gross profit
margin ratio. Higher the ratio the better it is. SIDHICK PLATE INDUSTRY has been quite
efficient in managing the operating expenses of the firm.
10. CASH PROFIT RATIO -The Cash Ratio is the most conservative of all these
measures of cash resources, as only actual cash and securities easily convertible to cash are
used to measure cash resources. The short-term liquidity of a company may be measured
through cash ratio.
FORMULA = CASH PROFIT

SALES
CASH PROFIT= NET PROFIT+ DEPRICIATION
76
COMPANY CASH SALES CASH
PROFIT PROFIT
RATIO
SIDHICK 5041.44 17551.09 28.72
PLATE
INDUSTRY
PAPER 7413.77 34223.92 21.85
PLATES 1790.23 8554.36 20.93

PROFIT PROFIT
RATIO
SIDHICK 5521.64 19693.28 28.38
PLATE
INDUSTRY
PAPER 8772.26 39508.45 22.20
PLATES 2415.37 11420.00 21.15

PROFIT PROFIT
RATIO
SIDHICK 6175.14 24315.77 25.40
PLATE
INDUSTRY
PAPER 7459.93 43150.08 17.29
PLATES 1313.16 14001.25 9.38

PROFIT PROFIT
RATIO
SIDHICK 6129.98 25021.98 24.50
PLATE
77
INDUSTRY
PAPER 8091.61 40551.38 19.95
PLATES 3146.15 18202.48 17.28

PROFIT PROFIT
RATIO
SIDHICK 8011.88 29396.35 27.25
PLATE
INDUSTRY
PAPER 6890.54 42718.71 14.95
PLATES 3389.38 23163.25 14.63
CHART
78
30 28.72 28.38
27.25
25.4
24.5
25
21.85 22.2
20.93 21.15 19.95
20
17.29
17.28 SIDHICK PALTE INDUSTRY
14.95
14.63
15 PAPER
PLATES
10 9.38
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
The ratio measures the cash generation in the business as a result of the operation expressed
in terms of sales. The cash profit ratio is more reliable indicator of performance where there are
sharp fluctuations in profit before tax and the net profit from year to year owing to the
difference in depreciation.
It facilitates the inter firm comparison of performance since different methods of
depreciation may be adopted by different companies.
SIDHICK PLATE INDUSTRY is ahead of the other two companies and has a better graph
as compared to PAPER and PLATES.
11. RETURN ON ASSETS -Here the profitability is measured in terms of the
relationship between net profits and assets. The ROA may be also called as profit-to-asset
ratio. It can be interpreted in two ways. First, it measures management’s ability and efficiency
in using the firm’s assets to generate (operating) profits. Second, it reports the total return
accruing to all providers of capital (debt and equity), independent of the source of capital.
FORMULA = EBIT
AVERAGE TOTAL ASSETS
COMPANY EBIT AVERAGE RETURN ON

TOTAL ASSETS ASSETS
SIDHICK PLATE 6435.55 20147.33 0.32
INDUSTRY
79
PAPER 9754.75 20644.91 0.47
PLATES 2314.72
FINANCILA YEAR 2015-2012

TOTAL ASSETS ASSETS
SIDHICK PLATE 7945.06 36336.51 0.22
INDUSTRY
PAPER 11719.67 25291.87 0.46
PLATES 2924.56 13627.68 0.21

TOTAL ASSETS ASSETS
SIDHICK PLATE 8468.30 52908.65 0.16
INDUSTRY
PAPER 9656.69 32266.23 0.30
PLATES 1474.88 18564.33 0.08
COMPANY EBIT AVER RET

AGE URN ON
TOTAL ASSETS
ASSETS
SIDHICK PLATE 8722.70 61487.28 0.14
INDUSTRY
PAPER 10534.04 44143.57 0.24
PLATES 3678.57 21954.72 0.17

TOTAL ASSETS ASSETS
SIDHICK PLATE 11077.34 71394.35 0.11
INDUSTRY
80
PAPER 7669.26 54984.45 0.14
PLATES 3477.46 27375.02 0.13
CHART
0.5 0.47 0.46

0.45
0.4
0.35 0.32
0.3
0.3
SIDHICK PALTE INDUSTRY
0.24
0.25
0.21 0.21 PAPER
0.2 0.17 PLATES
0.16 0.150.14
0.14 0.13
0.15
0.1 0.08
0.05
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
The ratio indicates how profitable a company is relative to its total assets. The ratio
illustrates how well management is employing company’s total assets to make a profit. The
higher the return, the more efficient management is in utilizing the assets base.
Here we can conclude that PAPER has not been utilizing its asset base efficiently and so
the graph has taken a downward trend.
81
SIDHICK PLATE INDUSTRY has also not been very efficient in utilizing the asset base
of the company.
12. RETURN ON AVERAGE NET WORTH-This ratio measures the return on the
total equity funds of ordinary shares. From this ratio it can be judged whether the firm has
earned a satisfactory return for its shareholders or not. The higher the ratio, the better it is for
the shareholders.
FORMULA= PROFIT AFTER TAX

AVERAGE NET WORTH
COMPANY PROFIT AFTER AVERAGE NET RETURN ON

TAX WORTH AVEARGE NET
WORTH
SIDHICK 4222.15 11697.83 0.36
PLATE
INDUSTRY
PAPER 6202.29 14784.80 0.42
PLATES 1292

WORTH
SIDHICK 4687.03 20519.62 0.23
PLATE
INDUSTRY
PAPER 7536.78 20134.05 0.38
PLATES 1728.19 6538.22 0.26
82
WORTH
SIDHICK 5201.74 28608.41 0.18
PLATE
INDUSTRY
PAPER 6174.81 25494.10 0.24
PLATES 958.50 7827.25 0.12

WORTH
SIDHICK 5046.80 33516.50 0.15
PLATE
INDUSTRY
PAPER 6754.37 30650.40 0.22
PLATES 2022.74 8832.80 0.23

WORTH
SIDHICK 6865.69 41953.22 0.16
PLATE
INDUSTRY
PAPER 4904.74 35193.09 0.14
PLATES 2014.67 13465.81 0.15
83
CHART
0.45 0.42
0.4 0.38
0.36
0.35
0.3
0.26
0.23 0.24 SIDHICK PALTE INDUSTRY
0.25 0.220.23
PAPER
0.2 0.18
0.15 0.16 PLATES
0.14 0.15
0.15 0.12
0.1
0.05
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
It expresses the net profit in terms of equity shareholders fund. It is an important yardstick
of performance for equity shareholders since it indicates the return on funds employed by
them. However this measure is based on the historical net worth and will be high for old plants
and low for new plants.
The factor which motivates the shareholders to invest in a company

is the expectations of an adequate rate of return on their funds, they will want to assess the rate
of return in order to decide whether to continue their investments or not.
13. RETURN ON AVERAGE CAPITAL EMPLOYED-Return on average capital

employed is a profitability ratio. The term capital employed refers to long-term funds supplied
by the lenders and owners of the firm. Capital employed basis provides a test of profitability
related to the sources of long-term funds. It is an insight into how efficiently the long-term
funds of owners and lenders are being used. The higher the ratio, the more efficient is the use
of capital employed.
CAPITAL EMPLOYED = TOTAL FUNDS EMPLOYED – MISCELLANOUS

EXPENSES TO THE EXTENT NOT WRITTEN OFF
84

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
SIDHICK PLATE 6435.55 19879.43 0.32
INDUSTRY
PAPER 9754.75 20601.58 0.47
PLATES 2314.72

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
SIDHICK PLATE 7945.06 36157.69 0.22
INDUSTRY
PAPER 11719.67 25326.71 0.46
PLATES 2924.56 13530.25 0.22

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
SIDHICK PLATE 8468.30 52778.56 0.16
INDUSTRY
PAPER 9656.69 32236.49 0.30
85
PLATES 1474.88 18564.33 0.08
COMPANY EBIT AVERAGE CAPITAL RETURN ON

EMPLOYED AVERAGE
CAPITAL
EMPLOYED
SIDHICK PLATE 8722.70 61434.74 0.14
INDUSTRY
PAPER 10534.04 44048.96 0.24
PLATES 3678.57 21954.72 0.17

CAPITAL AVERAGE
EMPLOYED CAPITAL
EMPLOYED
SIDHICK PLATE 11077.34 71394.35 0.16
INDUSTRY
PAPER 7669.26 54984.45 0.14
PLATES 3477.46 27375.02 0.13
CHART
86
0.5 0.47
0.46
0.45
0.4
0.35 0.32
0.3
0.3
0.24
0.25 0.22 0.22 PAPER
0.2 0.17 PLATES
0.16 0.16
0.14 0.14
0.15 0.13
0.1 0.08
0.05
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
Return on average capital employed ratio narrows the focus to gain a better understanding
of a company's ability to generate returns from its available capital base.
By comparing net income to the sum of a company's debt and equity capital, investors can get
a clear picture of how the use of leverage impacts a company's profitability. Financial analysts
consider the ROCE measurement to be a more comprehensive profitability indicator because it
gauges management's ability to generate earnings from a company's total pool of capital.
14. DIVIDEND PAYOUT RATIO -This ratio indicates the percentage PAT
distributed as dividends to equity shareholders. It is also known as pay-out ratio. For instance
PAT are Rs. 500000 and the dividend is Rs. 300000 then the dividend pay -out ratio would be
60%. This implies that 40% of the profits of the firm are retained (retention ratio) and 60%
distributed as dividends. Therefore, the higher the ratio the more dividends can be received.
FORMULA= DIVIDEND (EQUITY)/ PROFIT AFTER TAX
COMPANY DIVIDEND(EQUITY) PROFIT AFTER DIVIDEND

TAX PAYOUT RATIO
SIDHICK PLATE 1104.33 4222.15 26.16
INDUSTRY
PAPER 1478.40 6202.29 23.89
PLATES 199.39 1292 15.43
87
TAX PAYOUT RATIO
SIDHICK PLATE 1393.55 4687.03 29.73
INDUSTRY
PAPER 1787.16 7536.78 23.71
PLATES 241.49 1728.19 13.97

TAX PAYOUT RATIO
SIDHICK PLATE 1492.5 5201.74 28.69
INDUSTRY
PAPER 1255.16 6174.81 20.33
PLATES 55.41 958.50 5.78
COMPANY DIVIDEND(EQUITY) PROFIT DIVIDEND

AFTER TAX PAYOUT
RATIO
SIDHICK 878.45 5046.80 17.41
PLATE
INDUSTRY
PAPER 1590.55 6754.37 23.55
PLATES 240.93 2022.74 11.91

TAX PAYOUT RATIO
SIDHICK PLATE 1307.77 6865.69 19.05
INDUSTRY
PAPER 1152.45 4904.74 23.50
PLATES 350.09 2014.67 17.41
CHART
88
35
29.73
30 28.69
26.16
25 23.89 23.71 23.55 23.5
20.3
20 19.05
17.41 17.41 SRI MEENAKSHI GARMENTS
15.43 CLOTHS
15 13.97
11.97 TEXTILES
10
5.78
5
0
2010-2011 2011-2012 2012-2013 2013-2014 2014-2015
INTERPRETATION:
This ratio identifies the percentage of earnings (net income) per common share allocated to
paying cash dividends to shareholders. The dividend payout ratio is an indicator of how well
earnings support the dividend payment.
It indicates the extent to the net profit distributed to the shareholders as

dividend. A high payout signifies a liberal distribution policy and a low payout reflects
conservative distribution policy,
RECOMMENDATION:
 SIDHICK PLATE INDUSTRY should try to improve its solvency so that at the
time of crisis they don’t have to sell of their inventory to pay off debts.
89
 They should maintain quick ratio above or equal to 1.0.
 Fluctuations in operating cycle should be reduced.
 SIDHICK PLATE INDUSTRY must keep eye on its WIP conversion period.
 SIDHICK PLATE INDUSTRY should try to minimize its inventory conversion
period and also try to minimize the average age of stock to reduce the cost of inventories.
 As sale price per unit is lesser than the competitors it must keep trend increasing
mode of sales to reduce the blockage of its price in its inventory.
 Try to generate more revenue from other country.
 SIDHICK PLATE INDUSTRY should try for acquisition of more mines in India
to reduce the raw material outsourcing or import cost.
 There should be a proper balance between the current assets and the currents
liabilities. The working capital became negative due to an improper balance.
 It should not allow its net debt to become negative. A negative net debt indicates
more cash and less debt which means that the company is not investing enough in its growth.
 New and advanced concept must be introduced in inventory control management.
 Adequate planning is required for procurement of store items.
 Advance payments should be avoided. If at all advance payments are required, it

should be against securities like bank guarantees etc.
 The essence of effective working capital management is proper cash flow

forecasting. This should take into account the unforeseen events, market cycles, sudden fall in
demand, fall in selling price, loss in prime customers etc. This is a very important factor that
has to be taken into account.
90
CONCLUSION
SIDHICK PLATE INDUSTRY has been analyzed in terms of financial aspects especially
working capital and financial ratios. A comparison has been made with PLATES and PAPER
to see the position of SIDHICK PLATE INDUSTRY Ltd. in the industry.
Working capital management is a very crucial part of any organization. It needs to maintain
its working capital efficiently for its day to day operations to take place. An organization needs
proper liquidity to meet its obligations on time.
Ratio analysis is also a very important part of a business. It is a platform to judge a

company based on liquidity, profitability etc. It is very crucial for banks, investors, creditors
etc. It also makes comparisons easier.
SIDHICK PLATE INDUSTRY has been able to maintain a good liquidity position
throughout. It has been able to pay back its liabilities on time and also has been able to give
dividends on time to its shareholders. It has also maintained a good level of EPS. The
inventory turnover has been maintained efficiently which we can see from the high inventory
turnover ratio.
91
BIBLIOGRAPHY
 Gerald I. White, Ashwinpaul C. Sondhi&Dov Fried (2015). The Analysis And Use Of
Financial Statements- Third edition.
 M Y Khan & P K Jain (2014). Management Accounting- Fifth Edition.
 http://www.tataPAPER PLATE .com/about-us/company-profile.asp
 http://www.ey.com/Publication/vwLUAssets/Global_PAPER PLATE _Report_2014-
2015/$FILE/Global%20PAPER PLATE %20Report%202014-
2015%20FULL%20REPORT.pdf
 zenithresearch.org.in/images/stories/pdf/2012/Jan/ZIJMR/13 SURESH VADDE PAPER
PLATE _paper.pdf
 http://www.zacks.com/stock/news/49743/PAPER PLATE -industry-outlook-%96-march-
2015
 Research and Markets: Analyzing the Indian PAPER PLATE Industry – 2012 Edition is
Completed with An Analysis of the Major Players in the Indian PAPER PLATE Sector | Japan
Metal Bulletin
 Top Indian PAPER PLATE Companies Performance | News From Business, Finance,
Share Market Real Estate
92
Balance sheet
(Rs crore)
2011 2012 2013 2014 2015
Sources of funds
Owner's fund
Equity share
capital 971.41 971.41 971.41 971.41 959.41
Share
application
money - - - 178.20
Preference
share capital - - - - -
Reserves &
surplus 65,692.48 60,176.58 54,238.27 51,649.95 45,807.02
Loan funds
Secured loans 4,507.64 4,400.55 4,311.02 4,190.47 3,509.18
Unsecured
loans 21,702.61 21,726.23 21,600.49 19,503.35 22,639.00
T
otal 92,874.14 87,274.77 81,121.19 76,315.18 73,092.81
93
2011 2012 2013 2014 2015
Uses of funds
Fixed assets
Gross block 41,791.52 39,019.72 38,056.28 23,081.58 22,497.83
Less :
revaluation
reserve - - - - -
Less :
accumulated
depreciation 16,543.00 14,753.97 13,181.23 11,715.32 10,692.73
Net block 25,248.52 24,265.75 24,875.05 11,366.26 11,805.10
Capital work-
in-progress 23,036.67 18,509.40 8,722.29 16,058.49 5,612.28
Investments 53,164.32 54,661.80 50,418.80 50,282.52 46,564.94
Net current assets
Current
assets, loans
& advances 14,227.61 13,603.46 17,860.79 18,483.79 25,569.40
Less : current
liabilities &
provisions 22,802.98 23,765.64 20,755.74 19,875.88 16,458.91
Total net
current assets -8,575.37 10,162.18 -2,894.95 -1,392.09 9,110.49
Miscellaneous
expenses not
written - - - - -
T
otal 92,874.14 87,274.77 81,121.19 76,315.18 73,092.81
94
2011 2012 2013 2014 2015
Notes:
Book value of
unquoted
investments 52,088.86 53,615.18 49,434.56 49,617.55 45,899.97
Market value
of quoted
investments 11,528.97 8,390.72 4,904.96 4,911.43 4,914.95
Contingent
liabilities 14,610.35 17,398.71 18,999.02 18,039.57 14,288.41
Number of
equity shares
outstanding 9712.15 9712.15 9712.15 9712.14 9592.14
95

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A STUDY ON WORKING CAPITAL MANAGEMENT IN NERO AIR FILTER

CORPORTATION LIMITED AT COIMBA

“Excess of current assets over current liabilities”.

According to Park & Gladson-

There are two concepts of working capital management

2. Net working capital

Permanent Working Variable Working

Initial Regular Seasonal Special

A. Initial working capital

B. Regular working capital

2. Temporary working capital

A. Seasonal working capital

IMPORTANCE OF WORKING CAPITAL MANAGEMENT

DETERMINATION OF WORKING CAPITAL

2. Length of production cycle

5. Terms of purchase and sales

SOURCES OF WORKING CAPITAL

The main sources of working capital are as under:

1. Shares and Debentures

Mainly three components of working capital management

OBJECTIVES OF THE STUDY

LIMITATIONS OF THE STUDY

Chapter 2: Review Of Literature

Chapter 3: Research Methodology

Chapter 4: Data Analysis and Interpretations

Chapter 5: Findings, Suggestion, Conclusions

ii) Secondary data

(1) Annual reports

WHAT IS WORKING CAPITAL???

Working capital management is a very important component of corporate finance because

Every business needs funds for two purposes.

WORKING CAPITAL COMPRISES OF THE FOLLOWING:-

2. Accounts receivables: - Many businesses extend credit to their customers.

 If you do, is the amount of accounts receivable reasonable relative to sales?

4. Accounts payable: - Financing by suppliers is common in small business; it is

THERE ARE TWO DIFFERENT CONCEPTS OF WORKING CAPITAL:-

 Purchase of raw materials.

IMPORTANCE OF WORKING CAPITAL

The advantages of working capital or adequate working capital may be enumerated as

2. It creates a Feeling of Security and Confidence:

3. ‘Must’ for Maintaining Solvency and Continuing Production:

5. Easy Loans from the Banks:

7. Exploitation of Good Opportunity:

8. Meeting Unseen Contingency:

10. Increased Production Efficiency:

Every business concern should have adequate working capital to run i

4. It may result into overall inefficiency in the organization.

DISADVANTAGES OF INADEQUATE WORKING CAPITAL

3) It becomes impossible to utilize efficiently the fixed asset

4) The rate of return on investments also falls with the

NET WORKING CAPITAL

CURRENT 2014- 2015- 2012- 2013- 2014-

CURRENT 2014- 2015- 2012- 2013- 2014-2015

NET WORKING 1022.29 (702.5) 1063.43 1375.68 7080.71

PERCENTAGE CHANGE IN NET WORKING CAPITAL

CURRENT 2014- 2015- 2012- 2013- 2014-

PROVISION FOR 5987.65 0.00 0.00 0.00 0.00

1. WORKING CAPITAL TURNOVER RATIO

FORMULA = NET SALES